SUBSEQUENT EVENT

3 Months Ended

Jul. 31, 2011

NOTE 9 – SUBSEQUENT EVENT

Effective September 1, 2011, the Company entered into a Securities Purchase Agreement and Amendment No. 1 to the Escrow Agreement (the Agreements) with Multiband, for the acquisition by Multiband of the common stock of the Company’s subsidiaries comprising the St. Louis and Sarasota operations for $2,000,000 in cash. The $2,000,000 in proceeds was paid to BOA to reduce the outstanding borrowings under the Loan Agreement.

The Agreements also provide that Multiband will use its best efforts to complete the acquisition of the outstanding common stock of the Company on terms consistent with the non-binding letter of intent dated June 1, 2011, as amended August 11, 2011. Under the terms of the non-binding letter of intent, Multiband is offering $3.20 in cash per common share for the outstanding common stock of the Company, and the Company has provided Multiband an exclusive period until February 1, 2012 (the Exclusivity Period) in which to complete the transaction. In exchange for the Exclusivity Period, Multiband has agreed that it will not sell any of the 709,271 shares of Company common stock it currently owns for the duration of the Exclusivity Period. In addition, Multiband will maintain $250,000 in earnest money down payment in an escrow account in connection with completing the acquisition of the common stock of the Company. The potential acquisition of the common stock of the Company is subject to customary due diligence, negotiation of a definitive merger agreement and other conditions, including the approval of the Company’s shareholders. Multiband, traded under the NASDAQ symbol MBND, is the largest nationwide DIRECTV master system operator in the multiple dwelling unit market and one of the largest full-service home service providers of DIRECTV’s installations, maintenance and upgrades for residents of single-family homes.

The following presents the unaudited pro forma financial information as of and for the three months ended July 31, 2011 and 2010, respectively, to give effect to the sale of the St. Louis and Sarasota operations and the application of the $2,000,000 in proceeds, net of transaction costs, as if each had occurred as of and for the three months ended July 31, 2011. The net proceeds were used to reduce the outstanding borrowings under the Loan Agreement with BOA. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period.

Pro Forma Unaudited Condensed Consolidated Balance Sheet at July 31, 2011

	As Reported							Pro Forma
	July 31,		Pro Forma					July 31,
ASSETS	2011		Adjustments					2011

CURRENT ASSETS:

Cash and cash equivalents	$	4,063,322	$	26,455		(1	)	$	4,089,777
Accounts receivable, net of allowance of $1,631,985 at July 31, 2011		25,777,082		(1,657,922	)	(1	)		24,119,160
Costs and estimated earnings in excess of billings on uncompleted contracts		4,546,270		(772,277	)	(1	)		3,773,993
Inventory		1,606,385		(83,941	)	(1	)		1,522,444
Prepaid expenses and other current assets		1,592,500		(28,582	)	(1	)		1,563,918
Prepaid income taxes		214,897		(46,822	)	(1	)		168,075
Income taxes receivable		1,185,000		-		(1	)		1,185,000
Deferred tax assets		2,642,598		(27,000	)	(1	)		2,615,598
Total current assets		41,628,054		(2,590,089	)				39,037,965

PROPERTY AND EQUIPMENT, net		5,909,461		(435,758	)	(1	)		5,473,703

OTHER INTANGIBLE ASSETS, net		742,897		-					742,897

GOODWILL		2,038,978		-					2,038,978

DEFERRED TAX ASSETS		2,674,841		(751,000	)	(1	)		1,923,841

OTHER ASSETS		134,145		(60,558	)	(1	)		73,587

Total assets	$	53,128,376	$	(3,837,405	)			$	49,290,971

	As Reported								Pro Forma
LIABILITIES AND EQUITY	July 31,			Pro Forma					July 31,
	2011			Adjustments					2011

CURRENT LIABILITIES:

Current portion of loans payable	$	97,299		$	(12,261	)	(1	)	$	85,038
Borrowings under line of credit		5,560,977			(2,000,000	)	(2	)		3,560,977
Current portion of capital lease obligations		48,175			-					48,175
Accounts payable and accrued expenses		13,599,932			(817,669	)	(1	)		12,782,263
Billings in excess of costs and estimated earnings on uncompleted contracts		2,168,352			(37,777	)	(1	)		2,130,575
Deferred revenue		809,169			-					809,169
Due joint venture partner		3,134,583			-					3,134,583
Acquisition-related contingent consideration		1,049,011			-					1,049,011
Total current liabilities		26,467,498			(2,867,707	)				23,599,791

Loans payable, net of current portion		211,677			(64,634	)	(1	)		147,043
Capital lease obligations, net of current portion		5,432			-					5,432
Total liabilities		26,684,607			(2,932,341	)				23,752,266



EQUITY:
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued		-			-
Common stock - $0.0001 par value, 25,000,000 shares authorized, 6,954,766
shares issued and outstanding at July 31, 2011		695			-					695
Additional paid-in capital		50,453,914								50,453,914
Accumulated deficit		(26,630,508	)		(905,064	)	(1	), (2)		(27,535,572	)
Accumulated other comprehensive income on foreign currency translation, net of										-
tax effects of $191,979 at July 31, 2011		1,560,411			-					1,560,411

Total WPCS shareholders' equity		25,384,512			(905,064	)				24,479,448

Noncontrolling interest		1,059,257			-					1,059,257

Total equity		26,443,769			(905,064	)				25,538,705

Total liabilities and equity	$	53,128,376		$	(3,837,405	)			$	49,290,971

Notes to Pro Forma Unaudited Condensed Consolidated Balance Sheet as of July 31, 2011:

(1)	The adjustments reflect the disposition of the St. Louis and Sarasota Operations.

(2)	The adjustments reflect the use of the $2,000,000 in proceeds from the sale of the St. Louis and Sarasota Operations to reduce total amounts outstanding under the Loan Agreement with BOA.

Pro Forma Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended July 31, 2011 and 2010

	Three Months Ended July 31, 2011
				Pro Forma
	As Reported			Adjustments					Pro Forma

REVENUE	$	25,419,503		$	(1,855,908	)	(1	)	$	23,563,595

COSTS AND EXPENSES:
Cost of revenue		19,573,186			(1,541,032	)	(1	)		18,032,154
Selling, general and administrative expenses		5,156,522			(712,493	)	(1	)		4,444,029
Depreciation and amortization		604,832			(52,581	)	(1	)		552,251
Change in fair value of acquisition-related contingent consideration		43,068			-					43,068

		25,377,608			(2,306,106	)				23,071,502

OPERATING INCOME		41,895			450,198					492,093

OTHER EXPENSE (INCOME):
Interest expense		95,932			(26,342	)	(1	),(2)		69,590
Interest income		(8,476	)		-					(8,476	)

(Loss) income from continuing operations before income tax (benefit) provision		(45,561	)		476,540					430,979

Income tax (benefit) provision		(26,340	)		295,409		(1	)		269,069

(LOSS) INCOME FROM CONTINUING OPERATIONS		(19,221	)		181,131					161,910

Discontinued operations:

Loss from operations		-			(476,540	)				(476,540	)
Loss from disposal		-			(905,064	)	(3	)		(905,064	)
Income tax benefit		-			295,409					295,409

Loss from discontinued operations		-			(1,086,195	)				(1,086,195	)

CONSOLIDATED NET LOSS		(19,221	)		(905,064	)				(924,285	)

Net income attributable to noncontrolling interest		15,456			-					15,456

NET LOSS ATTRIBUTABLE TO WPCS	$	(34,677	)	$	(905,064	)			$	(939,741	)

Basic net loss per common share attributable to WPCS:
(Loss) income from continuing operations attributable to WPCS	$	(0.00	)	$	0.03				$	0.03
Loss from discontinued operations attributable to WPCS	$	0.00		$	(0.16	)			$	(0.16	)
Basic net loss income per common share attributable to WPCS	$	(0.00	)	$	(0.13	)			$	(0.13	)

Diluted net (loss) income per common share attributable to WPCS:
(Loss) income from continuing operations attributable to WPCS	$	(0.00	)	$	0.03				$	0.03
Loss from discontinued operations attributable to WPCS	$	0.00		$	(0.16	)			$	(0.16	)
Diluted net loss per common share attributable to WPCS	$	(0.00	)	$	(0.13	)			$	(0.13	)

Basic weighted average number of common shares outstanding		6,954,766			6,954,766					6,954,766
Diluted weighted average number of common shares outstanding		6,954,766			6,964,211					6,964,211

	Three Months Ended July 31, 2010
				Pro Forma
	As Reported			Adjustments					Pro Forma

REVENUE	$	28,852,498		$	(5,586,627	)	(1	)	$	23,265,871

COSTS AND EXPENSES:
Cost of revenue		22,697,975			(4,086,993	)	(1	)		18,610,982
Selling, general and administrative expenses		5,916,327			(1,037,182	)	(1	)		4,879,145
Depreciation and amortization		734,615			(77,265	)	(1	)		657,350
Change in fair value of acquisition-related contingent consideration		63,052			-					63,052

		29,411,969			(5,201,440	)				24,210,529

OPERATING LOSS		(559,471	)		(385,187	)				(944,658	)

OTHER EXPENSE (INCOME):
Interest expense		54,635			(16,293	)	(1	), (2)		38,342
Interest income		(10,069	)		-					(10,069	)

Loss from continuing operations before income tax benefit		(604,037	)		(368,894	)				(972,931	)

Income tax benefit		(238,379	)		(160,523	)	(1	)		(398,902	)

LOSS FROM CONTINUING OPERATIONS		(365,658	)		(208,371	)				(574,029	)

Discontinued operations:

Gain from operations		-			368,894					368,894
Loss from disposal		-			-					-
Income tax provision		-			(160,523	)				(160,523	)

Gain from discontinued operations		-			208,371					208,371

CONSOLIDATED NET LOSS		(365,658	)		-					(365,658	)

Net income attributable to noncontrolling interest		10,293			-					10,293

NET LOSS ATTRIBUTABLE TO WPCS	$	(375,951	)	$	(208,371	)			$	(584,322	)

Basic net loss per common share attributable to WPCS:
Loss from continuing operations attributable to WPCS	$	(0.05	)	$	(0.03	)			$	(0.08	)
Gain from discontinued operations attributable to WPCS	$	0.00		$	0.03				$	0.03
Basic net loss income per common share attributable to WPCS	$	(0.05	)	$	0.00				$	(0.05	)

Diluted net loss per common share attributable to WPCS:
Loss from continuing operations attributable to WPCS	$	(0.05	)	$	(0.03	)			$	(0.08	)
Gain from discontinued operations attributable to WPCS	$	0.00		$	0.03				$	0.03
Diluted net loss per common share attributable to WPCS	$	(0.05	)	$	(0.00	)			$	(0.05	)

Basic weighted average number of common shares outstanding		6,954,766			6,954,766					6,954,766
Diluted weighted average number of common shares outstanding		6,954,766			6,968,633					6,968,633

Notes to Pro Forma Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended July 31, 2011 and 2010:

(1)	The adjustments reflect the disposition of the St. Louis and Sarasota operations.

(2)

The adjustments reflect the reduction in interest expense of $26,250 and $16,250, and the related income tax effect, for the three months ended July 31, 2011 and 2010, respectively, from the $2,000,000 use of proceeds from the sale of the St. Louis and Sarasota Operations to reduce total amounts outstanding under the Loan Agreement with BOA.

(3)	The adjustment reflects the loss that will be recognized in the second quarter ending October 31, 2011 from the disposition of the St. Louis and Sarasota Operations.