UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): November 13, 2002
WPCS INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 0-26277 98-0204758
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
140 South Village Avenue, Suite 20, Exton, Pennsylvania 19341
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 903-0400
ITEM 1. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Invisinet, Inc.
On November 13, 2002 the Company entered into and completed an Agreement and
Plan of Merger with Invisinet Acquisitions Inc., a Delaware corporation wholly
owned by the Company (the "Subsidiary"), Invisinet, Inc. a Delaware corporation
("Invisinet"), J. Johnson LLC, a Delaware corporation ("Johnson") and E. J. von
Schaumburg ("von Schaumburg"). Pursuant to the terms of the Agreement and Plan
of Merger the Company acquired (the "Acquisition") all of the issued and
outstanding shares of capital stock of Invisinet from Johnson and von Schaumburg
in exchange for an aggregate of 1,000,000 newly issued shares of the Company's
common stock (the "Shares"). As part of the Acquisition, the Company's Board of
Directors appointed Norm Dumbroff, the principal of Johnson, as a member of the
Company's Board of Directors and appointed von Schaumburg as the Company's
Executive Vice-President of Strategic Development.
Invisinet is in the business of providing fixed wireless solutions and services
for internal and external fixed wireless connectivity. Invisinet commenced
business in July, 2000 and has offices in Morristown, New Jersey and West
Chicago, Illinois. Invisinet's customer base includes such companies as EPS,
Tyco, Associated Press International, USX, FEMA and Fidelity Investments.
Invisinet offers to its customers wireless products and services focused on
wireless network implementation. Invisinet also provides strategic network
planning and consulting services, assisting customers in developing wireless
strategies.
The 1,000,000 shares of common stock issued in the merger were not registered
under the Securities Act of 1933, as amended (the "Act") and were issued in the
reliance upon the exemption from registration provided by section 4(2) of the
Act, on the basis that the Acquisition is a transaction not involving a public
offering. All certificates evidencing the Shares bear a customary form of
investment legend and may not be sold, pledged, hypothecated or otherwise
transferred unless first registered under the Act or pursuant to an available
exemption from such registration requirements.
As part of the Acquisition, the Company caused the Subsidiary and Invisinet to
be merged pursuant to a Certificate of Merger filed with the Delaware Secretary
of State on November 13, 2002. Invisinet survived the merger and the Company
intends to continue to hold the surviving company as a wholly owned subsidiary
and to continue its operations. The Company believes that the merger will
qualify as a tax-free reorganization of Invisinet pursuant to section 351 and
368(a)(1)(B) of the Internal Revenue Code of 1996, as amended.
The amount of consideration paid to Johnson and von Schaumburg for Invisinet was
determined through arm's-length negotiations between these parties and the
Company. Other than as disclosed herein there are no material relationships
between Johnson, von Schaumburg and the Company or any of its affiliates, any
directors or officers of the Company, or any associate of such directors or
officers.
Following the closing of the merger, the Company had 10,025,632 shares of its
common stock issued and outstanding.
Appointment of New Director and Officer
The Agreement and Plan of Merger required that the Company appoint Norm Dumbroff
as a director of the Company and von Schaumburg as Executive Vice-President of
Strategic Development of the Company.
Mr. Dumbroff has been the President and Chief Executive Officer of WAV, Inc.
(formerly POS Information Systems) since 1990. Prior to this he was an engineer
with Hughes Aircraft. Mr. Dumbroff holds a Bachelor of Science in Computer
Science from Albright College in Reading, Pennsylvania.
Mr. von Schaumburg has served as President and Chief Executive Office of
Invisinet since July, 2000. From 1988 to 2000 Mr. von Schaumburg was employed by
AT&T and Lucent Technologies. Mr. von Schaumburg holds a Bachelor in Science in
Finance from Saint Bonaventure University in Saint Bonaventure, New York and a
Masters of Business Administration from Fairleigh Dickinson University in
Madison, New Jersey.
Assignment of Account Receivable
As part of the Acquisition, WAV, Inc., a company controlled by Norm Dumbroff,
issued to Invisinet a promissory note in the amount of $172,514.04 in exchange
for the assignment by Invisinet to WAV, Inc. of an account receivable in the
amount of $154,514.06 and certain other consideration.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of businesses acquired.
1. Audited Financial Statements of Invisinet for the period
from inception to December 31, 2000 and for the year
ended December 31, 2001 (previously filed).
2. Unaudited Financial Statements of Invisinet for the nine month
period ended September 30, 2002 (previously filed).
(b) Proforma Financial Information
Proforma Financial Information. Filed herwith.
(c) Exhibits.
3. Agreement and Plan of Merger by and among WPCS International
Incorporated, Invisinet Acquisitions Inc., Invisinet, Inc., J.
Johnson LLC and E. J. von Schaumburg made as of the 13th day
of November, 2002 (previously filed).
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
Date: January 17, 2003 /s/ ANDREW HIDALGO
-------------------- ---------------------------
Andrew Hidalgo, President
WPCS INTERNATIONAL INCORPORATED
INDEX TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION 1
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET-
"WPCS" AT OCTOBER 31, 2002 AND "INVISINET" AT SEPTEMBER 30, 2002 2-3
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS -"WPCS" FOR SIX MONTHS ENDED OCTOBER 31,2002
AND "INVISINET" FOR SIX MONTHS ENDED SEPTEMBER 30, 2002 4
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) 5-6
WPCS INTERNATIONAL INCORPORATED
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
On November 13, 2002, Invisinet Acquisition Corp, ("Acquisition
Corp") a newly formed, wholly owned subsidiary of WPCS International
Incorporated ("WPCS") acquired all of the assets and assumed all of the
liabilities of Invisinet Inc. ("Invisinet"). Subsequently on that date,
Acquisition Corp was merged with and into Invisinet, with Invisinet being the
surviving corporation. Invisinet then became a wholly owned subsidiary of WPCS.
The aggregate consideration paid by WPCS for the entire equity
interest in Invisinet was approximately $1,750,000 subject to further
adjustment. As a result of and at the effective time of the merger, all of the
issued and outstanding shares of common stock of Invisinet were exchanged for
aggregate merger consideration consisting of 1,000,000 shares of common stock of
WPCS with a value of approximately $1,750,000.
The unaudited pro forma condensed consolidated balance sheet of the
Company gives effect to the merger as if it had occurred on October 31, 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.
The acquisition of Invisinet was accounted for under the purchase
method of accounting in accordance with the Statement of Financial Accounting
Standards No. 141, Business Combinations ("SFAS 141"). Under the purchase method
of accounting, assets acquired and liabilities assumed are recorded at their
estimated fair values. Goodwill is created to the extent that the merger
consideration, including certain acquisition and closing costs, exceeds the fair
value of the net identifiable assets acquired at the date of the merger. Based
on the preliminary information currently available, the acquisition resulted in
approximately $1,637,000 of goodwill.
This unaudited pro forma condensed consolidated financial information
is based on the estimates and assumptions set forth herein and in the notes
thereto, and has been prepared utilizing (a) the interim unaudited financial
statements of WPCS included in Form 10-QSB for the six months ended October 31,
2002; and (b) the interim unaudited pro forma financial statements of Invisinet
for the six months period April 1, 2002 to September 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", WPCS's audited consolidated
financial statements, including the notes thereto contained in its Annual Report
on Form 10-KSB for the year ended April 30, 2002 incorporated herein by
reference, Invisinet's' audited financial statements, including the notes
thereto, for the years ended December 31, 2001 and 2000 and other historical
financial information appearing elsewhere herein.
1
WPCS INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA UNAUDITED BALANCE SHEET
OCTOBER 31, SEPTEMBER 30, PRO FORMA
2002 2002
WPCS INVISINET ADJUSTMENTS CONSOLIDATED
-----------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 78,607 $ 34,401 - $ 113,008
Accounts receivable, net 130,966 159,438 - 290,404
Due from related party - 164,514 - 164,514
Inventories 5,644 13,286 - 18,930
Prepaid expense and other current assets 2,559 2,372 - 4,931
-----------------------------------------------------------------------------------
Total current assets 217,776 374,011 - 591,787
-----------------------------------------------------------------------------------
Property and Equipment, net 25,186 5,003 30,189
Cost in excess of net assets acquired (b) 1,637,056 1,637,056
- - -
Other Assets 2,242 350 - 2,592
-----------------------------------------------------------------------------------
$ 245,204 $ 379,364 $ 1,637,056 $ 2,261,624
===================================================================================
2
WPCS INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA UNAUDITED BALANCE SHEET
OCTOBER 31, SEPTEMBER 30,
2002 2002 PRO FORMA
WPCS INVISINET ADJUSTMENTS CONSOLIDATED
----------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 72,399 $ 222,120(b) 25,000 $ 319,519
Accounts payable - Related party - 14,372 - 14,372
Accrued expenses - 4,928 - 4,928
Current maturities of capital lease obligation 2,183 - - 2,183
Notes payable - Related party - 600,000(a) (600,000) -
----------------------------------------------------------------------------------
Total current liabilities 74,582 841,420 (575,000) 341,002
----------------------------------------------------------------------------------
Noncurrent Liabilities
Capital lease obligation - noncurrent 5,783 - - 5,783
Deferred taxes 4,150 - 4,150
----------------------------------------------------------------------------------
Total noncurrent liabilities 9,933 - - 9,933
----------------------------------------------------------------------------------
Total liabilities 84,515 841,420 - 350,935
----------------------------------------------------------------------------------
Stockholders' equity
Preferred Stock:
Series B Convertible Preferred Stock,
1,000 shares designated, 519 shares
issued and outstanding at October
31,2002 liquidation preference of $519,000
Common stock 903 1,000(d) 100 1,003
(c) (1,000)
Additional paid-in capital 615,283 62,472(a) 600,000 2,365,183
(b) 1,612,956
(c) (525,528)
Accumulated deficit (455,497) (525,528)(c) 525,528 (455,497)
----------------------------------------------------------------------------------
Total stockholders equity 160,689 (462,056) 2,212,056 1,910,689
----------------------------------------------------------------------------------
$ 245,204 $ 379,364 $ 1,637,056 $ 2,261,624
==================================================================================
3
WPCS INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA UNAUDITED STATEMENT OF OPERATIONS
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
OCTOBER 31, SEPTEMBER 30, PRO FORMA
2002 2002
WPCS INVISINET ADJUSTMENTS CONSOLIDATED
--------------------- --------------------- ------------------- ------------------
Net sales $ 606,482 $ 656,295 - $ 1,262,777
Cost of sales 474,096 521,630 - 995,726
--------------------- --------------------- ------------------- ------------------
Gross profit 132,386 134,665 - 267,051
--------------------- --------------------- ------------------- ------------------
Operating expenses
Selling expenses 7,018 - - 7,018
General and administrative 389,729 172,516 - 562,245
Provision for doubtful accounts 26,285 6,000 - 32,285
Depreciation and amortization 3,085 3,366 - 6,451
--------------------- --------------------- ------------------- ------------------
Total operating expenses 426,118 181,882 - 608,000
--------------------- --------------------- ------------------- ------------------
Loss from operations (293,732) (47,217) - (340,949)
Other expense
Interest expense - (297) - (297)
--------------------- --------------------- ------------------- ------------------
Total other expense - (297) - (297)
--------------------- --------------------- ------------------- ------------------
Net loss (293,732) (47,514) - (341,246)
Imputed dividends accreted on convertible
Series B
Preferred stock (173,000) - - (173,000)
--------------------- --------------------- ------------------- ------------------
Net loss attributable to
common stockholders $ (466,732) $ (47,514) $ - $ (514,246)
===================== ===================== =================== ==================
Basic and diluted loss per share of common
stock $ (0.05)
-----------------
Common shares used in the calculation of loss
per
share 10,025,632
-----------------
4
WPCS INTERNATIONAL INCORPORATED
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. WPCS International Incorporated ("WPCS") is a publicly held
corporation whose newly formed subsidiary, on November 13, 2002,
merged with Invisinet, Inc. ("Invisinet"). For accounting
purposes, this transaction has been treated as an acquisition with
the net assets of Invisinet being stated at fair value in
accordance with the purchase method of accounting.
NOTE 2. The unaudited pro forma consolidated balance sheet at October
31, 2002 presented herein has been prepared as if the merger had
been consummated on October 31, 2002.
The unaudited pro forma condensed consolidated statement of
operations for the six months ended October 31, 2002 presented
herein has been prepared as if the merger described above had been
consummated as of May 1, 2002. WPCS began its operations in
December 2001; therefore no pro forma financial information is
presented for any prior years.
Pro forma adjustments have been made for the following:
(a) To record the conversion of Notes Payable- Related party of
$600,000 by Invisinet into additional paid-in capital
(b) To reflect the excess of acquisition cost over the estimated
fair value of the net assets acquired (goodwill). The
allocation of the purchase price is based on financial
information of Invisinet as of September 30, 2002. There might
be further adjustments to the purchase price allocation upon
finalization of financial information as of the date of the
merger. However, we do not believe that the final purchase
price allocation will have a material impact on our pro forma
results of operations or financial position. The purchase
price and purchase price allocation are summarized as follows:
Purchase price paid as:
Common stock issued $ 1,750,000
----------------
Transaction costs 25,000
Total purchase price consideration 1,775,000
Allocated to:
Historical net book value of Invisinet
at September 30, 2002 $ 137,944
----------------
Cost in excess of net assets acquired $ 1,637,056
================
(c) To reflect the elimination of the shareholders' equity
accounts of Invisinet of ($525,528) and the issuance of WPCS
common stock. To effect the merger, WPCS issued 1,000,000
shares of WPCS common stock with a value of approximately
$1,750,000, based upon the average closing price of $1.75 per
share a few days before and after the date of merger.
(d) To reflect the issuance of 1,000,000 shares of WPCS common
stock to effect the merger as if these shares were outstanding
at the beginning of the periods presented.
5
WPCS INTERNATIONAL INCORPORATED
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 3. The statement of operations of WPCS was derived from its
interim unaudited financial statements on Form 10Q-SB for the six
months ended October 31, 2002.
The statement of operations of Invisinet was derived from its
interim unaudited financial statements for the nine months ended
September 30, 2002, less unaudited financial statements for the
three months ended March 31, 2002.
6