DISCONTINUED OPERATIONS

3 Months Ended

Jul. 31, 2014

Discontinued Operations

DISCONTINUED OPERATIONS

NOTE 11 - DISCONTINUED OPERATIONS

Australia Operations

On July 30, 2014, the Company entered into the Waiver with the Holder of a majority of the Notes and Warrants. The Notes are secured by a first priority lien on the assets of the Company and subsidiaries pursuant to the Security Agreement by the Company and subsidiaries in favor of the Collateral Agent. As a result of the Waiver, the Collateral Agent released the stock of Pride from collateral pursuant to the Security Agreement.

On the Closing Date, the Company completed the sale of Pride to Turquino, whose managing member is Hidalgo, former Chairman and Chief Executive Officer of the Company. The closing of the sale was pursuant to the Agreement.

Pursuant to the Agreement, WPCS Australia agreed to sell 100% of the shares of Pride to Turquino for the Purchase Price, which Purchase Price was subject to adjustment based on the NTAV of Pride on the Closing Date. In the event that the NTAV was less than AUD$1.4 million on the Closing Date, WPCS Australia was required to pay Turquino an amount equal to the shortfall between the NTAV as of the Closing Date and AUD$1.4 million. At the closing, the Purchase Price was to be settled by applying the net after tax severance balance due Hidalgo under the Severance Agreement, as payment towards the Purchase Price. 

Pursuant to the Letter Agreement, the parties agreed that the NTAV of Pride on the Closing Date was $970,000. By the Letter Agreement, Hidalgo agreed to reduce the total severance owed to him under the Severance Agreement by $168,000, which reduced the total severance due Hidalgo to $970,000, the NTAV of Pride on the Closing Date. As a result, the Company was not required to make any further payment to Hidalgo pursuant to the Severance Agreement.

The gain on sale of Australia is as follows:

Purchase price	$	970,010
Net assets before accumulative other comprehensive income		1,037,833
Accumulative other comprehensive income		(866,719)
Gain on sale of Australia	$	798,896

WPCS International - Seattle, Inc.

On August 15, 2014, the Company reconvened a special meeting of stockholders, at which the Company’s stockholders approved the proposal to approve the sale of substantially all of the assets of the Seattle Operations.

The Company has reported the financial activity of these two operations as discontinued operations for all periods presented. The following is a summary of the operating results for the discontinued operations is as follows:

	Three months ended
	July 31,
	2014		2013
REVENUE	$	3,270,074	$	5,456,345
COSTS AND EXPENSES:
Cost of revenue		2,330,901		3,994,779
Selling, general and administrative expenses		739,423		1,032,679
Depreciation and amortization		49,884		91,141
		3,120,208		5,118,599
OPERATING INCOME FROM DISCONTINUED OPERATIONS		149,866		337,746
Interest expense		1,005		564
Interest income		-		(2,770)
Income from discontinued operations		148,861		339,952
Gain on sale of Australia		798,896		-
TOTAL INCOME FROM DISCONTINUED OPERATIONS	$	947,757	$	339,952

The following table summarizes the assets and liabilities held for sale for the Seattle operations as of July 31, 2014 and April 30, 2014:

	July 31, 2014		April 30, 2014
ASSETS
CURRENT ASSETS:
Accounts receivable, net of allowance	$	2,651,576	$	3,351,881
Costs and estimated earnings in excess of billings on uncompleted contracts		318,215		616,858
Prepaid expenses and other current assets		3,147		33,073
Total current assets held for sale		2,972,938		4,001,812
PROPERTY AND EQUIPMENT, net		179,339		342,884
OTHER ASSETS		14,000		30,046
Total other assets held for sale		193,339		372,930
Total assets held for sale	$	3,166,277	$	4,374,742
LIABILITIES
Current portion of loans payable	$	27,218	$	26,921
Accounts payable and accrued expenses		867,900		1,425,586
Billings in excess of costs and estimated earnings on uncompleted contracts		438,727		345,108
Total current liabilities held for sale		1,333,845		1,797,615
Loans payable, net of current portion		81,506		88,404
Total liabilities	$	1,415,351	$	1,886,019