WPCS International Inc. is planning to enter into forbearance talks with noteholders after defaulting on the terms of notes it issued in 2012.
The Exton, Pennsylvania engineering company focuses on communications infrastructure, including specialty construction but has been busy developing a bitcoin trading platform. The group also designs wireless networks and provides technology integration to create wireless communications systems.
In a June 20 filing with the U.S. Securities and Exchange Commission, WPCS says that it received a notice from the Nasdaq exchange on June 18 that the company's stock may be delisted if it does not regain compliance with the exchange's listing requirements. Terms on the notes that WPCS issued in 2012 say that an event of default occurs if the company's common stock is suspended or threatened with suspension from trading on the Nasdaq exchange. WPCS has until December 14 to regain Nasdaq compliance.
The default gives noteholders the right to require WPCS to redeem the notes, which currently are worth $898,334. WPCS says that it provided a notice of the default, but hasn't yet received any redemption requests. If it does, "the company does not have sufficient working capital to repay the outstanding borrowings," it says.
WPCS plans to enter into discussions with the noteholders for the forbearance or waiver of the event of default, but the company warns that there is no assurance the parties will come to an agreement.
According to WPCS' latest quarterly report, filed on March 17, losses from operations and outstanding debt raise substantial doubt about the company's ability to continue as a going concern, or without the threat of liquidation. Now, it must raise additional funds through debt or security offerings.
The organization noted in the filing that it had defaulted under a forbearance agreement with Zurich American Insurance Co., to which it owes about $1.5 million.
In order to increase working capital, in April, WPCS agreed to sell the Seattle operations to EC, an Oregon-based electrical company for $2.7 million. The group has sold other assets, including an Australian business unit called Pride Group Pty. Ltd., in October.
For the previous edition of Turnaround Tuesday, see "Struggling Efactor Plans to Raise Cash Through Stock Offering."
For more struggling companies, see Mergers & Acquisitions' Distressed Company Watch List.