SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 to
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
May 24, 2002
(Date of report)
WPCS INTERNATIONAL INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-26277 98-0204758
(State of Incorporation) (Commission File Number) (IRS Employer ID)
140 South Village Avenue
Suite 20
Exton, Pennsylvania 19341
(Address of Principal Executive Offices)
(610) 903-0400
(Registrant's telephone number, including area code)
ITEM 1. Changes in Control of Registrant.
On May 17, 2002, the Company entered into an Agreement and Plan of
Merger with WPCS Acquisition Corp., a Delaware corporation wholly-owned by the
Company ("Subsidiary"), WPCS Holdings, Inc., a Delaware corporation ("WPCS"),
and Andy Hidalgo. Pursuant to the terms of the Agreement and Plan of Merger
which closed on May 24, 2002, Subsidiary acquired all of the issued and
outstanding shares of capital stock of WPCS from Mr. Hidalgo in exchange for an
aggregate of 5,500,000 newly issued shares of the Company's common stock (the
"Acquisition"). Concurrently with the Acquisition, WPCS was merged with and into
Subsidiary. As a condition to the Acquisition, the Company's director prior to
the transaction was required to appoint Mr. Hidalgo as a member of the Company's
Board of Directors. Stephen C. Jackson, the Company's current member of the
Board of Directors, will resign effective as of the appointment of Mr. Hidalgo.
Concurrently with the Acquisition, and as a condition thereof, a
principal stockholder of the Company returned shares of the Company's common
stock to the Company, without compensation. Century Capital Management Ltd.
returned an aggregate of 500,000 shares of Common Stock to the Company. In
addition, the Company changed its name to WPCS International Incorporation.
Voting Securities
The Common Stock is the only class of voting securities of the Company
outstanding. As of May 24, 2002, there were 9,025,632 shares outstanding and
entitled to one vote per share.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock immediately after the
Acquisition, by:
o each person known to beneficially own more than five percent of the Common
Stock;
o each director of the Company (including proposed directors); and
o all directors and executive officers as a group.
Name and Address Shares of Percent
of Beneficial Owner Common Stock of Class
Andy Hidalgo 5,500,000 60.9%
140 South Village Avenue
Suite 20
Exton, Pennsylvania 19341
All officers and directors, after
completion of the Acquisition (1 person) 5,500,000 60.9%
- ----------------------
Appointment of New Directors
The Agreement and Plan of Merger provides that, subject to compliance
with applicable law, the Company will take all action necessary to cause Andy
Hidalgo to be appointed to the Board of Directors. Set forth below is certain
information with respect to Mr. Hidalgo:
Mr. Hidalgo has been Chairman and Chief Executive Officer of WPCS, a
fixed wireless services provider, responsible for the development and
implementation of the company's business plan. From September 2000 until
December 2001, Mr. Hidalgo was President of Wireless Professional Communication
Services Incorporated, a technology distribution company. From November 1999
until September 2000, Mr. Hidalgo was Chairman and Chief Executive Officer of
CommSpan Incorporated, a holding company for the communications infrastructure
subsidiaries acquired from Applied Digital Solutions. From December 1997 until
September 1999, Mr. Hidalgo was Senior Vice President for Applied Digital
Solutions, a telecommunications company, where he was responsible for the core
business group that represented five divisions, 30 subsidiaries and $200 million
in annual revenue. From December 1995 until December 1997, Mr. Hidalgo was
Divisional Director of Bentley Systems Incorporated, a privately held
engineering software company, where he developed and implemented the sales and
marketing strategies for the manufacturing market sector.
ITEM 7. Exhibits
1. Agreement and Plan of Merger by and among Phoenix Star Ventures, Inc.,
WPCS Acquisition Corp., a Delaware corporation, WPCS
Holdings, Inc., a Delaware corporation, and Andy Hidalgo, dated as of
May 17, 2002 (previously filed)
2. Financial statements of WPCS Holdings, Inc., together with pro forma
financial information.
[remainder intentionally blank]
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, hereunto duly authorized.
WPCS INTERNATIONAL INCORPORATED
By: /s/ ANDREW HIDALGO
Andrew Hidalgo,
President and
Chief Executive Officer
Dated: August 5, 2002
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
INDEX TO PRO FORMA INFORMATION
SELECTED FINANCIAL DATA 1
PRO FORMA CONSOLIDATED BALANCE SHEET-
APRIL 30, 2002 (UNAUDITED) 2-3
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS - YEAR ENDED DECEMBER 31,2001 (UNAUDITED) 4
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) 5-6
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
SELECTED FINANCIAL DATA
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial information reflects
the merger of WPCS Holdings, Inc. ("Holdings") into a newly formed, wholly owned
subsidiary of Phoenix Star Ventures, Inc. ("PVSI"), a public company. Pursuant
to an Agreement and Plan of Merger dated May 17, 2002, the stockholders of
Holdings exchanged all of their shares of stock for 5,500,000 shares of common
stock of PVSI. The merger, which was consummated on May 17, 2002, will be
recorded as a reverse acquisition inasmuch as the Holdings stockholders became
the controlling stockholders of PVSI. As described in Note 1, in connection with
the merger, PVSI changed its name to WPCS International Incorporated. (the
Company). The unaudited pro forma consolidated balance sheet of the Company
gives effect to the merger as if it had occurred on April 30, 2002 and the
unaudited pro forma condensed consolidated statement of operations of the
Company gives effect to the merger as if it had occurred on May 1, 2001.
This pro forma financial information is based on the estimates and
assumptions set forth herein and in the notes thereto, and has been prepared
utilizing (a) the annual audited financial statements of PVSI on Form 10K-SB for
the fiscal year ended April 30, 2002; and (b) the annual audited financial
statements of Holdings for the period November 15, 2001 (date of inception) to
April 30, 2002.
The following unaudited pro forma financial information is presented
for informational purposes only and is not necessarily indicative of (i) the
results of operations of the Company that actually would have occurred had the
"Agreement and Plan of Merger" been consummated on the dates indicated or (ii)
the results of operations of the Company that may occur or be attained in the
future. The following information is qualified in its entirety by reference to
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations", PVSI's audited consolidated
financial statements, including the notes thereto, Holdings' audited financial
statements, including the notes thereto, and other historical financial
information appearing elsewhere herein.
1
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 2002
(UNAUDITED)
PRO FORMA
---------------------------------------------
Holdings PSVI ADJUSTMENTS CONSOLIDATED
-------- ---- ----------- ------------
ASSETS
Current Assets
Cash $ 15,554 $ 3,257 $ 18,811
Accounts receivable - net 91,183 - 91,183
Inventories 7,975 - 7,975
Prepaid expenses and other current assets - 7,500 7,500
-------- ------ ----------- ------------
Total current assets 114,712 10,757 125,469
-------- ------ ----------- ------------
Property and Equipment - at cost, less
Accumulated depreciation
28,271 - 28,271
-------- ------ ----------- ------------
Other Assets
Security deposits
2,242 - 2,242
-------- ------ ----------- ------------
Total other assets
2,242 - 2,242
-------- ------ ----------- ------------
$ 145,225 $ 10,757 $ 155,982
======== ====== =========== ============
See the accompanying notes to pro forma financial statements
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 2002
(UNAUDITED)
PRO FORMA
----------------------------------
Holdings PSVI ADJUSTMENTS CONSOLIDATED
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 93,866 $ 59,572 $ 153,438
Taxes payable - other than income
1,053 - 1,053
Current maturities of capital lease obligation
2,077 - 2,077
Advances from stockholder
20,743 32,000 52,743
Income taxes payable
200 - 200
------------------ ------------ --------------- ----------
Total current liabilities
117,939 91,572 209,511
------------------ ------------ --------------- ----------
Noncurrent Liabilities
Capital lease obligation - noncurrent
6,902 6,902
Deferred tax liabilities
4,150 - 4,150
------------------ ------------ --------------- ----------
Total noncurrent liabilities
11,052 - 11,052
------------------ ------------ --------------- ----------
Total liabilities
128,991 91,572 220,563
------------------ ------------ --------------- ----------
Stockholders' equity
Preferred Stock:
Series A convertible, liquidation preference of
$250,000 1 1
Common stock
3,000 103 550 (a) 603
(50)(b)
(3,000)(c)
Additional paid-in capital
2,000 2,092,164 (2,089,664)(a),(b) 4,500
(c,d)
Accumulated deficit 11,234 (2,173,083) 2,092,164 (d) (69,685)
------------------ ------------ --------------- ----------
Total stockholders' equity 16,234 (80,815) - (64,581)
------------------ ------------ --------------- ----------
$ 145,225 $10,757 $ 155,982
================= ============ =============== ==========
See the accompanying notes to pro forma financial statements
3
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 2002
(UNAUDITED)
PRO FORMA
-------------------------------
Holdings PSVI ADJUSTMENTS CONSOLIDATED
-------- ---- ----------- ------------
Net sales $402,289 $ - $ 402,289
Cost of sales 267,032 - 267,032
------------------------------------------------------------------------------
Gross profit
135,257 - 135,257
------------------------------------------------------------------------------
Operating expenses
Selling expenses
4,857 4,857
General and administrative
111,606 89,354 200,960
Depreciation and amortization
2,570 - 2,570
------------------------------------------------------------------------------
Total operating expenses 208,387
119,033 89,354
------------------------------------------------------------------------------
Loss before other income (expense) (73,130)
16,224 (89,354)
------------------------------------------------------------------------------
Other income (expense):
Gain on settlement of debt
- 22,652 22,652
Expenses of former subsidiary
(17,812) (17,812)
Interest expense
(640) - (640)
------------------------------------------------------------------------------
Total other income (expense)
(640) 4,840 4,200
------------------------------------------------------------------------------
Net income/(loss) before provision for income tax
15,584 (84,514) (68,930)
Provision for income tax 4,350 - 4,350
------------------------------------------------------------------------------
Net loss attributable to common stockholders
11,234 (84,514) (73,280)
==============================================================================
Basic and diluted earnings per share of common stock $ (0.01)
=====================
Common shares used in the calculation of
earnings per share 6,025,632
=====================
See the accompanying notes to pro forma financial statements
4
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Phoenix Star Ventures, Inc. ("PVSI") is a publicly held corporation
whose newly formed subsidiary merged with WPCS Holdings, Inc.
("Holdings") on May 17, 2002. In connection with the merger PVSI
changed its name to WPCS International Incorporated (the Company). For
accounting purposes, this transaction has been treated as a reverse
acquisition with the net assets of PVSI being stated at fair value in
accordance with the purchase method of accounting. Accordingly, the
then outstanding shares of PVSI remain outstanding commencing with the
date of merger. The historical financial statements of PVSI prior to
the merger will no longer be reported, as Holdings' financial
statements are now considered the financial statements of the ongoing
reporting entity.
Note 2. The unaudited pro forma consolidated balance sheet at April 30,
2002 presented herein has been prepared as if the merger had been
consummated on April 30, 2002.
The unaudited pro forma condensed consolidated statement of operations
for the year ended April 30, 2002 presented herein has been prepared
as if the merger described above had been consummated as of May 1,
2001.
Pro forma adjustments have been made for the following:
(a) To record the issuance of 5,500,000 shares of PVSI's common stock
to the stockholders of Holdings in exchange for all of their
shares;
(b) To record the return and cancellation of 500,000 shares of PVSI's
common stock by certain of its stockholders;
(c) To record the elimination of the common stock of Holdings;
(d) To record the elimination of PVSI's accumulated deficit by
$2,092,164, limited to the additional paid-in capital.
Note 3. The statement of operations of PVSI was derived from its annual
audited financial statements on Form 10K-SB for the fiscal year ended
April 30, 2002.
The statement of operations of Holdings was derived from its annual
audited financial statements for the period November 15, 2001 (date of
inception) to April 30, 2002.
5
WPCS INTERNATIONAL INCORPORATED
(FORMERLY PHOENIX STAR VENTURES, INC.)
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Net loss per common share was calculated under SFAS No. 128
"Earnings Per Share". Basic net loss per share is calculated by
treating all shares of common stock issued and outstanding at May 17,
2002, net of such shares as were cancelled on May 17, 2002 (as
described in Note 2(b)) as if they were outstanding for the entire
period reported.
Note 5. Changes in ownership contemplated herein are expected to result in
a restriction for income tax purposes on the availability of net
operating loss carryforwards of approximately $2,000,000 applicable to
PVSI which shall be limited annually to the value of PVSI on the date
of such ownership change multiplied by the Federal long-term tax
exempt rate ("annual limitation"). To the extent amounts available
under this annual limitation are not used, they may be carried forward
for the remainder of the 20-year period following the years in which
the losses were originally incurred.
6
WPCS HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report 1
Financial Statements
Balance Sheets at April 30, 2002 2-3
Statement of Earnings and Retained Earnings for the period
November 15, 2001 (date of inception) To April 30, 2002 4
Statement of Cash Flows for the period November 15, 2001
(date of inception) To April 30, 2002 5
Notes to Financial Statements 6-9
LEONARD FRIEDMAN
Certified Public Accountant
385 Old Westbury Road
East Meadow, New York 11554
Tel. # (516) 735-0824
Fax # (516) 735-6301
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders of
WPCS Holdings, Inc.
I have audited the accompanying balance sheet of WPCS Holdings, Inc. as of April
30, 2002, and the related statement of earnings and retained earnings and cash
flows for the period then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on our audit.
I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of WPCS Holdings, Inc. as of April 30,
2002, and the result of their operations and their cash flows for the period
then ended, in conformity with accounting principles generally accepted in the
United States of America.
/s/LEONARD FRIEDMAN
East Meadow, New York
July 1, 2002
1
WPCS HOLDINGS, INC.
BALANCE SHEETS
APRIL 30, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,554
Accounts receivable 91,183
Inventory 7,975
TOTAL CURRENT ASSETS $ 114,712
PROPERTY AND EQUIPMENT - NET 28,271
- -----------------------
OTHER ASSETS
Security deposits 2,242
TOTAL OTHER ASSETS 2,242
$ 145,225
The accompanying notes are an integral part of these financial statements
2
WPCS HOLDINGS, INC.
BALANCE SHEETS
APRIL 30, 2002
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable 93,866
Capital lease obligation - current 2,077
Taxes payable - other than on income 1,053
Income taxes payable 200
Due to Stockholder 20,743
TOTAL CURRENT LIABILITIES 117,939
NONCURRENT LIABILITIES
Capital lease obligation - noncurrent 6,902
Deferred tax liabilities 4,150
TOTAL NONCURRENT LIABILITIES 11,052
TOTAL LIABILITIES 128,991
STOCKHOLDER'S EQUITY
Common Stock - $0.001 par value,
20,000,000 shares authorized, 3,000,000 shares
issued and outstanding 3,000
Additional paid-in capital 2,000
Retained earnings 11,234
TOTAL STOCKHOLDER'S EQUITY 16,234
$ 145,225
The accompanying notes are an integral part of these financial statements
3
WPCS HOLDINGS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE PERIOD NOVEMBER 15, 2001 (DATE OF INCEPTION) TO APRIL 30,2002
SALES $ 402,289
COST OF SALES 267,032
GROSS PROFIT 135,257
OPERATING EXPENSES
Selling expenses 4,857
General and administrative expenses 111,606
Depreciation and amortization 2,570
TOTAL OPERATING EXPENSES 119,033
INCOME BEFORE OTHER EXPENSE 16,224
OTHER EXPENSE - INTEREST 640
NET INCOME BEFORE PROVISION FOR INCOME TAXES 15,584
Provision for income taxes 4,350
NET INCOME 11,234
RETAINED EARNINGS - BEGINNING -
RETAINED EARNINGS - ENDING $ 11,234
The accompanying notes are an integral part of these financial statements
4
WPCS HOLDINGS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD NOVEMBER 15, 2001 (DATE OF INCEPTION) TO APRIL 30,2002
CASH FLOW FROM OPERATING ACTIVITIES :
Net Income $ 15,584
Adjustments to reconcile net income
to net cash provided by operating activities:
Noncash items:
Depreciation and amortization 2,570
(Increase)/Decrease in assets:
Accounts receivable (91,183)
Inventory (7,974)
Security deposits (2,242)
Increase/(Decrease) in liabilities:
Accounts payable 93,866
Taxes payable - other than on income 1,053
(3,910)
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,674
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (20,895)
NET CASH USED IN INVESTING ACTIVITIES (20,895)
CASH FLOWS FROM FINANCING ACTIVITIES
Subscription of capital stock 5,000
Loan from stockholder 20,743
Repayment of capital lease obligations (968)
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,775
INCREASE IN CASH 15,554
CASH AT BEGINNING OF PERIOD -
CASH AT END OF PERIOD $ 15,554
The accompanying notes are an integral part of these financial statements
5
WPCS HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WPCS Holdings, Inc. (the "Company") was incorporated in the State of
Delaware on November 15, 2001. The Company provides complete fixed wireless
solutions and various other telecommunication services to a wide spectrum of
businesses and government institutions.
Use of estimates
In preparing financial statements in conformity with accounting
principles generally accepted in the United States, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and revenue and expenses
during the reported period. Actual results could differ from those estimates.
Accounts receivable
The Company utilizes the allowance method for recognizing the
collectibility of its accounts receivable. The allowance method recognizes bad
debt expense based on reviews of the individual accounts outstanding based on
the surrounding facts. As of April 30, 2002, no allowance was deemed necessary
by management.
Inventory
Inventory that consists of parts and supplies used by the company, is
valued at lower of cost or market value.
Property and equipment
Property and equipment are recorded at cost less accumulated
depreciation, which is provided on the straight-line basis over the estimated
useful lives of five to seven years. Expenditures for maintenance and repairs
are expensed as incurred.
A long-term lease transaction relating to certain equipment acquired by
the Company has been accounted for as a capital lease in accordance with
Financial Accounting Standards Board Statement No. 13. The lease obligation has
been capitalized as at the beginning of the lease term, reflecting the present
value of future rental payments. A corresponding amount has been capitalized as
the cost of the equipment and depreciation will be charged over the five year
estimated economic life of the asset when it is placed in service.
6
WPCS HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
Revenue Recognition
Revenue consists of sales of wireless solutions and its deployment to
business houses and government institutions. Equipment sales are recognized when
installation is completed. Maintenance revenues are recognized when services are
provided. Prepayments for services and/or installations are deferred and
recognized as revenue as installations are completed and services are provided.
Direct Cost of Revenue
Direct cost of revenue consists primarily of cost of equipment sold,
labor cost incurred on installing equipment and shipping cost incurred on
equipment sold to customers.
Income Taxes
The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities.
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, accounts payable and
accrued expenses are a reasonable estimate of their fair value because of the
short-term maturity of these instruments. The carrying value of short-term debt
closely approximates its fair value based on the instruments' interest rate
terms, maturity date and collateral, if any, in comparison to the Company's
incremental borrowing rates of similar financial instruments.
NOTE 2 - PLANT AND EQUIPMENT
Property and equipment consists of the following as of April 30, 2002:
Office Equipment $ 17,718
Furniture and fixtures 13,123
-----------
$ 30,841
Less: accumulated depreciation 2,570
-----------
$ 28,271
===========
Fixed assets under capital lease aggregate $9,947 at April 30, 2002.
The accumulated depreciation related to these assets is $829 at April 30, 2002.
7
WPCS HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -CAPITAL LEASE OBLIGATION
On December 1, 2001, the Company assumed a lease agreement for purchase
of office equipment from one of its vendors. As of that date, the principal
balance payable on the lease was $9,947 payable in 45 monthly payments of
$240.09.
Future minimum lease payments at April 30, 2002 are as follows:
Year Ending
April 30, Amount
2003 $2,881
2004 2,881
2005 2,881
2006 2,161
-------
Total minimum lease payments 10,804
Less: Amount representing interest 1,825
-------
Present value of minimum lease payments 8,979
Less - Current maturities 2,077
-------
Notes Payable - long term $6,902
-------
Interest expense on capital lease obligations for the period ended
April 30, 2002 was $492.
NOTE 4 - PROVISION FOR INCOME TAX
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related to differences between the financial statement and tax bases of
assets and liabilities for financial statement and income tax reporting
purposes. Deferred tax assets and liabilities represent the future tax return
consequences of these temporary differences, which will either be taxable or
deductible in the year when the assets or liabilities are recovered or settled.
Accordingly, measurement of the deferred tax assets and liabilities attributable
to the book-tax basis differentials are computed at a rate of 15% federal and
15% state.
The only material tax effect of significant items comprising the Company's
current deferred tax assets as of April 30, 2002, is the difference in
depreciation per book and taxes, which amounted to approximately $18,000 as of
April 30, 2002. The deferred tax liability associated with the depreciation
adjustment amounted to approximately $4,150 as of April 30, 2002.
8
WPCS HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS
Lease Commitments
In November 2001, the Company entered into a lease agreement for its
administrative office.
The Company's approximate future minimum rental under non-cancelable
operating lease in effect on April 30, 2002 is as follows:
Year ended
April 30,
-----------------
2003 $ 27,253
2004 28,000
2005 15,386
------------
$ 70,639
============
NOTE - 5 - SUBSEQUENT EVENTS
On May 17, 2002, the Company entered into an Agreement and Plan of
Merger with Phoenix Star Ventures, Inc. ("Phoenix"), a publicly traded entity
incorporated in the State of Delaware, WPCS Acquisition Corp. ("Subsidiary"), a
wholly owned subsidiary of Phoenix and Andy Hidalgo, the sole shareholder of the
company. Pursuant to the terms of the Agreement and Plan of Merger which closed
on May 24, 2002, Subsidiary acquired all of the issued and outstanding shares of
capital stock of the company from Mr. Hidalgo in exchange for an aggregate of
5,500,000 newly issued shares of Phoenix's common stock (the "Acquisition").
Concurrently with the Acquisition, the company was merged with and into the
Subsidiary. As a condition to the Acquisition, Phoenix's director prior to the
transaction was required to appoint Mr. Hidalgo as a member of its Board of
Directors. Stephen C. Jackson, Phoenix's current member of the Board of
Directors, will resign effective as of the appointment of Mr. Hidalgo.
Concurrently with the Acquisition, and as a condition thereof, a
principal stockholder of Phoenix returned an aggregate of 500,000 shares of its
Common Stock to Phoenix. In addition, Phoenix changed its name to WPCS
International Incorporated.
9