Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
WPCS International Incorporated (the "Company") previously issued secured
convertible notes (the "Notes") to certain accredited investors (the "Holders")
pursuant to a securities purchase agreement dated December 4, 2012. Pursuant to
the terms of the Notes, an event of default occurs when the Company's common
stock is suspended or threatened with suspension from trading on The NASDAQ
Capital Market (or an equivalent market). As discussed more fully in Item 3.01
below, the Company received a letter from the Staff of the Listing
Qualifications Department of The NASDAQ Stock Market LLC ("NASDAQ") indicating
that the Company's common stock would be subject to delisting from The NASDAQ
Capital Market on December 15, 2014, unless the Company regains compliance with
the continued listing requirements of NASDAQ or is entitled to additional time
to achieve compliance with the NASDAQ rules. As a result of the notice from
NASDAQ, an event of default occurred under the Notes (the "Event of Default").
As a result of the Event of Default, the Holders have the right to require the
Company to redeem the Notes equal to the Conversion Amount (as defined in the
Notes) to be redeemed, plus a make-whole amount equal to the amount of any
interest that, but for any redemption of the Notes on such given date, would
have accrued with respect to the Conversion Amount being redeemed under the
Notes at the interest rate then in effect for the period from such given date
through October 31, 2023, the amended maturity date of the Notes, discounted to
the present value of such interest using a discount rate of 2.5% per annum.
Currently, the principal amount of Notes outstanding is $898,334.
The Company has provided notice to the Holders of the Event of Default, but no
Holder has exercised its right of redemption. If the Company is required to
repay the Notes, the Company does not have sufficient working capital to repay
the outstanding borrowings.
The Company intends to commence discussions with the Holders concerning a
forbearance or waiver of the Event of Default; however, there can be no
assurance that the Company and Holders will come to any agreement (either oral
or written) regarding repayment, forbearance, waiver and/or modification of the
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On June 18, 2014, the Company received a letter from the Staff of the Listing
Qualifications Department (the "Staff") of NASDAQ indicating that for the last
30 consecutive business days, the closing bid price of the Company's common
stock has been below $1.00 per share, the minimum closing bid price required by
the continued listing requirements of NASDAQ, as set forth in Listing Rule
5550(a)(2) (the "Rule").
In accordance with Listing Rule 5810(c)(3)(A), the Company has been granted 180
calendar days, or until December 14, 2014, to regain compliance with the Rule
(the "Compliance Period"). To regain compliance, the closing bid price of the
Company's common stock must be at least $1.00 per share for a minimum of 10
consecutive business days, but generally no more than 20 business days, during
the Compliance Period.
If the Company does not regain compliance with the Rule by December 14, 2014,
NASDAQ will provide written notification to the Company that its common stock
may be delisted. However, the Company would be entitled to an additional 180-day
period from December 14, 2014 to regain compliance, if, on December 14, 2014,
the Company meets the continued listing requirement for market value of publicly
held shares and all other initial listing standards for The NASDAQ Capital
Market, with the exception of the bid price requirement, and the Company would
need to provide written notice to NASDAQ of its intention to cure the deficiency
during the second compliance period by effecting a reverse stock split, if
There is no assurance as to the price at which the Company's common stock will
trade. The Company intends to actively monitor the bid price for its common
stock during the Compliance Period, and if the common stock continues to trade
below the minimum bid price required for continued listing, the Company's board
of directors will consider its options to regain compliance with the continued
Item 8.01 Other Events.
As previously announced, on May 2, 2014
, the Company received notice from the
Staff indicating that the Company had not timely complied with the annual
meeting and proxy solicitation requirements, as set forth in Listing Rules
5620(a) and (b), respectively, and that the Company would therefore be subject
to delisting unless it requested a hearing before a Listing Qualifications Panel
(the "Panel"). Accordingly, the Company timely requested a hearing before the
Panel, at which it requested continued listing pending the solicitation of
proxies and the holding of the annual meeting following the filing of its Annual
Report on Form 10-K. The Company intends to make a further announcement
following the receipt of the Panel's decision.