10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended July 31, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number 001-34643

WPCS INTERNATIONAL INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware		98-0204758
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)
521 Railroad Avenue
Suisun City, California	94585	(707) 421-1300
(Address of principal executive office)	(Zip Code)	(Registrant’s telephone number,
		Including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No  x

As of September 12, 2016, there were 2,848,659 shares of registrant’s common stock outstanding.

TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed consolidated balance sheets as of July 31, 2016 and April 30, 2016	3
	Condensed consolidated statements of operations for the three months ended July 31, 2016 and 2015	4
	Condensed consolidated statements of comprehensive loss for the three months ended July 31, 2016 and 2015	5
	Condensed consolidated statement of equity for the three months ended July 31, 2016	6
	Condensed consolidated statements of cash flows for the three months ended July 31, 2016 and 2015	7
	Notes to condensed consolidated financial statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	21
Item 4.	Controls and Procedures	21
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
SIGNATURES		24

2

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED) 

	July 31,			April 30,
	2016			2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,939,900		$	2,235,597
Accounts receivable, net of allowance of $92,000 at July 31, 2016 and April 30, 2016, respectively		4,328,118			2,886,154
Costs and estimated earnings in excess of billings on uncompleted contracts		437,185			357,210
Prepaid expenses and other current assets		123,977			66,256
Total current assets		6,829,180			5,545,217
Property and equipment, net		298,559			237,800
Other assets		24,940			21,162
Total assets	$	7,152,679		$	5,804,179
LIABILITIES AND EQUITY
Current liabilities:
Current portion of loans payable	$	60,848		$	53,996
Accounts payable and accrued expenses		2,276,717			2,071,765
Billings in excess of costs and estimated earnings on uncompleted contracts		1,901,295			1,358,289
Total current liabilities		4,238,860			3,484,050
Loans payable, net of current portion		108,833			94,825
Total liabilities		4,347,693			3,578,875
Commitments and contingencies
Stockholders' equity
Preferred stock - $0.0001 par value, 5,000,000 shares authorized at July 31, 2016 and April 30, 2016, respectively
Convertible Series H, 8,500 shares designated, - 2,638 shares issued and outstanding at July 31, 2016 and April 30, 2016, respectively; liquidation preference of $406,000		406,262			406,262
Convertible Series H-1, 9,488 shares designated, - 8,119 shares issued and outstanding at July 31, 2016 and April 30, 2016, respectively; liquidation preference of $1,348,000		699,324			699,324
Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,706,159 and 2,691,055 shares issued and outstanding as of July 31, 2016 and April 30, 2016, respectively		271			269
Additional paid-in capital		85,962,888			85,940,389
Accumulated deficit		(84,263,759	)		(84,820,940	)
Total stockholders' equity		2,804,986			2,225,304
Total liabilities and stockholders’ equity	$	7,152,679		$	5,804,179

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended
	July 31,
	2016			2015
Revenue	$	3,416,453		$	4,464,003
Costs and expenses:
Cost of revenue		2,635,508			3,447,203
Selling, general and administrative expenses		1,352,986			1,312,803
Depreciation and amortization		20,666			14,969
		4,009,160			4,774,975
Operating loss		(592,707	)		(310,972	)
Other income (expense):
Interest expense		(1,981	)		(892	)
Income from Section 16 settlement		-			400,000
Income from Arbitration settlement		1,150,000			-
Other income (expense)		4,487			(2,906	)
Income from continuing operations before income tax provision		559,799			85,230
Income tax provision		2,618			1,099
Income from continuing operations		557,181			84,131
Discontinued operations:
Income from discontinued operations		-			41,261
Consolidated net income		557,181			125,392
Net income attributable to noncontrolling interest		-			16,505
Net income attributable to WPCS		557,181			108,887
Dividends declared on preferred stock		-			(3,587,121	)
Deemed dividend on convertible preferred stock, due to beneficial conversion feature		-			(703,770	)
Net income (loss) attributable to WPCS common shareholders	$	557,181		$	(4,182,004	)
Basic income (loss) from continuing operations per common share	$	0.21		$	(2.86	)
Basic income from discontinued operations per common share		-			0.02
Basic income (loss) per common share	$	0.21		$	(2.84	)
Diluted income (loss) from continuing operations per common share	$	0.14		$	(2.86	)
Diluted income from discontinued operations per common share		-			0.02
Diluted income (loss) per common share	$	0.14		$	(2.84	)
Weighted average shares outstanding - basic		2,701,404			1,470,248
Weighted average shares outstanding - diluted		3,937,628			1,470,248

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	For the three months ended
	July 31,
	2016		2015
Consolidated net income	$	557,181	$	125,392
Foreign currency translation adjustments		-		(647	)
Comprehensive income		557,181		124,745
Less: comprehensive loss attributable to noncontrolling interest		-		(431	)
Comprehensive income attributable to WPCS shareholders	$	557,181	$	125,176

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

									Additional					Total
	Preferred Stock				Common Stock				Paid-In		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance, May 1, 2016		10,757	$	1,105,586		2,691,055	$	269	$	85,940,389	$	(84,820,940	)	$	2,225,304
Share based compensation		-		-		15,104		2		22,499		-			22,501
Net income		-		-		-		-		-		557,181			557,181
Balance, July 31, 2016		10,757	$	1,105,586		2,706,159	$	271	$	85,962,888	$	(84,263,759	)	$	2,804,986

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the three months ended
	July 31,
	2016			2015
Operating activities:
Net income from operations	$	557,181		$	84,131
Consolidated net income from discontinued operations		-			41,261
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
Depreciation and amortization		20,666			14,969
Shares based compensation		22,501
Income on Section 16 settlement		-			(400,000	)
Changes in operating assets and liabilities:
Accounts receivable		(1,441,964	)		1,424,935
Costs and estimated earnings in excess of billings on uncompleted contracts		(79,975	)		(103,324	)
Current assets held for sale		-			(506,215	)
Prepaid expenses and other current assets		(57,721	)		84,464
Other assets		(3,778	)		-
Other assets held for sale		-			(34,522	)
Income taxes payable		-			(2,658	)
Accounts payable and accrued expenses		204,952			(1,277,741	)
Current liabilities held for sale		-			2,200,030
Billings in excess of costs and estimated earnings on uncompleted contracts		543,006			125,355
Net cash (used in) provided by operating activities		(235,132	)		1,650,685
Investing activities:
Acquisition of property and equipment		(30,803	)		(10,707	)
Net cash used in investing activities		(30,803	)		(10,707	)
Financing activities:
Proceeds from issuance of Series H-1 preferred stock and warrants		-			1,575,000
Borrowings under loan payable obligations		-			7,762
Repayment under loan payable obligations		(29,762	)		-
Repayments under other payable to Zurich		-			(135,000	)
Repayments of short term convertible note		-			(4,000	)
Net cash (used in) provided by financing activities		(29,762	)		1,443,762
Effect of exchange rate changes on cash		-			91,510
Net (decrease) increase in cash and cash equivalents		(295,697	)		3,175,250
Cash and cash equivalents, beginning of the period		2,235,597			2,364,360
Cash and cash equivalents, end of the period	$	1,939,900		$	5,539,610

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

	For the three months ended
	July 31,
	2016		2015
Schedule of non-cash investing and financing activities:
Asset financing	$	50,622	$	-
Declaration on preferred dividend payable	$	-	$	3,587,121
Warrants issued with convertible preferred stock	$	-	$	841,405
Deemed dividend on conversion of preferred stock to common stock	$	-	$	703,770
Conversion of dividends payable related to make-whole amount to common stock	$	-	$	3,375,792
Conversion of dividends payable related to Series F-1 preferred stock	$	-	$	501,826
Conversion of dividends payable related to Series G-1 preferred stock	$	-	$	158,481
Conversion of short term convertible note to Series H preferred stock	$	-	$	1,299,000
Conversion of Series F and F-1 preferred stock to common stock	$	-	$	2,731,984
Conversion of Series G and G-1 preferred stock to common stock	$	-	$	1,084,230
Conversion of Series H preferred stock to common stock	$	-	$	691,768

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

The Company currently specializes in low voltage communications, audio-visual and security contracting services, conducting business in one segment but three operation centers, through its wholly-owned domestic subsidiaries, WPCS International - Suisun City, Inc. (“Suisun City Operations”) and WPCS International - Texas Operations, Inc. (“Texas Operations”).

The Company is a full-service low voltage contractor that specializes in the installation and service of Voice & Data Networks, Security Systems, Audio-Visual Solutions, and Distributed Antenna Systems and provides experienced project management and delivers complex projects to key vertical markets that include Healthcare, Education, Transportation, Energy & Utilities, Oil & Gas, Manufacturing, Commercial Real Estate, Financial, Government, etc.

The Company also has strategic alliances with technology partners to provide consulting and application software development services for collaboration, visualization and unified communications and is aligned with major manufacturers to provide the products and technology for seamless integrated and enhanced user experience for enterprise solutions.

Basis of Presentation

The condensed consolidated financial statements of WPCS International Incorporated, a Delaware corporation (“WPCS”) and its wholly and majority-owned subsidiaries, (collectively, the “Company”) included in this Report for the three months ended July 31, 2016 and 2015, reflect the accounts of current and former entities as either continued or discontinued operations, as discussed below.

Continuing operations for the three months ended July 31, 2016 and 2015 include the results of operations of: (i) WPCS International Incorporated (corporate operating expenses); (ii) Suisun City Operations and the Texas Operations, the Company’s only two active operating subsidiaries; (iii) WPCS Incorporated, an inactive subsidiary; and (iv) WPCS International – Trenton, Inc. (“Trenton Operations”), which operations were closed in September 2013.

Discontinued operations for the three months ended July 31, 2015 include the results of WPCS Asia Limited, a 60% joint venture interest in Tai'an AGS Pipeline Construction Co. Ltd. (the “China Operations”). There are no discontinued operations for the three months ended July 31, 2016.

The unaudited condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the financial position and the results of operations and cash flows of the Company for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the financial statements included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2016.

The results of operations for the three months ended July 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year.

9

NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2016, the Company had a working capital surplus of approximately $2,590,000 as compared to a working capital surplus of approximately $2,061,000 at April 30, 2016. The increase in working capital is due primarily to an increase in accounts receivable and cash received for an arbitration settlement, offset by an increase in liabilities and cash used to fund our operating loss.

The Company’s cash and cash equivalents balance at July 31, 2016 was $1,940,000 as compared to $2,236,000 at April 30, 2016.

The Company's future plans and growth are dependent on its ability to increase revenues and continue its business development efforts surrounding its contract award backlog. If the Company continues to incur losses and revenues do not generate from the backlog as expected, the Company may need to raise additional capital to expand its business and continue as a going concern. The Company currently anticipates that its current cash position will be sufficient to meet its working capital requirements to continue its sales and marketing efforts for at least 12 months from the filing date of this report. If in the future the Company’s plans or assumptions change or prove to be inaccurate, the Company may need to raise additional funds through public or private debt or equity offerings, financings, corporate collaborations, or other means. The Company may also be required to reduce operating expenditures or investments in its infrastructure.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Form 10-K for the year ended April 30, 2016.

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”) or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Reclassifications

Certain reclassifications have been made in prior years’ consolidated financial statements to conform to the current year’s presentation. These reclassifications reflect the results of the China Operations as discontinued operations for all periods presented.

NOTE 4 – CONCENTRATIONS

Accounts Receivable

As of July 31, 2016, two customers comprised 42% of the Company’s total accounts receivable. Also included in the accounts receivable is retainage receivable of $404,000 and $326,000 at July 31, 2016 and April 30, 2016, respectively, and both the retainage and aged accounts receivable are expected to be collected.

Revenue Recognition

For the three months ended July 31, 2016, 8% of revenue was derived from one customer as compared to two customers who generated 21% and 15% of the revenue for the same period in 2015.

10

NOTE 5 – BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

Basic and diluted net income (loss) per common share from continuing operations is computed as net income (loss) from continuing operations less non-controlling interest and dividends on preferred stock, divided by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur from common stock issuable through the exercise of stock options and warrants and note conversions.

	For the three months ended
	July 31,
	2016		2015
Numerator:
Income (loss) from continuing operations attributable to WPCS common shareholders	$	557,181	$	(4,206,760	)
Income from discontinued operations, basic and diluted		-		24,756
Net income (loss) attributable to WPCS common shareholders, basic and diluted	$	557,181	$	(4,182,004	)
Denominator:
Weighted average shares outstanding – basic		2,701,404		1,470,248
Stock options		160,524		-
Series H and H-1 convertible preferred stock		1,075,700		-
Weighted average shares outstanding – diluted		3,937,628		1,470,248
Basic income (loss) from continuing operations per common share	$	0.21	$	(2.86	)
Basic income from discontinued operations per common share		-		0.02
Basic income (loss) per common share	$	0.21	$	(2.84	)
Diluted income (loss) from continuing operations per common share	$	0.14	$	(2.86	)
Diluted income from discontinued operations per common share		-		0.02
Diluted income (loss) per common share	$	0.14	$	(2.84	)

The following securities were excluded from the weighted average dilutive common shares outstanding because their inclusion would have been antidilutive.

	As of July 31,
	2016		2015
Common stock equivalents:
Common stock options		865,000		41,000
Series F and F-1 preferred stock		-		84,000
Series G and G-1 preferred stock		-		118,000
Series H and H-1 preferred stock		-		1,248,000
Make-whole on preferred shares		-		56,000
Common stock purchase warrants		1,295,000		1,295,000
Totals		2,160,000		2,842,000

11

NOTE 6 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts represents revenue recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenue recognized. Costs and estimated earnings on uncompleted contracts consist of the following at July 31, 2016 and April 30, 2016:

	July 31, 2016			April 30, 2016
Costs incurred on uncompleted contracts	$	30,127,451		$	28,884,776
Estimated contract earnings		4,663,183			4,367,463
		34,790,634			33,252,239
Less: Billings to date		36,254,744			34,253,318
Total	$	(1,464,110	)	$	(1,001,079	)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	437,185		$	357,210
Billings in excess of cost and estimated earnings on uncompleted contracts		1,901,295			1,358,289
Total	$	(1,464,110	)	$	(1,001,079	)

Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which circumstances requiring the revisions become known. Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion.

NOTE 7 – DISCONTINUED OPERATIONS

The Company previously disclosed the details regarding the sales of its China Operations in its Form 10-K filed for the year ended April 30, 2016. The schedule below shows the results of discontinued operations from China for the three months ended July 31, 2016 and 2015.

	For the three months ended
	July 31,
	2016		2015
Revenue	$	-	$	839,969
Costs and expenses:
Cost of revenue		-		546,296
Selling, general and administrative expenses		-		111,324
Depreciation and amortization		-		80,971
		-		738,591
Operating income (loss) from discontinued operations		-		101,378
Interest expense		-		49,234
Income (loss) from discontinued operations before income tax provision		-		52,144
Income tax provision		-		10,883
Total income from discontinued operations	$	-	$	41,261

Due Related Party

As of July 31, 2016 and April 30, 2016, the China Operations had outstanding payables, representing interest accrued on working capital loans and cash provided for the purpose of retiring the short term bank loan in the amounts of $0 and $0, respectively, due on demand to a related party, TGG. This loan, which was paid off at the time of sale of our China Operations was not guaranteed by WPCS. Interest expense for the quarter ended July 31, 2015 was immaterial.

The China Operations earned revenue for contracting services provided to TGG (noncontrolling interest in China Operations) and subsidiaries of $0 and $212,000 for the three months ended July 31, 2016 and 2015, respectively.

12

NOTE 8 – INCOME FROM SECTION 16 SETTLEMENT

For the three months ended July 31, 2016, the Company received no income from Section 16 settlements. For the same period in 2015, the Company received $400,000 of income from a Section 16 settlement. This income was comprised of forgiveness of certain promissory notes as part of the settlement with a note holder who was a defendant named in a Section 16 litigation brought by a shareholder of WPCS. These settlements resolved all issues related to this litigation.

NOTE 9 – BANK LINE OF CREDIT

On May 20, 2015, the Company entered into an asset-based revolving credit line agreement with a California-based bank, which provides a $1,000,000 line of credit for its Suisun City Operations. The line of credit expires on August 15, 2017, has an interest rate of prime plus 2% and is subject to a monthly borrowing base calculation based upon eligible accounts receivable. The line of credit is secured by all of the assets of the Company. In addition, the line of credit requires our Suisun City Operations to comply with certain financial and operational covenants, such as, amongst other things, maintaining a certain quick ratio and a minimum net worth. Suisun City Operations is currently in compliance with all such covenants.

As of the filing date of this report, the Company has not drawn down on the line of credit.

NOTE 10 – LOANS PAYABLE

As of July 31, 2016 and April 30, 2016, the Company had approximately $170,000 and $149,000 of loans payable, respectively. These loans are associated with the purchase of automobiles and carry interest rates ranging from 3.89% to 4.89%. The due dates of these loans range from August 2016 to August 2021. As of July 31, 2016, the Company has classified approximately $61,000 as short-term and $109,000 as long-term loans payable.

NOTE 11 – STOCKHOLDERS’ EQUITY

Issuance of Common Shares

On August 1, 2015, the Company entered into an engagement letter with an investment bank to provide investment advisory services for a period of twelve (12) months, which may be extended by mutual consent of the parties.  The Company agreed to pay a $7,500 monthly fee to the investment bank payable in shares of common stock, calculated based on the closing bid price of the common stock on the trading day immediately prior to date payment is due.  On each date of payment, the common stock is issued in reliance upon the exemption from registration in Section 4(a)(2) of the Securities Act of 1933.  The shares issued for the payments due for the period from May 1, 2016 through July 31, 2016 were 15,104, which resulted in $22,501 of expense being recognized in the Condensed Consolidated Statement of Operations for the quarter ended July 31, 2016. The total shares issued under this agreement as of July 31, 2016 is 63,073.

The Company did not renew this agreement beyond the July 31, 2016 termination date.

NOTE 12 – INCOME FROM ARBITRATION SETTLEMENT

On June 16, 2016, the Company entered into a global settlement agreement and mutual release to resolve all disputes and claims regarding the construction of the Cooper Medical School at Rowan University, located in Camden, New Jersey, in which the Company served as an electrical prime contractor. As a result of such settlement, the Company received proceeds of $1,150,000 and recorded a gain in the Condensed Consolidated Statement of Operations for the quarter ended July 31, 2016.

NOTE 13 – SUBSEQUENT EVENTS

On August 4, 2016 the Company issued 142,500 shares of its common stock upon the conversion of 1,425 shares of Series H Preferred Stock.

On August 8, 2016, the Company settled a $232,000 accounts payable with a vendor for $125,000 and will recognize a gain on the settlement of $107,000 in the quarter ending October 31, 2016.

13

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company’s services, fluctuations in pricing for materials, and competition.

Overview

The Company currently specializes in contracting services offering communications, security and audio-visual infrastructure through its Suisun City and Texas Operations. We previously announced that we launched the Texas Operations in San Antonio, Texas in January 2016 and then commenced operations in Dallas, Texas in April 2016. During the quarter ended July 31, 2016, the Texas Operations generated approximately $262,000 in revenue, while incurring approximately $366,000 in selling, general and administrative expenses in starting these two offices. It is our belief that we can develop the Texas Operations and become profitable in those markets through organic growth, although there can be no assurances.

During the third quarter of 2015, we sold our joint venture interest in the former China Operations and therefore, the financial results of the China Operations for the three months ended July 31, 2015, are included in the results from discontinued operations in our financial statements.

Our Suisun City and Texas Operations communication infrastructure services offers low voltage communications infrastructure contracting services to the public services, healthcare, energy and corporate enterprise markets. We provide an integrated approach to project coordination that creates cost-effective solutions. Corporations, government entities, healthcare organizations and educational institutions depend on the reliability and accuracy of voice, data and video communications. However, the potential for this new technology cannot be realized without the right infrastructure to support the convergence of technology. In this regard, we create integrated building systems, including the installation of advanced structured cabling systems. We specialize in wireless technology and a combination of various technologies to develop a cost effective network for a customer's wireless communication requirements. This includes Wi-Fi networks, point-to-point systems, cellular networks, in-building systems and two-way communication systems. We support the integration of telecommunications, life safety, security and HVAC and design for future growth by building in additional capacity for expansion as new capabilities are added.

For the three months ended July 31, 2016, we generated revenues from continuing operations of $3,416,000 as compared to $4,464,000 for the same period in 2015. Our backlog at July 31, 2016 was $13,070,000 as compared to $14,355,000 at July 31, 2015.

Company Strategy

During the past two fiscal years, our strategy in the contracting services segment included divesting certain operations through the sales of Pride, Seattle Operations and China Operations.

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We divested and/or closed these operations either because they were not profitable, or were part of our plan to reduce expenses and liabilities, improve operational performance, as well as to generate cash for working capital and general corporate purposes.

Meanwhile, our ongoing plan continues to be to strengthen the Company’s balance sheet as well as to increase revenue, profit and cash flow at our Suisun City Operations and Texas Operations by developing new organic growth opportunities for the Company and seeking viable acquisition and/or merger candidate(s).

The transition from our restructuring plan to a growth plan began during fiscal 2016, as we launched the first wave of organic initiatives targeting revenue enhancement and selected demographic expansion, including:

· Establishing Texas Operations in San Antonio and Dallas;

· Strengthening our operations team with proven audio-visual and security systems professionals;

· Hiring an experienced direct sales team;

· Uniformly deploying full-service low voltage capabilities for developing, installing and servicing structured cabling, audio-visual and security systems into both our California and Texas markets; and,

· Introducing new recurring revenue product and service offerings.

We believe that these initiatives will change the Company’s business and provide more opportunities for growth.

Historically, our Suisun City Operations operated primarily as a subcontractor for low-voltage structured cabling systems, which were generally secured through the competitive bidding process. We were not adequately positioned with the resources to deliver a fully integrated offering to include audio-visual and security. As a result, such opportunities had either been lost, or had to be subcontracted to others. However, with the recent additions we have instituted, we are now able to offer a full turnkey service in both our Suisun City and Texas Operations that will allow us to be fully engaged with our customers well after an initial installation is completed.

In addition to expanding our geographical presence, broadening our contracting revenue potential and offering higher margin recurring service capabilities, we are also pursuing and securing more corporate affiliations and strategic alliances that will create more direct relationships capable of advancing our business opportunities even further.

We have a multi-faceted execution strategy and intend to methodically roll out new initiatives during the fiscal year. Furthermore, we continue to aggressively explore other viable growth opportunities.

In addition to the ongoing operational plan, at the corporate level we are evaluating and undertaking new measures to enhance our public company profile by seeking to attract new long-term minded investors, optimize our capital resources for growth and strengthen our Board of Directors.

We believe that our operational performance and corporate strategies will have a positive impact towards building shareholder value.

15

Current Operating Trends and Financial Highlights

Management currently considers the following events, trends and uncertainties to be important in understanding our results of operations and financial condition during the current fiscal year.

With regards to our financial results from continuing operations for the quarter ended July 31, 2016, we generated revenue of approximately $3,416,000 as compared to revenue of $4,464,000 for the same period last year. This $1,048,000 decrease in revenue was due primarily to a $1,310,000 decrease in revenue in our Suisun City Operations related to work on one major contract, which was effectively completed during the last fiscal year, offset by adding approximately $262,000 in revenue from our newly established Texas Operations. As such, the composition of our current revenue is less reliant on one large customer contract than during the last fiscal year.

We generated a net income to common shareholders for the three months ended July 31, 2016 of approximately $557,000, or $0.21 per common share, which includes income from our: (i) Suisun City Operations of approximately $207,000 and (ii) corporate division of approximately $657,000, which is comprised of corporate expenses of approximately $495,000 offset by a gain on legal settlement of $1,150,000; and which was partially offset by a loss from our Texas Operations of approximately $307,000.

The net income to common shareholders for the three months ended July 31, 2016 compares to a net loss of approximately $4,182,000, or $2.84 per common share for the three months ended July 31, 2015, which includes: (i) a loss from operations of approximately $311,000; (ii) a gain from discontinued China Operations of approximately $41,000; and (ii) approximately $4,291,000 of non-cash dividends declared on preferred stock, which were partially offset by income of $400,000 from a Section 16 settlement.

We believe that our integrated, full service low voltage communication infrastructure contracting services strategy will create additional opportunities. We believe that the ability to provide comprehensive communications infrastructure contracting services gives us a competitive advantage. In regards to strategic development, our focus is on identifying organic growth and selected acquisition opportunities. We are optimistic about our opportunities in the markets we currently serve, as evidenced by our new contract awards and customers continuing to seek bids from us, due to our experience and strong reputation in these markets.

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Results of Operations for the Three Months Ended July 31, 2016 Compared to the Three Months Ended July 31, 2015

	For the three month ended
	July 31,
	2016					2015
Revenue	$	3,416,453		100.0	%	$	4,464,003		100.0	%
Costs and expenses:
Cost of revenue		2,635,508		77.1	%		3,447,203		77.2	%
Selling, general and administrative expenses		1,352,986		39.6	%		1,312,803		29.4	%
Depreciation and amortization		20,666		0.6	%		14,969		0.3	%
		4,009,160		117.3	%		4,774,975		107.0	%
Operating loss		(592,707	)	-17.3	%		(310,972	)	-7.0	%
Other income (expense):
Interest expense		(1,981	)	-0.1	%		(892	)	0.0	%
Income from Section 16 settlement		-		0.0	%		400,000		9.0	%
Income from Arbitration settlement		1,150,000		33.7	%		-		0.0	%
Other income		4,487		0.1	%		(2,906	)	-0.1	%
Income from continuing operations before income tax provision		559,799		16.4	%		85,230		1.9	%
Income tax provision		2,618		0.1	%		1,099		0.0	%
Income from continuing operations		557,181		16.3	%		84,131		1.9	%
Discontinued operations:
Income from discontinued operations		-		0.0	%		41,261		0.9	%
Consolidated net income		557,181		16.3	%		125,392		2.8	%
Net income attributable to noncontrolling interest		-		0.0	%		16,505		0.4	%
Net income attributable to WPCS		557,181		16.3	%		108,887		2.4	%
Dividends declared on preferred stock		-		0.0	%		(3,587,121	)	-80.4	%
Deemed dividend on convertible preferred stock, due to beneficial conversion feature		-		0.0	%		(703,770	)	-15.8	%
Net income (loss) attributable to WPCS common shareholders	$	557,181		16.3	%	$	(4,182,004	)	-93.7	%

Operating Loss

The Company had an operating loss of approximately $593,000 for the three months ended July 31, 2016. This quarter’s operating loss was comprised primarily of $208,000 in operating income from Suisun City Operations, which was offset by an operating loss of approximately $306,000 from our Texas Operations and $495,000 of corporate overhead expenses. For the three months ended July 31, 2015, the Company had an operating loss of approximately $311,000 which was comprised primarily of $544,000 in operating income from Suisun City Operations and which was offset by approximately $855,000 of corporate overhead. The details of the operating loss are as follows:

Revenue

Revenue for the three months ended July 31, 2016 decreased $1,048,000, or 23.5%, to $3,416,000, as compared to $4,464,000 for same period last year due to an approximately $1,310,000 decrease in revenue in Suisun City Operations offset by an approximately $262,000 increase in revenue from our newly established Texas Operations. This decrease in the Suisun City Operations’ revenue was primarily the result of $1,310,000 in revenue recognized from one customer contract during the prior period, which did not reoccur during the current period.

Cost of Revenue

Cost of revenue, which consists of direct costs on contracts: materials, direct labor, third party subcontractor services, union benefits and other overhead costs decreased $811,000, or 24%, to $2,636,000, or 77.1% of revenue, for the three months ended July 31, 2016, as compared to $3,447,000, or 77.2% of revenue, for the same period in 2015.

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Selling, General and Administrative Expenses

For the three months ended July 31, 2016, total selling, general and administrative expenses increased $40,000 or 3% to $1,353,000 as compared to $1,313,000 for the same period in 2015, which was primarily due to $368,000 of increased expenses in our newly established Texas Operations but offset by lower corporate expenses of $361,000. The Texas Operations did not have expenses during the quarter ended July 31, 2015, while the lower corporate overhead was comprised primarily of lower professional fees.

Depreciation and Amortization

For the three months ended July 31, 2016, depreciation and amortization was approximately $21,000 as compared to approximately $15,000 for the same quarter in 2015.

Loss from Continuing Operations

The Company had a net income from continuing operations of $557,000 for the three months ended July 31, 2016 as compared to $84,000 for the same period in 2015. Income from continuing operations is determined by adjusting the operating loss by the following items:

Interest Expense

For the three months ended July 31, 2016 and 2015, interest expense was approximately $1,981 and $892, respectively.

Income from Section 16 Settlement

During the quarter ended July 31, 2015, the Company recorded income of $400,000 as it recorded forgiveness of certain promissory notes as part of the settlements with certain note holders who were the remaining defendants named in a Section 16 litigation brought by a shareholder of WPCS.

Income from Arbitration Settlement

During the quarter ended July 31, 2016, the Company received $1,150,000 in connection with a global settlement agreement and mutual release to resolve all existing disputes and claims regarding the construction of the Cooper Medical School at Rowan University, located in Camden, New Jersey, in which the Company served as an electrical prime contractor.

Other Income (Expense)

For the three months ended July 31, 2016, other income was approximately $5,000 as compared to other expense of approximately $3,000 for the same period in 2015.

Net Income (Loss) Attributable to WPCS Common Shareholders

The Company incurred a net income attributable to WPCS common shareholders of $557,000 for the three months ended July 31, 2016 as compared to net loss attributable to WPCS common shareholders of $4,182,000 for the same period in 2015. The following items are the adjustments to the loss from continuing operations that result in determining the net loss attributable to WPCS common shareholders:

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Income From Discontinued Operations

As a result of the sale of the China Operations, we have recorded all activity related to that operation as income from discontinued operations. The cumulative effect is no income or loss for the three months ended July 31, 2016 as compared to income of $41,000 for the same period in 2015. 

Dividends Declared on Preferred Stock

As a result of the issuance of preferred stock, we declared dividends, make-whole dividends, and deemed dividends of $0 for the three months ended July 31, 2016 as compared to $4,291,000 for the same period in 2015. These dividends are non-cash and were paid in common shares. The Company is no longer required to pay any such dividends on any remaining preferred stock.

Effects of Inflation

Inflation has not had a material impact on our business.

Liquidity and Capital Resources as of July 31, 2016

As of July 31, 2016, we had working capital of approximately $2,590,000, which consisted of current assets of approximately $6,829,000 and current liabilities of approximately $4,239,000. This compares to working capital of approximately $2,061,000 at April 30, 2016. The current liabilities as presented in the balance sheet at July 31, 2016 primarily include approximately $2,276,000 of accounts payable and accrued expenses and approximately $1,901,000 of billings in excess of costs and estimated earnings on uncompleted contracts.

Our cash and cash equivalents balance at July 31, 2016 was approximately $1,940,000.

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During the prior fiscal year ended April 30, 2016, the Company had completed a series of transactions that it believed would provide it with sufficient working capital and equity to operate its business plan for the next twelve months from the date of filing this report, while it continues to seek growth opportunities, including, but not limited to: (i) organic growth to complement and enhance existing operations; (ii) acquisitions; and/or (iii) a viable merger candidate.

Some of these transactions provided cash to the Company while others eliminated future cash spending requirements. Along with expected continued operating profits from its Suisun City Operations for fiscal year 2017 and lower corporate overhead, these are the primary factors that support the belief that the Company will have adequate liquidity for the next twelve months from the filing date of this report. In addition, during the quarter ended July 31, 2016, we settled an outstanding legal claim and collected a cash settlement of $1,150,000.

Backlog

As of July 31, 2016, we had a backlog of unfilled orders of approximately $13,070,000 as compared to approximately $13,200,000 at April 30, 2016. We define backlog as the value of work-in-hand to be provided for customers as of a specific date where the following conditions are met (with the exception of engineering change orders): (i) the price of the work to be done is fixed; (ii) the scope of the work to be done is fixed, both in definition and amount; and (iii) there is a written contract, purchase order, agreement or other documentary evidence which represents a firm commitment by the customer to pay us for the work to be performed. These backlog amounts are based on contract values and purchase orders and may not result in actual receipt of revenue in the originally anticipated period or at all. We have experienced variances in the realization of our backlog because of project delays or cancellations resulting from external market factors and economic factors beyond our control and we may experience such delays or cancellations in the future. Backlog does not include new firm commitments that may be awarded to us by our customers from time to time in future periods. These new project awards could be started and completed in this same future period. Accordingly, our backlog does not necessarily represent the total revenue that could be earned by us in future periods.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than operating lease commitments.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates.

Our critical accounting policies and significant estimates are detailed in the Form 10-K for the year ended April 30, 2016. Our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in the Form 10-K.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that, as of July 31, 2016, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended July 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in any legal proceedings since the disclosures contained in the Registrant’s Form 10-K for the year ended April 30, 2016.

ITEM 1A. RISK FACTORS

Not required.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Investment Banking Agreement

On August 1, 2015, the Company entered into an engagement letter with an investment bank to provide investment banking services for a period of twelve (12) months, which may be extended by mutual consent of the parties.  The Company agreed to pay a $7,500 monthly fee to the investment bank payable in shares of Common Stock, calculated based on the closing bid price of the Common Stock on the trading day immediately prior to date payment is due.  On each date of payment, the Common Stock is issued in reliance upon the exemption from registration in Section 4(a)(2) of the Securities Act of 1933.  The shares issued for the payments due for the period from May 1, 2016 through July 31, 2016, were 15,104 and the total shares issued under this agreement to date is 63,073. Such agreement expired on its own terms as of July 31, 2016.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) There is no information required to be disclosed on Form 8-K during the period covered by this Form 10-Q that was not so reported.

(b) There were no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors during the quarter ended July 31, 2016.

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ITEM 6. EXHIBITS

3.1	Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s registration statement on Form SB-2 filed April 7, 2006.
3.2	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on December 9, 2008, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Annual Report on Form 10-K filed July 29, 2015.
3.3	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on March 4, 2013, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed March 4, 2013.
3.4	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on May 16, 2013 and effective May 28, 2013, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed May 28, 2013.
3.5	Certificate of Correction to the Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on December 19, 2014, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed December 19, 2014.
3.6	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on April 16, 2015 and effective April 20, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed April 16, 2015.
3.7	Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on September 30, 2014, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed October 3, 2014.
3.8	Certificate of Designations, Preferences and Rights of the Series G Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on September 30, 2014, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Current Report on Form 8-K filed October 3, 2014.
3.9	Certificate of Designations, Preferences and Rights of Series F-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on November 20, 2014, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed November 20, 2014.
3.10	Certificate of Designations, Preferences and Rights of Series G-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on November 20, 2014, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Current Report on Form 8-K filed November 20, 2014.
3.11	Certificate of Designations, Preferences and Rights of Series H Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on June 30, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed July 1, 2015.
3.12	Certificate of Designations, Preferences and Rights of Series H-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on July 14, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed July 15, 2015.
3.13	Amended and Restated Bylaws of WPCS International Incorporated as of January 12, 2016, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed January 13, 2016.

31.1* Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith

** Furnished herewith

23

SIGNATURES

Pursuant to the requirements 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
By:	/s/ Sebastian Giordano
	Name:	Sebastian Giordano
	Title:	Chief Executive Officer

By:	/s/ David Allen
	Name:	David Allen
	Title:	Chief Financial Officer

Date: September 12, 2016

24

Index to Exhibits 

Exhibit Number	Exhibit
3.1	Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s registration statement on Form SB-2 filed April 7, 2006.
3.2	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on December 9, 2008, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Annual Report on Form 10-K filed July 29, 2015.
3.3	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on March 4, 2013, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed March 4, 2013.
3.4	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on May 16, 2013 and effective May 28, 2013, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed May 28, 2013.
3.5	Certificate of Correction to the Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on December 19, 2014, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed December 19, 2014.
3.6	Certificate of Amendment to the Certificate of Incorporation, filed with the Delaware Secretary of State on April 16, 2015 and effective April 20, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed April 16, 2015.
3.7	Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on September 30, 2014, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed October 3, 2014.
3.8	Certificate of Designations, Preferences and Rights of the Series G Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on September 30, 2014, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Current Report on Form 8-K filed October 3, 2014.
3.9	Certificate of Designations, Preferences and Rights of Series F-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on November 20, 2014, incorporated by reference to Exhibit 3.01 of WPCS International Incorporated’s Current Report on Form 8-K filed November 20, 2014.
3.10	Certificate of Designations, Preferences and Rights of Series G-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on November 20, 2014, incorporated by reference to Exhibit 3.02 of WPCS International Incorporated’s Current Report on Form 8-K filed November 20, 2014.
3.11	Certificate of Designations, Preferences and Rights of Series H Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on June 30, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed July 1, 2015.
3.12	Certificate of Designations, Preferences and Rights of Series H-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on July 14, 2015, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed July 15, 2015.
3.13	Amended and Restated Bylaws of WPCS International Incorporated as of January 12, 2016, incorporated by reference to Exhibit 3.1 of WPCS International Incorporated’s Current Report on Form 8-K filed January 13, 2016.
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith
**	Furnished herewith

25

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Sebastian Giordano, certify that:

1. I have reviewed this quarterly report on Form 10-Q of WPCS International Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: September 12, 2016

/s/ Sebastian Giordano
Name:	Sebastian Giordano
Title:	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, David Allen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of WPCS International Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: September 12, 2016

/s/ David Allen
Name:	David Allen
Title:	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of WPCS International Incorporated. (the “Company”) on Form 10-Q for the quarter ended July 31, 2016, as filed with the Securities and Exchange Commission (the “Report”), I, Sebastian Giordano, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)         The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ Sebastian Giordano
Date: September 12, 2016	Name:	Sebastian Giordano
	Title:	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of WPCS International Incorporated. (the “Company”) on Form 10-Q for the quarter ended July 31, 2016 as filed with the Securities and Exchange Commission (the “Report”), I, David Allen, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)         The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ David Allen
Date: September 12, 2016	Name:	David Allen
	Title:	Chief Financial Officer

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Document And Entity Information - shares	3 Months Ended
	Jul. 31, 2016	Sep. 12, 2016
Document Information [Line Items]
Entity Registrant Name	WPCS INTERNATIONAL INC
Entity Central Index Key	0001086745
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--04-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	WPCS
Entity Common Stock, Shares Outstanding		2,848,659

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jul. 31, 2016	Apr. 30, 2016
Current assets:
Cash and cash equivalents	$ 1,939,900	$ 2,235,597
Accounts receivable, net of allowance of $92,000 at July 31, 2016 and April 30, 2016, respectively	4,328,118	2,886,154
Costs and estimated earnings in excess of billings on uncompleted contracts	437,185	357,210
Prepaid expenses and other current assets	123,977	66,256
Total current assets	6,829,180	5,545,217
Property and equipment, net	298,559	237,800
Other assets	24,940	21,162
Total assets	7,152,679	5,804,179
Current liabilities:
Current portion of loans payable	60,848	53,996
Accounts payable and accrued expenses	2,276,717	2,071,765
Billings in excess of costs and estimated earnings on uncompleted contracts	1,901,295	1,358,289
Total current liabilities	4,238,860	3,484,050
Loans payable, net of current portion	108,833	94,825
Total liabilities	4,347,693	3,578,875
Commitments and contingencies
Stockholders' equity
Preferred stock
Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,706,159 and 2,691,055 shares issued and outstanding as of July 31, 2016 and April 30, 2016, respectively	271	269
Additional paid-in capital	85,962,888	85,940,389
Accumulated deficit	(84,263,759)	(84,820,940)
Total stockholders' equity	2,804,986	2,225,304
Total liabilities and stockholders' equity	7,152,679	5,804,179
Convertible Series H [Member]
Stockholders' equity
Preferred stock	406,262	406,262
Convertible Series H-1 [Member]
Stockholders' equity
Preferred stock	$ 699,324	$ 699,324

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($)	Jul. 31, 2016	Apr. 30, 2016
Allowance for accounts receivable	$ 92,000	$ 92,000
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	2,706,159	2,691,055
Common stock, shares outstanding	2,706,159	2,691,055
Convertible Series H [Member]
Preferred stock, shares authorized	8,500
Preferred stock, shares issued	2,638	2,638
Preferred Stock, Shares Outstanding	2,638	2,638
Preferred Stock, liquidation preference (in dollars)	$ 406,000	$ 406,000
Convertible Series H-1 [Member]
Preferred stock, shares authorized	9,488
Preferred stock, shares issued	8,119	8,119
Preferred Stock, Shares Outstanding	8,119	8,119
Preferred Stock, liquidation preference (in dollars)	$ 1,348,000	$ 1,348,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Revenue	$ 3,416,453	$ 4,464,003
Costs and expenses:
Cost of revenue	2,635,508	3,447,203
Selling, general and administrative expenses	1,352,986	1,312,803
Depreciation and amortization	20,666	14,969
Costs and expenses	4,009,160	4,774,975
Operating loss	(592,707)	(310,972)
Other income (expense):
Interest expense	(1,981)	(892)
Income from Section 16 settlement	0	400,000
Income from Arbitration settlement	1,150,000	0
Other income (expense)	4,487	(2,906)
Income from continuing operations before income tax provision	559,799	85,230
Income tax provision	2,618	1,099
Income from continuing operations	557,181	84,131
Discontinued operations:
Income from discontinued operations	0	41,261
Consolidated net income	557,181	125,392
Net income attributable to noncontrolling interest	0	16,505
Net loss attributable to WPCS	557,181	108,887
Dividends declared on preferred stock	0	(3,587,121)
Deemed dividend on convertible preferred stock, due to beneficial conversion feature	0	(703,770)
Net income (loss) attributable to WPCS common shareholders	$ 557,181	$ (4,182,004)
Basic income (loss) from continuing operations per common share	$ 0.21	$ (2.86)
Basic income from discontinued operations per common share	0	0.02
Basic income (loss) per common share	0.21	(2.84)
Diluted income (loss) from continuing operations per common share	0.14	(2.86)
Diluted income from discontinued operations per common share	0	0.02
Diluted income (loss) per common share	$ 0.14	$ (2.84)
Weighted average shares outstanding - basic	2,701,404	1,470,248
Weighted average shares outstanding - diluted	3,937,628	1,470,248

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Consolidated net income	$ 557,181	$ 125,392
Foreign currency translation adjustments	0	(647)
Comprehensive income	557,181	124,745
Less: comprehensive loss attributable to noncontrolling interest	0	(431)
Comprehensive income attributable to WPCS shareholders	$ 557,181	$ 125,176

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - 3 months ended Jul. 31, 2016 - USD ($)	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Balance at Apr. 30, 2016	$ 2,225,304	$ 1,105,586	$ 269	$ 85,940,389	$ (84,820,940)
Balance (in shares) at Apr. 30, 2016		10,757	2,691,055
Share based compensation	22,501	$ 0	$ 2	22,499	0
Share based compensation (in shares)		0	15,104
Net income	557,181	$ 0	$ 0	0	557,181
Balance at Jul. 31, 2016	$ 2,804,986	$ 1,105,586	$ 271	$ 85,962,888	$ (84,263,759)
Balance (in shares) at Jul. 31, 2016		10,757	2,706,159

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Operating activities:
Net income from operations	$ 557,181	$ 84,131
Consolidated net income from discontinued operations	0	41,261
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
Depreciation and amortization	20,666	14,969
Shares based compensation	22,501
Income on Section 16 settlement	0	(400,000)
Changes in operating assets and liabilities:
Accounts receivable	(1,441,964)	1,424,935
Costs and estimated earnings in excess of billings on uncompleted contracts	(79,975)	(103,324)
Current assets held for sale	0	(506,215)
Prepaid expenses and other current assets	(57,721)	84,464
Other assets	(3,778)	0
Other assets held for sale	0	(34,522)
Income taxes payable	0	(2,658)
Accounts payable and accrued expenses	204,952	(1,277,741)
Current liabilities held for sale	0	2,200,030
Billings in excess of costs and estimated earnings on uncompleted contracts	543,006	125,355
Net cash (used in) provided by operating activities	(235,132)	1,650,685
Investing activities:
Acquisition of property and equipment	(30,803)	(10,707)
Net cash used in investing activities	(30,803)	(10,707)
Financing activities:
Borrowings under loan payable obligations	0	7,762
Repayment under loan payable obligations	(29,762)	0
Repayments under other payable to Zurich	0	(135,000)
Repayments of short term convertible note	0	(4,000)
Net cash (used in) provided by financing activities	(29,762)	1,443,762
Effect of exchange rate changes on cash	0	91,510
Net (decrease) increase in cash and cash equivalents	(295,697)	3,175,250
Cash and cash equivalents, beginning of the period	2,235,597	2,364,360
Cash and cash equivalents, end of the period	1,939,900	5,539,610
Schedule of non-cash investing and financing activities:
Asset financing	50,622	0
Declaration on preferred dividend payable	0	3,587,121
Warrants issued with convertible preferred stock	0	841,405
Deemed dividend on conversion of preferred stock to common stock	0	703,770
Conversion of dividends payable related to make-whole amount to common stock	0	3,375,792
Series F-1 Preferred Stock [Member]
Schedule of non-cash investing and financing activities:
Conversion of dividends payable related to make-whole amount to common stock	0	501,826
Series G-1 Preferred Stock [Member]
Schedule of non-cash investing and financing activities:
Conversion of dividends payable related to make-whole amount to common stock	0	158,481
Series F And F1 Preferred Stock [Member]
Schedule of non-cash investing and financing activities:
Conversion of preferred stock through the issuance of common stock	0	2,731,984
Series G And G1 Preferred Stock [Member]
Schedule of non-cash investing and financing activities:
Conversion of preferred stock through the issuance of common stock	0	1,084,230
Series H Preferred Stock [Member]
Schedule of non-cash investing and financing activities:
Conversion of Stock, Amount Converted	0	1,299,000
Conversion of preferred stock through the issuance of common stock	0	691,768
Series H-1 Preferred Stock [Member]
Financing activities:
Proceeds from issuance of Series H-1 preferred stock and warrants	$ 0	$ 1,575,000

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DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

3 Months Ended

Jul. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

The Company currently specializes in low voltage communications, audio-visual and security contracting services, conducting business in one segment but three operation centers, through its wholly-owned domestic subsidiaries, WPCS International - Suisun City, Inc. (“Suisun City Operations”) and WPCS International - Texas Operations, Inc. (“Texas Operations”).

The Company is a full-service low voltage contractor that specializes in the installation and service of Voice & Data Networks, Security Systems, Audio-Visual Solutions, and Distributed Antenna Systems and provides experienced project management and delivers complex projects to key vertical markets that include Healthcare, Education, Transportation, Energy & Utilities, Oil & Gas, Manufacturing, Commercial Real Estate, Financial, Government, etc.

The Company also has strategic alliances with technology partners to provide consulting and application software development services for collaboration, visualization and unified communications and is aligned with major manufacturers to provide the products and technology for seamless integrated and enhanced user experience for enterprise solutions.

Basis of Presentation

The condensed consolidated financial statements of WPCS International Incorporated, a Delaware corporation (“WPCS”) and its wholly and majority-owned subsidiaries, (collectively, the “Company”) included in this Report for the three months ended July 31, 2016 and 2015, reflect the accounts of current and former entities as either continued or discontinued operations, as discussed below.

Continuing operations for the three months ended July 31, 2016 and 2015 include the results of operations of: (i) WPCS International Incorporated (corporate operating expenses); (ii) Suisun City Operations and the Texas Operations, the Company’s only two active operating subsidiaries; (iii) WPCS Incorporated, an inactive subsidiary; and (iv) WPCS International – Trenton, Inc. (“Trenton Operations”), which operations were closed in September 2013.

Discontinued operations for the three months ended July 31, 2015 include the results of WPCS Asia Limited, a 60% joint venture interest in Tai'an AGS Pipeline Construction Co. Ltd. (the “China Operations”). There are no discontinued operations for the three months ended July 31, 2016.

The unaudited condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the financial position and the results of operations and cash flows of the Company for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the financial statements included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2016.

The results of operations for the three months ended July 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year.

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LIQUIDITY AND CAPITAL RESOURCES

3 Months Ended

Jul. 31, 2016

Liquidity and Capital Resources [Abstract]

LIQUIDITY AND CAPITAL RESOURCES

NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2016, the Company had a working capital surplus of approximately $2,590,000 as compared to a working capital surplus of approximately $2,061,000 at April 30, 2016. The increase in working capital is due primarily to an increase in accounts receivable and cash received for an arbitration settlement, offset by an increase in liabilities and cash used to fund our operating loss.

The Company’s cash and cash equivalents balance at July 31, 2016 was $1,940,000 as compared to $2,236,000 at April 30, 2016.

The Company's future plans and growth are dependent on its ability to increase revenues and continue its business development efforts surrounding its contract award backlog. If the Company continues to incur losses and revenues do not generate from the backlog as expected, the Company may need to raise additional capital to expand its business and continue as a going concern. The Company currently anticipates that its current cash position will be sufficient to meet its working capital requirements to continue its sales and marketing efforts for at least 12 months from the filing date of this report. If in the future the Company’s plans or assumptions change or prove to be inaccurate, the Company may need to raise additional funds through public or private debt or equity offerings, financings, corporate collaborations, or other means. The Company may also be required to reduce operating expenditures or investments in its infrastructure.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Form 10-K for the year ended April 30, 2016.

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”) or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. 

Reclassifications

Certain reclassifications have been made in prior years’ consolidated financial statements to conform to the current year’s presentation. These reclassifications reflect the results of the China Operations as discontinued operations for all periods presented.

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CONCENTRATIONS

3 Months Ended

Jul. 31, 2016

Risks and Uncertainties [Abstract]

CONCENTRATIONS

NOTE 4 – CONCENTRATIONS

Accounts Receivable

As of July 31, 2016, two customers comprised 42% of the Company’s total accounts receivable. Also included in the accounts receivable is retainage receivable of $404,000 and $326,000 at July 31, 2016 and April 30, 2016, respectively, and both the retainage and aged accounts receivable are expected to be collected.

Revenue Recognition

For the three months ended July 31, 2016, 8% of revenue was derived from one customer as compared to two customers who generated 21% and 15% of the revenue for the same period in 2015.

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BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

3 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

BASIC AND DILUTED NET LOSS PER COMMON SHARE

NOTE 5 – BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

Basic and diluted net income (loss) per common share from continuing operations is computed as net income (loss) from continuing operations less non-controlling interest and dividends on preferred stock, divided by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur from common stock issuable through the exercise of stock options and warrants and note conversions.

	For the three months ended
	July 31,
	2016		2015
Numerator:
Income (loss) from continuing operations attributable to WPCS common shareholders	$	557,181	$	(4,206,760)
Income from discontinued operations, basic and diluted		-		24,756
Net income (loss) attributable to WPCS common shareholders, basic and diluted	$	557,181	$	(4,182,004)
Denominator:
Weighted average shares outstanding – basic		2,701,404		1,470,248
Stock options		160,524		-
Series H and H-1 convertible preferred stock		1,075,700		-
Weighted average shares outstanding – diluted		3,937,628		1,470,248
Basic income (loss) from continuing operations per common share	$	0.21	$	(2.86)
Basic income from discontinued operations per common share		-		0.02
Basic income (loss) per common share	$	0.21	$	(2.84)
Diluted income (loss) from continuing operations per common share	$	0.14	$	(2.86)
Diluted income from discontinued operations per common share		-		0.02
Diluted income (loss) per common share	$	0.14	$	(2.84)

The following securities were excluded from the weighted average dilutive common shares outstanding because their inclusion would have been antidilutive.

	As of July 31,
	2016		2015
Common stock equivalents:
Common stock options		865,000		41,000
Series F and F-1 preferred stock		-		84,000
Series G and G-1 preferred stock		-		118,000
Series H and H-1 preferred stock		-		1,248,000
Make-whole on preferred shares		-		56,000
Common stock purchase warrants		1,295,000		1,295,000
Totals		2,160,000		2,842,000

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COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

3 Months Ended

Jul. 31, 2016

Contractors [Abstract]

COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

NOTE 6 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts represents revenue recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenue recognized. Costs and estimated earnings on uncompleted contracts consist of the following at July 31, 2016 and April 30, 2016:

	July 31, 2016		April 30, 2016
Costs incurred on uncompleted contracts	$	30,127,451	$	28,884,776
Estimated contract earnings		4,663,183		4,367,463
		34,790,634		33,252,239
Less: Billings to date		36,254,744		34,253,318
Total	$	(1,464,110)	$	(1,001,079)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	437,185	$	357,210
Billings in excess of cost and estimated earnings on uncompleted contracts		1,901,295		1,358,289
Total	$	(1,464,110)	$	(1,001,079)

Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which circumstances requiring the revisions become known. Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion.

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DISCONTINUED OPERATIONS

3 Months Ended

Jul. 31, 2016

Discontinued Operations

DISCONTINUED OPERATIONS

NOTE 7 – DISCONTINUED OPERATIONS

The Company previously disclosed the details regarding the sales of its China Operations in its Form 10-K filed for the year ended April 30, 2016. The schedule below shows the results of discontinued operations from China for the three months ended July 31, 2016 and 2015.

	For the three months ended
	July 31,
	2016		2015
Revenue	$	-	$	839,969
Costs and expenses:
Cost of revenue		-		546,296
Selling, general and administrative expenses		-		111,324
Depreciation and amortization		-		80,971
		-		738,591
Operating income (loss) from discontinued operations		-		101,378
Interest expense		-		49,234
Income (loss) from discontinued operations before income tax provision		-		52,144
Income tax provision		-		10,883
Total income from discontinued operations	$	-	$	41,261

Due Related Party

As of July 31, 2016 and April 30, 2016, the China Operations had outstanding payables, representing interest accrued on working capital loans and cash provided for the purpose of retiring the short term bank loan in the amounts of $0 and $0, respectively, due on demand to a related party, TGG. This loan, which was paid off at the time of sale of our China Operations was not guaranteed by WPCS. Interest expense for the quarter ended July 31, 2015 was immaterial.

The China Operations earned revenue for contracting services provided to TGG (noncontrolling interest in China Operations) and subsidiaries of $0 and $212,000 for the three months ended July 31, 2016 and 2015, respectively.

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INCOME FROM SECTION 16 SETTLEMENT

3 Months Ended

Jul. 31, 2016

Income From Section Sixteen Settlements [Abstract]

INCOME FROM SECTION 16 SETTEMENTS

NOTE 8 – INCOME FROM SECTION 16 SETTLEMENT

For the three months ended July 31, 2016, the Company received no income from Section 16 settlements. For the same period in 2015, the Company received $400,000 of income from a Section 16 settlement. This income was comprised of forgiveness of certain promissory notes as part of the settlement with a note holder who was a defendant named in a Section 16 litigation brought by a shareholder of WPCS. These settlements resolved all issues related to this litigation.

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BANK LINE OF CREDIT

3 Months Ended

Jul. 31, 2016

Line of Credit Facility [Abstract]

BANK LINE OF CREDIT

NOTE 9 – BANK LINE OF CREDIT

On May 20, 2015, the Company entered into an asset-based revolving credit line agreement with a California-based bank, which provides a $1,000,000 line of credit for its Suisun City Operations. The line of credit expires on August 15, 2017, has an interest rate of prime plus 2% and is subject to a monthly borrowing base calculation based upon eligible accounts receivable. The line of credit is secured by all of the assets of the Company. In addition, the line of credit requires our Suisun City Operations to comply with certain financial and operational covenants, such as, amongst other things, maintaining a certain quick ratio and a minimum net worth. Suisun City Operations is currently in compliance with all such covenants.

As of the filing date of this report, the Company has not drawn down on the line of credit.

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LOANS PAYABLE

3 Months Ended

Jul. 31, 2016

Debt Disclosure [Abstract]

LOANS PAYABLE

NOTE 10 – LOANS PAYABLE

As of July 31, 2016 and April 30, 2016, the Company had approximately $170,000 and $149,000 of loans payable, respectively. These loans are associated with the purchase of automobiles and carry interest rates ranging from 3.89% to 4.89%. The due dates of these loans range from August 2016 to August 2021. As of July 31, 2016, the Company has classified approximately $61,000 as short-term and $109,000 as long-term loans payable.

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STOCKHOLDERS' EQUITY

3 Months Ended

Jul. 31, 2016

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 11 – STOCKHOLDERS’ EQUITY

Issuance of Common Shares

On August 1, 2015, the Company entered into an engagement letter with an investment bank to provide investment advisory services for a period of twelve (12) months, which may be extended by mutual consent of the parties.  The Company agreed to pay a $7,500 monthly fee to the investment bank payable in shares of common stock, calculated based on the closing bid price of the common stock on the trading day immediately prior to date payment is due.  On each date of payment, the common stock is issued in reliance upon the exemption from registration in Section 4(a)(2) of the Securities Act of 1933.  The shares issued for the payments due for the period from May 1, 2016 through July 31, 2016 were 15,104, which resulted in $22,501 of expense being recognized in the Condensed Consolidated Statement of Operations for the quarter ended July 31, 2016. The total shares issued under this agreement as of July 31, 2016  is 63,073.

The Company did not renew this agreement beyond the July 31, 2016 termination date.

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INCOME FROM ARBITRATION SETTLEMENT

3 Months Ended

Jul. 31, 2016

Income From Legal Settlements [Abstract]

INCOME FROM ARBITRATION SETTLEMENTS

NOTE 12 – INCOME FROM ARBITRATION SETTLEMENT

On June 16, 2016, the Company entered into a global settlement agreement and mutual release to resolve all disputes and claims regarding the construction of the Cooper Medical School at Rowan University, located in Camden, New Jersey, in which the Company served as an electrical prime contractor. As a result of such settlement, the Company received proceeds of $1,150,000 and recorded a gain in the Condensed Consolidated Statement of Operations for the quarter ended July 31, 2016.

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SUBSEQUENT EVENTS

3 Months Ended

Jul. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 13 – SUBSEQUENT EVENTS

On August 4, 2016 the Company issued 142,500 shares of its common stock upon the conversion of 1,425 shares of Series H Preferred Stock.

On August 8, 2016, the Company settled a $232,000 accounts payable with a vendor for $125,000 and will recognize a gain on the settlement of $107,000 in the quarter ending October 31, 2016.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Form 10-K for the year ended April 30, 2016.

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”) or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Reclassifications

Reclassifications

Certain reclassifications have been made in prior years’ consolidated financial statements to conform to the current year’s presentation. These reclassifications reflect the results of the China Operations as discontinued operations for all periods presented.

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BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE (Tables)

3 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

Diluted net income per common share reflects the potential dilution that could occur from common stock issuable through the exercise of stock options and warrants and note conversions.

	For the three months ended
	July 31,
	2016		2015
Numerator:
Income (loss) from continuing operations attributable to WPCS common shareholders	$	557,181	$	(4,206,760)
Income from discontinued operations, basic and diluted		-		24,756
Net income (loss) attributable to WPCS common shareholders, basic and diluted	$	557,181	$	(4,182,004)
Denominator:
Weighted average shares outstanding – basic		2,701,404		1,470,248
Stock options		160,524		-
Series H and H-1 convertible preferred stock		1,075,700		-
Weighted average shares outstanding – diluted		3,937,628		1,470,248
Basic income (loss) from continuing operations per common share	$	0.21	$	(2.86)
Basic income from discontinued operations per common share		-		0.02
Basic income (loss) per common share	$	0.21	$	(2.84)
Diluted income (loss) from continuing operations per common share	$	0.14	$	(2.86)
Diluted income from discontinued operations per common share		-		0.02
Diluted income (loss) per common share	$	0.14	$	(2.84)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following securities were excluded from the weighted average dilutive common shares outstanding because their inclusion would have been antidilutive.

	As of July 31,
	2016		2015
Common stock equivalents:
Common stock options		865,000		41,000
Series F and F-1 preferred stock		-		84,000
Series G and G-1 preferred stock		-		118,000
Series H and H-1 preferred stock		-		1,248,000
Make-whole on preferred shares		-		56,000
Common stock purchase warrants		1,295,000		1,295,000
Totals		2,160,000		2,842,000

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COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Tables)

3 Months Ended

Jul. 31, 2016

Contractors [Abstract]

Schedule of Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts consist of the following at July 31, 2016 and April 30, 2016:

	July 31, 2016		April 30, 2016
Costs incurred on uncompleted contracts	$	30,127,451	$	28,884,776
Estimated contract earnings		4,663,183		4,367,463
		34,790,634		33,252,239
Less: Billings to date		36,254,744		34,253,318
Total	$	(1,464,110)	$	(1,001,079)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	437,185	$	357,210
Billings in excess of cost and estimated earnings on uncompleted contracts		1,901,295		1,358,289
Total	$	(1,464,110)	$	(1,001,079)

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DISCONTINUED OPERATIONS (Tables)

3 Months Ended

Jul. 31, 2016

Discontinued Operations

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement

The schedule below shows the results of discontinued operations from China for the three months ended July 31, 2016 and 2015.

	For the three months ended
	July 31,
	2016		2015
Revenue	$	-	$	839,969
Costs and expenses:
Cost of revenue		-		546,296
Selling, general and administrative expenses		-		111,324
Depreciation and amortization		-		80,971
		-		738,591
Operating income (loss) from discontinued operations		-		101,378
Interest expense		-		49,234
Income (loss) from discontinued operations before income tax provision		-		52,144
Income tax provision		-		10,883
Total income from discontinued operations	$	-	$	41,261

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DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details Textual)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Percentage Of International Operation	0.00%	60.00%

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LIQUIDITY AND CAPITAL RESOURCES (Details Textual) - USD ($)	Jul. 31, 2016	Apr. 30, 2016	Jul. 31, 2015	Apr. 30, 2015
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Working Capital Surplus	$ 2,590,000	$ 2,061,000
Cash and Cash Equivalents, at Carrying Value, Total	$ 1,939,900	$ 2,235,597	$ 5,539,610	$ 2,364,360

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CONCENTRATIONS (Details Textual) - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Apr. 30, 2016
Concentration Risk [Line Items]
Contract Receivable Retainage, Total	$ 404,000		$ 326,000
Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	42.00%
Sales Revenue, Net [Member] | Customer One [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	8.00%	21.00%
Sales Revenue, Net [Member] | Customer Two [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		15.00%

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BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE (Details) - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Numerator:
Income (loss) from continuing operations attributable to WPCS common shareholders	$ 557,181	$ (4,206,760)
Income from discontinued operations, basic and diluted	0	(41,261)
Net income (loss) attributable to WPCS common shareholders, basic and diluted	$ 557,181	$ (4,182,004)
Denominator:
Weighted average shares outstanding - basic (in shares)	2,701,404	1,470,248
Stock options	160,524	0
Series H and H-1 convertible preferred stock	1,075,700	0
Less: unvested issued restricted stock	(219,769)	0
Weighted average shares outstanding - diluted (in shares)	3,937,628	1,470,248
Basic income (loss) from continuing operations per common share	$ 0.21	$ (2.86)
Basic income from discontinued operations per common share	0	0.02
Basic income (loss) per common share	0.21	(2.84)
Diluted income (loss) from continuing operations per common share	0.14	(2.86)
Diluted income from discontinued operations per common share	0	0.02
Diluted income (loss) per common share	$ 0.14	$ (2.84)

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BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE (Details 1) - shares	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	219,769	0
Common stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	865,000	41,000
Make-whole on preferred shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	56,000
Common stock purchase warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,295,000	1,295,000
Series F and F1 Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	84,000
Series G and G1 Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	118,000
Series H and H1 Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	1,248,000

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COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details) - USD ($)	Jul. 31, 2016	Apr. 30, 2016
Costs incurred on uncompleted contracts	$ 30,127,451	$ 28,884,776
Estimated contract earnings	4,663,183	4,367,463
Gross Total	34,790,634	33,252,239
Less: Billings to date	36,254,744	34,253,318
Total	(1,464,110)	(1,001,079)
Costs and estimated earnings in excess of billings on uncompleted contracts	437,185	357,210
Billings in excess of cost and estimated earnings on uncompleted contracts	1,901,295	1,358,289
Total	$ (1,464,110)	$ (1,001,079)

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DISCONTINUED OPERATIONS (Details) - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Revenue	$ 0	$ 839,969
Costs and expenses:
Cost of revenue	0	546,296
Selling, general and administrative expenses	0	111,324
Depreciation and amortization	0	80,971
Disposal Group, Including Discontinued Operation, Operating Expense	0	738,591
Operating income (loss) from discontinued operations	0	101,378
Interest expense	0	49,234
Income (loss) from discontinued operations before income tax provision	0	52,144
Income tax provision	0	10,883
Total income from discontinued operations	$ 0	$ 41,261

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DISCONTINUED OPERATIONS (Details Textual) - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Apr. 30, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Disposal Group, Including Discontinued Operation, Revenue	$ 0	$ 839,969
China Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Disposal Group, Including Discontinued Operation, Accrued Liabilities, Current	0		$ 0
Disposal Group, Including Discontinued Operation, Revenue	$ 0	$ 212,000

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INCOME FROM SECTION 16 SETTLEMENT (Details Textual)	3 Months Ended
	Jul. 31, 2015 USD ($)
Income From Section Sixteen Settlements [Line Items]
Proceeds from Legal Settlements	$ 400,000

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BANK LINE OF CREDIT (Details Textual)	1 Months Ended
	May 20, 2015 USD ($)
Line of Credit Facility [Line Items]
Line of Credit Facility, Expiration Date	Aug. 15, 2017
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Proceeds from Lines of Credit	$ 1,000,000
Line of Credit Facility, Initiation Date	May 20, 2015
Line of Credit Facility, Interest Rate During Period	2.00%

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LOANS PAYABLE (Details Textual) - USD ($)	Jul. 31, 2016	Apr. 30, 2016
Debt Disclosure [Line Items]
Loans Payable, Total	$ 170,000	$ 149,000
Loans Payable, Current, Total	60,848	53,996
Loans Payable, Noncurrent, Total	$ 108,833	$ 94,825
Minimum [Member] | Loans Payable [Member]
Debt Disclosure [Line Items]
Debt Instrument, Interest Rate, Effective Percentage	3.89%
Maximum [Member] | Loans Payable [Member]
Debt Disclosure [Line Items]
Debt Instrument, Interest Rate, Effective Percentage	4.89%

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STOCKHOLDERS' EQUITY (Details Textual) - USD ($)	3 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Aug. 01, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-Based Compensation	$ 22,501
Common Stock, Capital Shares Reserved for Future Issuance			7,500
Stock Issued During Period, Shares, Conversion of Units	15,104
Stock Issued During Period, Shares, New Issues	63,073

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INCOME FROM ARBITRATION SETTLEMENT (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	Jun. 16, 2016	Jul. 31, 2015
Proceeds from Legal Settlements		$ 400,000
Cooper Medical School [Member]
Proceeds from Legal Settlements	$ 1,150,000

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SUBSEQUENT EVENTS (Details Textual) - Subsequent Event [Member] - USD ($)			1 Months Ended
	Oct. 08, 2016	Aug. 04, 2016	Oct. 31, 2016	Aug. 08, 2016
Subsequent Event [Line Items]
Accounts Payable, Current				$ 232,000
Payments to Suppliers	$ 125,000
Trading Gain (Loss)			$ 107,000
Common Stock [Member]
Subsequent Event [Line Items]
Convertible Preferred Stock, Shares Issued upon Conversion		142,500
Series H Preferred Stock [Member]
Subsequent Event [Line Items]
Conversion of Stock, Shares Converted		1,425