8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): September 16, 2013

WPCS INTERNATIONAL INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	001-34643	98-0204758
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One East Uwchlan Avenue, Suite 301, Exton, PA 19341

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (610) 903-0400

Copy of correspondence to:

Marc J. Ross, Esq.

Thomas A. Rose, Esq.

James M. Turner, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, New York 10006

Tel: (212) 930-9700 Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 Results of Operations and Financial Condition.

On September 16, 2013, WPCS International Incorporated (the “Company”) announced its operating results for the first fiscal quarter ended July 31, 2013. A copy of the press release that discusses this matter is filed as Exhibit 99.01 to, and incorporated by reference in, this report. The information in this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.

Use of Non-GAAP Financial Measures

The attached press release references EBITDA, a financial measure that is not in accordance with GAAP. WPCS defines EBITDA in the traditional sense of earnings before interest, income taxes, depreciation and amortization but in addition, WPCS has incurred one-time charges (credits) for the (gain) loss from discontinued operations and severance expenses as well as non-cash charges from changes in fair value of derivative liabilities, deferred tax asset valuation allowances, acquisition related earn-out costs and goodwill impairments. These charges are also excluded from the EBITDA calculation so that the company can provide a more meaningful perspective on the results for the continuing operations. The company uses EBITDA to evaluate its operating and financial performance in light of business objectives, for planning purposes, when publicly providing our business outlook and to facilitate period-to-period comparisons. The company believes that this measure is useful to investors because it enhances investors' ability to review the Company's business from the same perspective as our management and to facilitate comparisons of this period's results with prior periods. Non-GAAP measures are used at times by investors to assess the ongoing financial performance of the company. These financial measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. The presentation of the additional information should not be considered a substitute for net income (loss) or net income (loss) per diluted share prepared in accordance with GAAP. The primary material limitations associated with the use of non-GAAP measures as compared to the most directly comparable GAAP financial measures are (i) they may not be comparable to similarly titled measures used by other companies in our industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. Pursuant to the Requirements of Regulation G, WPCS has included a reconciliation of EBITDA to the most directly comparable GAAP financial measure.

ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.01 Press Release, dated September 16, 2013, issued by WPCS International Incorporated.

SIGNATURE

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WPCS INTERNATIONAL INCORPORATED
Date:  September 16, 2013	By: /s/ JOSEPH HEATER
	Joseph Heater
	Chief Financial Officer

EX-99.01

Exhibit 99.01

PRESS RELEASE SOURCE: WPCS International Incorporated

WPCS Reports 1st Quarter FY2014 Results

EXTON, PA - (Marketwired – September 16, 2013) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in design-build engineering services for communications infrastructure, today announced financial results for the fiscal year 2014 first quarter ended July 31, 2013. In the first quarter, the company generated consolidated EBITDA of approximately $118,000 on revenue of $9.7 million, compared to an EBITDA loss of $311,000 on revenue of $9.4 million in the preceding quarter ended April 30, 2013. For the same period in the prior year, the company generated an EBITDA loss of $81,000 on revenue of $13.4 million. WPCS currently has a backlog of $26.1 million in orders to fulfill and a bid list of $52.2 million in potential projects.

For the first quarter of fiscal year 2014 ended July 31, 2013, WPCS reported a net loss of approximately $5.9 million or $5.89 per diluted share, which includes a one-time charge for severance expense of approximately $1.5 million related to the separation agreement with the company’s former CEO, Andy Hidalgo. As part of the separation agreement, Mr. Hidalgo intends to acquire certain underperforming operation center assets, which is consistent with the company’s plan to improve its financial results.

For the first quarter ended July 31, 2013, WPCS recorded non-cash charges of approximately $4.1 million for the amortization of note discounts and change in fair value of the derivative liabilities. In connection with the completion of the $4 million senior secured convertible note financing facility on December 5, 2012, the conversion features of the notes and the common stock warrants issued are considered derivative financial instruments that are accounted for as a note discount with each being a derivative liability. WPCS is required to determine the fair value of these liabilities, with the changes in fair value recorded in the financial results each period as a non-cash charge or gain. These are non-cash charges and do not affect the operating cash flow of the company.

The net loss for the first quarter ended July 31, 2013, compares to net income of $994,000 or $0.99 per diluted share, for the same period one year ago, which includes income from discontinued operations for the Hartford and Lakewood operations of approximately $1.7 million, or $1.68 per diluted share.

Sebastian Giordano, Interim CEO of WPCS, commented, “The management team is pleased to report positive EBITDA performance, and since taking over the interim CEO role, the company is evaluating a number of opportunities for improvement, including seeking a shareholder value proposition in the near future.”

As a reminder, there will be an investor conference call at 5:00 pm ET today. To participate on the conference call, please dial 800-875-3456 for calls within the U.S. or 302-607-2001 for calls from international locations. Upon reaching the operator, verbally transmit the participant code VH61282. When the overview concludes, your questions can be asked by pressing *1 and your questions can be removed from the queue by pressing the number sign. Replays of the call will be available for a period of five days by dialing 800-355-2355 and entering 61282 # as the program identification number.

About WPCS International Incorporated:

WPCS is a design-build engineering company that focuses on the implementation requirements of communications infrastructure. The company provides its engineering capabilities including wireless communication, specialty construction and electrical power to the public services, healthcare, energy and corporate enterprise markets worldwide. For more information, please visit www.wpcs.com

Statements about the company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties and are subject to change at any time. The company’s actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the company undertakes no obligation to update forward looking statements.

CONTACT:

WPCS International Incorporated

610-903-0400 x104

ir@wpcs.com

The press release references a financial measure, EBITDA that is not in accordance with GAAP. WPCS defines EBITDA in the traditional sense of earnings before interest, income taxes, depreciation and amortization but in addition, WPCS has incurred one-time charges (credits) for the (gain) loss from discontinued operations and severance expenses, as well as non-cash charges from changes in fair value of derivative liabilities, deferred tax asset valuation allowances, acquisition related earn-out costs, and goodwill impairments. These charges are also excluded from the EBITDA calculation so that the company can provide a more meaningful perspective on the results for the continuing operations. The company uses EBITDA to evaluate its operating and financial performance in light of business objectives, for planning purposes, when publicly providing our business outlook and to facilitate period-to-period comparisons. The company believes that this measure is useful to investors because it enhances investors' ability to review the Company's business from the same perspective as our management and to facilitate comparisons of this period's results with prior periods. Non-GAAP measures are used at times by investors to assess the ongoing financial performance of the company. These financial measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. The presentation of the additional information should not be considered a substitute for net income (loss) or net income (loss) per diluted share prepared in accordance with GAAP. The primary material limitations associated with the use of non-GAAP measures as compared to the most directly comparable GAAP financial measures are (i) they may not be comparable to similarly titled measures used by other companies in our industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. Pursuant to the Requirements of Regulation G, WPCS has included a reconciliation of EBITDA to the most directly comparable GAAP financial measure.

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	July 31,
	2013			2012
REVENUE	$	9,712,088		$	13,444,417
COSTS AND EXPENSES:
Cost of revenue		7,149,494			10,514,076
Selling, general and administrative expenses		2,444,811			3,010,966
Severance expense		1,474,277			-
Depreciation and amortization		291,489			361,714
		11,360,071			13,886,756
OPERATING LOSS		(1,647,983	)		(442,339	)
OTHER EXPENSE (INCOME):
Interest expense		1,160,057			125,115
Change in fair value of derivative liabilities		3,041,905			-
Interest income		(2,770	)		(9,798	)
Loss from continuing operations before income tax provision		(5,847,175	)		(557,656	)
Income tax provision		24,151			134,529
LOSS FROM CONTINUING OPERATIONS		(5,871,326	)		(692,185	)
Discontinued operations
Loss from operations of discontinued operations, net of tax provision of  $54,164		-			(639,292	)
Gain from disposal		-			2,324,631
Income from discontinued operations, net of tax		-			1,685,339
CONSOLIDATED NET (LOSS) INCOME		(5,871,326	)		993,154
Net income (loss) attributable to noncontrolling interest		21,744			(547	)
NET (LOSS) INCOME ATTRIBUTABLE TO WPCS	$	(5,893,070	)	$	993,701
Basic and diluted net (loss) income per common share attributable to WPCS:
Loss from continuing operations attributable to WPCS	$	(5.89	)	$	(0.69	)
Income from discontinued operations attributable to WPCS	$	-		$	1.68
Basic and diluted net (loss) income per common share attributable to WPCS	$	(5.89	)	$	0.99
Basic and diluted weighted average number of common shares outstanding		1,000,624			1,000,624

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	July 31,		April 30,
ASSETS	2013		2013
	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	1,511,505	$	1,410,223
Restricted cash		655,754		1,869,178
Accounts receivable, net of allowance of  $1,382,778 and $1,427,308 at
July 31, 2013 and April 30, 2013, respectively		9,986,639		8,363,089
Costs and estimated earnings in excess of billings on uncompleted contracts		1,453,436		1,148,855
Deferred contract costs		1,569,341		1,597,894
Prepaid expenses and other current assets		318,913		204,492
Prepaid income taxes		2,185		2,185
Total current assets		15,497,773		14,595,916
PROPERTY AND EQUIPMENT, net		2,847,148		3,053,455
OTHER INTANGIBLE ASSETS, net		187,937		250,632
OTHER ASSETS		201,996		244,963
Total assets	$	18,734,854	$	18,144,966

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

LIABILITIES AND DEFICIT	July 31,			April 30,
	2013			2013
	(Unaudited)
CURRENT LIABILITIES:
Current portion of loans payable	$	49,653		$	43,942
Senior secured convertible notes, net of debt discount		1,549,928			1,111,111
Derivative liability - senior secured convertible note		3,939,029			3,088,756
Accounts payable and accrued expenses		5,779,215			4,764,487
Accrued severance expense		1,462,500			-
Billings in excess of costs and estimated earnings on uncompleted contracts		1,713,702			1,642,501
Deferred revenue		277,287			113,503
Other payable		1,633,757			1,743,986
Short-term bank loan		2,446,650			2,432,205
Income taxes payable		74,126			139,557
Total current liabilities		18,925,847			15,080,048
Loans payable, net of current portion		168,127			133,838
Derivative liability - warrants		5,363,285			3,858,508
Total liabilities		24,457,259			19,072,394
COMMITMENTS AND CONTINGENCIES
EQUITY:
WPCS DEFICIT:
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued		-			-
Common stock - $0.0001 par value, 14,285,714 shares authorized, 1,269,929 and 994,187 shares issued and outstanding at July 31, 2013 and April 30, 2013 respectively		127			99
Additional paid-in capital		52,146,305			50,844,183
Accumulated deficit		(59,947,459	)		(54,054,389	)
Accumulated other comprehensive income on foreign currency translation		1,202,993			1,433,541
Total WPCS deficit		(6,598,034	)		(1,776,566	)
Noncontrolling interest		875,629			849,138
Total deficit		(5,722,405	)		(927,428	)
Total liabilities and deficit	$	18,734,854		$	18,144,966

Reconciliation of GAAP to Non-GAAP Financial Measure (Unaudited)

(1) Reconciliation of Non-GAAP EBITDA as Adjusted:

	Three Months Ended
	July 31,			July 31,			April 30,
	2013			2012			2013
NET (LOSS) INCOME ATTRIBUTABLE TO WPCS, GAAP	$	(5,893,070	)	$	993,701		$	(6,186,744	)
Plus:
Net income (loss) attributable to noncontrolling interest		21,744			(547	)		12,484
Loss (income) from discontinued operations, net of tax		-			639,292			(106,027	)
(Gain) loss from disposal of discontinued operations		-			(2,324,631	)		69,953
Income tax provision		24,151			134,529			877,705
Interest expense		1,160,057			125,115			794,778
Change in fair value of derivative liabilities		3,041,905			-			2,000,674
Interest income		(2,770	)		(9,798	)		(36,550	)
Goodwill and intangible assets impairment		-			-			1,936,059
Depreciation and amortization		291,489			361,714			327,114
One time charge - severance expense		1,474,277			-			-
Consolidated EBITDA, as adjusted, Non-GAAP	$	117,783		$	(80,625	)	$	(310,554	)