|
Delaware
|
| |
4899
|
| |
98-0204758
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
Copies of all correspondence to:
|
| ||||||
|
Kenneth S. Rose, Esq.
Joel J. Goldschmidt, Esq. Morse, Zelnick, Rose & Lander, LLP 825 Third Avenue, 16 th Floor New York, NY 10022 (212) 838-5030 |
| |
Spencer Richardson
Chief Executive Officer DropCar, Inc. 1412 Broadway, Suite 2105 New York, NY 10018 (646) 342-1595 |
| |
Kenneth R. Koch, Esq.
Daniel A. Bagliebter, Esq. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 666 Third Avenue New York, NY 10017 (212) 935-3000 |
|
| Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ | |
| Non-accelerated filer | | | ☐ (Do not check if a smaller reporting company) | | | Smaller reporting company | | | ☒ | |
| | | | | | | Emerging growth company | | | ☐ | |
| Exchange Act Rule 13c-4(i) (Cross-Border Issuer Tender Offer) | | | ☐ | |
| Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) | | | ☐ | |
| | ||||||||||||||||||||||||
Title of each class of securities to be registered
|
| |
Amount to be
Registered (1) |
| |
Proposed maximum
offering price per unit |
| |
Proposed maximum
aggregate offering price (2) |
| |
Amount of
registration fee (3) |
| ||||||||||||
Common Stock, $0.0001 par value
|
| | | | 34,672,569 | | | | | | N/A | | | | | $ | 52,008,853 | | | | | $ | 6,475.10 | | |
|
| Sebastian Giordano | | |
Spencer Richardson
|
|
| Chief Executive Officer | | |
Chief Executive Officer
|
|
| WPCS International Incorporated | | |
DropCar, Inc.
|
|
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| | | | | F-A-1 | | | |
| | | | | F-B -1 | | |
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| | | |||
| ANNEX E — OPINION OF GORDIAN INVESTMENTS, LLC | | | | |
| | | | |
Name
|
| |
Title
|
|
Spencer Richardson | | | Chief Executive Officer | |
David Newman | | | Chief Business Development Officer | |
Daniel Gelbtuch | | | Vice President Corporate Finance and Communications | |
Wesley Stanton | | | Chief Customer Officer | |
Leandro Larroulet | | | Chief Information Officer | |
|
WPCS International Incorporated
|
| |||
| Telephone: | | |
|
|
| Attention: | | |
|
|
| Email: | | |
|
|
Name
|
| |
Title
|
|
Spencer Richardson | | | Chief Executive Officer | |
David Newman | | | Chief Business Development Officer | |
Daniel Gelbtuch | | | Vice President Corporate Finance and Communications | |
Wesley Stanton | | | Chief Customer Officer | |
Leandro Larroulet | | | Chief Information Officer | |
| | |
Years Ended April 30,
|
| |
Three Months Ended July 31,
|
| ||||||||||||||||||||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| |
2013
|
| |
2017
|
| |
2016
|
| |||||||||||||||||||||
| | | | | |
(Unaudited)
|
| ||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Revenue
|
| | | $ | 16,736,991 | | | | | $ | 14,555,102 | | | | | $ | 24,417,686 | | | | | $ | 15,751,092 | | | | | $ | 24,774,876 | | | | | $ | 3,523,347 | | | | | $ | 3,416,453 | | |
Costs and expenses: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Cost of revenue
|
| | | | 12,893,901 | | | | | | 11,570,364 | | | | | | 20,559,427 | | | | | | 12,725,037 | | | | | | 17,556,832 | | | | | | 2,754,550 | | | | | | 2,635,508 | | |
Selling, general and administrative expenses
|
| | | | 6,272,138 | | | | | | 6,951,637 | | | | | | 4,867,056 | | | | | | 5,072,566 | | | | | | 6,574,237 | | | | | | 1,184,501 | | | | | | 1,352,986 | | |
Severance expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | 1,775,732 | | | | | | — | | | | | | — | | | | | | — | | |
Depreciation and amortization
|
| | | | 115,454 | | | | | | 64,738 | | | | | | 60,207 | | | | | | 110,058 | | | | | | 916,449 | | | | | | 30,073 | | | | | | 20,666 | | |
| | | | | 19,281,493 | | | | | | 18,586,739 | | | | | | 25,486,690 | | | | | | 19,683,393 | | | | | | 25,047,518 | | | | | | 3,969,124 | | | | | | 4,009,160 | | |
Operating loss
|
| | | | (2,544,502 ) | | | | | | (4,031,637 ) | | | | | | (1,069,004 ) | | | | | | (3,932,301 ) | | | | | | (272,642 ) | | | | | | (445,777 ) | | | | | | (592,707 ) | | |
Other income (expense): | | | | | | | | | |||||||||||||||||||||||||||||||||||
Interest expense
|
| | | | (6,621 ) | | | | | | (3,196 ) | | | | | | (2,838,739 ) | | | | | | (4,795,178 ) | | | | | | (2,091,771 ) | | | | | | (2,051 ) | | | | | | (1,981 ) | | |
Change in fair value of derivative liabilities
|
| | | | — | | | | | | — | | | | | | — | | | | | | (833,750 ) | | | | | | (2,703,248 ) | | | | | | — | | | | | | — | | |
Loss on extinguishment of
notes |
| | | | — | | | | | | — | | | | | | — | | | | | | (1,299,304 ) | | | | | | — | | | | | | — | | | | | | — | | |
Inducement expense
|
| | | | — | | | | | | — | | | | | | (5,492,842 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Income from section 16 settlement
|
| | | | — | | | | | | 400,000 | | | | | | 1,401,516 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Gain on forgiveness of other payable
to Zurich |
| | | | — | | | | | | — | | | | | | 883,757 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Income from arbitrage settlement
|
| | | | 1,192,246 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 7,750 | | | | | | 1,150,000 | | |
Other income (expenses)
|
| | | | 143,178 | | | | | | 5,284 | | | | | | 187,209 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,487 | | |
Income (loss) from continuing operations before income tax provision
|
| | | | (1,215,699 ) | | | | | | (3,629,549 ) | | | | | | (6,928,103 ) | | | | | | (10,860,533 ) | | | | | | (5,067,661 ) | | | | | | (440,078 ) | | | | | | 559,799 | | |
Income tax provision
|
| | | | 3,130 | | | | | | 1,706 | | | | | | 69,679 | | | | | | (297,843 ) | | | | | | 216,314 | | | | | | — | | | | | | 2,618 | | |
Income (loss) from continuing operations
|
| | | | (1,218,829 ) | | | | | | (3,631,255 ) | | | | | | (6,997,782 ) | | | | | | (10,562,690 ) | | | | | | (5,283,975 ) | | | | | | (440,078 ) | | | | | | 557,181 | | |
Discontinued operations: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Income (loss) from discontinued operations
|
| | | | — | | | | | | 27,261 | | | | | | (2,550,113 ) | | | | | | (380,516 ) | | | | | | (3,287,932 ) | | | | | | — | | | | | | — | | |
Gain (loss) from disposal
|
| | | | — | | | | | | 837,720 | | | | | | 798,896 | | | | | | (104,446 ) | | | | | | 1,756,586 | | | | | | — | | | | | | — | | |
Gain from disposal of BTX
|
| | | | — | | | | | | — | | | | | | 19,700 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Loss from disposal of Seattle
Operations |
| | | | — | | | | | | — | | | | | | (374,932 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Loss from discontinued operations, net of tax
|
| | | | — | | | | | | 864,981 | | | | | | (2,106,449 ) | | | | | | (484,962 ) | | | | | | (1,531,346 ) | | | | | | — | | | | | | — | | |
Consolidated net income (loss)
|
| | | | (1,218,829 ) | | | | | | (2,766,274 ) | | | | | | (9,104,231 ) | | | | | | (11,047,652 ) | | | | | | (6,815,321 ) | | | | | | (440,078 ) | | | | | | 557,181 | | |
Net income attributable to noncontrolling interest
|
| | | | — | | | | | | 16,505 | | | | | | (284,210 ) | | | | | | 11,287 | | | | | | 95,406 | | | | | | — | | | | | | — | | |
Net income (loss) attributable to
WPCS |
| | | | (1,218,829 ) | | | | | | (2,782,779 ) | | | | | | (8,820,021 ) | | | | | | (11,058,939 ) | | | | | | (6,910,727 ) | | | | | | (440,078 ) | | | | | | 557,181 | | |
Dividends declared on preferred
stock |
| | | | — | | | | | | (4,742,768 ) | | | | | | (2,508,518 ) | | | | | | (109,027 ) | | | | | | — | | | | | | — | | | | | | — | | |
Deemed dividend on convertible preferred stock, due to beneficial conversion feature
|
| | | | (1,037,365 ) | | | | | | (744,499 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net income (loss) attributable to
WPCS common shareholders |
| | | $ | (2,256,194 ) | | | | | $ | (8,270,046 ) | | | | | $ | (11,328,539 ) | | | | | $ | (11,167,966 ) | | | | | $ | (6,910,727 ) | | | | | $ | (440,078 ) | | | | | $ | 557,181 | | |
Basic: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations
|
| | | $ | (0.41 ) | | | | | $ | (1.59 ) | | | | | $ | (10.40 ) | | | | | $ | (41.51 ) | | | | | $ | (116.93 ) | | | | | $ | (0.13 ) | | | | | $ | 0.21 | | |
Income (loss) from discontinued operations
|
| | | | — | | | | | | — | | | | | | (3.37 ) | | | | | | (1.54 ) | | | | | | (74.87 ) | | | | | | — | | | | | | — | | |
Gain (loss) from disposal
|
| | | | — | | | | | | 0.37 | | | | | | 0.66 | | | | | | (0.41 ) | | | | | | 38.87 | | | | | | — | | | | | | — | | |
Income (loss) per common share attributable to WPCS
|
| | | | (0.41 ) | | | | | | (1.22 ) | | | | | | (13.11 ) | | | | | | (43.46 ) | | | | | | (152.92 ) | | | | | | (0.13 ) | | | | | | 0.21 | | |
Dividends declared on preferred
stock |
| | | | — | | | | | | (2.07 ) | | | | | | (3.73 ) | | | | | | (0.43 ) | | | | | | — | | | | | | — | | | | | | — | | |
Deemed dividend on convertible preferred stock, due to beneficial conversion feature
|
| | | | (0.35 ) | | | | | | (0.33 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Income (loss) per common share attributable to WPCS common shareholders
|
| | | $ | (0.76 ) | | | | | $ | (3.61 ) | | | | | $ | (16.84 ) | | | | | $ | (43.89 ) | | | | | $ | (152.92 ) | | | | | $ | (0.13 ) | | | | | $ | 0.21 | | |
|
| | |
Years Ended April 30,
|
| |
Three Months Ended July 31,
|
| ||||||||||||||||||||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| |
2013
|
| |
2017
|
| |
2016
|
| |||||||||||||||||||||
| | | | | |
(Unaudited)
|
| ||||||||||||||||||||||||||||||||||||
Diluted: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations
|
| | | $ | (0.41 ) | | | | | $ | (1.59 ) | | | | | $ | (10.40 ) | | | | | $ | (41.51 ) | | | | | $ | (116.92 ) | | | | | $ | (0.13 ) | | | | | $ | 0.14 | | |
Income (loss) from discontinued operations
|
| | | | — | | | | | | — | | | | | | (3.37 ) | | | | | | (1.54 ) | | | | | $ | (74.87 ) | | | | | | — | | | | | | — | | |
Gain (loss) from disposal
|
| | | | — | | | | | | 0.37 | | | | | | 0.66 | | | | | | (0.41 ) | | | | | $ | 38.87 | | | | | | — | | | | | | — | | |
Income (loss) per common share attributable to WPCS
|
| | | | (0.41 ) | | | | | | (1.22 ) | | | | | | (13.11 ) | | | | | | (43.46 ) | | | | | | (152.92 ) | | | | | | (0.13 ) | | | | | | 0.14 | | |
Dividends declared on preferred
stock |
| | | | — | | | | | | (2.07 ) | | | | | | (3.73 ) | | | | | | (0.43 ) | | | | | | — | | | | | | — | | | | | | — | | |
Deemed dividend on convertible preferred stock, due to beneficial conversion feature
|
| | | | (0.35 ) | | | | | | (0.32 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Income (loss) per common share attributable to WPCS common shareholders
|
| | | $ | (0.76 ) | | | | | $ | (3.61 ) | | | | | $ | (16.84 ) | | | | | $ | (43.89 ) | | | | | $ | (152.92 ) | | | | | $ | (0.13 ) | | | | | $ | 0.14 | | |
Weighted average shares outstanding – basic
|
| | | | 2,967,984 | | | | | | 2,290,050 | | | | | | 672,723 | | | | | | 254,446 | | | | | | 45,190 | | | | | | 3,352,159 | | | | | | 2,701,404 | | |
Weighted average shares outstanding – diluted
|
| | | | 2,967,984 | | | | | | 2,290,050 | | | | | | 672,723 | | | | | | 254,446 | | | | | | 45,190 | | | | | | 3,352,159 | | | | | | 3,937,628 | | |
| | |
At December 31,
|
| |
At July 31,
2017 |
| ||||||||||||||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| |
2013
|
| |||||||||||||||||||||
| | | | | |
(Unaudited)
|
| ||||||||||||||||||||||||||||||
Balance Sheet Data: | | | | | | | | ||||||||||||||||||||||||||||||
Cash and cash equivalents
|
| | | $ | 1,659,318 | | | | | $ | 2,235,597 | | | | | $ | 2,364,360 | | | | | $ | 2,177,070 | | | | | $ | 1,410,223 | | | | | $ | 1,880,549 | | |
Accounts receivable, net of allowance
|
| | | $ | 4,199,674 | | | | | $ | 2,886,154 | | | | | $ | 6,494,890 | | | | | $ | 4,615,753 | | | | | $ | 4,139,768 | | | | | $ | 4,002,248 | | |
Total assets
|
| | | $ | 7,145,106 | | | | | $ | 5,804,179 | | | | | $ | 15,157,193 | | | | | $ | 22,021,726 | | | | | $ | 18,144,966 | | | | | $ | 7,076,911 | | |
Total liabilities
|
| | | $ | 4,073,558 | | | | | $ | 3,578,875 | | | | | $ | 15,296,257 | | | | | $ | 16,054,376 | | | | | $ | 19,072,394 | | | | | $ | 4,445,441 | | |
Convertible preferred stock
|
| | | $ | 1,144,678 | | | | | $ | 1,105,586 | | | | | $ | 5,120,697 | | | | | $ | 2,438,000 | | | | | $ | — | | | | | $ | 1,144,678 | | |
Common stock
|
| | | $ | 335 | | | | | $ | 269 | | | | | $ | 98 | | | | | $ | 63 | | | | | $ | 99 | | | | | $ | 335 | | |
Additional paid-in capital
|
| | | $ | 89,003,669 | | | | | $ | 85,940,389 | | | | | $ | 70,380,397 | | | | | $ | 66,673,434 | | | | | $ | 50,844,183 | | | | | $ | 89,003,669 | | |
Accumulated deficit
|
| | | $ | (87,077,134 ) | | | | | $ | (84,820,940 ) | | | | | $ | (76,550,894 ) | | | | | $ | (65,222,355 ) | | | | | $ | (54,054,389 ) | | | | | $ | (87,517,212 ) | | |
Accumulated other comprehensive income on foreign currency translation
|
| | | $ | — | | | | | $ | — | | | | | $ | 349,723 | | | | | $ | 1,232,003 | | | | | $ | 1,433,541 | | | | | $ | — | | |
Non-controlling interest
|
| | | $ | — | | | | | $ | — | | | | | $ | 560,915 | | | | | $ | 846,205 | | | | | $ | 849,138 | | | | | $ | — | | |
Total stockholders’ equity
|
| | | $ | 3,071,548 | | | | | $ | 2,225,304 | | | | | $ | (139,064 ) | | | | | $ | 5,967,350 | | | | | $ | (927,428 ) | | | | | $ | 2,631,470 | | |
| | |
For the
Year Ended December 31, 2016 |
| |
For the
Six Months Ended June 30, 2017 |
| ||||||
| | |
(in thousands, except per share data)
|
| |||||||||
Net Service Revenue
|
| | | $ | 1,702 | | | | | $ | 1,528 | | |
Cost of Services
|
| | | | 1,229 | | | | | | 1,234 | | |
Selling, general and administrative expenses
|
| | | | 1,764 | | | | | | 2,060 | | |
Amortization of capitalized software costs
|
| | | | 79 | | | | | | 91 | | |
Loss from operations
|
| | | | (1,370 ) | | | | | | (1,857 ) | | |
Interest (expense) income, net
|
| | | | 47 | | | | | | (329 ) | | |
Net loss
|
| | | | (1,417 ) | | | | | | (2,186 ) | | |
|
| | |
As of
December 31, 2016 |
| |
As of
June 30, 2017 |
| ||||||
| | |
(in thousands)
|
| |||||||||
Cash and cash equivalents
|
| | | $ | 51 | | | | | $ | 812 | | |
Working capital deficit, net
|
| | | $ | (367 ) | | | | | $ | (954 ) | | |
Total assets
|
| | | $ | 582 | | | | | $ | 1,490 | | |
Accumulated deficit
|
| | | $ | (1,964 ) | | | | | $ | (4,150 ) | | |
Total stockholders’ (deficit) equity
|
| | | $ | 83 | | | | | $ | (476 ) | | |
| | |
For the
Year Ended December 31, 2016 |
| |
For the
Six Months Ended June 30, 2017 |
| ||||||
| | |
(in thousands, except per share data)
|
| |||||||||
Revenue
|
| | | $ | 17,493 | | | | | $ | 9,260 | | |
Cost of revenue
|
| | | | 13,408 | | | | | | 7,192 | | |
Selling, general and administrative expenses
|
| | | | 8,173 | | | | | | 5,130 | | |
Depreciation and amortization
|
| | | | 675 | | | | | | 402 | | |
Operating loss
|
| | | | (4,763 ) | | | | | | (3,464 ) | | |
Other income (expense)
|
| | | | 1,267 | | | | | | (313 ) | | |
Loss before income taxes
|
| | | | (3,496 ) | | | | | | (3,777 ) | | |
Income tax benefit
|
| | | | 4 | | | | | | — | | |
Net loss
|
| | | | 3,500 | | | | | | 3,777 | | |
Dividends declared on preferred stock
|
| | | | (373 ) | | | | | | — | | |
Deemed dividend on convertible preferred stock, due to beneficial
conversion feature |
| | | | (537 ) | | | | | | (476 ) | | |
Net loss attributable to WPCS common shareholders
|
| | | $ | (4,410 ) | | | | | $ | (4,253 ) | | |
Net loss per share
|
| | | $ | (0.13 ) | | | | | $ | (0.12 ) | | |
|
| | |
As of
June 30, 2017 |
| |||
| | |
(in thousands)
|
| |||
Cash and cash equivalents
|
| | | $ | 6,693 | | |
Working capital, net
|
| | | $ | 5,507 | | |
Total assets
|
| | | $ | 24,146 | | |
Accumulated deficit
|
| | | $ | (7,649 ) | | |
Total stockholders’ equity
|
| | | $ | 17,759 | | |
| | |
For the
Year Ended December 31, 2016 |
| |
For the
Six Months Ended June 30, 2017 |
| ||||||
Historical Per Common Share Data: | | | | ||||||||||
Basic and diluted net loss per share
|
| | | $ | (0.13 ) | | | | | $ | (0.12 ) | | |
Book value per share
|
| | | | N/A | | | | | $ | 0.51 | | |
| | |
For the
Year Ended December 31, 2016 |
| |
For the
Six Months Ended June 30, 2017 |
| ||||||
Historical Per Common Share Data: | | | | ||||||||||
Basic and diluted net loss per share
|
| | | $ | (0.90 ) | | | | | $ | (0.54 ) | | |
Book value per share
|
| | | $ | 0.70 | | | | | $ | 0.79 | | |
| | |
For the
Year Ended December 31, 2016 |
| |
For the
Six Months Ended June 30, 2017 |
| ||||||
Historical Per Common Share Data: | | | | ||||||||||
Basic and diluted net loss per share
|
| | | $ | (0.28 ) | | | | | $ | (0.36 ) | | |
Book value per share
|
| | | $ | 0.02 | | | | | $ | (0.08 ) | | |
| | |
High
|
| |
Low
|
| | ||||||||
2018: | | | | | ||||||||||||
Second Quarter (through October 9, 2017)
|
| | | $ | 1.85 | | | | | $ | 1.20 | | | | ||
First Quarter
|
| | | $ | 1.52 | | | | | $ | 1.21 | | | | ||
2017: | | | | | ||||||||||||
Fourth Quarter
|
| | | $ | 1.58 | | | | | $ | 1.21 | | | | ||
Third Quarter
|
| | | $ | 1.58 | | | | | $ | 1.18 | | | | ||
Second Quarter
|
| | | $ | 1.67 | | | | | $ | 1.21 | | | | ||
First Quarter
|
| | | $ | 1.65 | | | | | $ | 1.22 | | | | ||
2016: | | | | | ||||||||||||
Fourth Quarter
|
| | | $ | 1.39 | | | | | $ | 0.97 | | | | ||
Third Quarter
|
| | | $ | 1.92 | | | | | $ | 1.19 | | | | ||
Second Quarter
|
| | | $ | 1.50 | | | | | $ | 1.07 | | | | ||
First Quarter
|
| | | $ | 3.07 | | | | | $ | 1.32 | | | | | |
| | |
Comparable Company
Values |
| |
Comparable Company
Values Applied to WPCS ($ in Millions) |
| ||||||||||||||||||
| | |
Mean
|
| |
Median
|
| |
Mean
|
| |
Median
|
| ||||||||||||
Enterprise Value to LTM Revenue
|
| | | | 0.60x | | | | | | 0.44x | | | | | $ | 12.0 | | | | | $ | 9.3 | | |
Enterprise Value to 2017 Revenue
|
| | | | 0.53x | | | | | | 0.44x | | | | | $ | 10.6 | | | | | $ | 9.1 | | |
Enterprise Value to NTM Revenue
|
| | | | 0.53x | | | | | | 0.46x | | | | | $ | 11.2 | | | | | $ | 0.0 | | |
Enterprise Value to 2018 Revenue
|
| | | | 0.52x | | | | | | 0.46x | | | | | $ | 11.0 | | | | | $ | 9.9 | | |
Enterprise Value to LTM EBITDA
|
| | | | 17.8x | | | | | | 7.4x | | | | | | NMF | | | | | | NMF | | |
Enterprise Value to 2017 EBITDA
|
| | | | 6.0x | | | | | | 6.5x | | | | | | NMF | | | | | | NMF | | |
Enterprise Value to NTM EBITDA
|
| | | | 5.4x | | | | | | 5.3x | | | | | $ | 4.2 | | | | | $ | 4.2 | | |
Enterprise Value to 2018 EBITDA
|
| | | | 5.3x | | | | | | 5.2x | | | | | $ | 3.9 | | | | | $ | 3.9 | | |
| | |
Comparable Company
Values |
| |
Comparable Company
Values Applied to DropCar ($ in Millions) |
| ||||||||||||||||||
| | |
Mean
|
| |
Median
|
| |
Mean
|
| |
Median
|
| ||||||||||||
Enterprise Value to LTM Revenue
|
| | | | 5.06x | | | | | | 3.08x | | | | | $ | 6.8 | | | | | $ | 12.1 | | |
Enterprise Value to 2017 Revenue
|
| | | | 4.64x | | | | | | 2.92x | | | | | $ | 12.5 | | | | | $ | 20.6 | | |
Enterprise Value to NTM Revenue
|
| | | | 4.60x | | | | | | 3.00x | | | | | $ | 30.1 | | | | | $ | 46.8 | | |
Enterprise Value to 2018 Revenue
|
| | | | 4.08x | | | | | | 2.73x | | | | | $ | 53.5 | | | | | $ | 80.7 | | |
Enterprise Value to LTM EBITDA
|
| | | | 21.7x | | | | | | 20.2x | | | | | | NMF | | | | | | NMF | | |
Enterprise Value to 2017 EBITDA
|
| | | | 15.9x | | | | | | 15.4x | | | | | | NMF | | | | | | NMF | | |
Enterprise Value to NTM EBITDA
|
| | | | 17.0x | | | | | | 20.1x | | | | | | NMF | | | | | | NMF | | |
Enterprise Value to 2018 EBITDA
|
| | | | 15.1x | | | | | | 18.6x | | | | | | NMF | | | | | | NMF | | |
| CSRA Inc. | | | NES Associates, LLC | |
| Dycom Industries, Inc. | | | Texstar Enterprises, Inc. | |
| Versar, Inc. | | | Johnson Controls Security Systems, LLC | |
| Cemtrex, Inc. | | | Advanced Industrial Services, Inc. | |
| MYR Group Inc. | | | E.S. Boulos Company, Inc. | |
| Court Square Capital Partners | | | Pike Corporation | |
| Star Construction, LLC | | | Watts Brothers Cable Construction, Inc. | |
| Comfort Systems USA, Inc. | | | DynaTen Corporation | |
| Electrical Construction Company | | | WPCS International - Seattle, Inc. | |
| Primoris Services Corporation | | | Aevenia, Inc. | |
| ForceField Energy Inc. | | | American Lighting | |
| Power Corporation of America | | | C and C Power Line, Inc. | |
| | |
Comparable Company
Values |
| |
Comparable Company Values
Applied to DropCar ($ in Millions) |
| ||||||||||||||||||
| | |
Mean
|
| |
Median
|
| |
Mean
|
| |
Median
|
| ||||||||||||
Enterprise Value to LTM Revenue
|
| | | | 0.58x | | | | | | 0.51x | | | | | $ | 10.4 | | | | | $ | 11.6 | | |
Enterprise Value to LTM EBITDA
|
| | | | 6.00x | | | | | | 6.01x | | | | | | NMF | | | | | | NMF | | |
| | |
Pro Forma
Ownership of WPCS Stockholders |
| |||
Primary | | | | | 13.4 % | | |
WPCS Allocation Percentage
|
| | | | 15.0 % | | |
Fully-Diluted
|
| | | | 24.0 % | | |
| | |
Estimated Valuation
($ in Millions) |
| |||||||||
| | |
Low
|
| |
High
|
| ||||||
WPCS Equity Value
|
| | | $ | 4.7 | | | | | $ | 10.0 | | |
Company Equity Value
|
| | | $ | 30.0 | | | | | $ | 55.0 | | |
| | |
Low
|
| |
High
|
| ||||||
Implied WPCS Pro Forma Ownership
|
| | | | 7.3 % | | | | | | 22.7 % | | |
Name and Principal Position
|
| |
Year
|
| |
Salary ($)
|
| |
Bonus ($)
|
| |
Option
Awards ($) (4) |
| |
All Other
Compensation ($) |
| |
Total ($)
|
| ||||||||||||||||||
Sebastian Giordano
Chief Executive Officer (1) |
| | | | 2017 | | | | | | 180,000 | | | | | | 77,000 | | | | | | 104,000 | | | | | | — | | | | | | 361,000 | | |
| | | 2016 | | | | | | 180,000 | | | | | | 35,000 | | | | | | 847,500 | | | | | | — | | | | | | 1,062,500 | | | ||
| | | | | | | | ||||||||||||||||||||||||||||||
David Allen
Chief Financial Officer (2) |
| | | | 2017 | | | | | | 140,000 | | | | | | 20,000 | | | | | | 78,000 | | | | | | — | | | | | | 238,000 | | |
| | | 2016 | | | | | | 140,000 | | | | | | 20,000 | | | | | | 409,200 | | | | | | — | | | | | | 569,200 | | | ||
| | | | | | | | ||||||||||||||||||||||||||||||
Robert Roller
President of Suisun City Operations (3) |
| | | | 2017 | | | | | | 170,000 | | | | | | 55,000 | | | | | | 78,000 | | | | | | — | | | | | | 303,000 | | |
| | | 2016 | | | | | | 170,000 | | | | | | 100,000 | | | | | | 180,575 | | | | | | — | | | | | | 419,575 | | |
Name
|
| |
Number of
Securities underlying Unexercised Options (#) Exercisable |
| |
Number of
Securities underlying Unexercised Options (#) Unexercisable |
| |
Equity
incentive plan awards: Number of securities underlying unexercised unearned options (#) |
| |
Option
Exercise Price ($/Sh) |
| |
Option
Expiration Date |
| |
Number
of shares or units of stock that have not vested (#) |
| |
Equity
incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) |
| |
Equity
incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) |
| |
Market
value of shares or units of stock that have not vested ($) |
| |||||||||||||||||||||
Sebastian Giordano
|
| | | | 130 | | | | | | — | | | | | | | | | | | $ | 60.06 | | | | | | 4/24/2018 | | | | | | | | | | | | | | | | | | | | |
| | | 11,364 | | | | | | — | | | | | | | | | | | $ | 26.40 | | | | | | 4/24/2019 | | | | | | | | | | | | | | | | | | | | | ||
| | | 50,000 | | | | | | — | | | | | | | | | | | $ | 1.19 | | | | | | 8/6/2025 | | | | | | | | | | | | | | | | | | | | | ||
| | | 650,000 | | | | | | — | | | | | | | | | | | $ | 1.32 | | | | | | 9/29/2025 | | | | | | | | | | | | | | | | | | | | | ||
| | | 150,000 | | | | | | — | | | | | | | | | | | $ | 1.26 | | | | | | 4/28/2026 | | | | | | | | | | | | | | | | | | | | | ||
| | | 100,000 | | | | | | — | | | | | | | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | 200,000 (1) | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | 200,000 | | | | | | | | | | | $ | 210,000 | | | ||
David Allen
|
| | | | 20,000 | | | | | | — | | | | | | | | | | | $ | 1.19 | | | | | | 8/6/2025 | | | | | | | | | | | | | | | | | | | | |
| | | 325,000 | | | | | | — | | | | | | | | | | | $ | 1.32 | | | | | | 9/29/2025 | | | | | | | | | | | | | | | | | | | | | ||
| | | 75,000 | | | | | | — | | | | | | | | | | | $ | 1.26 | | | | | | 4/28/2026 | | | | | | | | | | | | | | | | | | | | | ||
| | | 75,000 | | | | | | — | | | | | | | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | 100,000 (1) | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | 100,000 | | | | | | | | | | | $ | 105,000 | | | ||
Robert Roller
|
| | | | 162 | | | | | | — | | | | | | | | | | | $ | 13.20 | | | | | | 11/15/2017 | | | | | | | | | | | | | | | | | | | | |
| | | 2,273 | | | | | | — | | | | | | | | | | | $ | 26.40 | | | | | | 4/24/2019 | | | | | | | | | | | | | | | | | | | | | ||
| | | 7,500 | | | | | | — | | | | | | | | | | | $ | 1.19 | | | | | | 8/6/2025 | | | | | | | | | | | | | | | | | | | | | ||
| | | 100,000 | | | | | | — | | | | | | | | | | | $ | 1.32 | | | | | | 9/29/2025 | | | | | | | | | | | | | | | | | | | | | ||
| | | 75,000 | | | | | | — | | | | | | | | | | | $ | 1.26 | | | | | | 4/28/2026 | | | | | | | | | | | | | | | | | | | | | ||
| | | 75,000 | | | | | | — | | | | | | | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | 100,000 (1) | | | | | $ | 1.35 | | | | | | 4/28/2027 | | | | | | 100,000 | | | | | | | | | | | $ | 105,000 | | |
Plan Category
|
| |
(a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
| |
(b)
Weighted-average exercise price of outstanding options, warrants and rights |
| | | ||||||||||
Equity compensation plan approved by security holders
(1)
|
| | | | 3,328,137 | | | | | $ | 1.32 | | | | | | 330,954 | | |
Total
|
| | | | 3,328,137 | | | | | $ | 1.32 | | | | | | 330,954 | | |
|
Name
|
| |
Fees earned
or paid in cash ($) |
| |
Option
awards ($) (1) |
| |
Non-equity
incentive plan compensation ($) |
| |
Nonqualified
deferred compensation earnings ($) |
| |
All other
compensation ($) |
| |
Total ($)
|
| ||||||||||||||||||
Charles Benton
(2)
|
| | | $ | 30,000 | | | | | $ | 52,000 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 82,000 | | |
Norm Dumbroff
(2)
|
| | | $ | 24,000 | | | | | $ | 52,000 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 76,000 | | |
Edward Gildea
(2)
|
| | | $ | 24,000 | | | | | $ | 52,000 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 76,000 | | |
Joshua Silverman
(2)
|
| | | $ | 14,000 | | | | | $ | 52,000 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 66,000 | | |
Jonathan Schechter
|
| | | $ | 2,000 | | | | | $ | 0 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 2,000 | | |
Total
|
| | | $ | 94,000 | | | | | $ | 208,000 | | | | | | 0 | | | | | | 0 | | | | | | 0 | | | | | $ | 302,000 | | |
|
Directors and Executive Officers
|
| |
Number of Shares of
DropCar Capital Stock Held Immediately Prior to the Closing of the Merger |
| |||
Michael Spencer Richardson
(1)
|
| | | | 2,206,797 | | |
David Newman
(2)
|
| | | | 2,206,797 | | |
Solomon Mayer
|
| | | | — | | |
Daniel Gelbtuch
|
| | | | — | | |
Wesley Stanton
|
| | | | — | | |
Leandro Larroulet
|
| | | | — | | |
Plan
|
| ||||||
Name and Position
|
| |
Number of Shares (#)
|
| |||
Sebastian Giordano
Chief Executive Officer |
| | | | 1,161,494 | | |
David Allen
Chief Financial Officer |
| | | | 595,000 | | |
Robert Roller
President of Suisun Operations |
| | | | 359,773 | | |
All current executive officers as a group
|
| | | | 2,116,267 | | |
All current directors who are not executive officers as a group
|
| | | | 901,493 | | |
All employees, including all current officers who are not executive officers, as a group
|
| | | | 208,000 | | |
Each other person who received or is to receive 5% of awards
|
| | | | 0 | | |
| | |
For the three months ended July 31,
|
| |||||||||||||||||||||
| | |
2017
|
| |
2016
|
| ||||||||||||||||||
Revenue
|
| | | $ | 3,523,347 | | | | | | 100.0 % | | | | | $ | 3,416,453 | | | | | | 100.0 % | | |
Costs and expenses: | | | | | | ||||||||||||||||||||
Cost of revenue
|
| | | | 2,754,550 | | | | | | 78.2 % | | | | | | 2,635,508 | | | | | | 77.1 % | | |
Selling, general and administrative expenses
|
| | | | 1,184,501 | | | | | | 33.6 % | | | | | | 1,352,986 | | | | | | 39.6 % | | |
Depreciation and amortization
|
| | | | 30,073 | | | | | | 0.9 % | | | | | | 20,666 | | | | | | 0.6 % | | |
| | | | | 3,969,124 | | | | | | 112.7 % | | | | | | 4,009,160 | | | | | | 117.3 % | | |
Operating loss
|
| | | | (445,777 ) | | | | | | -12.7 % | | | | | | (592,707 ) | | | | | | -17.3 % | | |
Other income (expense): | | | | | | ||||||||||||||||||||
Interest expense
|
| | | | (2,051 ) | | | | | | -0.1 % | | | | | | (1,981 ) | | | | | | -0.1 % | | |
Income from arbitration settlement
|
| | | | 7,750 | | | | | | 0.2 % | | | | | | 1,150,000 | | | | | | 33.7 % | | |
Other income
|
| | | | — | | | | | | 0.0 % | | | | | | 4,487 | | | | | | 0.1 % | | |
(Loss) income from operations before income tax provision
|
| | | | (440,078 ) | | | | | | -12.5 % | | | | | | 559,799 | | | | | | 16.4 % | | |
Income tax provision
|
| | | | — | | | | | | 0.0 % | | | | | | 2,618 | | | | | | 0.1 % | | |
(Loss) income from operations
|
| | | | (440.078 ) | | | | | | -12.5 % | | | | | | 557,181 | | | | | | 16.3 % | | |
Net income (loss)
|
| | | $ | (440,078 ) | | | | | | -12.5 % | | | | | $ | 557,181 | | | | | | 16.3 % | | |
|
| | |
For the years ended April 30,
|
| | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
| | |
2017
|
| |
2016
|
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||
Revenue
|
| | | $ | 16,736,991 | | | | | | 100.0 % | | | | | $ | 14,555,102 | | | | | | 100.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Costs and expenses: | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Cost of revenue
|
| | | | 12,893,901 | | | | | | 77.0 % | | | | | | 11,570,364 | | | | | | 79.5 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Selling, general and administrative expenses
|
| | | | 6,272,138 | | | | | | 37.5 % | | | | | | 6,951,637 | | | | | | 47.8 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Depreciation and amortization
|
| | | | 115,454 | | | | | | 0.7 % | | | | | | 64,738 | | | | | | 0.4 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | | | | 19,281,493 | | | | | | 115.2 % | | | | | | 18,586,739 | | | | | | 127.7 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Operating loss
|
| | | | (2,544,502 ) | | | | | | -15.2 % | | | | | | (4,031,637 ) | | | | | | -27.7 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Other income (expense): | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Interest expense
|
| | | | (6,621 ) | | | | | | 0.0 % | | | | | | (3,196 ) | | | | | | 0.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Income from Section 16 settlement
|
| | | | — | | | | | | 0.0 % | | | | | | 400,000 | | | | | | 2.7 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Income from Arbitration settlement
|
| | | | 1,192,246 | | | | | | 7.1 % | | | | | | — | | | | | | 0.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Other income
|
| | | | 143,178 | | | | | | 0.9 % | | | | | | 5,284 | | | | | | 0.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Loss from continuing operations before income tax provision
|
| | | | (1,215,699 ) | | | | | | -7.3 % | | | | | | (3,629,549 ) | | | | | | -24.9 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Income tax provision
|
| | | | 3,130 | | | | | | 0.0 % | | | | | | 1,706 | | | | | | 0.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Loss from continuing operations
|
| | | | (1,218,829 ) | | | | | | -7.3 % | | | | | | (3,631,255 ) | | | | | | -24.9 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Discontinued operations: | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Income from discontinued operations
|
| | | | — | | | | | | 0.0 % | | | | | | 27,261 | | | | | | 0.2 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Gain from disposal
|
| | | | — | | | | | | 0.0 % | | | | | | 837,720 | | | | | | 5.8 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Consolidated net loss
|
| | | | (1,218,829 ) | | | | | | -7.3 % | | | | | | (2,766,274 ) | | | | | | -19.0 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Net loss attributable to noncontrolling interest
|
| | | | — | | | | | | 0.0 % | | | | | | 16,505 | | | | | | 0.1 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Net loss attributable to WPCS
|
| | | | (1,218,829 ) | | | | | | -7.3 % | | | | | | (2,782,779 ) | | | | | | -19.1 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Dividends declared on preferred stock
|
| | | | — | | | | | | 0.0 % | | | | | | (4,742,768 ) | | | | | | -32.6 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Deemed dividend on convertible preferred stock, due to beneficial conversion feature
|
| | | | (1,037,365 ) | | | | | | -6.2 % | | | | | | (744,499 ) | | | | | | -5.1 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
Net loss attributable to WPCS common
stockholders |
| | | $ | (2,256,194 ) | | | | | | -13.5 % | | | | | $ | (8,270,046 ) | | | | | | -56.8 % | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Six months ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2016
|
| |
2015
|
| ||||||||||||
Net services revenues
|
| | | $ | 1,527,853 | | | | | $ | 532,697 | | | | | $ | 1,702,495 | | | | | $ | 153,600 | | |
Cost of services
|
| | | | 1,234,366 | | | | | | 382,498 | | | | | | 1,229,536 | | | | | | 267,364 | | |
Gross profit (loss)
|
| | | | 293,487 | | | | | | 150,199 | | | | | | 472,959 | | | | | | (114,034 ) | | |
Gross margin %
|
| | | | 19 % | | | | | | 28 % | | | | | | 28 % | | | | | | (74 )% | | |
Selling, general and administrative: | | | | | | ||||||||||||||||||||
Technology
|
| | | | 46,138 | | | | | | 28,932 | | | | | | 77,675 | | | | | | 19,263 | | |
Sales, marketing and training
|
| | | | 498,355 | | | | | | 130,442 | | | | | | 365,782 | | | | | | 68,994 | | |
General and administrative
|
| | | | 1,515,229 | | | | | | 468,172 | | | | | | 1,320,228 | | | | | | 292,917 | | |
Total selling, general, and administrative
|
| | | | 2,059,722 | | | | | | 627,546 | | | | | | 1,763,685 | | | | | | 381,174 | | |
Depreciation and amortization
|
| | | | (90,827 ) | | | | | | (25,635 ) | | | | | | (79,169 ) | | | | | | (17,589 ) | | |
Interest expense, net
|
| | | | (328,393 ) | | | | | | (45,514 ) | | | | | | (47,451 ) | | | | | | (16,133 ) | | |
Net loss
|
| | | $ | (2,185,505 ) | | | | | $ | (548,496 ) | | | | | $ | (1,417,346 ) | | | | | $ | (528,930 ) | | |
|
| | |
Six month ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2016
|
| |
2015
|
| ||||||||||||
Net cash used in operating activities
|
| | | $ | (1,373,628 ) | | | | | $ | (434,405 ) | | | | | $ | (980,124 ) | | | | | $ | (470,495 ) | | |
Net cash used in investing activities
|
| | | $ | (117,784 ) | | | | | $ | (136,579 ) | | | | | $ | (281,452 ) | | | | | $ | (189,236 ) | | |
Net cash provided by financing activities
|
| | | $ | 2,251,768 | | | | | $ | 600,000 | | | | | $ | 1,255,000 | | | | | $ | 475,000 | | |
Name
|
| |
Age
|
| |
Position(s)
|
|
Executive Officers | | | | ||||
Spencer Richardson | | |
33
|
| | Chief Executive Officer; Chairman of Board of Directors | |
David Newman | | |
56
|
| | Chief Business Development Officer; Vice Chairman of Board of Directors | |
Daniel Gelbtuch | | |
45
|
| | Vice President Corporate Finance and Communications | |
Wesley Stanton | | |
40
|
| | Chief Customer Officer | |
Leandro Larroulet | | |
35
|
| | Chief Information Officer | |
Non-Employee Directors | | | | ||||
Sebastian Giordano | | |
60
|
| | Director | |
Brian Harrington | | |
50
|
| | Director | |
Joshua Silverman | | |
47
|
| | Director | |
Greg Schiffman | | |
59
|
| | Director | |
Name
|
| |
Fees Paid in
Cash |
| |
Option Awards
|
| |
Stock Awards
|
| |
Total
|
| ||||||||||||
Solomon Mayer
|
| | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Name and Principal Position
|
| |
Fiscal
Year |
| |
Salary
|
| |
Bonus
(1)
|
| |
Option
Awards |
| |
Non-Equity
Incentive Plan Compensation |
| |
All Other
Compensation |
| |
Total
|
| |||||||||||||||||||||
Spencer Richardson,
Chief Executive Officer |
| | | | 2016 | | | | | $ | 0 | | | | | $ | 50,000 (2) | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 142,750 (2) | | | | | $ | 192,750 | | |
| | | 2015 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 68,750 (2) | | | | | $ | 68,750 | | | ||
David Newman,
Chief Business Development Officer |
| | | | 2016 | | | | | $ | 0 | | | | | $ | 50,000 (3) | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 136,000 (3) | | | | | $ | 186,000 | | |
| | | 2015 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | |
Name
|
| |
Notes
|
| |
Warrants
|
| |
Total
Purchase Price |
| |||||||||
Alpha Capital Anstalt
|
| | | $ | 300,000 | | | | | | 155,440 | | | | | $ | 300,000 | | |
Name
|
| |
Notes
|
| |
Warrants
|
| |
Total
Purchase Price |
| |||||||||
Alpha Capital Anstalt
|
| | | $ | 225,000 | | | | | | 116,580 | | | | | $ | 225,000 | | |
Brio Capital Master Fund Ltd.
|
| | | $ | 200,000 | | | | | | 103,627 | | | | | $ | 200,000 | | |
Name
|
| |
Notes
|
| |
Warrants
|
| |
Total
Purchase Price |
| |||||||||
Alpha Capital Anstalt
|
| | | $ | 300,000 | | | | | | 155,440 | | | | | $ | 300,000 | | |
| | |
DropCar
(1)
|
| |
WPCS
(2)
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| ||||||||||||
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 812 | | | | | $ | 1,881 | | | | | $ | 4,000 | | | |
(c)
|
| | | $ | 6,693 | | |
Restricted cash
|
| | | | — | | | | | | 500 | | | | | | — | | | | | | | | | 500 | | |
Accounts receivable
|
| | | | 185 | | | | | | 4,002 | | | | | | — | | | | | | | | | 4,187 | | |
Costs and estimated earnings in excess of billings on
uncompleted contracts |
| | | | — | | | | | | 335 | | | | | | — | | | | | | | | | 335 | | |
Prepaid expense and other current assets
|
| | | | 16 | | | | | | 51 | | | | | | — | | | | | | | | | 67 | | |
Total current assets
|
| | | | 1,013 | | | | | | 6,769 | | | | | | 4,000 | | | | | | | | | 11,782 | | |
Property and equipment, net
|
| | | | 474 | | | | | | 297 | | | | | | — | | | | | | | | | 771 | | |
Intangible assets
|
| | | | — | | | | | | — | | | | | | 2,500 | | | |
(b)
|
| | | | 2,500 | | |
Goodwill
|
| | | | — | | | | | | — | | | | | | 9,079 | | | |
(b)
|
| | | | 9,079 | | |
Other assets
|
| | | | 3 | | | | | | 11 | | | | | | — | | | | | | | | | 14 | | |
Total assets
|
| | | $ | 1,490 | | | | | $ | 7,077 | | | | | $ | 15,579 | | | | | | | | $ | 24,146 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current portion of loans payable
|
| | | $ | — | | | | | | 52 | | | | | | — | | | | | | | | | 52 | | |
Accounts payable, accrued expenses and deferred revenue
|
| | | | 625 | | | | | | 1,369 | | | | | | 500 | | | |
(b)
|
| | | | 3,311 | | |
| | | | | | | | | | | | | | | | | 817 | | | |
(f)
|
| | | | | | |
Billings in excess of costs and estimated earnings on
uncompleted contracts |
| | | | — | | | | | | 2,912 | | | | | | — | | | | | | | | | 2,912 | | |
Convertible notes payable, net of issuance costs
|
| | | | 1,342 | | | | | | — | | | | | | 4,000 | | | |
(c)
|
| | | | — | | |
| | | | | | | | | | | | | | | | | (5,342 ) | | | |
(d)
|
| | | | | | |
Total current liabilities
|
| | | | 1,967 | | | | | | 4,333 | | | | | | 25 | | | | | | | | | 6,275 | | |
Loans payable, net of current portion
|
| | | | — | | | | | | 112 | | | | | | — | | | | | | | | | 112 | | |
Total liabilities
|
| | | | 1,967 | | | | | | 4,445 | | | | | | (25 ) | | | | | | | | | 6,387 | | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stockholders’ equity (deficit) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Preferred stock, $.0001 par value
|
| | | | — | | | | | | 1,145 | | | | | | (1,145 ) | | | |
(b)
|
| | | | — | | |
Common stock, $.001 par value
|
| | | | 1 | | | | | | — | | | | | | 34 | | | |
(a)
|
| | | | 35 | | |
Additional paid-in-capital
|
| | | | 3,672 | | | | | | 89,004 | | | | | | (34 ) | | | |
(a)
|
| | | | 25,373 | | |
| | | | | | | | | | | | | | | | | 13,711 | | | |
(b)
|
| | | | | | |
| | | | | | | | | | | | | | | | | (89,004 ) | | | |
(b)
|
| | |||||
| | | | | | | | | | | | | | | | | 6,240 | | | |
(d)
|
| | | | | | |
| | | | | | | | | | | | | | | | | 1,784 | | | |
(e)
|
| | | | | | |
Accumulated deficit
|
| | | | (4,150 ) | | | | | | (87,517 ) | | | | | | 87,517 | | | |
(b)
|
| | | | (7,649 ) | | |
| | | | | | | | | | | | | | | | | (898 ) | | | |
(d)
|
| | | | | | |
| | | | | | | | | | | | | | | | | (1,784 ) | | | |
(e)
|
| | | | | | |
| | | | | | | | | | | | | | | | | (817 ) | | | |
(f)
|
| | | | | | |
Total stockholders’ equity (deficit)
|
| | | | (477 ) | | | | | | 2,632 | | | | | | 15,604 | | | | | | | | | 17,759 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 1,490 | | | | | $ | 7,077 | | | | | $ | 15,579 | | | | | | | | $ | 24,146 | | |
|
| | |
DropCar
(1)
|
| |
WPCS
(2)
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| ||||||||||||
Revenue:
|
| | | $ | 1,528 | | | | | $ | 7,732 | | | | | $ | — | | | | | | | | $ | 9,260 | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of revenue
|
| | | | 1,234 | | | | | | 5,958 | | | | | | — | | | | | | | | | 7,192 | | |
Selling, general and administrative expenses
|
| | | | 2,060 | | | | | | 3,070 | | | | | | — | | | | | | | | | 5,130 | | |
Depreciation and amortization
|
| | | | 91 | | | | | | 61 | | | | | | 250 | | | |
(g)
|
| | | | 402 | | |
| | | | | 3,385 | | | | | | 9,089 | | | | | | 250 | | | | | | | | | 12,724 | | |
Operating loss
|
| | | | (1,857 ) | | | | | | (1,357 ) | | | | | | (250 ) | | | | | | | | | (3,464 ) | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | (328 ) | | | | | | (4 ) | | | | | | — | | | | | | | | | (332 ) | | |
Income from arbitration settlement
|
| | | | — | | | | | | 11 | | | | | | — | | | | | | | | | 11 | | |
Other income
|
| | | | — | | | | | | 8 | | | | | | — | | | | | | | | | 8 | | |
Loss before income taxes
|
| | | | (2,185 ) | | | | | | (1,342 ) | | | | | | (250 ) | | | | | | | | | (3,777 ) | | |
Deemed dividend on convertible preferred stock,
due to beneficial conversion feature |
| | | | — | | | | | | (476 ) | | | | | | — | | | | | | | | | (476 ) | | |
Net loss attributable to WPCS common shareholders
|
| | | $ | (2,185 ) | | | | | $ | (1,818 ) | | | | | $ | (250 ) | | | | | | | | $ | (4,253 ) | | |
Net loss per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | $ | (0.54 ) | | | | | | | | | | | | | | | (0.12 ) | | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | | 3,345,896 | | | | | | 31,155,366 | | | |
(h)
|
| | | | 34,501,262 | | |
|
| | |
DropCar
(1)
|
| |
WPCS
(2)
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| ||||||||||||
Revenue:
|
| | | $ | 1,702 | | | | | $ | 15,791 | | | | | $ | — | | | | | | | | $ | 17,493 | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of revenue
|
| | | | 1,229 | | | | | | 12,179 | | | | | | — | | | | | | | | | 13,408 | | |
Selling, general and administrative expenses
|
| | | | 1,764 | | | | | | 6,409 | | | | | | — | | | | | | | | | 8,173 | | |
Depreciation and amortization
|
| | | | 79 | | | | | | 96 | | | | | | 500 | | | |
(g)
|
| | | | 675 | | |
| | | | | 3,072 | | | | | | 18,684 | | | | | | 500 | | | | | | | | | 22,256 | | |
Operating loss
|
| | | | (1,370 ) | | | | | | (2,893 ) | | | | | | (500 ) | | | | | | | | | (4,763 ) | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | (47 ) | | | | | | (6 ) | | | | | | — | | | | | | | | | (53 ) | | |
Income from arbitration settlement
|
| | | | — | | | | | | 1,192 | | | | | | — | | | | | | | | | 1,192 | | |
Other income
|
| | | | — | | | | | | 128 | | | | | | — | | | | | | | | | 128 | | |
Loss before income taxes
|
| | | | (1,417 ) | | | | | | (1,579 ) | | | | | | (500 ) | | | | | | | | | (3,496 ) | | |
Income tax benefit
|
| | | | — | | | | | | (4 ) | | | | | | — | | | | | | | | | (4 ) | | |
Consolidated net loss
|
| | | | (1,417 ) | | | | | | (1,583 ) | | | | | | (500 ) | | | | | | | | | (3,500 ) | | |
Dividends declared on preferred stock
|
| | | | — | | | | | | (373 ) | | | | | | — | | | | | | | | | (373 ) | | |
Deemed dividend on convertible preferred stock,
due to beneficial conversion feature |
| | | | — | | | | | | (537 ) | | | | | | — | | | | | | | | | (537 ) | | |
Net loss attributable to WPCS common shareholders
|
| | | $ | (1,417 ) | | | | | $ | (2,493 ) | | | | | $ | (500 ) | | | | | | | | $ | (4,410 ) | | |
Net loss per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | $ | (0.90 ) | | | | | | | | | | | | | | $ | (0.13 ) | | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | |||||
Basic and diluted
|
| | | | | | | | | | 2,782,564 | | | | | | 31,155,366 | | | |
(h)
|
| | | | 33,937,930 | | |
|
|
Cash and cash equivalents
|
| | | $ | 1,881 | | |
|
Restricted cash
|
| | | | 500 | | |
|
Accounts receivable
|
| | | | 4,002 | | |
|
Costs and estimated earnings in excess of billing
|
| | | | 335 | | |
|
Prepaid expense and other current assets
|
| | | | 51 | | |
|
Property and equipment, net
|
| | | | 297 | | |
|
Other assets
|
| | | | 11 | | |
|
Current portion of loans payable
|
| | | | (52 ) | | |
|
Accounts payable and accrued expenses
|
| | | | (1,869 ) | | |
|
Billings in excess of costs and estimated earning:
|
| | | | (2,912 ) | | |
|
Loans payable, net of current portion
|
| | | | (112 ) | | |
|
Goodwill
|
| | | | 9,079 (w) | | |
|
Intangible assets
|
| | | | 2,500 | | |
|
Total consideration
|
| | | $ | 13,711 (y) | | |
|
Change in stock price
|
| |
Stock price
|
| |
Estimated
purchase price |
| |
Estimated
goodwill |
| |||||||||
Increase of 10%
|
| | | $ | 1.93 | | | | | $ | 11,739 | | | | | $ | 7,107 | | |
Decrease of 10%
|
| | | $ | 1.58 | | | | | $ | 10,566 | | | | | $ | 5,934 | | |
Increase of 20%
|
| | | $ | 2.10 | | | | | $ | 12,326 | | | | | $ | 7,694 | | |
Decrease of 20%
|
| | | $ | 1.40 | | | | | $ | 9,979 | | | | | $ | 5,347 | | |
Increase of 30%
|
| | | $ | 2.28 | | | | | $ | 12,912 | | | | | $ | 8,280 | | |
Decrease of 30%
|
| | | $ | 1.23 | | | | | $ | 9,392 | | | | | $ | 4,760 | | |
Increase of 50%
|
| | | $ | 2.63 | | | | | $ | 14,085 | | | | | $ | 9,453 | | |
Decrease of 50%
|
| | | $ | 0.88 | | | | | $ | 8,219 | | | | | $ | 3,587 | | |
| | |
Common
Stock |
| |
Additional
Paid in Capital |
| ||||||
Issuance of 31,155,366 shares of WPCS’ common stock
|
| | | | 31 | | | | | | (31 ) | | |
Adjustments due to reverse merger
|
| | | | 3 | | | | | | (3 ) | | |
| | | | | 34 | | | | | | (34 ) | | |
|
Total consideration
|
| | | $ | 13,711 (y) | | |
|
Preferred stock, $.0001 par value
|
| | | | (1,145 ) | | |
|
Common stock, $.001 par value
|
| | | | — | | |
|
Additional paid-in-capital
|
| | | | (89,004 ) | | |
|
Accumulated deficit
|
| | | | 87,517 | | |
| Write-down/(write-up) of assets: | | | | | | | |
|
Intangible assets
|
| | | | (2,500 ) | | |
| (Write-down)/write-up of liabilities: | | | | | | | |
|
Accounts payable (change in control obligations)
|
| | | | 500 (z) | | |
|
Goodwill
|
| | | $ | 9,079 | | |
|
| | |
Estimated
Fair Value |
| |
Estimated
Useful Life in Years |
| |
Year Ended
December 31, 2016 Amortization Expense |
| |
Six Months
Ended June 30, 2017 Amortization Expense |
| |||||||||
Customer list
|
| | | $ | 2,500 | | | |
5 years
|
| | | $ | 500 | | | | | $ | 250 | | |
| | | | $ | 2,500 | | | | | | | | $ | 500 | | | | | $ | 250 | | |
|
Name and Address of Beneficial Owner
|
| |
Number of
Shares Owned |
| |
Percentage
of Class |
| ||||||
Named Executive Officers and Directors | | | | ||||||||||
Sebastian Giordano
|
| | | | 1,161,494 (1) | | | | | | 24.7 % | | |
David Allen
|
| | | | 595,000 (1) | | | | | | 14.4 % | | |
Charles Benton
|
| | | | 284,545 (1) | | | | | | 7.4 % | | |
Norm Dumbroff
|
| | | | 282,273 (1) | | | | | | 7.4 % | | |
Edward Gildea
|
| | | | 284,675 (1) | | | | | | 7.4 % | | |
Robert Roller
|
| | | | 359,773 (1) | | | | | | 9.2 % | | |
Joshua Silverman
|
| | | | 50,000 (1) | | | | | | 1.4 % | | |
Jonathan Schechter
|
| | | | — (1) | | | | | | — | | |
Brian Daly
|
| | | | — (1) | | | | | | — | | |
All Executive Officers and Directors as a Group (9)
|
| | | | 3,017,760 (1) | | | | | | 46.0 % | | |
Greater Than 5% Stockholders | | | | ||||||||||
Iroquois Capital Management LLC
(2)
|
| | | | 393,292 | | | | | | 9.9 % | | |
Renaissance Technologies LLC
(3)
|
| | | | 185,219 | | | | | | 5.2 % | | |
Alpha Capital Anstalt
(4)
|
| | | | 393,292 | | | | | | 9.9 % | | |
Barry Honig
(5)
|
| | | | 357,443 | | | | | | 9.9 % | | |
Brio Capital Management LLC
(6)
|
| | | | 393,292 | | | | | | 9.9 % | | |
| | |
Beneficial Ownership
|
| |||||||||||||||||||||
Name and Address of Beneficial Owner
|
| |
Number of
Outstanding Shares Beneficially Owned |
| |
Number of
Shares Exercisable Within 60 Days |
| |
Number of
Shares Beneficially Owned |
| |
Percentage of
Beneficial Ownership |
| ||||||||||||
5% and Greater Stockholders | | | | | | ||||||||||||||||||||
Alpha Capital Anstalt
(1)
|
| | | | 2,334,051 | | | | | | 992,357 | | | | | | 3,326,408 | | | | | | 30.0 % | | |
SDMY Holdings LLC
(2)
|
| | | | 538,639 | | | | | | — | | | | | | 538,639 | | | | | | 5.3 % | | |
Executive Officers and Directors | | | | | | ||||||||||||||||||||
Spencer Richardson
(3)
|
| | | | 2,206,797 | | | | | | — | | | | | | 2,206,797 | | | | | | 21.9 % | | |
David Newman
(4)
|
| | | | 2,206,797 | | | | | | — | | | | | | 2,206,797 | | | | | | 21.9 % | | |
Solomon Mayer
|
| | | | — | | | | | | — | | | | | | — | | | | |||||
Daniel Gelbtuch
|
| | | | — | | | | | | — | | | | | | — | | | | |||||
Wesley Stanton
|
| | | | — | | | | | | — | | | | | | — | | | | |||||
Leandro Larroulet
|
| | | | — | | | | | | — | | | | | | — | | | | |||||
All directors and executive officers as a group (6 persons)
|
| | | | 4,413,594 | | | | | | — | | | | | | 4,413,594 | | | | | | 43.7 % | | |
| | |
Beneficial Ownership
|
| |||||||||||||||||||||
Name and Address of Beneficial Owner
|
| |
Number of
Outstanding Shares Beneficially Owned |
| |
Number of
Shares Exercisable Within 60 Days |
| |
Number of
Shares Beneficially Owned |
| |
Percentage of
Beneficial Ownership |
| ||||||||||||
5% and Greater Stockholders
|
| | | | | ||||||||||||||||||||
Alpha Capital Anstalt
(1)
|
| | | | 11,815,124 | | | | | | 532,642 | | | | | | 12,347,766 | | | | | | 35.2 % | | |
Iroquois Capital Management LLC
(2)
|
| | | | — | | | | | | 2,125,317 | | | | | | 2,125,317 | | | | | | 5.8 % | | |
Executive Officers and Directors
|
| | | | | ||||||||||||||||||||
Spencer Richardson
(3)
|
| | | | 4,321,040 | | | | | | — | | | | | | 4,321,040 | | | | | | 12.5 % | | |
David Newman
(4)
|
| | | | 4,321,040 | | | | | | — | | | | | | 4,321,040 | | | | | | 12.5 % | | |
Daniel Gelbtuch
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Wesley Stanton
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Leandro Larroulet
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Joshua Silverman
(5)
|
| | | | — | | | | | | 50,000 | | | | | | 50,000 | | | | | | * | | |
Sebastian Giordano
(6)
|
| | | | — | | | | | | 1,161,494 | | | | | | 1,161,494 | | | | | | 2.7 % | | |
Greg Schiffman
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Brian Harrington
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
All directors and executive officers as a group (10 persons)
|
| | | | 8,642,080 | | | | | | 1,211,494 | | | | | | 9,853,574 | | | | | | 27.6 % | | |
|
WPCS International Incorporated
521 Railroad Avenue Suisun City, CA 94585 Attn: Investor Relations Tel: Email: |
| |
DropCar, Inc.
1412 Broadway, Suite 2105 New York, NY 10018 Telephone: (646) 342-1595 Attention: Spencer Richardson Email: spencer@dropcar.com |
|
| | |
Page
|
| |||
Audited Financial Statements | | | | | | | |
| | | | F-A-2 | | | |
| | | | F-A-3 | | | |
| | | | F-A-4 | | | |
| | | | F-A-5 | | | |
| | | | F-A-6 | | | |
| | | | F-A-7 | | | |
| | | | F-A-9 | | | |
Unaudited Financial Statements | | | | | | | |
| | | | F-A-28 | | | |
| | | | F-A-29 | | | |
| | | | F-A-30 | | | |
| | | | F-A-31 | | |
| | |
April 30,
2017 |
| |
April 30,
2016 |
| ||||||
ASSETS | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 1,659,318 | | | | | $ | 2,235,597 | | |
Restricted cash
|
| | | | 500,026 | | | | | | — | | |
Accounts receivable, net of allowance of $247,000 and $92,000 at April 30, 2017 and 2016, respectively
|
| | | | 4,199,674 | | | | | | 2,886,154 | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | | 410,826 | | | | | | 357,210 | | |
Prepaid expenses and other current assets
|
| | | | 41,135 | | | | | | 66,256 | | |
Total current assets
|
| | | | 6,810,979 | | | | | | 5,545,217 | | |
Property and equipment, net
|
| | | | 322,643 | | | | | | 237,800 | | |
Other assets
|
| | | | 11,484 | | | | | | 21,162 | | |
Total assets
|
| | | $ | 7,145,106 | | | | | $ | 5,804,179 | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Current portion of loans payable
|
| | | $ | 52,946 | | | | | $ | 53,996 | | |
Accounts payable and accrued expenses
|
| | | | 1,790,256 | | | | | | 2,071,765 | | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
| | | | 2,105,797 | | | | | | 1,358,289 | | |
Total current liabilities
|
| | | | 3,948,999 | | | | | | 3,484,050 | | |
Loans payable, net of current portion
|
| | | | 124,559 | | | | | | 94,825 | | |
Total liabilities
|
| | | | 4,073,558 | | | | | | 3,578,875 | | |
Commitments and contingencies | | | | | | | | | | | | | |
Stockholders’ equity | | | | | | | | | | | | | |
Preferred stock – $0.0001 par value, 5,000,000 shares authorized at April 30, 2017 and 2016, respectively
|
| | | | | | | | | | | | |
Convertible Series H, 8,500 shares designated – 8 and 2,638 shares issued and outstanding at April 30, 2017 and 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 April 30, 2017 and 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 April 30, 2017 and 2016, respectively; liquidation preference of $400,000
|
| | | | 230,721 | | | | | | — | | |
Convertible Series H-3, 8,461 shares designated – 7,017 and 0 shares issued and outstanding at April 30, 2017 and 2016, respectively; liquidation preference of $968,000
|
| | | | 475,185 | | | | | | — | | |
Common stock – $0.0001 par value, 100,000,000 shares authorized, 3,352,159 and 2,691,055 shares issued and outstanding as of April 30, 2017 and 2016, respectively
|
| | | | 335 | | | | | | 269 | | |
Additional paid-in capital
|
| | | | 89,003,669 | | | | | | 85,940,389 | | |
Accumulated deficit
|
| | | | (87,077,134 ) | | | | | | (84,820,940 ) | | |
Total stockholders’ equity
|
| | | | 3,071,548 | | | | | | 2,225,304 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 7,145,106 | | | | | $ | 5,804,179 | | |
|
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Revenue
|
| | | $ | 16,736,991 | | | | | $ | 14,555,102 | | |
Costs and expenses: | | | | | | | | | | | | | |
Cost of revenue
|
| | | | 12,893,901 | | | | | | 11,570,364 | | |
Selling, general and administrative expenses
|
| | | | 6,272,138 | | | | | | 6,951,637 | | |
Depreciation and amortization
|
| | | | 115,454 | | | | | | 64,738 | | |
| | | | | 19,281,493 | | | | | | 18,586,739 | | |
Operating loss
|
| | | | (2,544,502 ) | | | | | | (4,031,637 ) | | |
Other income (expense): | | | | | | | | | | | | | |
Interest expense
|
| | | | (6,621 ) | | | | | | (3,196 ) | | |
Income from Section 16 settlement
|
| | | | — | | | | | | 400,000 | | |
Income from Arbitration settlement
|
| | | | 1,192,246 | | | | | | — | | |
Other income
|
| | | | 143,178 | | | | | | 5,284 | | |
Loss from continuing operations before income tax provision
|
| | | | (1,215,699 ) | | | | | | (3,629,549 ) | | |
Income tax provision
|
| | | | 3,130 | | | | | | 1,706 | | |
Loss from continuing operations
|
| | | | (1,218,829 ) | | | | | | (3,631,255 ) | | |
Discontinued operations: | | | | | | | | | | | | | |
Income from discontinued operations
|
| | | | — | | | | | | 27,261 | | |
Gain from disposal
|
| | | | — | | | | | | 837,720 | | |
Consolidated net loss
|
| | | | (1,218,829 ) | | | | | | (2,766,274 ) | | |
Net income attributable to noncontrolling interest
|
| | | | — | | | | | | 16,505 | | |
Net loss attributable to WPCS
|
| | | | (1,218,829 ) | | | | | | (2,782,779 ) | | |
Dividends declared on preferred stock
|
| | | | — | | | | | | (4,742,768 ) | | |
Deemed dividend on convertible preferred stock, due to beneficial conversion
feature |
| | | | (1,037,365 ) | | | | | | (744,499 ) | | |
Net loss attributable to WPCS common shareholders
|
| | | $ | (2,256,194 ) | | | | | $ | (8,270,046 ) | | |
Basic and diluted loss from continuing operations per common share
|
| | | $ | (0.76 ) | | | | | $ | (3.98 ) | | |
Gain from disposal
|
| | | | — | | | | | | 0.37 | | |
Basic and diluted net loss per common share
|
| | | $ | (0.76 ) | | | | | $ | (3.61 ) | | |
Basic and diluted weighted average number of common shares outstanding
|
| | | | 2,967,984 | | | | | | 2,290,050 | | |
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Consolidated net loss
|
| | | $ | (1,218,829 ) | | | | | $ | (2,766,274 ) | | |
Reclassification adjustments of other comprehensive loss on the sale of China
Operations |
| | | | — | | | | | | 349,723 | | |
Comprehensive loss attributable to WPCS shareholders
|
| | | $ | (1,218,829 ) | | | | | $ | (2,416,551 ) | | |
|
| | |
Preferred Stock
|
| |
Common Stock
|
| |
Additional
Paid-In Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Equity |
| |||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||
Balance, May 1, 2015
|
| | | | 16,126 | | | | | $ | 5,120,697 | | | | | | 982,660 | | | | | $ | 98 | | | | | $ | 70,380,397 | | | | | $ | (76,550,894 ) | | | | | $ | (1,049,702 ) | | |
Issuance of Series H-1 preferred stock and warrants for cash
|
| | | | 8,532 | | | | | | 1,575,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,575,000 | | |
Issuance of warrants with Series H-1 preferred stock
|
| | | | — | | | | | | (841,405 ) | | | | | | — | | | | | | — | | | | | | 841,405 | | | | | | — | | | | | | — | | |
Beneficial conversion feature of Series H-1 convertible preferred stock
|
| | | | — | | | | | | (703,770 ) | | | | | | — | | | | | | — | | | | | | 703,770 | | | | | | — | | | | | | — | | |
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H-1 convertible preferred stock
|
| | | | — | | | | | | 703,770 | | | | | | — | | | | | | — | | | | | | — | | | | | | (703,770 ) | | | | | | — | | |
Deemed dividend on conversion of Series H-1 convertible preferred stock to common stock
|
| | | | — | | | | | | 40,729 | | | | | | — | | | | | | — | | | | | | — | | | | | | (40,729 ) | | | | | | — | | |
Conversion of Series H-1 preferred stock to common stock
|
| | | | (413 ) | | | | | | (75,000 ) | | | | | | 41,300 | | | | | | 4 | | | | | | 74,996 | | | | | | — | | | | | | — | | |
Dividends declared on Series F and F-1 preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (159,215 ) | | | | | | (159,215 ) | | |
Dividends declared on Series G and G-1 preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (126,198 ) | | | | | | (126,198 ) | | |
Make-whole amount on conversion of preferred F-1 and G-1 shares
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (4,457,355 ) | | | | | | (4,457,355 ) | | |
Conversion of dividends payable related to make-whole amount to common
stock |
| | | | — | | | | | | — | | | | | | 204,865 | | | | | | 21 | | | | | | 4,457,335 | | | | | | — | | | | | | 4,457,356 | | |
Conversion of a portion of the dividends payable related to Series F preferred stock
|
| | | | — | | | | | | — | | | | | | 13,959 | | | | | | 1 | | | | | | 313,185 | | | | | | — | | | | | | 313,186 | | |
Conversion of a portion of the dividends payable related to Series F-1 preferred stock
|
| | | | — | | | | | | — | | | | | | 14,291 | | | | | | 1 | | | | | | 311,790 | | | | | | — | | | | | | 311,791 | | |
Conversion of a portion of the dividends payable related to Series G preferred stock
|
| | | | — | | | | | | — | | | | | | 7,022 | | | | | | 1 | | | | | | 129,655 | | | | | | — | | | | | | 129,656 | | |
Conversion of a portion of the dividends payable related to Series G-1 preferred stock
|
| | | | — | | | | | | — | | | | | | 11,154 | | | | | | 1 | | | | | | 208,324 | | | | | | — | | | | | | 208,325 | | |
Conversion of short term convertible note to Series H preferred stock
|
| | | | 8,435 | | | | | | 1,299,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,299,000 | | |
Conversion of Series F preferred stock to common stock
|
| | | | (5,268 ) | | | | | | (1,589,933 ) | | | | | | 239,454 | | | | | | 24 | | | | | | 1,589,909 | | | | | | — | | | | | | — | | |
Conversion of Series F-1 preferred stock to common stock
|
| | | | (5,642 ) | | | | | | (1,702,808 ) | | | | | | 256,456 | | | | | | 26 | | | | | | 1,702,782 | | | | | | — | | | | | | — | | |
Conversion of Series G preferred stock to common stock
|
| | | | (2,088 ) | | | | | | (731,706 ) | | | | | | 116,453 | | | | | | 12 | | | | | | 731,694 | | | | | | — | | | | | | — | | |
Conversion of Series G-1 preferred stock to common stock
|
| | | | (3,128 ) | | | | | | (1,096,250 ) | | | | | | 174,457 | | | | | | 17 | | | | | | 1,096,233 | | | | | | — | | | | | | — | | |
Conversion of Series H preferred stock to common stock
|
| | | | (5,797 ) | | | | | | (892,738 ) | | | | | | 579,700 | | | | | | 58 | | | | | | 892,680 | | | | | | — | | | | | | — | | |
Share based compensation
|
| | | | — | | | | | | — | | | | | | 47,969 | | | | | | 5 | | | | | | 2,506,234 | | | | | | — | | | | | | 2,506,239 | | |
Fractional shares issued on reverse split
|
| | | | — | | | | | | — | | | | | | 1,315 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Reclassification adjustments of other comprehensive loss on sale of China operations
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Reclassification adjustments of net loss attributable to noncontrolling interest on sale of China Operations
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss attributable to WPCS
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,782,779 ) | | | | | | (2,782,779 ) | | |
Balance, April 30, 2016
|
| | | | 10,757 | | | | | | 1,105,586 | | | | | | 2,691,055 | | | | | | 269 | | | | | | 85,940,389 | | | | | | (84,820,940 ) | | | | | | 2,225,304 | | |
Share based compensation
|
| | | | — | | | | | | — | | | | | | 15,104 | | | | | | 2 | | | | | | 602,429 | | | | | | — | | | | | | 602,431 | | |
Issuance of Series H-2 preferred stock and warrants for cash, net of offering costs
|
| | | | 3,305 | | | | | | 461,969 | | | | | | — | | | | | | — | | | | | | (32,338 ) | | | | | | — | | | | | | 429,631 | | |
Issuance of warrants with Series H-2 preferred stock
|
| | | | — | | | | | | (231,248 ) | | | | | | — | | | | | | — | | | | | | 231,248 | | | | | | — | | | | | | — | | |
Beneficial conversion feature of Series H-2 convertible preferred stock
|
| | | | — | | | | | | (183,284 ) | | | | | | — | | | | | | — | | | | | | 183,284 | | | | | | — | | | | | | — | | |
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H-2 convertible preferred stock
|
| | | | — | | | | | | 183,284 | | | | | | — | | | | | | — | | | | | | — | | | | | | (183,284 ) | | | | | | — | | |
Issuance of Series H-3 preferred stock and warrants for cash, net of offering costs
|
| | | | 7,017 | | | | | | 1,033,011 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,033,011 | | |
Issuance of warrants with Series H-3 preferred stock
|
| | | | — | | | | | | (557,826 ) | | | | | | — | | | | | | — | | | | | | 557,826 | | | | | | — | | | | | | — | | |
Beneficial conversion feature of Series H-3 convertible preferred stock
|
| | | | — | | | | | | (476,375 ) | | | | | | — | | | | | | — | | | | | | 476,375 | | | | | | — | | | | | | — | | |
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H-3 convertible preferred stock
|
| | | | — | | | | | | 476,375 | | | | | | — | | | | | | — | | | | | | — | | | | | | (476,375 ) | | | | | | — | | |
Conversion of Series H preferred stock to common stock
|
| | | | (2,630 ) | | | | | | (405,020 ) | | | | | | 263,000 | | | | | | 26 | | | | | | 404,994 | | | | | | — | | | | | | — | | |
Conversion of Series H-1 preferred stock to common stock
|
| | | | (3,830 ) | | | | | | (639,500 ) | | | | | | 383,000 | | | | | | 38 | | | | | | 639,462 | | | | | | — | | | | | | — | | |
Deemed dividend on conversion of Series H-1 convertible preferred stock to common stock
|
| | | | — | | | | | | 377,706 | | | | | | — | | | | | | — | | | | | | — | | | | | | (377,706 ) | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (1,218,829 ) | | | | | | (1,218,829 ) | | |
Balance, April 30, 2017
|
| | | | 14,619 | | | | | $ | 1,144,678 | | | | | | 3,352,159 | | | | | $ | 335 | | | | | $ | 89,003,669 | | | | | $ | (87,077,134 ) | | | | | $ | 3,071,548 | | |
|
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Operating activities: | | | | | | | | | | | | | |
Net loss from continuing operations
|
| | | $ | (1,218,829 ) | | | | | $ | (3,631,255 ) | | |
Consolidated net income from discontinued operations
|
| | | | — | | | | | | 864,981 | | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 115,454 | | | | | | 64,738 | | |
Shares based compensation
|
| | | | 602,431 | | | | | | 2,506,239 | | |
Gain on sale of China Operations
|
| | | | — | | | | | | (837,720 ) | | |
Income on Section 16 settlement
|
| | | | — | | | | | | (400,000 ) | | |
Changes in operating assets and liabilities:
|
| | | ||||||||||
Accounts receivable
|
| | | | (1,313,520 ) | | | | | | 3,608,736 | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | | (53,616 ) | | | | | | 63,224 | | |
Current assets held for sale
|
| | | | — | | | | | | (3,853,621 ) | | |
Prepaid expenses and other current assets
|
| | | | 25,121 | | | | | | 93,513 | | |
Other assets
|
| | | | 9,678 | | | | | | 4,222 | | |
Other assets held for sale
|
| | | | — | | | | | | (34,523 ) | | |
Accounts payable and accrued expenses
|
| | | | (281,509 ) | | | | | | (3,342,504 ) | | |
Current liabilities held for sale
|
| | | | — | | | | | | 2,200,030 | | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
| | | | 747,508 | | | | | | 11,828 | | |
Net cash used in operating activities
|
| | | | (1,367,282 ) | | | | | | (2,682,112 ) | | |
Investing activities: | | | | | | | | | | | | | |
Acquisition of property and equipment
|
| | | | (77,272 ) | | | | | | (139,552 ) | | |
Proceeds from sale of China Operations, net of acquisition cost
|
| | | | — | | | | | | 1,325,744 | | |
Net cash (used in) provided by investing activities
|
| | | | (77,272 ) | | | | | | 1,186,192 | | |
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, net of offering costs
|
| | | | 429,631 | | | | | | — | | |
Proceeds from issuance of Series H-3 preferred stock and warrants, net of offering costs
|
| | | | 1,033,011 | | | | | | — | | |
Borrowings under loan payable obligations
|
| | | | — | | | | | | 115,753 | | |
Repayment under loan payable obligations
|
| | | | (94,341 ) | | | | | | (51,106 ) | | |
Repayments under other payable to Zurich
|
| | | | — | | | | | | (360,000 ) | | |
Repayments of short term convertible note
|
| | | | — | | | | | | (4,000 ) | | |
Net cash provided by financing activities
|
| | | | 1,368,301 | | | | | | 1,275,647 | | |
Effect of exchange rate changes on cash
|
| | | | — | | | | | | 91,510 | | |
Net decrease in cash, cash equivalents and restricted cash
|
| | | | (76,253 ) | | | | | | (128,763 ) | | |
Cash, cash equivalents and restricted cash beginning of the year
|
| | | | 2,235,597 | | | | | | 2,364,360 | | |
Cash, cash equivalents and restricted cash end of the year
|
| | | $ | 2,159,344 | | | | | $ | 2,235,597 | | |
|
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Schedule of non-cash investing and financing activities: | | | | | | | | | | | | | |
Automobile loan payable obligations
|
| | | $ | 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 | | | | | $ | — | | |
Issuance of warrants with Series H-3 preferred stock
|
| | | $ | 557,826 | | | | | $ | — | | |
Beneficial conversion feature of Series H-3 convertible preferred stock
|
| | | $ | 476,375 | | | | | $ | — | | |
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H-3 convertible preferred stock
|
| | | $ | 476,375 | | | | | $ | — | | |
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 | | | | | $ | 892,738 | | |
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 | | | | | $ | — | | |
| | |
As of
|
| |||||||||
| | |
April 30, 2017
|
| |
April 30, 2016
|
| ||||||
Customer A
|
| | | | 24 % | | | | | | — % | | |
Customer B
|
| | | | 12 % | | | | | | — % | | |
Customer C
|
| | | | 10 % | | | | | | 21 % | | |
Customer D
|
| | | | — % | | | | | | 34 % | | |
Customer E
|
| | | | — | | | | | | 10 % | | |
| | |
For the years ended
|
| |||||||||
| | |
April 30, 2017
|
| |
April 30, 2016
|
| ||||||
Customer A
|
| | | | 16 % | | | | | | 17 % | | |
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Numerator: | | | | | | | | | | | | | |
Loss from continuing operations attributable to WPCS common shareholders
|
| | | $ | (2,256,194 ) | | | | | $ | (9,118,522 ) | | |
Income from discontinued operations, basic and diluted
|
| | | | — | | | | | | 848,476 | | |
Net loss attributable to WPCS common shareholders, basic and diluted
|
| | | $ | (2,256,194 ) | | | | | $ | (8,270,046 ) | | |
Denominator: | | | | | | | | | | | | | |
Basic and diluted weighted average shares outstanding
|
| | | | 2,967,984 | | | | | | 2,290,050 | | |
Basic and diluted loss from continuing operations per common share
|
| | | $ | (0.76 ) | | | | | $ | (3.98 ) | | |
Basic and diluted income from discontinued operations per common share
|
| | | | — | | | | | | 0.37 | | |
Basic and diluted loss per common share
|
| | | $ | (0.76 ) | | | | | $ | (3.61 ) | | |
|
| | |
As of April 30,
|
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Common stock equivalents: | | | | ||||||||||
Common stock options
|
| | | | 3,328,000 | | | | | | 3,290,000 | | |
Series H, H-1, H-2 and H-3 preferred stock
|
| | | | 1,462,000 | | | | | | 1,076,000 | | |
Common stock purchase warrants
|
| | | | 2,893,000 | | | | | | 1,295,000 | | |
Totals
|
| | | | 7,683,000 | | | | | | 5,661,000 | | |
|
| | |
April 30, 2017
|
| |
April 30, 2016
|
| ||||||
Costs incurred on uncompleted contracts
|
| | | $ | 16,362,011 | | | | | $ | 28,884,776 | | |
Estimated contract earnings
|
| | | | 3,714,584 | | | | | | 4,367,463 | | |
| | | | | 20,076,595 | | | | | | 33,252,239 | | |
Less: Billings to date
|
| | | | 21,771,566 | | | | | | 34,253,318 | | |
Total
|
| | | $ | (1,694,971 ) | | | | | $ | (1,001,079 ) | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | $ | 410,826 | | | | | $ | 357,210 | | |
Billings in excess of cost and estimated earnings on uncompleted contracts
|
| | | | 2,105,797 | | | | | | 1,358,289 | | |
Total
|
| | | $ | (1,694,971 ) | | | | | $ | (1,001,079 ) | | |
|
| | |
Estimated useful life
(years) |
| |
2017
|
| |
2016
|
| |||||||||
Furniture and fixtures
|
| | | | 5 – 7 | | | | | $ | 98,550 | | | | | $ | 74,265 | | |
Computers and software
|
| | | | 2 – 3 | | | | | | 302,843 | | | | | | 283,928 | | |
Vehicles
|
| | | | 5 – 7 | | | | | | 914,217 | | | | | | 909,175 | | |
Machinery and equipment
|
| |
5
|
| | | | 118,106 | | | | | | 88,689 | | | |||
Leasehold improvements
|
| | | | 2 – 3 | | | | | | 291,689 | | | | | | 291,688 | | |
| | | | | | | | | | | 1,725,405 | | | | | | 1,647,745 | | |
Less accumulated depreciation and amortization
|
| | | | | | | | | | (1,402,762 ) | | | | | | (1,409,945 ) | | |
| | | | | | | | | | $ | 322,643 | | | | | $ | 237,800 | | |
|
| | |
Maturity Date
|
| |
Stated
Interest Rate |
| |
Carrying Value
as of April 30, 2017 |
| |
Estimated Future Payment
|
| |||||||||||||||
| | |
Within 1 Year
|
| |
After 1 year
|
| |||||||||||||||||||||
0% automobile loan payable
|
| |
April 2018 – June 2019
|
| | | | 0.0 % | | | | | $ | 18,000 | | | | | $ | 9,000 | | | | | $ | 9,000 | | |
1% automobile loan payable
|
| |
November 2022
|
| | | | 1.0 % | | | | | | 23,000 | | | | | | 5,000 | | | | | | 18,000 | | |
3% automobile loan payable
|
| |
November 2022
|
| | | | 3.0 % | | | | | | 24,000 | | | | | | 5,000 | | | | | | 19,000 | | |
4% automobile loan payable
|
| |
December 2016 – January 2020
|
| | | | 4.0 % | | | | | | 25,000 | | | | | | 9,000 | | | | | | 16,000 | | |
5% automobile loan payable
|
| |
January 2020 – February 2020
|
| | | | 5.0 % | | | | | | 50,000 | | | | | | 17,000 | | | | | | 33,000 | | |
7% automobile loan payable
|
| |
June 2019
|
| | | | 7.0 % | | | | | | 23,000 | | | | | | 5,000 | | | | | | 18,000 | | |
8% automobile loan payable
|
| |
October 2021
|
| | | | 8.0 % | | | | | | 15,000 | | | | | | 3,000 | | | | | | 12,000 | | |
| | | | | | | | | | | | | $ | 178,000 | | | | | $ | 53,000 | | | | | $ | 125,000 | | |
|
| | |
Maturity Date
|
| |
Stated
Interest Rate |
| |
Carrying Value
as of April 30, 2016 |
| |
Estimated Future Payment
|
| |||||||||||||||
| | |
Within 1 Year
|
| |
After 1 year
|
| |||||||||||||||||||||
0% automobile loan payable
|
| |
April 2018 – May 2019
|
| | | | 0.0 % | | | | | $ | 25,000 | | | | | $ | 10,000 | | | | | $ | 15,000 | | |
4% automobile loan payable
|
| |
August 2016 – January 2020
|
| | | | 4.0 % | | | | | | 58,000 | | | | | | 28,000 | | | | | | 30,000 | | |
5% automobile loan payable
|
| |
January 2020 – February 2020
|
| | | | 5.0 % | | | | | | 66,000 | | | | | | 16,000 | | | | | | 50,000 | | |
| | | | | | | | | | | | | $ | 149,000 | | | | | $ | 54,000 | | | | | $ | 95,000 | | |
|
| | |
Federal
Identification Number |
| |
Pension
Certified Zone Status |
| |
FIP/RP
Status Pending or Implemented |
| |
Expiration
of Collective Bargaining Arrangement |
| |
Company’s
Contributions |
| |||||||||||||||||||||||||||
Pension Plan Legal name
|
| |
2016
|
| |
2015
|
| |
2017
|
| |
2016
|
| ||||||||||||||||||||||||||||||
International Brotherhood of Electrical
Workers District No. 9 Pension Plan |
| | | | 93-6074829 | | | | | | Green | | | | | | Green | | | | | | No | | | | | | 11/30/2017 | | | | | $ | 525,523 | | | | | $ | 366,923 | | |
|
| | |
Years Ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Current | | | | ||||||||||
Federal
|
| | | $ | — | | | | | $ | — | | |
State
|
| | | | 1,632 | | | | | | 1,706 | | |
Foreign
|
| | | | — | | | | | | — | | |
Totals
|
| | | | 1,632 | | | | | | 1,706 | | |
Deferred | | | | ||||||||||
Federal
|
| | | | — | | | | | | — | | |
State
|
| | | | — | | | | | | — | | |
Foreign
|
| | | | — | | | | | | — | | |
Totals
|
| | | | — | | | | | | — | | |
Total provision for income taxes (benefits)
|
| | | $ | 1,632 | | | | | $ | 1,706 | | |
|
| | |
Years Ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Expected tax (benefit) provision at statutory rate (34%)
|
| | | $ | (413,337 ) | | | | | $ | (1,233,531 ) | | |
State and local taxes, net of federal tax benefit
|
| | | | (684,228 ) | | | | | | (675,924 ) | | |
Valuation allowance
|
| | | | 1,300,959 | | | | | | 1,288,447 | | |
Deferred tax true-up
|
| | | | (320,038 ) | | | | |||||
Write-off of foreign tax credits
|
| | | | — | | | | | | 265,600 | | |
Inducement Expense
|
| | | | — | | | | | | 136,000 | | |
Permanent differences
|
| | | | 118,276 | | | | | | 1,706 | | |
Other
|
| | | | — | | | | | | 219,408 | | |
Totals
|
| | | $ | 1,632 | | | | | $ | 1,706 | | |
|
| | |
April 30, 2017
|
| |
April 30, 2016
|
| ||||||
Deferred tax assets: | | | | | | | | | | | | | |
Allowance for doubtful accounts
|
| | | $ | 100,989 | | | | | $ | 36,165 | | |
Bonus and vacation accruals
|
| | | | 45,319 | | | | | | 53,727 | | |
Non-qualified stock options
|
| | | | 1,422,692 | | | | | | 1,135,090 | | |
Valuation allowance
|
| | | | (1,569,000 ) | | | | | | (1,224,973 ) | | |
Deferred tax assets – current
|
| | | | — | | | | | | — | | |
Capital loss carryforward
|
| | | | 4,768,005 | | | | | | 4,126,345 | | |
Property and equipment
|
| | | | (12,725 ) | | | | | | 43,948 | | |
Net operating loss carryforward
|
| | | | 12,962,521 | | | | | | 12,590,576 | | |
Valuation allowance
|
| | | | (17,717,801 ) | | | | | | (16,760,869 ) | | |
Deferred tax assets (liabilities) – long term
|
| | | | — | | | | | | — | | |
Net deferred tax assets (liabilities)
|
| | | | — | | | | | $ | — | | |
|
| | |
Number of Shares
|
| |
Weighted Average
Exercise Price |
| |
Total Intrinsic
Value |
| |
Weighted Average
Remaining Contractual Life (in years) |
| ||||||||||||
Outstanding as of May 1, 2015
|
| | | | 40,688 | | | | | $ | 18.8 | | | | | $ | — | | | | | | 5.9 | | |
Employee options granted
|
| | | | 4,054,250 | | | | | | 1.32 | | | | | | — | | | | | | 7.6 | | |
Forfeited/expired
|
| | | | (804,665 ) | | | | | | 1.37 | | | | | | — | | | | | | — | | |
Outstanding as of April 30, 2016
|
| | | | 3,290,273 | | | | | | 1.52 | | | | | | — | | | | | | 9.4 | | |
Employee options granted
|
| | | | 1,017,000 | | | | | | 1.35 | | | | | | — | | | | | | 9.3 | | |
Forfeited/expired
|
| | | | (979,136 ) | | | | | | 1.38 | | | | | | — | | | | | | — | | |
Outstanding as of April 30, 2017
|
| | | | 3,328,137 | | | | | $ | 1.51 | | | | | $ | 108,655 | | | | | | 8.7 | | |
Options vested and exercisable
|
| | | | 2,928,137 | | | | | $ | 1.53 | | | | | $ | 108,655 | | | | | | 8.5 | | |
| | |
For the years ended
April 30, |
| ||||||
| | |
2017
|
| |
2016
|
| |||
Exercise price
|
| | | $ | 1.35 | | | |
$1.19 – $1.53
|
|
Expected term (years)
|
| | | | 5.0 | | | |
5.0
|
|
Expected stock price volatility
|
| | | | 104.8 % | | | |
101.7% – 104.1%
|
|
Risk-free rate of interest
|
| | | | 1.8 % | | | |
1.3% – 1.6%
|
|
| | |
Number of
Warrants |
| |
Weighted
Average Exercise Price |
| |
Weighted
Average Remaining Life in years |
| |||||||||
Outstanding, May 1, 2015
|
| | | | 15,510 | | | | | $ | 7.25 | | | | | | 3.3 | | |
Warrants issued in connection with Series H-1 preferred stock for cash
|
| | | | 1,279,759 | | | | | | 1.66 | | | | | | 4.3 | | |
Outstanding as of April 30, 2016
|
| | | | 1,295,269 | | | | | $ | 5.50 | | | | | | 4.2 | | |
Warrants issued in connection with Series H-2 preferred stock for cash
|
| | | | 495,750 | | | | | | 1.21 | | | | | | 4.6 | | |
Warrants issued in connection with Series H-3 preferred stock for cash
|
| | | | 1,101,751 | | | | | | 1.38 | | | | | | 4.9 | | |
Outstanding, April 30, 2017
|
| | | | 2,892,770 | | | | | $ | 3.23 | | | | | | 4.1 | | |
|
| | |
For the years ended
April 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Revenue
|
| | | $ | — | | | | | $ | 839,969 | | |
Costs and expenses: | | | | | | | | | | | | | |
Cost of revenue
|
| | | | — | | | | | | 546,296 | | |
Selling, general and administrative expenses
|
| | | | — | | | | | | 125,324 | | |
Depreciation and amortization
|
| | | | — | | | | | | 80,971 | | |
| | | | | — | | | | | | 752,591 | | |
Operating income from discontinued operations
|
| | | | — | | | | | | 87,378 | | |
Interest expense
|
| | | | — | | | | | | (49,234 ) | | |
Income from discontinued operations before income tax provision
|
| | | | — | | | | | | 38,144 | | |
Income tax provision
|
| | | | — | | | | | | (10,883 ) | | |
Income from discontinued operations, net of tax
|
| | | | — | | | | | | 27,261 | | |
Gain from disposal
|
| | | | — | | | | | | 837,720 | | |
Total income from discontinued operations
|
| | | $ | — | | | | | $ | 864,981 | | |
|
| Year ending April 30, | | | | | | | |
|
2018
|
| | | $ | 80,213 | | |
|
2019
|
| | | | 80,213 | | |
|
2020
|
| | | | 80,213 | | |
|
2021
|
| | | | 66,844 | | |
|
Total minimum lease payments
|
| | | $ | 307,483 | | |
|
| | |
July 31,
2017 |
| |
April 30,
2017 |
| ||||||
ASSETS | | | | ||||||||||
Current assets: | | | | ||||||||||
Cash and cash equivalents
|
| | | $ | 1,880,549 | | | | | $ | 1,659,318 | | |
Restricted cash
|
| | | | 500,100 | | | | | | 500,026 | | |
Accounts receivable, net of allowance of $247,000 at July 31, 2017 and April 30, 2017, respectively
|
| | | | 4,002,248 | | | | | | 4,199,674 | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | | 334,956 | | | | | | 410,826 | | |
Prepaid expenses and other current assets
|
| | | | 50,899 | | | | | | 41,135 | | |
Total current assets
|
| | | | 6,768,752 | | | | | | 6,810,979 | | |
Property and equipment, net
|
| | | | 296,675 | | | | | | 322,643 | | |
Other assets
|
| | | | 11,484 | | | | | | 11,484 | | |
Total assets
|
| | | $ | 7,076,911 | | | | | $ | 7,145,106 | | |
LIABILITIES AND EQUITY | | | | ||||||||||
Current liabilities: | | | | ||||||||||
Current portion of loans payable
|
| | | $ | 52,271 | | | | | $ | 52,946 | | |
Accounts payable and accrued expenses
|
| | | | 1,369,097 | | | | | | 1,790,256 | | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
| | | | 2,911,882 | | | | | | 2,105,797 | | |
Total current liabilities
|
| | | | 4,333,250 | | | | | | 3,948,999 | | |
Loans payable, net of current portion
|
| | | | 112,191 | | | | | | 124,559 | | |
Total liabilities
|
| | | | 4,445,441 | | | | | | 4,073,558 | | |
Commitments and contingencies | | | | ||||||||||
Stockholders’ equity | | | | ||||||||||
Preferred stock – $0.0001 par value, 5,000,000 shares authorized at July 31, 2017 and April 30, 2017, respectively
|
| | | ||||||||||
Convertible Series H, 8,500 shares designated – 8 shares issued and outstanding at July 31, 2017 and April 30, 2017, respectively; liquidation preference of $1,000
|
| | | | 1,242 | | | | | | 1,242 | | |
Convertible Series H-1, 9,488 shares designated – 4,289 shares issued and outstanding at July 31, 2017 and April 30, 2017, respectively; liquidation preference of $712,000
|
| | | | 437,530 | | | | | | 437,530 | | |
Convertible Series H-2, 3,500 shares designated – 3,305 shares issued and outstanding at July 31, 2017 and April 30, 2017, respectively; liquidation preference of $400,000
|
| | | | 230,721 | | | | | | 230,721 | | |
Convertible Series H-3, 9,500 shares designated – 7,017 shares issued and outstanding at July 31, 2017 and April 30, 2017, respectively; liquidation preference of $968,000
|
| | | | 475,185 | | | | | | 475,185 | | |
Common stock – $0.0001 par value, 100,000,000 shares authorized, 3,352,159 shares issued and outstanding as of July 31, 2017 and April 30, 2017, respectively
|
| | | | 335 | | | | | | 335 | | |
Additional paid-in capital
|
| | | | 89,003,669 | | | | | | 89,003,669 | | |
Accumulated deficit
|
| | | | (87,517,212 ) | | | | | | (87,077,134 ) | | |
Total stockholders’ equity
|
| | | | 2,631,470 | | | | | | 3,071,548 | | |
Total liabilities and equity
|
| | | $ | 7,076,911 | | | | | $ | 7,145,106 | | |
|
| | |
For the three months ended
July 31, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Revenue
|
| | | $ | 3,523,347 | | | | | $ | 3,416,453 | | |
Costs and expenses: | | | | ||||||||||
Cost of revenue
|
| | | | 2,754,550 | | | | | | 2,635,508 | | |
Selling, general and administrative expenses
|
| | | | 1,184,501 | | | | | | 1,352,986 | | |
Depreciation and amortization
|
| | | | 30,073 | | | | | | 20,666 | | |
| | | | | 3,969,124 | | | | | | 4,009,160 | | |
Operating loss
|
| | | | (445,777 ) | | | | | | (592,707 ) | | |
Other income (expense): | | | | ||||||||||
Interest expense
|
| | | | (2,051 ) | | | | | | (1,981 ) | | |
Income from arbitration settlements
|
| | | | 7,750 | | | | | | 1,150,000 | | |
Other income
|
| | | | — | | | | | | 4,487 | | |
(Loss) income from operations before income tax provision
|
| | | | (440,078 ) | | | | | | 559,799 | | |
Income tax provision
|
| | | | — | | | | | | 2,618 | | |
(Loss) income from operations
|
| | | | (440,078 ) | | | | | | 557,181 | | |
Net (loss) income
|
| | | $ | (440,078 ) | | | | | $ | 557,181 | | |
Basic (loss) income per common share
|
| | | $ | (0.13 ) | | | | | $ | 0.21 | | |
Diluted (loss) income per common share
|
| | | $ | (0.13 ) | | | | | $ | 0.14 | | |
Weighted average shares outstanding – basic
|
| | | | 3,352,159 | | | | | | 2,701,404 | | |
Weighted average shares outstanding – diluted
|
| | | | 3,352,159 | | | | | | 3,937,628 | | |
| | |
For the three months ended
July 31, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Operating activities: | | | | ||||||||||
Net (loss) income
|
| | | $ | (440,078 ) | | | | | $ | 557,181 | | |
Adjustments to reconcile consolidated net loss to net cash provided by (used in)
operating activities: |
| | | ||||||||||
Depreciation and amortization
|
| | | | 30,073 | | | | | | 20,666 | | |
Shares based compensation
|
| | | | — | | | | | | 22,501 | | |
Changes in operating assets and liabilities:
|
| | | ||||||||||
Accounts receivable
|
| | | | 197,426 | | | | | | (1,441,964 ) | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | | 75,870 | | | | | | (79,975 ) | | |
Prepaid expenses and other current assets
|
| | | | (9,764 ) | | | | | | (57,721 ) | | |
Other assets
|
| | | | — | | | | | | (3,778 ) | | |
Accounts payable and accrued expenses
|
| | | | (421,159 ) | | | | | | 204,952 | | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
| | | | 806,085 | | | | | | 543,006 | | |
Net cash provided by (used in) operating activities
|
| | | | 238,453 | | | | | | (235,132 ) | | |
Investing activities: | | | | ||||||||||
Acquisition of property and equipment
|
| | | | (4,105 ) | | | | | | (30,803 ) | | |
Net cash used in investing activities
|
| | | | (4,105 ) | | | | | | (30,803 ) | | |
Financing activities: | | | | ||||||||||
Repayment under loan payable obligations
|
| | | | (13,043 ) | | | | | | (29,762 ) | | |
Net cash used in financing activities
|
| | | | (13,043 ) | | | | | | (29,762 ) | | |
Net change in cash, cash equivalents and restricted cash
|
| | | | 221,305 | | | | | | (295,697 ) | | |
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
|
| | | $ | 2,380,649 | | | | | $ | 1,939,900 | | |
Schedule of non-cash investing and financing activities: | | | | ||||||||||
Automobile financing
|
| | | $ | — | | | | | $ | 50,622 | | |
| | |
As of
|
| |||||||||
| | |
July 31, 2017
|
| |
April 30, 2017
|
| ||||||
Customer A
|
| | | | 21 % | | | | | | 24 % | | |
Customer B
|
| | | | 17 % | | | | | | 12 % | | |
Customer C
|
| | | | — | | | | | | 10 % | | |
| | | | ||||||||||
| | |
2017
|
| |
2016
|
| ||||||
Customer A
|
| | | | 24 % | | | | | | — | | |
Customer B
|
| | | | 15 % | | | | | | — | | |
Customer C
|
| | | | 10 % | | | | | | — | | |
| | |
For the three months ended
July 31, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Numerator: | | | | ||||||||||
Net (loss) income, basic and diluted
|
| | | $ | (440,078 ) | | | | | $ | 557,181 | | |
Denominator: | | | | ||||||||||
Weighted average shares outstanding – basic
|
| | | | 3,352,159 | | | | | | 2,701,404 | | |
Stock options
|
| | | | — | | | | | | 160,524 | | |
Series H and H-1 convertible preferred stock
|
| | | | — | | | | | | 1,075,700 | | |
Weighted average shares outstanding – diluted
|
| | | | 3,352,159 | | | | | | 3,937,628 | | |
Basic (loss) income per common share
|
| | | $ | (0.13 ) | | | | | $ | 0.21 | | |
Diluted (loss) income per common share
|
| | | $ | (0.13 ) | | | | | $ | 0.14 | | |
| | |
As of July 31,
|
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
Common stock equivalents: | | | | ||||||||||
Common stock options
|
| | | | 3,253,000 | | | | | | 865,000 | | |
Series H, H-1, H-2 and H-3 preferred stock
|
| | | | 1,462,000 | | | | | | — | | |
Common stock purchase warrants
|
| | | | 2,893,000 | | | | | | 1,295,000 | | |
Totals
|
| | | | 7,608,000 | | | | | | 2,160,000 | | |
|
| | |
July 31, 2017
|
| |
April 30, 2017
|
| ||||||
Costs incurred on uncompleted contracts
|
| | | $ | 17,191,287 | | | | | $ | 16,362,011 | | |
Estimated contract earnings
|
| | | | 3,849,901 | | | | | | 3,714,584 | | |
| | | | | 21,041,188 | | | | | | 20,076,595 | | |
Less: Billings to date
|
| | | | 23,618,114 | | | | | | 21,771,566 | | |
Total
|
| | | $ | (2,576,926 ) | | | | | $ | (1,694,971 ) | | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
| | | $ | 334,956 | | | | | $ | 410,826 | | |
Billings in excess of cost and estimated earnings on uncompleted contracts
|
| | | | 2,911,882 | | | | | | 2,105,797 | | |
Total
|
| | | $ | (2,576,926 ) | | | | | $ | (1,694,971 ) | | |
|
| | |
Maturity Date
|
| |
Stated
Interest Rate |
| |
Carrying Value
as of July 31, 2017 |
| |
Estimated Future Payment
|
| |||||||||||||||
| | |
Within 1 Year
|
| |
After 1 year
|
| |||||||||||||||||||||
0% automobile loan payable
|
| |
May 2019 –
June 2019 |
| | | | 0.0 % | | | | | $ | 16,000 | | | | | $ | 9,000 | | | | | $ | 7,000 | | |
1% automobile loan payable
|
| |
November 2022
|
| | | | 1.0 % | | | | | | 22,000 | | | | | | 5,000 | | | | | | 17,000 | | |
3% automobile loan payable
|
| |
November 2022
|
| | | | 3.0 % | | | | | | 23,000 | | | | | | 5,000 | | | | | | 18,000 | | |
4% automobile loan payable
|
| |
December 2016 –
January 2020 |
| | | | 4.0 % | | | | | | 21,000 | | | | | | 8,000 | | | | | | 13,000 | | |
5% automobile loan payable
|
| |
January 2020 –
February 2020 |
| | | | 5.0 % | | | | | | 46,000 | | | | | | 17,000 | | | | | | 29,000 | | |
7% automobile loan payable
|
| |
June 2019
|
| | | | 7.0 % | | | | | | 22,000 | | | | | | 5,000 | | | | | | 17,000 | | |
8% automobile loan payable
|
| |
October 2021
|
| | | | 8.0 % | | | | | | 14,000 | | | | | | 3,000 | | | | | | 11,000 | | |
| | | | | | | | | | | | | $ | 164,000 | | | | | $ | 52,000 | | | | | $ | 112,000 | | |
|
| | |
Maturity Date
|
| |
Stated
Interest Rate |
| |
Carrying Value
as of April 30, 2017 |
| |
Estimated Future Payment
|
| |||||||||||||||
| | |
Within 1 Year
|
| |
After 1 year
|
| |||||||||||||||||||||
0% automobile loan payable
|
| |
April 2018 –
June 2019 |
| | | | 0.0 % | | | | | $ | 18,000 | | | | | $ | 9,000 | | | | | $ | 9,000 | | |
1% automobile loan payable
|
| |
November 2022
|
| | | | 1.0 % | | | | | | 23,000 | | | | | | 5,000 | | | | | | 18,000 | | |
3% automobile loan payable
|
| |
November 2022
|
| | | | 3.0 % | | | | | | 24,000 | | | | | | 5,000 | | | | | | 19,000 | | |
4% automobile loan payable
|
| |
December 2016 –
January 2020 |
| | | | 4.0 % | | | | | | 25,000 | | | | | | 9,000 | | | | | | 16,000 | | |
5% automobile loan payable
|
| |
January 2020 –
February 2020 |
| | | | 5.0 % | | | | | | 50,000 | | | | | | 17,000 | | | | | | 33,000 | | |
7% automobile loan payable
|
| |
June 2019
|
| | | | 7.0 % | | | | | | 23,000 | | | | | | 5,000 | | | | | | 18,000 | | |
8% automobile loan payable
|
| |
October 2021
|
| | | | 8.0 % | | | | | | 15,000 | | | | | | 3,000 | | | | | | 12,000 | | |
| | | | | | | | | | | | | $ | 178,000 | | | | | $ | 53,000 | | | | | $ | 125,000 | | |
|
| | |
Page
|
|
Audited Financial Statements | | | | |
| | | ||
Financial Statements | | | | |
| | | ||
| | | ||
| | | ||
| | | ||
| | | ||
Unaudited Financial Statements | | | | |
| | | ||
| | | ||
| | | ||
| | | ||
| | |
| | |
December 31,
|
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
ASSETS | | | | | | | | | | | | | |
Current assets:
|
| | | | | | | | | | | | |
Cash
|
| | |
$
|
51,366
|
| | | | $ | 57,942 | | |
Accounts receivable
|
| | |
|
61,710
|
| | | | | 16,678 | | |
Prepaid expenses and other current assets
|
| | |
|
18,617
|
| | | | | 8,241 | | |
Total current assets
|
| | |
|
131,693
|
| | | | | 82,861 | | |
Capitalized software costs, net
|
| | |
|
447,322
|
| | | | | 201,515 | | |
Security deposits
|
| | |
|
3,000
|
| | | | | — | | |
Total assets
|
| | |
$
|
582,015
|
| | | | $ | 284,376 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable and accrued expenses
|
| | |
$
|
417,446
|
| | | | $ | 70,212 | | |
Deferred income
|
| | |
|
81,276
|
| | | | | 15,036 | | |
Accrued interest
|
| | |
|
—
|
| | | | | 2,932 | | |
Derivative liability
|
| | |
|
—
|
| | | | | 57,353 | | |
Convertible notes payable
|
| | |
|
—
|
| | | | | 280,588 | | |
Total current liabilities
|
| | |
|
498,722
|
| | | | | 426,121 | | |
Commitments and Contingencies (Note E)
|
| | | | | | | | | | | | |
Stockholders’ equity (deficit):
|
| | | | | | | | | | | | |
Series Seed preferred stock; par value $.0001; 842,405 shares authorized, 842,405 shares issued and outstanding
|
| | |
|
84
|
| | | | | 84 | | |
Series A preferred stock; par value $.0001; 1,963,877 shares authorized, 1,619,633 shares in 2016 and none in 2015 issued and outstanding
|
| | |
|
162
|
| | | | | — | | |
Common stock; par value $.0001; 12,000,000 shares authorized; 5,000,000
shares issued and outstanding |
| | |
|
500
|
| | | | | 500 | | |
Subscription receivable – 78,345 shares of Series A preferred stock
|
| | |
|
(69,960
)
|
| | | | | — | | |
Additional paid-in capital
|
| | |
|
2,116,598
|
| | | | | 404,416 | | |
Accumulated deficit
|
| | |
|
(1,964,091
)
|
| | | | | (546,745 ) | | |
Total stockholders’ equity (deficit)
|
| | |
|
83,293
|
| | | | | (141,745 ) | | |
Total liabilities and stockholders’ equity (deficit)
|
| | |
$
|
582,015
|
| | | | $ | 284,376 | | |
|
| | |
For the Year Ended
December 31, |
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
Net services revenues
|
| | | $ | 1,702,495 | | | | |
$
|
153,600
|
| |
Cost of services
|
| | | | (1,229,536 ) | | | | |
|
(267,634
)
|
| |
Gross profit (loss)
|
| | | | 472,959 | | | | |
|
(114,034
)
|
| |
Selling, general and administrative: | | | | | | | | | | | | | |
Selling, general and administrative
|
| | |
|
1,763,685
|
| | | | | 381,174 | | |
Amortization of capitalized software costs
|
| | |
|
79,169
|
| | | | | 17,589 | | |
Operating loss
|
| | |
|
(1,369,895
)
|
| | | | | (512,797 ) | | |
Interest expense
|
| | |
|
(47,451
)
|
| | | | | (16,133 ) | | |
Net loss
|
| | | $ | (1,417,346 ) | | | | |
$
|
(528,930
)
|
| |
|
| | |
Preferred Stock —
Series Seed |
| |
Preferred Stock —
Series A |
| |
Common Stock
|
| |
Subscription
Receivable |
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
|
| |||||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2014
|
| | | | 526,504 | | | | | $ | 53 | | | | | | | | | | | | | | | | | | 5,000,000 | | | | | $ | 500 | | | | | | | | | | | $ | 254,447 | | | | | $ | (17,815 ) | | | | | $ | 237,185 | | |
Issuance of Series Seed Preferred Stock
|
| | | | 315,901 | | | | | | 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 149,969 | | | | | | | | | | | | 150,000 | | |
Net loss
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (528,930 ) | | | | | | (528,930 ) | | |
Balance at December 31, 2015
|
| | | | 842,405 | | | | | | 84 | | | | | | | | | | | | | | | | | | 5,000,000 | | | | | | 500 | | | | | | | | | | | | 404,416 | | | | | | (546,745 ) | | | | | | (141,745 ) | | |
Issuance of Series A Preferred Stock, net
|
| | | | | | | | | | | | | | | | 1,246,912 | | | | | $ | 125 | | | | | | | | | | | | | | | | | $ | (69,960 ) | | | | | | 1,324,835 | | | | | | | | | | | | 1,255,000 | | |
Issuance of Preferred Stock in settlement of convertible notes, derivative and accrued interest
|
| | | | | | | | | | | | | | | | 372,721 | | | | | | 37 | | | | | | | | | | | | | | | | | | | | | | | | 387,347 | | | | | | | | | | | | 387,384 | | |
Net loss
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,417,346 ) | | | | | | (1,417,346 ) | | |
Balance at December 31, 2016
|
| | | | 842,405 | | | | | $ | 84 | | | | | | 1,619,633 | | | | | $ | 162 | | | | | | 5,000,000 | | | | | $ | 500 | | | | | $ | (69,960 ) | | | | | $ | 2,116,598 | | | | | $ | (1,964,091 ) | | | | | $ | 83,293 | | |
|
| | |
For the Year Ended
December 31, |
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | |
$
|
(1,417,346
)
|
| | | | $ | (528,930 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Amortization of capitalized software
|
| | |
|
79,169
|
| | | | | 17,589 | | |
Accretion of notes discount
|
| | |
|
44,412
|
| | | | | 12,941 | | |
Changes in assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable
|
| | |
|
(45,032
)
|
| | | | | (16,678 ) | | |
Prepaid expenses and other current assets
|
| | |
|
(10,376
)
|
| | | | | (7,741 ) | | |
Security deposit
|
| | |
|
(3,000
)
|
| | | | | — | | |
Accounts payable and accrued expenses
|
| | |
|
305,809
|
| | | | | 37,288 | | |
Deferred income
|
| | |
|
66,240
|
| | | | | 15,036 | | |
Net cash used in operating activities
|
| | |
|
(980,124
)
|
| | | | | (470,495 ) | | |
Cash flows from investing activities: | | | | | | | | | | | | | |
Capitalized software development costs
|
| | |
|
(281,452
)
|
| | | | | (189,236 ) | | |
Net cash used in investing activities
|
| | |
|
(281,452
)
|
| | | | | (189,236 ) | | |
Cash flows from financing activities: | | | | | | | | | | | | | |
Proceeds from sale of convertible notes
|
| | |
|
—
|
| | | | | 325,000 | | |
Proceeds from issuance of preferred stock
|
| | |
|
1,255,000
|
| | | | | 150,000 | | |
Net cash provided by financing activities
|
| | |
|
1,255,000
|
| | | | | 475,000 | | |
Net decrease in cash
|
| | | | (6,576 ) | | | | |
|
(184,731
)
|
| |
Cash at beginning of year
|
| | |
|
57,942
|
| | | | | 242,673 | | |
Cash at end of year
|
| | | $ | 51,366 | | | | |
$
|
57,942
|
| |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Interest paid during the year
|
| | |
$
|
—
|
| | | | $ | — | | |
Supplemental disclosures of non-cash financing activities: | | | | | | | | | | | | | |
Issuance of Preferred Stock in settlement of convertible notes, derivative and accrued interest
|
| | |
$
|
387,384
|
| | | | $ | — | | |
Supplemental disclosures of non-cash investing activities: | | | | | | | | | | | | | |
Accrued for capitalized software development costs
|
| | |
$
|
43,524
|
| | | | $ | — | | |
| | |
December 31,
|
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
Software
|
| | |
$
|
544,080
|
| | | | $ | 219,104 | | |
Accumulated amortization
|
| | |
|
(96,758
)
|
| | | | | (17,589 ) | | |
| | | | $ | 447,322 | | | | |
$
|
201,515
|
| |
|
| | |
December 31,
|
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
Federal income tax benefit at statutory rate
|
| | |
|
-34.00
%
|
| | | | | -34.00 % | | |
State income tax, net of federal benefit
|
| | |
|
-11.35
%
|
| | | | | -11.70 % | | |
Permanent items
|
| | |
|
0.09
%
|
| | | | | 0.12 % | | |
Other
|
| | |
|
0.03
%
|
| | | | | -1.07 % | | |
Change in valuation allowance
|
| | |
|
45.23
%
|
| | | | | 46.66 % | | |
Provision for income taxes
|
| | |
|
—
|
| | | | | — | | |
|
| | |
December 31,
|
| |||||||||
| | |
2016
|
| |
2015
|
| ||||||
Net operating loss carryforwards – Federal
|
| | |
$
|
732,484
|
| | | | $ | 206,102 | | |
Net operating loss carryforwards – State
|
| | |
|
244,414
|
| | | | | 68,694 | | |
Capitalized software
|
| | |
|
(202,839
)
|
| | | | | (28,405 ) | | |
Settlement reserve
|
| | |
|
68,018
|
| | | | | — | | |
Accrued bonus
|
| | |
|
45,345
|
| | | | | — | | |
Valuation allowance
|
| | |
|
(887,422
)
|
| | | | | (246,391 ) | | |
Net deferred tax assets
|
| | |
$
|
—
|
| | | | $ | — | | |
|
| | |
For the Three Months Ended June 30,
|
| |
For the Six Months Ended June 30,
|
| ||||||||||||||||||
| | |
2017
|
| |
2016
|
| |
2017
|
| |
2016
|
| ||||||||||||
NET SERVICE REVENUES
|
| | | $ | 889,295 | | | | | $ | 341,381 | | | | | $ | 1,527,853 | | | | | $ | 532,697 | | |
COST OF SERVICES
|
| | | | 808,152 | | | | | | 250,609 | | | | | | 1,234,366 | | | | | | 382,498 | | |
GROSS PROFIT
|
| | | | 81,143 | | | | | | 90,772 | | | | | | 293,487 | | | | | | 150,199 | | |
SELLING, GENERAL AND ADMINISTRATIVE:
|
| | | | | ||||||||||||||||||||
Selling, general and administrative expenses
|
| | | | 1,500,661 | | | | | | 366,477 | | | | | | 2,059,772 | | | | | | 627,546 | | |
Depreciation and Amortization
|
| | | | 45,487 | | | | | | 18,948 | | | | | | 90,827 | | | | | | 25,635 | | |
OPERATING LOSS
|
| | | | (1,465,005 ) | | | | | | (294,653 ) | | | | | | (1,857,112 ) | | | | | | (502,982 ) | | |
Interest (expense) income, net
|
| | | | (328,393 ) | | | | | | 30 | | | | | | (328,393 ) | | | | | | (45,514 ) | | |
NET LOSS
|
| | | $ | (1,793,398 ) | | | | | $ | (294,623 ) | | | | | $ | (2,185,505 ) | | | | | $ | (548,496 ) | | |
|
| | |
Series Seed
Preferred Stock |
| |
Series A
Preferred Stock |
| |
Common Stock
|
| |
Subscription
Receivable |
| |
Additional
Paid-in Capital |
| |
Accumulated
(Deficit) |
| |
Total
|
| |||||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||||||||
Balances, December 31, 2016
|
| | | | 842,405 | | | | | $ | 84 | | | | | | 1,619,633 | | | | | $ | 162 | | | | | | 5,000,000 | | | | | $ | 500 | | | | | $ | (69,960 ) | | | | | $ | 2,116,598 | | | | | $ | (1,964,091 ) | | | | | $ | 83,293 | | |
Issuance of Series A Preferred stock
|
| | | | — | | | | | | — | | | | | | 224,512 | | | | | | 23 | | | | | | — | | | | | | — | | | | | | 69,960 | | | | | | 149,985 | | | | | | — | | | | | | 219,968 | | |
Issuance of Series A Preferred stock for services
|
| | | | — | | | | | | — | | | | | | 24,548 | | | | | | 2 | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,998 | | | | | | — | | | | | | 25,000 | | |
Issuance of Common stock to Officers
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,031,166 | | | | | | 103 | | | | | | (2,000 ) | | | | | | 257,689 | | | | | | — | | | | | | 255,792 | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 137,900 | | | | | | — | | | | | | 137,900 | | |
Fair value of Warrants issued with convertible notes
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 987,158 | | | | | | — | | | | | | 987,158 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,185,505 ) | | | | | | (2,185,505 ) | | |
Balances, June 30, 2017, (unaudited)
|
| | | | 842,405 | | | | | $ | 84 | | | | | | 1,868,693 | | | | | $ | 187 | | | | | | 6,031,166 | | | | | $ | 603 | | | | | $ | (2,000 ) | | | | | $ | 3,674,328 | | | | | $ | (4,149,596 ) | | | | | $ | (476,394 ) | | |
|
| | |
For the Six Months Ended
June 30, |
| |||||||||
| | |
2017
|
| |
2016
|
| ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | ||||||||||
Net loss
|
| | | $ | (2,185,505 ) | | | | | $ | (548,496 ) | | |
Change in net loss to net cash used in operating activities:
|
| | | ||||||||||
Depreciation and amortization
|
| | | | 90,827 | | | | | | 25,635 | | |
Amortization of debt discount & deferred financing
|
| | | | 296,860 | | | | | | — | | |
Stock based compensation
|
| | | | 418,692 | | | | | | — | | |
Changes in operating assets and liabilities:
|
| | | ||||||||||
Accounts receivable
|
| | | | (123,330 ) | | | | | | (42,425 ) | | |
Deposit
|
| | | | — | | | | | | (3,000 ) | | |
Prepaid expenses and other current assets
|
| | | | 2,270 | | | | | | 7,107 | | |
Accounts payable and accrued expenses
|
| | | | (27,798 ) | | | | | | 5,093 | | |
Accrued interest
|
| | | | 31,667 | | | | | | 44,412 | | |
Deferred income
|
| | | | 122,689 | | | | | | 77,269 | | |
NET CASH USED IN OPERATING ACTIVITIES
|
| | | | (1,373,628 ) | | | | | | (434,405 ) | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | ||||||||||
Purchase of fixed assets
|
| | | | (6,600 ) | | | | | | — | | |
Capitalization of software costs
|
| | | | (111,184 ) | | | | | | (136,579 ) | | |
NET CASH USED IN INVESTING ACTIVITIES
|
| | | | (117,784 ) | | | | | | (136,579 ) | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | ||||||||||
Proceeds from issuance of Series Seed Stock
|
| | | | — | | | | | | 600,000 | | |
Proceeds from issuance of Series A Preferred Stock & subscription receivable
|
| | | | 219,968 | | | | | | — | | |
Proceeds from issuance of convertible notes and warrants
|
| | | | 2,240,000 | | | | | | — | | |
Offering costs – Convertible Notes
|
| | | | (208,200 ) | | | | | | — | | |
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
| | | | 2,251,768 | | | | | | 600,000 | | |
Net increase in cash
|
| | | | 760,356 | | | | | | 29,016 | | |
Cash, beginning of period
|
| | | | 51,366 | | | | | | 57,942 | | |
Cash, end of period
|
| | | $ | 811,722 | | | | | $ | 86,958 | | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | | ||||||||||
Cash paid for interest
|
| | | $ | — | | | | | $ | — | | |
Cash paid for taxes
|
| | | $ | — | | | | | $ | — | | |
NON-CASH FINANCING ACTIVITIES: | | | | ||||||||||
Issuance of Preferred Stock in settlement of convertible notes, derivative and accrued interest
|
| | | $ | — | | | | | $ | 387,384 | | |
Issuance of stock warrants related to convertible notes
|
| | | $ | 987,158 | | | | | $ | — | | |
Fair value of common stock sold to founders
|
| | | $ | 137,900 | | | | | $ | — | | |
|
| | |
June 30,
|
| |||
| | |
2017
|
| |||
Software
|
| | | $ | 655,264 | | |
Accumulated amortization
|
| | | | (187,437 ) | | |
| | | | $ | 467,827 | | |
|
| | |
Page
|
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| Exhibits and Schedules: | | |||
| Exhibit A | | | Definitions | |
| Exhibit B-1 | | | Form of WPCS Stockholder Support Agreement with WPCS Officers, Directors and certain 5% Stockholders | |
| Exhibit B-2 | | | Form of WPCS Stockholder Support Agreement with certain 5% Stockholders | |
| Exhibit C-1 | | | Form of Company Stockholder Support Agreement with Company Officers and Directors and certain 5% Stockholders | |
| Exhibit C-2 | | | Form of Company Stockholder Support Agreement with certain 5% Stockholders | |
| Exhibit D | | | WPCS Allocation Percentage Adjustment Formula | |
| Schedule 5.14 | | | Directors | |
| | | | WPCS I nternational I ncorporated | | |||
| | | | By: | | | /s/ Sebastian Giordano | |
| | | | Name: | | | Sebastian Giordano | |
| | | | Title: | | | Chief Executive Officer | |
| | | | DC A cquisition C orporation | | |||
| | | | By: | | | /s/ Sebastian Giordano | |
| | | | Name: | | | Sebastian Giordano | |
| | | | Title: | | | Chief Executive Officer | |
| | | | D rop C ar , I nc . | | |||
| | | | By: | | | /s/ Spencer Richardson | |
| | | | Name: | | | Spencer Richardson | |
| | | | Title: | | | Chief Executive Officer | |
|
Term
|
| |
Section
|
|
409A Plan | | | 2.17(k) | |
Accounting Firm | | | 1.6(e) | |
Allocation Certificate | | | 5.19 | |
Anticipated Closing Date | | | 1.6(a) | |
Anti-Corruption Laws | | | 2.24(a) | |
Cash Determination Time | | | 1.6(a) | |
Certificate of Merger | | | 1.3 | |
Certifications | | | 3.7(a) | |
Closing | | | 1.3 | |
Closing Date | | | 1.3 | |
Company | | | Preamble | |
Company Board Recommendation | | | 5.2(c) | |
Company Disclosure Schedule | | | 2 | |
Company Employee Plan | | | 2.17(d) | |
Company Audited Financials | | | 2.7(a) | |
Company Material Contract | | | 2.13(a) | |
Term
|
| |
Section
|
|
Company Permits | | | 2.14(b) | |
Company Real Estate Leases | | | 2.11 | |
Company Stock Certificate | | | 1.7 | |
Company Termination Fee | | | 9.3(b) | |
Company Unaudited Interim Balance Sheet | | | 2.7(a) | |
Costs | | | 5.8(a) | |
D&O Indemnified Party | | | 5.8(a) | |
Delivery Date | | | 1.6(a) | |
Dispute Notice | | | 1.6(b) | |
Dissenting Shares | | | 1.9(a) | |
Effective Time | | | 1.3 | |
End Date | | | 9.1(b) | |
Exchange Agent | | | 1.8(a) | |
Exchange Fund | | | 1.8(a) | |
FCPA | | | 3.25 | |
GAAP | | | 2.7(a) | |
Interim Company Financials | | | 2.7(a) | |
Liability | | | 2.9 | |
Money Laundering | | | 2.26 | |
Merger | | | Recitals | |
Merger Consideration | | | 1.5(a) | |
Merger Sub | | | Preamble | |
NASDAQ Listing Application | | | 5.11 | |
Net Cash Condition | | | 8.6 | |
Net Cash Calculation | | | 1.6(a) | |
Net Cash Schedule | | | 1.6(a) | |
Notice Period | | | 5.3(c) | |
OFAC | | | 2.25a | |
Pre-Closing Period | | | 4.1(a) | |
Public Announcement Date | | | 9.3(f) | |
Required Company Stockholder Vote | | | 2.4 | |
Required WPCS Charter Stockholder Vote | | | 3.4 | |
Required WPCS Merger Stockholder Vote | | | 3.4 | |
Required WPCS Stockholder Vote | | | 3.4 | |
Response Date | | | 1.6(b) | |
Stockholder Notice | | | 5.2(b) | |
Surviving Corporation | | | 1.1 | |
Third Party Expenses | | | 9.3(f) | |
WARN Act | | | 2.17(n) | |
WPCS | | | Preamble | |
WPCS Board Adverse Recommendation Change | | | 5.3(b) | |
WPCS Board Recommendation | | | 5.3(b) | |
WPCS Disclosure Schedule | | | 3 | |
Term
|
| |
Section
|
|
WPCS Employee Plan | | | 3.17(d) | |
WPCS Material Contract | | | 3.13 | |
WPCS Permits | | | 3.14(b) | |
WPCS Real Estate Leases | | | 3.11 | |
WPCS Reverse Stock Split | | | 5.21 | |
WPCS SEC Documents | | | 3.7(a) | |
WPCS Stock Plans | | | 3.6(c) | |
WPCS Stockholder Matters | | | 5.3(a) | |
WPCS Stockholders’ Meeting | | | 5.3(a) | |
WPCS Termination Fee | | | 9.3(c) | |
|
WPCS assumed outstanding shares
|
| | | | 6,118,689.00 | | | | | | | | |
|
WPCS allocation percentage
|
| | | | 0.15 | | | | | | | | |
|
Exchange ratio
|
| | | | 5.67 | | | | | | | | |
|
Drop car shares
|
| | | | 34,672,571.00 | | | | | | | | |
| Pre-adjustment pro forma cap tab | | | | ||||||||||
|
WPCS
|
| | | | 6,118,689.00 | | | | | | 15.0 % | | |
|
DropCar
|
| | | | 34,672,571.00 | | | | | | 85.0 % | | |
|
Total
|
| | | | 40,791,260.00 | | | | | | | | |
|
WPCS 10-day avg share price
|
| | | $ | 1.29 | | | | | | | | |
|
WPCS net cash
|
| | | $ | 500,000.00 | | | | | | | | |
|
WPCS net cash requirement
|
| | | $ | 419,000 | | | | | | | | |
|
Over/short
|
| | | $ | 81,000 | | | | | | | | |
|
Value in WPCS shares
|
| | | | 62,790.70 | | | | | | | | |
|
Exchange Ratio
|
| | | | 5.67 | | | | | | | | |
|
Increase (Decrease) in DropCar Shares
|
| | | | -355,813.95 | | | | | | | | |
| Post-adjustment pro forma cap tab | | | | ||||||||||
|
WPCS
|
| | | | 6,118,689.00 | | | | | | 15.1 % | | |
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DropCar
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| | | | 34,316,757.05 | | | | | | 84.9 % | | |
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Total
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| | | | 40,435,446.05 | | | | | | | | |
| WPCS INTERNATIONAL INCORPORATED | | |||
| By: | | | | |
| Name: | | | Sebastian Giordano | |
| Title: | | | Chief Executive Officer | |
| WPCS INTERNATIONAL INCORPORATED | | |||
| By: | | | | |
| Name: | | | Seastian Giordano | |
| Title: | | | Chief Executive Officer | |
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| WPCS INTERNATIONAL INCORPORATED | | |||
| By: | | | /s/ Sebastian Giordano | |
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Sebastian Giordano
Chief Executive Officer |
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/s/ Sebastian Giordano
Sebastian Giordano
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Chief Executive Officer and Director
(Principal Executive Officer) |
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October 10, 2017
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/s/ David Allen
David Allen
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Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) |
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October 10, 2017
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/s/ Charles Benton
Charles Benton
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Director
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October 10, 2017
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/s/ Norm Dumbroff
Norm Dumbroff
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Director
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October 10, 2017
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/s/ Edward Gildea
Edward Gildea
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Director
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October 10, 2017
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/s/ Jonathan Schechter
Jonathan Schechter
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Director
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October 10, 2017
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/s/ Joshua Silverman
Joshua Silverman
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Director
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October 10, 2017
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/s/ Brian Daly
Brian Daly
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Director
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October 10, 2017
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Exhibit 5.1
Morse, Zelnick, Rose & Lander
A LIMITED LIABILITY PARTNERSHIP
825 THIRD AVENUE
NEW YORK, NEW YORK 10022
212-838-1177
FAX – 212-838-9190
October __, 2017
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Re: | Registration Statement on Form S-4 SEC File No. 333- |
Ladies and Gentlemen:
We have acted as special counsel to WPCS International Incorporated, a Delaware corporation (“ WPCS ”), in connection with the proposed issuance by WPCS of up to [40,000,000] shares (the “ Shares ”) of its common stock, par value $0.0001 per share (the “Common Stock”) . The Shares are included in a registration statement on Form S–4 under the Securities Act of 1933, as amended (the “ Act ”), initially filed with the Securities and Exchange Commission (the “ Commission ”) on October __, 2017 (Registration No.333-______) (as amended, the “ Registration Statement ”), in connection with that certain Agreement and Plan of Merger and Reorganization (the “ Merger Agreement ”), dated as of September 6, 2017, by and among WPCS, DC Acquisition Corporation ( “Merger Sub” ), a Delaware company and a wholly-owned subsidiary of the Company) and DropCar, Inc. (“ DropCar ”), a Delaware company, which is included as Annex A to the Registration Statement. This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus (the “ Prospectus ”), other than as expressly stated herein with respect to the issuance of the Shares.
As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of WPCS and others as to factual matters without having independently verified such factual matters. We are opining herein only with respect to the General Corporation Law of the State of Delaware (the “ DGCL ”), and we express no opinion with respect to any other laws.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the applicable DropCar stockholders, and have been issued by WPCS against payment therefor (not less than par value) in the circumstances contemplated by the Registration Statement and the Merger Agreement, and WPCS has filed the amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware effecting a reverse stock split of the Common Stock, at a ratio mutually agreed to by WPCS and DropCar in the range of one new share for every 1.5 to 10 shares outstanding (or any number in between), the issuance and sale of the Shares will have been duly authorized by all necessary corporate action of WPCS, and the Shares will be validly issued, fully paid and nonassessable.
WPCS International Incorporated
________ __, 2017
Page 2
In rendering the foregoing opinion, we have assumed that (i) at or prior to the time of the delivery of any Shares, the Registration Statement will have been declared effective under the Act and that the registration will apply to all of the Shares and will not have been modified or rescinded and that there will not have occurred any change in law affecting the validity of the issuance of such Shares and (ii) WPCS will comply with all applicable notice requirements regarding uncertificated shares provided in the DGCL.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act.
We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
Very truly yours,
MORSE, ZELNICK, ROSE & LANDER, LLP
By: |
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration Statement of WPCS International Incorporated on Form S-4 of our report dated July 21, 2017, with respect to our audits of the consolidated financial statements of WPCS International Incorporated and Subsidiaries as of April 30, 2017 and 2016 and for the years then ended, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Marcum llp
Marcum llp
New York, NY
October 10, 2017
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement of WPCS International Incorporated on Form S-4 (No. [ XX ]) to be filed on or about October 10, 2017, of our report dated July 13, 2017, on our audits of the financial statements of DropCar, Inc. (the “Company”) as of December, 31, 2016 and 2015 and for each of the years then ended. Our report includes an explanatory paragraph about the existence of substantial doubt concerning the Company's ability to continue as a going concern. We also consent to the reference to our firm under the caption “Experts” in the Registration Statement on Form S-4.
/s/ EISNERAMPER LLP | |
New York, New York | |
October 10, 2017 |
Exhibit 99.3
Consent of Gordian Investments, LLC
October 10, 2017
Board of Directors
WPCS International Incorporated
521 Railroad Avenue
Suisun City, California 94585
Re: Registration Statement on Form S-4 of WPCS International Incorporated
Members of the Board:
We hereby consent to: (i) the inclusion of our opinion letter, dated September 5, 2017, to the Board of Directors of WPCS International Incorporated (“WPCS”) as Annex E to the proxy statement/prospectus/information statement that forms part of the Registration Statement on Form S-4 of WPCS (the “Registration Statement”) filed on October 10, 2017; and (ii) the references made to our firm and such opinion in such Registration Statement under the captions “Prospectus Summary—Opinion of the WPCS Financial Advisor,” “The Merger—Background of the Merger,” “The Merger—WPCS Reasons for the Merger,” and “The Merger—Opinion of the WPCS Financial Advisor.” Notwithstanding the foregoing, in giving such consent, we do not thereby admit and we hereby disclaim that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we hereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term “experts” as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours, | |
/s/ Gordian Investments, LLC | |
GORDIAN INVESTMENTS, LLC |
Exhibit 99.7
September 28, 2017
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Consent to Reference in Proxy Statement/Prospectus/Information Statement
WPCS International Incorporated (the “Company”) is filing a Registration Statement on Form S-4 (Registration No. 333- ) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus/ information statement included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Spencer Richardson |
Name: Spencer Richardson |
Exhibit 99.8
September 28, 2017
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Consent to Reference in Proxy Statement/Prospectus/Information Statement
WPCS International Incorporated (the “Company”) is filing a Registration Statement on Form S-4 (Registration No. 333- ) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus/ information statement included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ David Newman |
Name: David Newman |
Exhibit 99.9
September 28, 2017
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Consent to Reference in Proxy Statement/Prospectus/Information Statement
WPCS International Incorporated (the “Company”) is filing a Registration Statement on Form S-4 (Registration No. 333- ) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus/ information statement included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Brian Harrington |
Name: Brian Harrington |
Exhibit 99.10
September 28, 2017
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Consent to Reference in Proxy Statement/Prospectus/Information Statement
WPCS International Incorporated (the “Company”) is filing a Registration Statement on Form S-4 (Registration No. 333- ) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”). In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to the reference to me in the proxy statement/prospectus/ information statement included in such registration statement as a future member of the board of directors of the Company.
Sincerely, |
/s/ Greg Schiffman |
Name: Greg Schiffman |