Delaware
|
34-200-8348
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization
|
Identification
Number)
|
·
|
Indicate
by check mark if the registrant is a well-known seasoned issuer,
as
defined in Rule 405 of the Securities Act. Yes o
No x
|
·
|
Indicate
by check mark if the registrant is not required to file reports
pursuant
to Section 13 or Section 15(d) of the Act. Yes o No x
|
·
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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
o
|
·
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of
Regulation S-K (229.405 of this chapter) is not contained herein,
and will
not be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of
this Form 10-K or any amendment to this Form 10-K. o
|
·
|
Indicate
by check mark whether the registrant is a large accelerated filer,
an
accelerated filer, or a non-accelerated filer. Non-accelerated
filer x
|
·
|
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Act). Yes o
No x
|
·
|
State
issuer's revenues for its most recent fiscal year.
$13,853,313
|
·
|
State
the aggregate market value of the voting and non-voting common
equity held
by non-affiliates computed by reference to the price at which the
common
equity was sold, or the average bid and asked price of such common
equity,
as of a specified date within the past 60 days. (See definition
of
affiliate in Rule 12b-2 of the Exchange Act.). Based on the closing
sale
price on the OTC Bulletin Board on January 31, 2008, the aggregate
market
value of the registrant's common stock held by non-affiliates was
approximately $15,414,866. For purposes of this computation, all
directors
and executive officers of the registrant are considered to be affiliates
of the registrant. This assumption is not to be deemed an admission
by the
persons that they are affiliates of the registrant.
|
·
|
State
the number of shares outstanding of each of the issuer's classes
of common
equity, as of the latest practicable date: 48,279,056 as of February
15, 2008.
|
PART
I
|
||
ITEM
1.
|
DESCRIPTION
OF BUSINESS
|
3
|
ITEM
2.
|
DESCRIPTION
OF PROPERTY
|
16
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
17
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
17
|
|
||
PART
II
|
||
ITEM
5.
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
18
|
ITEM
6.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|
20
|
ITEM
7.
|
FINANCIAL
STATEMENTS
|
29
|
ITEM
8.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
29
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
|
29
|
ITEM
8B.
|
OTHER
INFORMATION
|
29
|
PART
III
|
||
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS,CONTROL PERSON AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|
30
|
ITEM
10.
|
EXECUTIVE
COMPENSATION
|
34
|
ITEM
11.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
43
|
ITEM
12.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
44
|
ITEM
13.
|
EXHIBITS
|
48
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
49
|
50
|
· |
marine
geophysical survey (commercial), which focuses around oil and gas,
construction and oceanographic research and exploration, where
we market
to survey companies, research institutions, salvage companies.
This was
our original focus, from founding in 1994. Our current products encompass
geophysical data collection and analysis, through to printers to
output
geophysical data collected by sonar. We believe that our marine
geophysical survey markets are experiencing rapid growth due to:
1)
successful new product introductions in recent periods; 2)
market-proximity benefits derived from 2004 relocation to the United
States; 3) initial market penetration into new sub-sectors of the
marine
geophysical survey markets; 4) the high price of oil and gas in
the past
few years, resulting in unprecedented exploration and production
activity.
|
· |
underwater
defense/security, where we market to ports and harbors, state and
federal
government agencies and defense contractors. We started to focus
on this
market following the acquisition of OmniTech AS, a Norwegian company,
in
December 2002 (now operating under the name of Coda Octopus Omnitech
AS),
a Company which had developed a prototype system, the Echoscope™ , a
unique, patented instrument which supplies accurate three-dimensional
visualization, measurement, data recording and mapping of underwater
objects. We have recently completed developing and commenced marketing
this first real time, high resolution, three-dimensional underwater
sonar
imaging device which we believe has particularly important applications
in
the fields of port security, defense and undersea oil and gas
development.
|
· |
First
mover advantage in 3-D sonar markets based on our patented technology,
research and development efforts and extensive and successful tests
that
date back almost two decades as well as the resulting broad customer
acceptance , as evidenced by orders for our product and its derivatives
from government agencies, research institutes and oil and gas companies,
that conduct their own testing prior to placing orders . There is a
usually a significant time period between introduction of the product
to a
prospective customer and the purchase order. Prospective customers
need to test the product in the environment in which they intend
to use it
to ensure that it is suitable for its intended purpose. We hold the
patent for a “Method
for Producing a 3D image”
of, for example, a submerged object and/or underwater environment.
This patent, first applied for in Norway in 1998, is recorded in
the
European Patents Register, Australia, Norway and the USA. This
method is the culmination of approximately 20 years of research
and
testing led by the three inventors/scientists, who worked for OmniTech
AS
which was acquired by us in December 2002. These individuals continue
to
work for us and are actively involved in producing and advancing
the
Echoscope™ which incorporates this
patent
|
· |
Early
recognition of need for 3-D real-time sonar in defense/security
applications. We believe that we are the first to bring to market
a
product with capability of producing a 3D image of submerged or
underwater
objects or environment. Prior to the deployment of this method
in the
marine environment, producing an image of a submerged or underwater
object
or environment was accomplished strictly by two-dimensional
sonar.
|
· |
Expansion
into new geographies like North America and Western
Europe.
|
· |
Expansion
into new commercial markets like commercial marine survey with
innovative
products.
|
· |
inspection
of harbor walls.
|
· |
inspection
of ship hulls,
|
· |
inspection
of bridge pilings;
|
· |
ROV
navigation (obstacle avoidance);
|
· |
AUV
navigation and target recognition (obstacle
avoidance);
|
· |
construction
- pipeline touchdown placement and
inspection;
|
· |
obstacle
avoidance navigation;
|
· |
bathymetry
(measurement of water depth to create 3-D terrain
models);
|
· |
monitoring
underwater construction;
|
· |
underwater
intruder detection;
|
· |
dredging
and rock dumping;
|
· |
contraband
detection;
|
· |
locating
and identifying objects undersea, including
mines.
|
Option
|
|
Description
|
|
Estimated Purchase Price
|
|
Time Period for Delivery
|
|
Option
1
RANGE
RESOLUTION ENHANCEMENT
|
|
Development
of core beam forming hardware and related technology to improve
the
current 3 or 4cm range resolution to 1 or 2cm, and increase target
detection of objects on harbor walls and other close range
applications.
|
|
$
|
634,065
|
|
Six
months from date of exercise
|
|
|
|
|
|
|
|
|
Option
2
INCREASE
ECHOSCOPE FREQUENCY
|
|
Development
of new transducer and channel board hardware to allow operation
at higher
frequencies (up to 500KHz) which will increase the resolution of
the
data
|
|
$
|
378,084
|
|
Six
months from date of exercise
|
|
|
|
|
|
|
|
|
Option
3
AUTOMATED
CHANGE DETECTION
|
|
Development
of software compatible with the UIS platform and designed for on-line
detection and post-processing analysis of captured Echoscope data.
In
essence, the software will have the capability of registering any
changes
of new data collected against a baseline survey and automatically
end-user
to the changes (i.e the presence of something that was not there
on the
last inspection - example of a harbor wall).
|
|
$
|
1,122,948
|
|
18
months from date of exercise
|
|
|
|
|
|
|
|
|
Option
4
ADVANCED
PROTOTYPE UIS SYSTEM
|
|
Building
of up to seven (7) additional UIS Systems to agreed USCG
specifications.
|
|
$
|
3,291,750
|
|
Six
months from date of exercise
|
|
|
|
|
|
|
|
|
Option
5
DEVELOPMENT
OF ONE PIECE F190
|
|
Development
of a F190 Positioning System to replace the standard two piece
system
currently used in the UIS.
|
|
$
|
247,434
|
|
Six
months from date of exercise
|
·
|
Coda
Octopus Products - eight persons distributed between the UK and
Florida,
USA
|
·
|
Martech
Systems (Weymouth) - two full time and one part time based in Weymouth,
UK
|
·
|
Colmek
Systems Engineering - two full time staff, one in California and
one in
Washington state
|
·
|
Innalogic,
Inc. - one staff member based in New York City,
USA
|
·
|
Port
Security Group - currently being developed by Group-level
staff
|
·
|
Group
level – one member of staff, based in New York City,
USA
|
|
·
|
Product:
The extension of our product line (particularly Echoscope™) through adding
value to produce higher added functionality products (eg. UIS™, the
Company’s Underwater Inspection System).
|
|
|
|
|
·
|
Price:
The maintenance and enhancement of profit margin through value
add (as
described above).
|
|
|
|
|
·
|
Place:
The use of strategic partnerships, at the higher value end of the
market,
particularly to provide solutions rather than product (eg. the
provision,
through partnership, of a complete port security solution to a
major
port), and the use of existing and new sales agents to provide
sales leads
for lower value but very important “pure” product
sales.
|
|
|
|
|
·
|
Promotion:
The attendance and illustration of our capabilities at trade shows,
use of
customer mailing, advertising and trade public
relations.
|
·
|
PMA,
a lobbying firm based in Washington, DC, is assisting in reaching
congressional members to assit with government funding towards
the use of
our products in port security
applications;
|
·
|
CJ
Strategies, a lobbying firm based in Washington, DC, is assisting
in
reaching the US Navy and has strong connections with the state
of
California;
|
·
|
The
Johnson Group, a company based in Washington, DC, is assisting
in reaching
individual ports and other end-users, as well as helping with funding
for
these end-users from Homeland
Security.
|
·
|
The
Grossman Group, LLC, a lobbying firm based in Washington, D.C,
is
assisting in helping to gain governmental support for our operations
in
Utah.
|
|
·
|
Patent
No. 6,438,071 concerns the “Method for Producing a 3-D Image” and is
recorded in the European Patents Register File #SH-44923; Australia
#55375/99; Norway #307014 and US Patent Office # 6,438,071. This
patent
relates to the method for producing an image of a submerged object
(3),
e.g. a shipwreck or the sea bottom, comprising the steps of emitting
acoustic waves from a first transducer toward a first chosen
volume.
|
|
|
|
|
·
|
Patent
No. 6,532,192 concerns “Subsea Positioning System and Apparatus”, recorded
in the US Patent Office. This patent relates to subsea positioning
system
and apparatus.
|
· |
6
are employed in research and development in our Bergen
facility
|
· |
4
are employed in production, marketing and administration at our
Edinburgh
facility
|
· |
22
are employed in software development, marketing and administration
at our
Edinburgh office
|
· |
9
are employed in management and administration at our New York City
office
|
· |
7
are employed in product development, sales and support in New York
City
|
· |
4
are employed in sales and marketing at our Florida
office
|
· |
2
are employed in Government Relations at our Washington
office
|
· |
23
are employed in Martech in Weymouth, of which 20 are full time
employees
and 3 are part time (paid on an hourly
basis)
|
· |
22
are employed in Colmek in Salt Lake City, the main categories of
employees
being engineers and technician.
|
Year
Ended October 31, 2006
|
HIGH
|
LOW
|
|||||
First
Quarter
|
$
|
0.65
|
$
|
0.45
|
|||
Second
Quarter
|
$
|
0.75
|
$
|
0.40
|
|||
Third
Quarter
|
$
|
1.40
|
$
|
0.65
|
|||
Fourth
Quarter
|
$
|
1.50
|
$
|
1.00
|
Year
Ended October 31, 2007
|
HIGH
|
LOW
|
|||||
First
Quarter
|
$
|
1.55
|
$
|
0.72
|
|||
Second
Quarter
|
$
|
1.70
|
$
|
1.05
|
|||
Third
Quarter
|
$
|
1.72
|
$
|
1.50
|
|||
Fourth
Quarter
|
$
|
1.50
|
$
|
0.80
|
Year
Ended October 31, 2008
|
HIGH
|
LOW
|
|||||
First
Quarter
|
$
|
0.88
|
$
|
0.45
|
·
|
marine
geophysical survey (commercial), which focuses around oil and
gas,
construction and oceanographic research and exploration, where
we market
to survey companies, research institutions, salvage companies.
This was
our original focus, from original founding in 1994, with current
products
spanning geophysical data collection and analysis, through to
printers to
output geophysical data collected by sonar. We believe that our
marine
geophysical survey markets are experiencing rapid growth due
to: 1)
successful new product introductions in recent periods; 2)
market-proximity benefits derived from our 2004 relocation to
the United
States; 3) initial market penetration into new sub-sectors of
the marine
geophysical survey markets; 4) the high price of oil and gas
in the past
few years, resulting in unprecedented exploration and production
activity.
|
·
|
underwater
defense/ security, where we market to ports and harbors, state
and federal
government agencies and defense contractors. We started to focus
on this
market following the acquisition of OmniTech AS, a Norwegian
Company, in
December 2002, a company which had developed a prototype system,
the
Echoscope™,
a unique, patented instrument which permits accurate three-dimensional
visualization, measurement, data recording and mapping of underwater
objects. We have recently completed developing and commenced
marketing
this first real time, high resolution, three-dimensional underwater
sonar
imaging device which we believe has particularly important applications
in
the fields of port security, defense and undersea oil and gas
development.
|
· |
First
mover advantage in 3-D sonar markets based on our patented technology,
our
research and development efforts and extensive and successful testing
in
this area that date back almost two decades as well as broad customer
acceptance.
|
· |
Early
recognition of need for 3-D real-time sonar in defense/security
applications.
|
· |
Expansion
into new geographies like North America and Western
Europe.
|
· |
Expansion
into new commercial markets like commercial marine survey with
innovative
products.
|
· |
Recent
sole source classification for one of our products and its derivatives
by
certain government procurement
agencies.
|
|
·
|
we
are now starting to bid (sometimes in partnership, where areas
of focus
other than underwater sonar and wireless
video surveillance capability are demanded) for complete port
security and
other solutions. We have bid on a small number of these in
the last six
months and hope for our first successes shortly. We have not
yet been
awarded any contracts for the purchase of complete solutions.
However, in
July 2007, we received a $2.59 million order from the U.S.
Department of
Defense to build and deliver three next- generation Underwater
Inspection
System (UIS)™ for the US Coast Guard and other potential users, to enable
rapid underwater searches in the nation’s ports and waterways. These units
were accepted by the US Coast Guard on December 15, 2007. The
contract
includes additional options which, if fully funded, would require
us to
deliver an additional seven UIS™ systems, or other development options
which they may select. Pursuant to a contract amendment on
February 19,
2008, options with a contract value of US$1,527,149 were exercised.
The
contract was awarded to us on a sole source basis, which means
that the
product is considered to be available from one source only
and under
Federal rules may be acquired from that source without competitive
bidding
process. Although this is not a complete port security system,
it
represents the first step towards achieving this.
|
|
·
|
we
are currently reviewing the possibility of launching next year,
in
partnership with others, a services business based on our product
set.
This business will be port based and will, for example, provide
ship hull
inspections by way of rental of equipment and provision of
a team to
operate the equipment for any ship entering that particular
port.
|
·
|
Continue
to sell our current range of products into a mixture of commercial
and
government markets, increasing sales of these products over the
course of
this financial year - we are expecting previous growth trends broadly
to
continue over the course of the
year;
|
·
|
Start
to sell complete turnkey systems based around our leading Echoscope™ 3-D
technology, to open markets in law enforcement and inspection -
a great
deal of our R&D expenditure has been directed towards the launch of
these systems earlier this year, and we expect to sell a small
number of
high-value systems before the end of the current financial
year;
|
·
|
Complete
additional government sales in the
US;
|
·
|
Gain
our first port security solution contracts through the provision
of our
unique 3-D technology and other products and services, enabling
us to
provide complete solutions;
|
·
|
·
|
Continue
to review and refocus our cost base where necessary to achieve
a cost base
commensurate with our current level of
activity.
|
|
Pound
Sterling
|
Norwegian
Kroner
|
|
|||||||||||||
|
Actual
Results
|
Constant
Rates
|
Actual
Results
|
Constant
Rates
|
Total
Effect
|
|||||||||||
|
|
|
|
|
|
|||||||||||
Revenues
|
$
|
11,256,485
|
$
|
(10,268,005
|
)
|
$
|
1,058,181
|
$
|
(978,214
|
)
|
$
|
1,068,447
|
||||
Costs
|
11,824,358
|
(10,786,011
|
)
|
1,057,910
|
(977,964
|
)
|
1,118,293
|
|||||||||
Profits/(Losses)
|
(567,873
|
)
|
517,994
|
|
271
|
(250
|
)
|
(49,858
|
)
|
|||||||
Assets
|
11,347,451
|
(10,422,812
|
)
|
758,499
|
(625,504
|
)
|
1,057,634
|
|||||||||
Liabilities
|
11,922,351
|
(10,950,866
|
)
|
442,274
|
(364,726
|
)
|
1,049,033
|
|||||||||
Net
Assets/(Liabilities)
|
(574,900
|
)
|
528,054
|
|
316,225
|
(260,778
|
)
|
8,601
|
Name
|
|
Age
|
|
Position(s)
|
|
Jason
Reid
|
|
41
|
|
President,
Chief Executive Officer and Director
|
|
Paul
Nussbaum
|
|
60
|
|
Chairman
of the Board of Directors
|
|
Rodney
Peacock
|
|
61
|
|
Director
|
|
Jody
E. Frank
|
|
55
|
|
Chief
Financial Officer
|
|
Blair
Cunningham
|
|
38
|
|
Chief
Technology Officer
|
|
Anthony
Davis
|
|
41
|
|
President
US Operations
|
|
Frank
B. Moore
|
|
72
|
|
Senior
Vice President - Government Relations
|
|
Geoff
Turner
|
|
54
|
|
President
European Operations
|
|
Angus
Lugsdin
|
31
|
Senior
Vice President, Market Development
|
|||
Scott
Debo
|
|
37
|
|
President
and CEO , Colmek Systems Engineering
|
|
·
|
Being
directly responsible for the appointment, compensation and oversight
of
the independent auditor, which shall report directly to the Audit
Committee, including resolution of disagreements between management
and
auditors regarding financial reporting for the purpose of preparing
or
issuing an audit report or related work.
|
|
|
|
|
·
|
oversee
management’s preparation of the Company’s financial statements and
management’s conduct regarding the accounting and financial reporting
processes;
|
|
|
|
|
·
|
oversee
management’s maintenance of internal controls and procedures for financial
reporting;
|
|
|
|
|
·
|
oversee
the Company’s compliance with applicable legal and regulatory
requirements, including without limitation, those requirements
relating to
financial controls and reporting;
|
|
|
|
|
·
|
oversee
the independent auditor’s qualifications and
independence;
|
|
|
|
|
·
|
oversee
the performance of the independent auditors, including the annual
independent audit of the Company’s financial
statements;
|
|
|
|
|
·
|
prepare
the report required by the rules of the SEC to be included in the
Company’s proxy statement; and
|
|
|
|
|
·
|
discharge
such duties and responsibilities as may be required of the Audit
Committee
by the provisions of applicable law or rule or regulation of the
American
Stock Exchange and the Sarbanes-Oxley Act of
2002.
|
Name
and Principal Position
|
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Restricted
Stock
Awards
|
|
|
|
Option
Awards
|
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
($)
(2)
|
|
|
|
($)
(3)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason
Reid
President
& Chief Executive Officer
|
|
|
2007
2006
|
|
|
350,000
250,000
|
|
|
-0-
-0-
|
|
100,000
100,000
|
(5)
(6)
|
|
-0-
-0-
|
|
50,385
12,667
|
|
|
400,385
362,667
|
|
||||
Blair
Cunningham (1)
Chief
Technology Officer
|
|
|
2007
2006
|
|
|
175,000
144,072
|
|
|
-0-
-0-
|
|
50,000
43,750
|
(7)
(8)
|
|
-0-
-0-
|
|
|
18,866
20,249
|
|
|
243,866
208,071
|
|
|||
Anthony
Davis (1)
President
US Operations
|
|
|
2007
2006
|
|
|
175,000
163,796
|
|
|
-0-
-0-
|
|
50,000
43,750
|
(7)
(8)
|
|
-0-
-0-
|
|
|
11,962
10,858
|
|
|
236,962
218,404
|
|
|||
Jody
Frank
Chief
Financial Officer
|
2007
2006
|
104,808
-0-
|
(4)
|
-0-
-0-
|
12,908
-0-
|
(9)
|
281,243
-0-
|
(10)
|
1,750
-0-
|
400,709
-0-
|
|
|
(3)
|
Comprising
400,000 options valued based on the date of issue using Black Scholes
method and booked in our accounts as an expense.
|
|
|
(4)
|
Comprising
200,000 options valued based on the date of issue using Black Scholes
method and booked in our accounts as an expense.
|
|
|
(5)
|
Comprising
150,000 options valued based on the date of issue using Black Scholes
method and booked in our accounts as an expense.
|
|
|
(6)
|
Comprising
150,000 options valued based on date of issue using Black Scholes
method
and booked in our accounts as an expense.
|
|
|
(7)
|
Comprising
150,000 options valued based on date of issue using Black Scholes
method
and booked in our accounts as an expense.
|
|
|
(8)
(8(a)
|
Comprising
140,000 shares valued at $100,000 and
|
|
|
(9)
|
Comprising
50,000 shares, half of which is valued at $0.50 and half at
$1.25
|
|
|
(10)
|
Comprising
50,000 shares, half of which is valued at $0.50 and half at
$1.25
|
|
|
(11)
|
Comprising
25,000 shares valued at $1.25
|
Name
(a)
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
Option
Exercise
Price
($)
(e)
|
Option
Expiration Date
(f)
|
||||||||||
Jason
Reid
President
and Chief Executive Officer
|
400,000
|
$
|
1.00
|
May
2010
|
||||||||||
Blair
Cunningham
Chief
Technology Officer
|
200,000
|
$
|
1.00
|
May
2010
|
||||||||||
Anthony
Davis
President
US Operations
|
150,000
|
$
|
1.00
|
May
2010
|
||||||||||
Geoff
Turner
President
European Operations
|
150,000
|
$
|
1.00
|
November 2010
|
||||||||||
Frank
Moore
Senior VP Government Relations
|
100,500
|
49,500
|
** |
$
|
1.00
|
May
2011
|
||||||||
Angus
Lugsdin
Senior
VP Market Development
|
100,000
|
$
|
1.00
|
May
2010
|
Name
(a)
|
|
Fees
Earned or Paid
in
Cash
($)
(b)
|
|
|
|
Stock
Awards ($)
(c)
|
|
|
|
Option
Awards ($)
(d)
(4)
|
|
Total
($)
(j)
|
|||||||
Paul
Nussbaum
|
$
|
30,000
|
(2)
|
$
|
30,000
|
(5)
|
$
|
109,573
|
(4a) |
$
|
169,573 | ||||||||
Rodney
Peacock
|
$
|
20,000
|
(3)
|
$
|
20,000
|
(6)
|
$
|
73,049
|
(4b) |
$
|
113,049 | ||||||||
|
|
|
|
(2)
|
Consists
of an annual retainer in the amount of $45,000 and $3,750 per
board
meeting attended. Half of these amounts is payable in the Company’s
Stock
|
|
|
|
|
(3)
|
Consists
of an annual retainer in the amount of $25,000 and $3,750 per
board
meeting attended. Half of these amounts is payable in the Company’s
Stock.
|
|
|
|
(4a) |
Comprising
75,000 options valued based on date of issue using Black Scholes
method
and booked into our accounts as an expense.
|
|
(4b) |
Comprising
50,000 options valued based on date of issue using Black Scholes
method
and booked into our accounts as an expense.
|
|
|
|
|
|
(5)
|
Consist
of 24,095 shares.
|
|
|
|
|
(6)
|
Consist
of 15,532 shares.
|
(a) |
assist
the Company’s Management with the analysis and effective and optimal
implementation of its business
plan;
|
(b) |
oversee
the Company’s European operations and performance of the
Group;
|
(c) |
explore
acquisitions, strategic alliances, partnering opportunities and
other
cooperative ventures within and without its industry
focus;
|
(d) |
evaluate
possible acquisitions and strategic strategies and partnering candidates,
including the evaluation of targets and the structuring of related
transactions; and
|
(e) |
advise
and consult with executive officers with respect to any of the
above
described matters.
|
·
|
reimbursement
for out-of-pocket expenses;
|
·
|
continued
insurance benefits to the extent required by
law;
|
·
|
payment
of any vested but unpaid rights as required by any bonus or incentive
pay
or stock plan or any other employee benefit plan;
and
|
·
|
any
unpaid bonus or incentive compensation that was approved (except
in the
case of termination for cause).
|
· |
a
lump sum payment equal to one times the sum of (x) the Executive’s then
current Base Salary and (y) the greater of (A) the average of the
Executive’s bonuses (taking into account a payment of no bonus or a
payment of a bonus of $0) with respect to the preceding three fiscal
years
(or the period of the Executive’s employment if shorter), (B) the
Executive’s bonus with respect to the preceding fiscal year and (C) in the
event that such termination of employment occurs before the first
anniversary of the Commencement Date, the Executive’s annualized projected
bonus for such year (the “Severance Payment”). The Severance Payment shall
be paid to the Executive within 60 days following the Date of
Termination;
|
· |
continued
payment by Coda Octopus for life, health and disability insurance
coverage
and salary and other benefits for the Executive and the Executive’s spouse
and dependents for one year following the Date of Termination to
the same
extent that Coda Octopus paid for such coverage immediately prior
to the
termination of the Executive’s employment and subject to the eligibility
requirements and other terms and conditions of such insurance coverage,
provided that if any such insurance coverage shall become unavailable
during the one year period, Coda Octopus thereafter shall be obliged
only
to pay to the Executive an amount which, after reduction for income
and
employment taxes, is equal to the employer premiums for such insurance
for
the remainder of such severance period;
and
|
· |
vesting
as of the Date of Termination in any unvested portion of any stock
option,
restricted stock and any other long term incentive award previously
issued
to the Executive by Coda Octopus. Each such stock option must be
exercised
by the Executive within 180 days after the Date of Termination
or the date
of the remaining option term, if
earlier.
|
Name
and Address of Beneficial Owner (1)
|
Amount
and Nature
Of
Beneficial Ownership of
Common
Stock (2)
|
Percent
of
Common
Stock
|
|||||
Jason
Reid (3)
|
23,726,643
|
46.
1
|
%
|
||||
Paul
Nussbaum (4)
|
644,095
|
1.3
|
%
|
||||
Rodney
Peacock (5)
|
517,064
|
*
|
|||||
Blair
Cunningham (6)
|
490,159
|
*
|
|||||
Anthony
Davis (7)
|
390,159
|
*
|
|||||
Frank
B. Moore (8)
|
215,159
|
*
|
|||||
Geoff
Turner (9)
|
190,159
|
*
|
|||||
Scott
Debo (10)
|
157,492
|
*
|
|||||
Jody
Frank (11)
|
187,908
|
*
|
|||||
Angus
Lugsdin (13)
|
237,587
|
||||||
Vision
Opportunity Master Fund Limited (12 )
317
Madison Avenue, Suite 1220
New
York, NY 10017
|
5,157,472
|
9.9
|
%
|
||||
|
|||||||
All
Directors and Executive Officers as a Group (eight
persons):
|
26,756,425
|
50.
3
|
%
|
|
·
|
At
October 31, 2005 we owed $70,584 to Weight Management Group Limited,
a UK
Company of which Mr. Reid is Director and Principal Stockholder,
for
certain services provided, including insurance, healthcare, recharged
expenses, vehicle contract hire and administrative services.
This balance
increased by approximately $5,566 as a result of fluctuating
exchange
rates, to $76,150 by October 31, 2006.
Since
October 31, 2006, the amount outstanding to Weight Management
Group
Limited has been transferred to Weight Management (UK) Ltd (see
below),
leaving no balance outstanding with this company at October 31,
2007.
|
|
·
|
As
of October 31, 2005, we owed an amount of $351,302 to Softworks
Limited,
a Scottish company of which Mr. Reid is a Director and Principal
Stockholder and of which Blair Cunningham, one of our executive
officers,
is a Director. During the year ended October 31, 2005,
Softworks Limited provided to us consultancy and programming
services
valued at $218,488, including services provided by Mr. Blair
Cunningham
and associated expenses for these services. Between November
2005 and July
2006, we provided Softworks Limited with technical support services
valued at $85,056. Softworks Limited also loaned us a cash sum
of $19,667 over the course of that year. We also received cash
totaling $69,108 in connection with receivables assigned to us by
Softworks Limited. A total of $520,289 was repaid to Softworks
Limited on our behalf by Dr R M Reid and Graham Reid, both family
members of Jason Reid, in consideration for which we issued to
these
individuals 4,029.70 shares of Series A Preferred Stock. Of the
remaining outstanding amount, $51,121 was converted into 500
shares of
Series A Preferred Stock with an estimated fair value of $20,000,
which
has since been converted into 50,000 shares of our common stock. In
consideration for this early conversion, we also issued warrants
to
purchase 50,000 shares of common stock at a price ranging from
$1.30 and
$1.70. These warrants were valued at approximately $54,455. Allowing
for a
currency translation gain of $783, this left a balance due to
Softworks of
$1,316, which we repaid in cash on July 31, 2007. There is no
balance
outstanding between the two companies at October 31,
2007.
|
|
·
|
As
a result of a series of loan transactions, at October 31, 2005
we owed an
amount of $81,107 to Fairwater Technology Group Limited, a UK
company, of
which Mr. Reid is a Director and Principal Stockholder. A summary
of
material charges and payments between the two entities
follows:
|
|
·
|
A
dividend of $30,622 due to Fairwater for an earlier Series
A preferred
stock investment (since converted into shares of our common
stock) was
added to the amount owed by us in April 2006, which was paid
in June
2006;
|
||
|
|
|||
|
·
|
An
additional $10,491 in cash was loaned to us by Fairwater
Technology Group
in April 2006; and
|
||
|
|
|
||
|
·
|
Of
the balance outstanding, $91,418 was converted into Series
A Preferred
Stock at April 30, 2006 (which has since been converted into
shares of our
common stock). Allowing for a currency translation gain of
$177, this left
a balance due to Fairwater of $878 which was repaid in cash
on July 31,
2007.
|
||
·
|
Dividends
due to Fairwater on series A preferred stock, before its
conversion on
March 25, 2007, were not paid but recognized as a loan from
Fairwater to
the Company, bearing no interest. This left an amount of
$105,685 owed by
the Company to Fairwater at October 31,
2007.
|
|
·
|
At
October 31, 2005 we owed an amount of $67,435 to Weight Management
(UK)
Limited, a UK company of which Mr. Reid is a Director and Principal
Stockholder, for services rendered, including administration,
internet
hosting, office facilities and health insurance. This amount
was reduced
as follows:
|
|
·
|
From
November 2005 to June 2006, a variety of services were provided
by Weight
Management (UK) Limited, including health insurance, vehicles,
internet
hosting, administrative services, insurance, plus the recharge
of
telephone and travel costs incurred and paid for by Weight Management.
These services and recharges totaled $128,159.
|
||
|
|
|||
|
·
|
From
July 2006 to October 2006, we supplied to Weight Management software
development and support services totaling $42,418.
|
||
|
|
|
||
|
·
|
We
subsequently repaid $98,940 in cash, leaving $54,236 outstanding
and due
to Weight Management at October 31, 2006.
|
||
·
|
This
amount has subsequently been further repaid through the provision
of
services by us to Weight Management to the value of $51,646,
with a
balance of $76,150 also transferred from Weight Management Group
(see
above). As at October 31, 2007 we are indebted to Weight
Management in an amount of $78,740.
|
|||
·
|
Agreement
was made by the Company in September 2007 that an amount of
$60,000 would
be repaid to this company in January
2008.
|
|
·
|
At
October 31, 2005, owed $6,554 to Green Meadows Food Limited,
a United
Kingdom Company, of which Mr. Reid is a Director, in connection
with the
sub-lease of a photocopier to us. Pursuant to this transaction
a further
$3,331 was invoiced to us during the year, and the whole amount
outstanding was settled in cash in April 2006, leaving no balance
outstanding at October 31, 2007.
|
||
|
·
|
At
October 31, 2005, we owed $170,297 to Mr. Reid and Mr. Ashley
Reid (the
latter being a family member of Mr. Reid) pursuant to a loan
transaction.
This amount was repaid by the Company between January and April
2007,
leaving no balance outstanding at October 31, 2007.
|
||
·
|
Exhibit Number
|
|
Description
|
|
|
|
||
2.1
|
|
Plan
and Agreement of Merger dated July 12, 2004 by and between Panda
and Coda
Octopus *
|
|
|
|
|
|
2.2
|
|
Share
Purchase Agreement dated June 26, 2006 between Colin Richard, Coda
Octopus
(UK) Holdings Limited and Coda Octopus, Inc. *
|
|
|
|
|
|
2.
3
|
|
Stock
Purchase Agreement dated April 6, 2007, between Miller & Hilton d/b/a
Colmek Systems Engineering, its shareholders and Coda Octopus (US)
Holdings Inc. *
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation *
|
|
|
|
|
|
3.1(
a )
|
|
Certificate
of Designation Series A Preferred Stock *
|
|
|
|
|
|
3.1(
b )
|
|
Certificate
of Amendment to Certificate of Designation Series A Preferred Stock
*
|
|
|
|
|
|
3.1(
c )
|
|
Certificate
of Designation Series B Preferred Stock*
|
|
|
|
|
|
3.2
|
|
By-Laws
*
|
|
|
|
|
|
4.1
|
|
Form
of Warrant *
|
|
|
|
|
|
10.1
|
|
Employment
Agreement dated April 1, 2005 between the Company and Jason Reid
*
|
|
|
|
|
|
10.2
|
|
Employment
Agreement dated July 1, 2005 between the Company and Anthony Davis
*
|
|
|
|
|
|
10.3
|
|
Employment
Agreement dated July 1, 2005 between the Company and Blair
Cunningham *
|
|
|
|
|
|
10.4
|
|
Employment
Agreement dated May 1, 2006, between the Company and Frank Moore
*
|
|
|
|
|
|
10.5
|
|
Employment
Agreement dated April 6, 2007, between Miller and Hilton d/b/a
Colmek
Systems Engineering and Scott Debo *
|
|
|
|
|
|
10.6
|
|
Director’s
Agreement dated January 26, 2005 between the Company and Paul Nussbaum
*
|
|
10.7
|
|
Director’s
Agreement dated January 26, 2005 between the Company and Rodney
Peacock
*
|
|
|
|
|
|
10.8
|
|
Form
of Securities Purchase Agreement dated April 4, 2007 *
|
|
|
|
|
|
10.9
|
|
Sale
of Accounts and Security Agreement dated August 17, 2005 between
the
Company and Faunus Group International, Inc. *
|
|
|
|
|
|
10.10
|
|
Standard
Form of Office Lease dated June 1, 2007 between the Company and
Nelco Inc.
*
|
|
|
|
|
|
10.11
|
|
Collaboration
Agreement dated July 1, 2006 between Oxford Technical Solutions
Ltd. and
Codaoctopus
|
10.12
|
|
Amendment
to Securities Purchase Agreements dated March 21, 2007 between
Vision
Opportunity Master Fund Ltd. and Codaoctopus*
|
|
|
|
10.13
|
|
Securities
Repurchase Agreement dated April 10, 2007 between Codaoctopus and
Vision
Opportunity Master Fund*
|
|
|
|
10.14
|
|
Employment
Agreement dated as of July 16, 2007 between the Company and Jody
Frank*
|
|
|
|
10.15
|
|
Award/Contract
dated July 2, 2007 issued by U.S.
Army*
|
|
|
*
Incorporated by reference to the Company’s Registration Statement on Form
SB-2 (SEC File No.143144)
|
|
|
|
10.16
|
|
Subscription
Agreement dated February 21, 2008, between the Company and The
Royal Bank
of Scotland
|
|
||
10.17
|
|
Form
of Loan Note Instrument dated February 21, 2008
|
|
||
10.18
|
|
Form
of Loan Note Certificate
|
|
||
10.19
|
|
Security
Agreement dated February 21, 2008
|
|
||
10.20
|
|
Floating
Charge executed by Coda Octopus R&D Limited dated February 21,
2008
|
10.21
|
|
Floating
Charge executed by Coda Octopus Products Limited dated February 21,
2008
|
10.22
|
Form
of Guarantee
|
|
10.23
|
Intercreditor
Deed dated February 20, 2008 between the Company, The Royal Bank
of
Scotland and Faunus Group International
|
|
10.24
|
Debenture
issued by Martech Systems (Weymouth)
Limited
|
|
31.1
|
Chief Executive Officer Certification | |
31.2 | Chief Financial Officer Certification | |
32 | Certification Pursuant to 18 U.S.C. Section 1350 |
DATE:
|
February
26, 2008
|
CODA
OCTOPUS GROUP, INC.
|
/s/
Jason Reid
|
||
Jason
Reid
|
||
President
and Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ |
Jason
Lee Reid
|
|
Director
and Chief Executive Officer
|
|
February
26, 2008
|
|
(Principal
Executive Officer)
|
|
|
||
|
|
|
|
|
|
/s/ |
Jody
Frank
|
|
Chief
Financial Officer
|
|
February
26, 2008
|
|
(Principal
Financial and Accounting Officer)
|
|
|
||
|
|
|
|
|
|
/s/ |
Paul
Nussbaum
|
|
Chairman
|
|
February
26, 2008
|
|
|
|
|
||
|
|
|
|
||
/s/ |
Rodney
Peacock
|
|
Director
|
|
February
26, 2008
|
PAGE
|
||||
REPORT OF INDEPENDENT REGISTERED CERTIFIED |
F-1
|
|||
PUBLIC
ACCOUNTING FIRM.
|
||||
CONSOLIDATED
BALANCE SHEETS
|
||||
OCTOBER
31, 2007 and 2006
|
F-2
|
|||
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
||||
FOR
THE YEARS ENDED OCTOBER 31, 2007 and 2006
|
F-3
|
|||
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
||||
FOR
THE TWO YEARS ENDED OCTOBER 31, 2007
|
F-4
|
|||
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||
FOR
YEARS ENDED OCTOBER 31, 2007 and 2006
|
F-5
|
|||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-6
- F-21
|
|
/S/RBSM
LLP
|
New
York, New York
|
RBSM
LLP
|
January 16,
2008 except
for the fourth paragraph of Note 15,
as
to which the date is February 26, 2008
|
|
ASSETS
|
2007
|
2006
|
|||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
916,257
|
$
|
1,377,972
|
|||
Short-Term
Investments, Note 3
|
935,000
|
-
|
|||||
Accounts
receivable, net of allowance for doubtful accounts
|
2,720,151
|
1,120,968
|
|||||
Inventory
|
2,926,517
|
1,951,392
|
|||||
Tax
credit receivable
|
-
|
234,593
|
|||||
Due
from MSGI Security Solutions, Inc.
|
-
|
533,147
|
|||||
Due
from related parties, Note 12
|
105,685
|
104,720
|
|||||
Unbilled
receivables, Note 2
|
380,017
|
-
|
|||||
Other
current assets, Note 4
|
691,560
|
103,296
|
|||||
Prepaid
expenses
|
476,283
|
159,969
|
|||||
Total
current assets
|
9,151,470
|
5,586,057
|
|||||
Property
and equipment, net, Note 5
|
422,738
|
155,730
|
|||||
Rental
equipment, net, Note 5
|
-
|
120,851
|
|||||
Goodwill
and other intangible assets, net, Note 6
|
4,007,253
|
1,071,700
|
|||||
Total
assets
|
$
|
13,581,461
|
$
|
6,934,338
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable, trade
|
$
|
1,618,250
|
$
|
1,997,817
|
|||
Accrued
expenses and other current liabilities
|
1,937,569
|
2,219,568
|
|||||
Deferred
revenues, Note 2
|
593,325
|
323,350
|
|||||
Deferred
payment related to acquisitions, Note 13
|
763,936
|
381,680
|
|||||
Accrued
dividends on Series A & B Preferred Stock
|
86,766
|
304,394
|
|||||
Due
to related parties, Note 12
|
184,425
|
302,877
|
|||||
Loans
and notes payable, short term, Note 11
|
56,382
|
1,119,496
|
|||||
Total
current liabilities
|
5,240,653
|
6,649,182
|
|||||
Loans
and notes payable, long term, Note 11
|
265,139
|
-
|
|||||
Total
liabilities
|
5,505,792
|
6,649,182
|
|||||
Stockholders'
equity:
|
|||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized,
|
|||||||
6,407
and 23,641 shares Series A issued and outstanding, as of
|
|||||||
October
31, 2007 and 2006 respectively
|
6
|
24
|
|||||
Nil
and 41,000 shares Series B issued and outstanding as of
|
|||||||
October
31, 2007 and 2006 respectively
|
-
|
41
|
|||||
Common
stock, $.001 par value; 100,000,000 shares
|
|||||||
authorized,
48,245,768 and 24,301,980 shares issued and outstanding
|
|||||||
as
of October 31, 2007 and 2006 respectively
|
48,246
|
24,302
|
|||||
Common
Stock subscribed
|
80,000
|
153,750
|
|||||
Additional
paid-in capital
|
49,785,244
|
25,858,307
|
|||||
Accumulated
other comprehensive loss
|
(238,097
|
)
|
(292,821
|
)
|
|||
Accumulated
deficit
|
(41,599,730
|
)
|
(25,458,447
|
)
|
|||
Total
stockholders' equity
|
8,075,669
|
285,156
|
|||||
Total
liabilities and stockholders' equity
|
$
|
13,581,461
|
$
|
6,934,338
|
2007
|
2006
|
||||||
Net
revenue
|
$
|
13,853,313
|
$
|
7,291,291
|
|||
Cost
of revenue
|
6,398,042
|
2,611,590
|
|||||
Gross
profit
|
7,455,271
|
4,679,701
|
|||||
Research
and development
|
3,019,090
|
3,130,821
|
|||||
Selling,
general and administrative expenses
|
12,385,250
|
7,453,946
|
|||||
Other
operating expenses
|
435,000
|
447,750
|
|||||
Operating
loss
|
(8,384,069
|
)
|
(6,352,816
|
)
|
|||
Other
expense
|
|||||||
Other
income
|
87,143
|
3,012
|
|||||
Interest
expense
|
(6,655,283
|
)
|
(1,203,690
|
)
|
|||
Total
other expense
|
(6,568,140
|
)
|
(1,200,678
|
)
|
|||
Loss
before income taxes
|
(14,952,209
|
)
|
(7,553,494
|
)
|
|||
Provision
for income taxes
|
106
|
5,676
|
|||||
Net
loss
|
(14,952,315
|
)
|
(7,559,170
|
)
|
|||
Preferred
Stock Dividends:
|
|||||||
Series A
|
(281,289
|
)
|
(309,914
|
)
|
|||
Series B
|
(107,680
|
)
|
(74,130
|
)
|
|||
Beneficial Conversion Feature
|
(800,000
|
)
|
(4,152,800
|
)
|
|||
Net
Loss Applicable to Common Shares
|
$
|
(16,141,284
|
)
|
$
|
(12,096,014
|
)
|
|
Loss
per share, basic and diluted
|
(0.42
|
)
|
(0.50
|
)
|
|||
Weighted
average shares outstanding
|
38,476,352
|
24,030,423
|
|||||
Comprehensive
loss:
|
|||||||
Net
loss
|
$
|
(14,952,315
|
)
|
$
|
(7,559,170
|
)
|
|
Foreign
currency translation adjustment
|
(30,276
|
)
|
(282,704
|
)
|
|||
Unrealized
Gain on Investment
|
85,000
|
-
|
|||||
Comprehensive
loss
|
$
|
(14,897,591
|
)
|
$
|
(7,841,874
|
)
|
Preferred
Stock Series A
|
Preferred
Stock Series B
|
Common
Stock
|
||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Stock
Subscribed
|
Additional
Paid-in Capital
|
Accumulated
Other Comprehensive loss
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||||||||
Balance,
October 31, 2005
|
15,000
|
$ |
15
|
-
|
$ |
-
|
23,667,656
|
$ |
23,668
|
$ |
-
|
$ |
13,837,534
|
$ |
(10,117
|
)
|
$ |
(13,362,433
|
)
|
$ |
488,667
|
|||||||||||||
Sale
of preferred stock
|
2,947
|
3
|
41,000
|
41
|
4,564,056
|
4,564,100
|
||||||||||||||||||||||||||||
Preferred
stock issued for debt
|
5,694
|
6
|
809,622
|
809,628
|
||||||||||||||||||||||||||||||
Sale
of shares for cash
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
Shares
issued for compensation
|
634,324
|
634
|
-
|
316,528
|
317,162
|
|||||||||||||||||||||||||||||
Common
stock subscribed
|
153,750
|
153,750
|
||||||||||||||||||||||||||||||||
Fair
value of options and warrants issued as compensation and for
financing
|
2,177,767
|
2,177,767
|
||||||||||||||||||||||||||||||||
Beneficial
conversion feature of
|
||||||||||||||||||||||||||||||||||
preferred
stock, Series A
|
52,800
|
52,800
|
||||||||||||||||||||||||||||||||
preferred
stock, Series B
|
4,100,000
|
4,100,000
|
||||||||||||||||||||||||||||||||
Preferred
dividend, beneficial conversion feature
|
||||||||||||||||||||||||||||||||||
Series
A
|
(52,800
|
)
|
(52,800
|
)
|
||||||||||||||||||||||||||||||
Series
B
|
(4,100,000
|
)
|
(4,100,000
|
)
|
||||||||||||||||||||||||||||||
Preferred
dividend
|
||||||||||||||||||||||||||||||||||
Series
A
|
(309,914
|
)
|
(309,914
|
)
|
||||||||||||||||||||||||||||||
Series
B
|
(74,130
|
)
|
(74,130
|
)
|
||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(282,704
|
)
|
(282,704
|
)
|
||||||||||||||||||||||||||||||
Net
loss
|
(7,559,170
|
)
|
(7,559,170
|
)
|
||||||||||||||||||||||||||||||
Balance,
October 31, 2006
|
23,641
|
$
|
24
|
41,000
|
$
|
41
|
24,301,980
|
$
|
24,302
|
$
|
153,750
|
$
|
25,858,307
|
$
|
(292,821
|
)
|
$
|
(25,458,447
|
)
|
$
|
285,156
|
|||||||||||||
Sale
of preferred stock
|
8,000
|
8
|
799,342
|
799,350
|
||||||||||||||||||||||||||||||
Conversion
of preferred stock
|
||||||||||||||||||||||||||||||||||
Series
A
|
(17,234
|
)
|
(17
|
)
|
2,878,418
|
2,878
|
(2,861
|
)
|
(0
|
)
|
||||||||||||||||||||||||
Series
B
|
(30,819
|
)
|
(31
|
)
|
3,081,900
|
3,082
|
(3,051
|
)
|
0
|
|||||||||||||||||||||||||
Redemption
of preferred stock
|
(18,181
|
)
|
(18
|
)
|
(1,818,082
|
)
|
(1,818,100
|
)
|
||||||||||||||||||||||||||
Sale
of common stock for cash
|
15,709,100
|
15,709
|
13,782,921
|
13,798,630
|
||||||||||||||||||||||||||||||
Shares
issued for compensation
|
1,619,280
|
1,619
|
1,888,244
|
1,889,863
|
||||||||||||||||||||||||||||||
Stock
issued for acquisition
|
532,090
|
532
|
792,282
|
792,814
|
||||||||||||||||||||||||||||||
Stock
subscribed
|
||||||||||||||||||||||||||||||||||
Preferred
stock
|
20,000
|
20,000
|
||||||||||||||||||||||||||||||||
Common
stock
|
123,000
|
123
|
(93,750
|
)
|
153,627
|
60,000
|
||||||||||||||||||||||||||||
Fair
value of options and warrants issued as compensation
|
1,428,597
|
1,428,597
|
||||||||||||||||||||||||||||||||
Fair
value of options and warrants issued as financing
|
6,105,918
|
6,105,918
|
||||||||||||||||||||||||||||||||
Preferred
stock dividends
|
||||||||||||||||||||||||||||||||||
Series
A
|
(281,288
|
)
|
(281,288
|
)
|
||||||||||||||||||||||||||||||
Series
B
|
(107,680
|
)
|
(107,680
|
)
|
||||||||||||||||||||||||||||||
Beneficial
conversion feature of preferred stock, Series B
|
800,000
|
(800,000
|
)
|
-
|
||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(30,276
|
)
|
(30,276
|
)
|
||||||||||||||||||||||||||||||
Unrealized
gain from marketable securities
|
85,000
|
85,000
|
||||||||||||||||||||||||||||||||
Net
loss
|
(14,952,315
|
)
|
(14,952,315
|
)
|
||||||||||||||||||||||||||||||
Balance,
October 31, 2007
|
6,407
|
$
|
6
|
-
|
$
|
-
|
48,245,768
|
$
|
48,246
|
$
|
80,000
|
$
|
49,785,244
|
$
|
(238,097
|
)
|
$
|
(41,599,730
|
)
|
$
|
8,075,669
|
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
loss
|
$
|
(14,952,315
|
)
|
$
|
(7,559,170
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
used
by operating activities:
|
|||||||
Depreciation
and amortization
|
337,658
|
137,189
|
|||||
Stock
based compensation
|
3,318,460
|
2,005,056
|
|||||
Financing
costs
|
6,105,918
|
784,873
|
|||||
Bad
debt expense
|
17,910
|
16,008
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
|
(1,800,802
|
)
|
491,922
|
||||
Inventory
|
(975,125
|
)
|
(482,882
|
)
|
|||
Prepaid
expenses
|
(316,367
|
)
|
89,953
|
||||
Other
receivables
|
(672,216
|
)
|
2,260,315
|
||||
Increase
(decrease) in:
|
|||||||
Accounts
payable and accrued expenses
|
(1,033,074
|
)
|
1,855,467
|
||||
Due
to related parties
|
(118,452
|
)
|
523,076
|
||||
Net
cash (used in) / provided by operating activities
|
(10,088,405
|
)
|
121,807
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchases
of property and equipment
|
(288,803
|
)
|
(138,172
|
)
|
|||
Purchases
of intangible assets
|
(118,475
|
)
|
(6,543
|
)
|
|||
Acquisitions
|
(1,358,470
|
)
|
(1,154,590
|
)
|
|||
Cash
acquired in acquisitions
|
35,515
|
195,684
|
|||||
Net
cash used by investing activities
|
(1,730,233
|
)
|
(1,103,621
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Repayment
of loans
|
(884,405
|
)
|
(2,106,342
|
)
|
|||
Proceeds
from sale of stock
|
14,677,980
|
4,564,100
|
|||||
Redemption
of preferred stock
|
(1,818,100
|
)
|
-
|
||||
Preferred
stock dividend
|
(637,476
|
)
|
(79,650
|
)
|
|||
Net
cash provided by financing activities
|
11,337,999
|
2,378,108
|
|||||
Effect
of exchange rate changes on cash
|
18,924
|
(161,258
|
)
|
||||
Net
(decrease) increase in cash
|
(461,715
|
)
|
1,235,036
|
||||
Cash
and cash equivalents, beginning of period
|
1,377,972
|
142,936
|
|||||
Cash
and cash equivalents, end of period
|
$
|
916,257
|
$
|
1,377,972
|
|||
Cash
paid for:
|
|||||||
Interest
|
$
|
549,365
|
$
|
418,817
|
|||
Income
taxes
|
-
|
-
|
|||||
Supplemental
Disclosures:
|
|||||||
During
the twelve months ended October 31, 2007, 1,742,280 shares
of common
stock
|
|||||||
were
issued as payment of $1,926,268 of compensation that was
earned.
|
|||||||
During
the twelve months ended October 31, 2006, 634,324 shares
of common
stock
|
|||||||
were
issued as payment of $317,162 of compensation that was
earned.
|
|||||||
The
acquisitions figure consists of the acquisitions of Martech
in 2006 and
Colmek
|
|||||||
in
2007:
|
|||||||
Current
assets acquired
|
$
|
195,528
|
$
|
798,133
|
|||
Cash
acquired
|
35,515
|
195,684
|
|||||
Equipment
acquired
|
80,007
|
37,126
|
|||||
Goodwill
and intangible assets
|
2,773,613
|
998,591
|
|||||
Liabilities
assumed
|
(727,913
|
)
|
(493,264
|
)
|
|||
Deferred
note payable
|
(763,936
|
)
|
(381,680
|
)
|
|||
Amount
paid in common stock
|
(792,814
|
)
|
-
|
||||
Associated
costs of acquisition
|
158,470
|
-
|
|||||
Cash
Paid for Acquisition
|
$
|
958,470
|
$
|
1,154,590
|
|||
Acquisition
of Martech - deferred payment
|
$
|
400,000
|
$
|
-
|
|||
Total
|
$
|
1,358,470
|
$
|
1,154,590
|
2007
|
|
2006
|
|||||
Raw
materials
|
$
|
1,789,051
|
$
|
1,064,655
|
|||
Work
in process
|
334,813
|
389,042
|
|||||
Finished
goods
|
802,653
|
497,695
|
|||||
Total
inventory
|
$
|
2,926,517
|
$
|
1,951,392
|
2007
|
|
2006
|
|||||
Deposits
|
$
|
191,352
|
$
|
15,152
|
|||
Value
added tax (VAT)
|
293,934
|
42,164
|
|||||
Other
receivables
|
206,274
|
45,980
|
|||||
Total
|
$
|
691,560
|
$
|
103,296
|
2007
|
|
2006
|
|||||
Machinery
and equipment
|
$
|
983,115
|
$
|
614.305
|
|||
Accumulated
depreciation
|
(560,377
|
)
|
(458,575
|
)
|
|||
Net
property and equipment assets
|
$
|
422,738
|
$
|
155,730
|
2007
|
|
2006
|
|||||
Rental
equipment
|
$
|
240,876
|
$
|
240,876
|
|||
Accumulated
depreciation
|
(240,876
|
)
|
(120,025
|
)
|
|||
Net
rental equipment assets
|
$
|
-
|
$
|
120,851
|
2007
|
|
2006
|
|||||
Customer
relationships (weighted average life of 10 years)
|
$
|
694,503
|
$
|
-
|
|||
Non-compete
agreements (weighted average life of 3 years)
|
198,911
|
-
|
|||||
Patents
|
48,530
|
30,055
|
|||||
Licenses
|
100,000
|
-
|
|||||
Total
amortized identifiable intangible assets - gross carrying
value
|
1,041,944
|
30,055
|
|||||
Less
accumulated amortization
|
(134,266
|
)
|
(19,261
|
)
|
|||
Net
|
907,678
|
10,794
|
|||||
Residual
value
|
$
|
907,678
|
$
|
10,794
|
2008
|
$
|
195,157
|
||
2009
|
164,719
|
|||
2010
|
83,610
|
|||
2011
|
71,555
|
|||
2012
and thereafter
|
392,637
|
|||
Total
|
$
|
907,678
|
2007
|
2006
|
||||||
Beginning
goodwill balance at November 1
|
$
|
1,060,906
|
$
|
62,315
|
|||
Goodwill
recorded upon acquisition
|
2,038,669
|
998,591
|
|||||
Balance
at October 31
|
$
|
3,099,575
|
$
|
1,060,906
|
2007
|
2006
|
||||||||||||
Number
|
Weighted
Average Exercise Price
|
Number
|
Weighted
Average Exercise Price
|
||||||||||
Outstanding
at beginning of the period
|
13,410,000
|
$
|
1.29
|
2,350,000
|
$
|
1.00
|
|||||||
Granted
during the period
|
23,473,418
|
1.44
|
11,060,000
|
1.35
|
|||||||||
Exercised
during the period
|
(34,100
|
)
|
1.00
|
-
|
-
|
||||||||
Terminated
during the period
|
(330,000
|
)
|
1.22
|
-
|
-
|
||||||||
Outstanding
at the end of the period
|
36,519,318
|
$
|
1.39
|
13,410,000
|
$
|
1.29
|
|||||||
Exercisable
at the end of the period
|
35,467,518
|
$
|
1.39
|
12,084,000
|
$
|
1.31
|
Range
of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average Contractual Life (Yrs)
|
Total
Vested
|
|||||||
0.50
|
750,000
|
3.50
|
750,000
|
|||||||
0.58
|
400,000
|
3.42
|
400,000
|
|||||||
1.00
|
5,845,900
|
3.57
|
5,585,200
|
|||||||
1.30
|
14,566,709
|
4.23
|
14,220,209
|
|||||||
1.50
|
495,000
|
4.05
|
328,000
|
|||||||
1.70
|
14,401,709
|
4.23
|
14,164,109
|
|||||||
1.80
|
60,000
|
4.90
|
20,000
|
|||||||
Totals
|
36,519,318
|
4.10
|
35,467,518
|
Non-Current
|
2007
|
2006
|
|||||
Net
Operating Loss Carry Forward
|
$
|
10,455,000
|
$
|
2,429,000
|
|||
Valuation
Allowance
|
(10,455,000
|
)
|
(2,429,000
|
)
|
|||
Net
Deferred Tax Asset
|
$
|
-
|
$
|
-
|
2008
|
$
|
463,062
|
||
2009
|
377,090
|
|||
2010
|
360,121
|
|||
2011
|
329,549
|
|||
2012
and thereafter
|
177,846
|
|||
Total
|
$
|
1,707,667
|
2007
|
|
2006
|
|||||
The
Company, through its UK subsidiary Coda Octopus Products Ltd has
a 7 year
unsecured loan note; interest rate of 12% annually; repayable at
borrower’s instigation or convertible into common stock when the share
price reaches $3.
|
$
|
200,000
|
$
|
-
|
The
Company had outstanding balances under our UK bank revolving credit
facility of $1,119,496 as of October 31, 2006.This balance was
fully
repaid in the following year. The advances bear interest at 2.0%
over UK
Bank Base Rate and are due on demand. The advances were secured
by a bond
and a security interest in the assets of our subsidiary, Coda Octopus
Products Ltd, exclusive of accounts receivable.
|
-
|
1,119,496
|
|||||
The
Company, through its US subsidiary Innalogic, Inc., has a capital
lease
for equipment for monthly payments of $2,369.74 for 24 months.
The Company
at year end has sold the equipment and thus violated the terms
of the
lease that prohibit sale of equipment under the capital lease.
The Company
has deferred revenue of $127,340 in relation to this capital lease.
See
Note 2.
|
41,091
|
-
|
|||||
The
Company has an unsecured revolving line of credit with a US bank
through
its US subsidiary Colmek Systems Engineering, for $50,000 with
an interest
rate of 12.5% annually; repayable at borrower’s instigation.
|
17,181
|
-
|
|||||
The
Company through its US subsidiary Colmek Systems Engineering, has
an
outstanding loan note payable for the financing of a truck over
60 months;
monthly payments of $897.18; annual interest rate of 10.99%.
|
29,145
|
-
|
|||||
The
Company through its US subsidiary Colmek Systems Engineering, has
an
unsecured loan note payable to a director and former officer of
the
Company.
|
34,104
|
-
|
|||||
Total
|
$
|
321,521
|
$
|
1,119,496
|
|||
Less:
current portion
|
56,382
|
1,119,496
|
|||||
Total
long-term portion
|
$
|
265,139
|
$
|
-
|
Current
assets acquired
|
$
|
993,817
|
||
Equipment,
net
|
37,126
|
|||
Goodwill
|
998,591
|
|||
Current
liabilities assumed
|
$
|
(493,262
|
)
|
|
Purchase
price
|
$
|
1,536,272
|
Current
assets acquired
|
$
|
231,043
|
||
Equipment,
net
|
80,007
|
|||
Current
liabilities assumed
|
(727,913
|
)
|
||
Customer
relationships acquired
|
694,503
|
|||
Non-compete
agreements acquired
|
198,911
|
|||
Goodwill
acquired
|
2,038,669
|
|||
Total
purchase price
|
$
|
2,515,220
|
2007
|
|
2006
|
|||||
Revenue
|
$
|
14,757,876
|
$
|
11,587,523
|
|||
Net
loss
|
(15,259,562
|
)
|
(7,410,114
|
)
|
|||
Loss
per common share
|
(0.43
|
)
|
(0.50
|
)
|
Contracting
|
|
Products
|
|
Corporate
|
|
Totals
|
|||||||
Revenues
|
$
|
6,298,817
|
$
|
7,434,159
|
$
|
120,337
|
$
|
13,853,313
|
|||||
Operating
profit/(loss)
|
(35,559
|
)
|
2,207,177
|
(10,555,687
|
)
|
(8,384,069
|
)
|
||||||
Identifiable
assets
|
6,336,133
|
5,384,297
|
1,861,031
|
13,581,461
|
|||||||||
Capital
expenditure
|
198,932
|
132,476
|
75,870
|
407,278
|
|||||||||
Selling,
general & administrative
|
2,510,386
|
1,884,954
|
7,989,910
|
12,385,250
|
|||||||||
Depreciation
& amortization
|
147,677
|
46,707
|
143,274
|
337,658
|
|||||||||
Interest
expense
|
108,741
|
388,091
|
6,158,451
|
6,655,283
|
|
2007
|
2006
|
|||||
Revenues:
|
|
|
|||||
United
States
|
$
|
7,129,507
|
5,271,230
|
||||
United
Kingdom
|
6,723,806
|
2,020,061
|
|||||
Total
Revenues
|
$
|
13,853,313
|
7,291,291
|
||||
|
|||||||
Assets:
|
|||||||
United
States
|
$
|
5,529,261
|
329,765
|
||||
United
Kingdom
|
6,597,202
|
4,556,969
|
|||||
Corporate
and other
|
1,454,998
|
2,047,604
|
|||||
Total
Assets
|
$
|
13,581,461
|
6,934,338
|