10-Q: World Scan Project Swings to Profit, Raises Capital

Sentiment:

Quarterly Report 18 September 2025 3:05 PM

📋All filings for World Scan Project, INC

World Scan Project, Inc. reported a shift to net income for the six months ended April 30, 2025, alongside a significant reduction in liabilities and a capital raise, despite a decline in overall revenue.

Delay expectedThe S-1 Registration Statement offering, declared effective on August 23, 2023, was extended by an additional 90 calendar days by Mr. Ryohei Uetaki, concluding on November 21, 2024.

Capital raiseIssued 437,000 shares of common stock to 31 shareholders for proceeds totaling $5,244,000 during the period ended April 30, 2025, through an S-1 offering.Issued 743,000 shares of common stock to 43 shareholders for proceeds totaling $8,565,948 during the year ended October 31, 2024, through an S-1 offering.Funds from the S-1 offering are planned to be used for research and development, marketing, and working capital.

Better than expectedShifted from a net loss of $197,986 to a net income of $314,359 for the six months ended April 30, 2025.Gross profit increased by 11.78% to $3,243,420 despite a revenue decrease, indicating improved efficiency in cost of goods sold.Operating expenses decreased by 10.26% to $2,767,804, contributing to improved profitability.Total liabilities significantly decreased from $10,826,845 to $2,043,691, strengthening the company's financial position.Net cash used in operating activities improved from $(10,588,393) to $(6,749,870), indicating a reduced cash burn from core operations.

Summary

World Scan Project, Inc. reported a net income of $314,359 for the six months ended April 30, 2025, a significant improvement from a net loss of $197,986 in the prior year period.
Total revenues decreased by 20.12% to $8,671,654 for the six months ended April 30, 2025, primarily due to a decrease in sales of crypto miners.
Gross profit increased by 11.78% to $3,243,420 for the six months ended April 30, 2025, driven by a larger decrease in the cost of revenues.
Operating expenses decreased by 10.26% to $2,767,804 for the six months ended April 30, 2025.
Cash and cash equivalents significantly declined to $120,263 as of April 30, 2025, from $1,634,200 as of October 31, 2024.
Total liabilities dramatically decreased from $10,826,845 as of October 31, 2024, to $2,043,691 as of April 30, 2025.
Shareholders' equity increased from $16,583,406 to $23,775,446 during the six-month period.
Net cash used in operating activities improved to $(6,749,870) for the six months ended April 30, 2025, compared to $(10,588,393) in the prior year.
The company raised $5,244,000 from the sale of common shares during the six months ended April 30, 2025.
Management identified material weaknesses in disclosure controls and internal control over financial reporting, including domination by a single individual, lack of outside directors, inadequate segregation of duties, and absence of an audit committee.

Sentiment

Score: 6

Explanation: The company demonstrated a significant turnaround to net income and substantially reduced liabilities, which are strong positives. However, the sharp decline in cash and persistent material weaknesses in internal controls, coupled with a revenue decrease, present considerable risks and temper the overall positive sentiment.

Positives

Achieved a net income of $314,359 for the six months ended April 30, 2025, reversing a net loss of $197,986 in the prior year.
Gross profit increased by 11.78% to $3,243,420 for the six months ended April 30, 2025, despite a decrease in total revenues.
Operating expenses decreased by 10.26% to $2,767,804, indicating improved cost management.
Total liabilities significantly decreased from $10,826,845 to $2,043,691, strengthening the balance sheet.
Shareholders' equity increased substantially from $16,583,406 to $23,775,446.
Net cash used in operating activities improved by $3,838,523, from $(10,588,393) to $(6,749,870).

Negatives

Total revenues decreased by 20.12% to $8,671,654 for the six months ended April 30, 2025, primarily due to reduced sales of crypto miners.
Cash and cash equivalents significantly decreased from $1,634,200 as of October 31, 2024, to $120,263 as of April 30, 2025.
Identified material weaknesses in disclosure controls and procedures and internal control over financial reporting.
Management is dominated by a single individual without adequate compensating controls.
The board of directors lacks a majority of outside directors, leading to ineffective oversight.
Inadequate segregation of duties consistent with control objectives.
Absence of an audit committee.

Risks

Changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, and competition could materially adversely affect operations and future prospects.
Material weaknesses in internal controls, including domination of management by a single individual, lack of a majority of outside directors, inadequate segregation of duties, and lack of an audit committee, pose significant operational and financial reporting risks.
Concentration of purchases from a few suppliers, with Bon Corporation accounting for 39.72% and Handa Boseki Co., Ltd for 21.58% of inventories for the period ended April 30, 2025.
Concentration of revenues from a few customers, with Drone Net.in generating 32.34% and Marui Bussan 10.27% of total revenue for the period ended April 30, 2025.
Exposure to foreign currency translation adjustments, which can lead to significant fluctuations in accumulated other comprehensive income/loss.

Future Outlook

The ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors such as changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles could have a material adverse effect on operations and future prospects.

Management Comments

"Currently, our cash balance is sufficient to fund our operations without the need for additional funding."
"This decrease in revenues was due mainly to a decrease in the sales of crypto miners."
"This increase in net income was due mainly to a decrease in the cost of goods sold and a decrease in general and administrative expenses."
"The decrease in operating cash flow is attributed to a decrease in accounts payable and accruals during this period."
"The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below."

Industry Context

The company operates in the industrial automation equipment sector, focusing on drones, Web3 infrastructure, and IoT. The reported decrease in crypto miner sales suggests a sensitivity to the volatile cryptocurrency market, which impacts its Web3 infrastructure segment. While the drone market is generally expanding, the company's specific competitive positioning and market share are not detailed in the filing.

Comparison to Industry Standards

As a smaller reporting company, the filing does not provide specific comparable companies, projects, or results to assess performance against global benchmarks.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Identified Weakness	Domination of management by a single individual without adequate compensating controls.	April 30, 2025	Leads to ineffective oversight and increased risk of financial misstatement or operational inefficiencies.
Identified Weakness	Lack of a majority of outside directors on the board of directors.	April 30, 2025	Results in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Identified Weakness	Inadequate segregation of duties consistent with control objectives.	April 30, 2025	Increases the risk of errors, fraud, and lack of accountability within financial processes.
Identified Weakness	Lack of an audit committee.	April 30, 2025	Absence of independent oversight for financial reporting, internal controls, and audit processes, increasing governance risk.

Related Party Transactions

Ryohei Uetaki (CEO and Director) advanced $49,068 for salary and $458 for expenses to the Company as of April 30, 2025. This advance is an unsecured, noninterest-bearing loan payable on demand.
Ryohei Uetaki gifted 300 shares of World Scan Project Corporation (WSP Japan) common stock to the Company on January 25, 2020, making WSP Japan a wholly-owned subsidiary.
Ryohei Uetaki gifted 7,000,000 common shares and 10,000,000 preferred shares to SKYPR LLC (100% owned and controlled by Ryohei Uetaki) on February 19, 2020.

Stakeholder Impact

**Shareholders**: Positive impact from the shift to net income and increased equity, but diluted EPS remains low. Concerns regarding governance weaknesses and significant cash burn could affect investor confidence.
**Employees**: The CEO's salary advance to the company suggests potential liquidity management practices that could indirectly affect employee compensation or stability, though it's listed as a loan to the company.
**Customers**: High concentration of revenue from a few customers (e.g., Drone Net.in 32.34%) poses a risk if these relationships deteriorate.
**Suppliers**: High concentration of purchases from a few suppliers (e.g., Bon Corporation 39.72%) creates dependency and potential supply chain risks.
**Creditors**: The significant reduction in total liabilities is a positive indicator for creditors, reducing the company's overall financial risk.

Next Steps

Continue to provide investors with a current prospectus, including up-to-date financial information and any other required disclosures, for ongoing offerings.
Address identified material weaknesses in disclosure controls and internal control over financial reporting.

Key Dates

Date	Description
2019-10-25	Company incorporated in Delaware; Ryohei Uetaki appointed CEO, CFO, President, Director, Secretary, and Treasurer; Ryohei Uetaki received 10,000,000 common and 10,000,000 preferred shares.
2019-11-18	Yasumasa Ichikawa appointed Chief Technology Officer.
2020-01-22	World Scan Project Corporation (WSP Japan) incorporated in Japan.
2020-01-25	Company acquired 100% interest in WSP Japan from Ryohei Uetaki.
2020-02-19	Ryohei Uetaki gifted 7,000,000 common shares and 10,000,000 preferred shares to SKYPR LLC.
2020-08-28	S-1 Registration Statement for 2020 offering became effective.
2020-09-01	Company issued 647,350 common shares for $323,675 to 41 shareholders.
2023-05-25	S-1 Registration Statement for 2023 offering became effective.
2023-06-01	Company issued 170,000 common shares for $1,740,000 to 10 shareholders in June and August 2023.
2023-08-23	S-1 Registration Statement for offering extended in 2024 became effective.
2024-08-13	Form 8-K filed to announce extension of S-1 offering by 90 days.
2024-10-31	Company's fiscal year end; Balance Sheet date for prior period comparison.
2024-11-21	Extended S-1 offering concluded.
2025-04-30	End of current reporting period for the 10-Q filing.
2025-09-18	Date of filing; latest practicable date for shares outstanding; date financial statements were available to be issued.

Recommendation

hold

While World Scan Project, Inc. demonstrated a significant turnaround to net income and substantially reduced its liabilities, these positives are tempered by a sharp decline in cash and identified material weaknesses in internal controls. The revenue decrease, even if offset by improved gross profit, indicates challenges in core business growth. The capital raise provides some liquidity, but the overall financial health requires careful monitoring. A 'Hold' recommendation reflects these mixed signals, acknowledging improvements while highlighting ongoing concerns that prevent a stronger positive outlook for immediate investment.

Keywords

Drones, Autonomous Aerial Vehicles, Industrial Automation, Web3 Infrastructure, IoT, Financial Results, SEC Filing, 10-Q, Corporate Governance, Internal Controls, Japan, Tokyo

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