x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
34-200-8348
|
|
(State
or other jurisdiction of Incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
Newport Office Center 1, 111 Town Square Place, Jersey City,
Suite 1201, New Jersey 07301 |
07301
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant's
telephone number, including area code:
|
(201)
420 9100
|
Large
accelerated filer ¨
|
Accelerated
filer ¨ Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Page
|
|
PART
I - Financial Information
|
1
|
Item
1: Financial Statements
|
1
|
Six
Months Ended April 30, 2010 and 2009
|
|
Condensed
Consolidated Balance Sheet as of April 30, 2010 (Unaudited) and
October 31, 2009
|
1
|
Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss) for
the Six Months Ended April 30, 2010 and 2009
(Unaudited)
|
2
|
Condensed
Consolidated Statement of Stockholders’ Deficiency for the
Six Months Ended April 30, 2010
(Unaudited)
|
3
|
Condensed
Consolidated Statements of Cash Flows for the Six months ended April 30,
2010 and 2009 (Unaudited)
|
4
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
5
|
Item
2: Management's Discussion and Analysis or Plan of
Operation
|
18
|
Item
4T:
Controls and Procedures
|
29
|
PART
II - Other Information
|
30
|
Item
1: Legal Proceedings
|
30
|
Item
2: Unregistered Sales of Equity Securities and Use of
Proceeds
|
30
|
Item
3: Defaults Upon Senior Securities
|
30
|
Item
4: Submission of Matters to a Vote of Security Holders
|
30
|
Item
5: Other Information
|
30
|
Item
6: Exhibits
|
30
|
Signatures
|
31
|
April
30,
|
October
31,
|
|||||||
|
2010
|
2009
|
||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 84,322 | $ | 275,885 | ||||
Restricted
cash, Note 2
|
551,480 | 994,081 | ||||||
Short-Term
Investments, Note 4
|
38,250 | 51,000 | ||||||
Accounts
receivable, net of allowance for doubtful accounts
|
1,715,829 | 2,033,879 | ||||||
Inventory
|
1,824,788 | 2,798,425 | ||||||
Unbilled
receivables, Note 3
|
2,465,067 | 690,344 | ||||||
Other
current assets, Note 5
|
202,240 | 285,691 | ||||||
Prepaid
expenses
|
260,626 | 247,134 | ||||||
Total
current assets
|
7,142,602 | 7,376,439 | ||||||
Property
and equipment, net, Note 6
|
161,166 | 267,964 | ||||||
Deferred
financing costs, net of accumulated amortization of $544,787 in 2010 and
$423,723 in 2009, Note 13
|
1,150,106 | 1,271,170 | ||||||
Goodwill
and other intangible assets, net, Note 7
|
4,150,359 | 4,221,807 | ||||||
Total
assets
|
$ | 12,604,233 | $ | 13,137,380 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$ | 2,081,759 | $ | 2,390,039 | ||||
Accrued
expenses and other current liabilities
|
4,543,225 | 4,626,164 | ||||||
Warrant
liability, Note 10
|
5,987,321 | - | ||||||
Deferred
revenues, Note 3
|
1,168,419 | 398,482 | ||||||
Deferred
payment related to acquisitions
|
383,022 | 404,274 | ||||||
Total
current liabilities
|
14,163,746 | 7,818,959 | ||||||
Loans
and notes payable, long term, Note 13
|
13,733,065 | 13,233,523 | ||||||
Total
liabilities
|
27,896,811 | 21,052,482 | ||||||
Contingencies
and Commitments, Note 12
|
||||||||
Stockholders'
deficiency:
|
||||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized, 6,287 Series A issued
and outstanding, as of April 30, 2010 and October 31, 2009,
respectively
|
6 | 6 | ||||||
Nil
shares Series B issued and outstanding as of April 30, 2010 and October
31, 2009, respectively
|
- | - | ||||||
Common
stock, $.001 par value; 150,000,000 shares authorized, 49,075,244 and
49,000,244 shares issued and outstanding as of April 30, 2010 and October
31, 2009, respectively
|
49,075 | 49,000 | ||||||
Common
Stock subscribed
|
96,350 | 96,350 | ||||||
Additional
paid-in capital
|
46,860,154 | 51,766,495 | ||||||
Accumulated
other comprehensive loss
|
(903,823 | ) | (696,617 | ) | ||||
Accumulated
deficit
|
(61,394,340 | ) | (59,130,336 | ) | ||||
Total
stockholders' deficiency
|
(15,292,578 | ) | (7,915,102 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 12,604,233 | $ | 13,137,380 |
For
the three months
|
For
the three months
|
For
the six months
|
For
the six months
|
|||||||||||||
ended
April 30,
|
ended
April 30,
|
ended
April 30,
|
ended
April 30,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
revenue
|
$ | 3,713,585 | $ | 4,307,447 | $ | 6,781,795 | $ | 7,506,553 | ||||||||
Cost
of revenue
|
1,422,884 | 1,575,788 | 2,728,863 | 3,017,935 | ||||||||||||
Gross
profit
|
2,290,701 | 2,731,659 | 4,052,932 | 4,488,618 | ||||||||||||
Research
and development
|
455,173 | 456,477 | 932,186 | 1,060,158 | ||||||||||||
Selling,
general and administrative expenses
|
1,848,938 | 2,386,460 | 3,484,364 | 5,289,179 | ||||||||||||
Operating
income (loss)
|
(13,410 | ) | (111,278 | ) | (363,618 | ) | (1,860,719 | ) | ||||||||
Other
income (expense)
|
||||||||||||||||
Other
income
|
27,962 | 3,547 | 37,945 | 31,187 | ||||||||||||
Interest
expense
|
(454,802 | ) | (426,814 | ) | (896,384 | ) | (824,238 | ) | ||||||||
Loss
on change in fair value of derivative liability
|
(5,188,334 | ) | (3,633,426 | ) | ||||||||||||
Gain
on sale of investment in marketable securities
|
15,750 | 15,750 | ||||||||||||||
Impairment
of investment in marketable securities
|
- | (782,000 | ) | - | (782,000 | ) | ||||||||||
Total
other income (expense)
|
(5,599,424 | ) | (1,205,267 | ) | (4,476,115 | ) | (1,575,051 | ) | ||||||||
Loss
before income taxes
|
(5,612,834 | ) | (1,316,545 | ) | (4,839,733 | ) | (3,435,770 | ) | ||||||||
Provision
for income taxes
|
- | - | - | - | ||||||||||||
Net
loss
|
(5,612,834 | ) | (1,316,545 | ) | (4,839,733 | ) | (3,435,770 | ) | ||||||||
Preferred
Stock Dividends:
|
||||||||||||||||
Series
A
|
- | (439 | ) | - | (31,588 | ) | ||||||||||
Net
Loss Applicable to Common Shares
|
$ | (5,612,834 | ) | $ | (1,316,984 | ) | $ | (4,839,733 | ) | $ | (3,467,358 | ) | ||||
Loss
per share, basic and diluted
|
(0.11 | ) | (0.03 | ) | (0.10 | ) | (0.07 | ) | ||||||||
Weighted
average shares outstanding
|
49,050,244 | 49,000,244 | 49,029,133 | 48,950,494 | ||||||||||||
Comprehensive
loss:
|
||||||||||||||||
Net
loss
|
$ | (5,612,834 | ) | $ | (1,316,545 | ) | $ | (4,839,733 | ) | $ | (3,435,770 | ) | ||||
Foreign
currency translation adjustment
|
(145,925 | ) | (18,531 | ) | (204,206 | ) | (408,131 | ) | ||||||||
Unrealized
gain (loss) on investment
|
38,250 | - | 12,750 | - | ||||||||||||
Comprehensive
loss
|
$ | (5,720,509 | ) | $ | (1,335,076 | ) | $ | (5,031,189 | ) | $ | (3,843,901 | ) |
Additional
|
Accumulated
|
|||||||||||||||||||||||||||||||||||||||||||
Preferred
Stock Series A
|
Preferred
Stock Series B
|
Common
Stock
|
Stock
|
Paid-in
|
Other
|
Accumulated
|
||||||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Subscribed
|
Capital
|
Comprehensive
loss
|
Deficit
|
Total
|
||||||||||||||||||||||||||||||||||
Balance,
October 31, 2009
|
6,287 | $ | 6 | - | $ | - | 49,000,244 | $ | 49,000 | $ | 96,350 | $ | 51,766,495 | $ | (696,617 | ) | $ | (59,130,336 | ) | $ | (7,915,102 | ) | ||||||||||||||||||||||
Shares
issued for compensation
|
75,000 | 75 | - | 4,425 | 4,500 | |||||||||||||||||||||||||||||||||||||||
Fair
value of options issued as compensation
|
18,856 | 18,856 | ||||||||||||||||||||||||||||||||||||||||||
Cumulative
effect of warrant liability
|
(4,929,622 | ) | 2,575,729 | (2,353,893 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(204,206 | ) | (204,206 | ) | ||||||||||||||||||||||||||||||||||||||||
Unrealized
gain (loss) on marketable securities
|
12,750 | 12,750 | ||||||||||||||||||||||||||||||||||||||||||
Realized
gain reclassed on sale of marketable securities
|
(15,750 | ) | (15,750 | ) | ||||||||||||||||||||||||||||||||||||||||
Net
loss
|
(4,839,733 | ) | (4,839,733 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance,
April 30, 2010
|
6,287 | 6 | - | - | 49,075,244 | 49,075 | 96,350 | 46,860,154 | (903,823 | ) | (61,394,340 | ) | (15,292,578 | ) |
April
30,
|
April
30,
|
|||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (4,839,733 | ) | $ | (3,435,770 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
275,988 | 291,953 | ||||||
Stock
based compensation
|
23,356 | 298,726 | ||||||
Change
in fair value of warrant liability
|
3,633,426 | - | ||||||
Financing
costs
|
512,134 | 767,143 | ||||||
Impairment
of investment in marketable securities
|
- | 782,000 | ||||||
Gain
on sale of investment in marketable securities
|
(15,750 | ) | - | |||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
decrease in current assets:
|
||||||||
Accounts
receivable
|
318,050 | 106,836 | ||||||
Inventory
|
973,637 | (658,302 | ) | |||||
Prepaid
expenses
|
(13,492 | ) | 37,880 | |||||
Unbilled
receivables and other current assets
|
(1,657,271 | ) | (197,986 | ) | ||||
Increase
(decrease) in current liabilities:
|
||||||||
Accounts
payable and other current liabilities
|
357,448 | 741,698 | ||||||
Due
to related parties
|
- | (41,904 | ) | |||||
Net
cash used in operating activities
|
(432,207 | ) | (1,307,726 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Sale
(purchase) of property and equipment
|
16,102 | (52,814 | ) | |||||
Purchases
of intangible assets
|
(7,690 | ) | - | |||||
Cash
subject to restriction
|
442,601 | (488,830 | ) | |||||
Acquisitions
|
- | (214,317 | ) | |||||
Cash
acquired from acquisitions
|
- | 877 | ||||||
Net
cash provided by (used in) investing activities
|
451,013 | (755,084 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from/(repayment of) loans
|
- | (1,019,124 | ) | |||||
Preferred
stock dividend
|
- | (47,354 | ) | |||||
Net
cash used in financing activities
|
- | (1,066,478 | ) | |||||
Effect
of exchange rate changes on cash
|
(210,369 | ) | (587,478 | ) | ||||
Net
decrease in cash
|
(191,563 | ) | (3,716,766 | ) | ||||
Cash
and cash equivalents, beginning of period
|
275,885 | 3,896,149 | ||||||
Cash
and cash equivalents, end of period
|
$ | 84,322 | $ | 179,383 | ||||
Cash
paid for:
|
||||||||
Interest
|
$ | 384,250 | $ | 1,077,095 | ||||
Income
taxes
|
- | - | ||||||
Supplemental Disclosures:
|
||||||||
Acquisition of Dragon:
|
||||||||
Current
assets acquired
|
$ | - | $ | 147,039 | ||||
Cash
acquired
|
- | 877 | ||||||
Equipment
acquired
|
- | 51,336 | ||||||
Goodwill
and other intangible assets
|
- | 342,013 | ||||||
Liabilities
assumed
|
- | (201,166 | ) | |||||
Deferred
payments
|
- | (250,782 | ) | |||||
Cash
Paid for Acquisition
|
- | 89,317 | ||||||
Net
cash invested
|
- | 88,440 | ||||||
Acquisition of Tactical:
|
||||||||
Current
assets acquired
|
- | - | ||||||
Cash
acquired
|
- | - | ||||||
Equipment
acquired
|
- | 5,000 | ||||||
Goodwill
and other intangible assets
|
- | 245,000 | ||||||
Liabilities
assumed
|
- | - | ||||||
Deferred
note payable
|
- | (125,000 | ) | |||||
Cash
Paid for Acquisition
|
$ | - | $ | 125,000 |
2010
|
2009
|
|||||||
Raw
materials
|
$
|
714,949
|
$
|
1,384,043
|
||||
Work
in process
|
61,648
|
48,389
|
||||||
Finished
goods
|
1,048,191
|
1,365,993
|
||||||
Total
inventory
|
$
|
1,824,788
|
$
|
2,798,425
|
|
Quoted Prices
in
Active
Markets
For
Identical
Instruments
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Restricted
Cash
|
$ | 551,480 | $ | 551,480 | $ | - | $ | - | ||||||||
Short
term Investment
|
$ | 38,250 | $ | 38,250 | $ | - | $ | - | ||||||||
Total
|
$ | 589,730 | $ | 589,730 | $ | - | - | |||||||||
Liabilities:
|
||||||||||||||||
Warrant
liability
|
5,987,320 | - | 5,987,320 | - | ||||||||||||
Loans
and Notes Payable
|
$ | 13,733,065 | $ | - | $ | 13,733,065 | $ | - | ||||||||
Totals
|
$ | 19,720,385 | $ | - | $ | 19,720,385 | $ | - |
2010
|
2009
|
|||||||
Deposits
|
$
|
99,836
|
$
|
96,277
|
||||
Value
added tax (VAT)
|
17,526
|
113,636
|
||||||
Other
receivable
|
84,878
|
75,778
|
||||||
Total
|
$
|
202,240
|
$
|
285,691
|
2010
|
2009
|
|||||||
Machinery
and equipment
|
$
|
856,210
|
$
|
1,001,385
|
||||
Accumulated
depreciation
|
(695,044
|
)
|
(733,420
|
)
|
||||
Net
property and equipment assets
|
$
|
161,166
|
$
|
267,964
|
2010
|
2009
|
|||||||
Customer
relationships (weighted average life of 10 years)
|
$
|
784,243
|
$
|
784,243
|
||||
Non-compete
agreements (weighted average life of 3 years)
|
278,651
|
278,651
|
||||||
Patents
(weighted average life of 10 years)
|
73,805
|
67,837
|
||||||
Licenses
(weighted average life of 2 years)
|
100,000
|
100,000
|
||||||
Total
amortized identifiable intangible assets - gross carrying
value
|
1,236,699
|
1,230,731
|
||||||
Less
accumulated amortization
|
(610,879
|
)
|
(533,462
|
)
|
||||
Net
|
625,820
|
697,269
|
||||||
Residual
value
|
$
|
625,820
|
$
|
697,269
|
2011
|
$
|
65,838
|
||
2012
|
131,676
|
|||
2013
|
76,835
|
|||
2014
|
75,183
|
|||
2015
and thereafter
|
276,288
|
|||
Total
|
$
|
625,820
|
Warrants
|
Six months ended
April 30, 2010
|
Year ended
October 31, 2009
|
||||||||||||||
Number
|
Weighted
Average Exercise
Price
|
Number
|
Weighted
Average Exercise
Price
|
|||||||||||||
Outstanding
at beginning of the period
|
32,583,418 | $ | 1.42 | 32,583,418 | $ | 1.42 | ||||||||||
Granted
during the period
|
- | - | - | - | ||||||||||||
Terminated
during the period
|
- | - | - | - | ||||||||||||
Outstanding
at the end of the period
|
32,583,418 | $ | 1.42 | 32,583,418 | $ | 1.42 | ||||||||||
Exercisable
at the end of the period
|
32,583,418 | $ | 1.42 | 32,583,418 | $ | 1.42 |
Range of
Exercise Prices
|
Number
Outstanding
|
Weighted Average
Contractual Life
(Yrs)
|
Total Exercisable
|
|||||||||
0.50
|
750,000
|
1.00
|
750,000
|
|||||||||
0.58
|
400,000
|
0.92
|
400,000
|
|||||||||
1.00
|
2,750,000
|
1.86
|
2,750,000
|
|||||||||
1.30
|
14,341,709
|
1.68
|
14,341,709
|
|||||||||
1.50
|
-
|
-
|
-
|
|||||||||
1.70
|
14,341,709
|
1.68
|
14,341,709
|
|||||||||
1.80
|
-
|
-
|
-
|
|||||||||
Totals
|
32,583,418
|
1.73
|
32,583,418
|
Stock Options
|
Six months ended
April 30, 2010
|
Year ended
October 31, 2009
|
||||||||||||||
Number
|
Weighted
Average Exercise
Price
|
Number
|
Weighted
Average Exercise
Price
|
|||||||||||||
Outstanding
at beginning of the period
|
5,595,900
|
$
|
1.18
|
5,755,900
|
$
|
1.18
|
||||||||||
Granted
during the period
|
-
|
-
|
50,000
|
1.30
|
||||||||||||
Terminated
during the period
|
(2,095,000
|
)
|
1.29
|
(210,000
|
)
|
1.32
|
||||||||||
Outstanding
at the end of the period
|
3,500,900
|
$
|
1.13
|
5,595,900
|
$
|
1.18
|
||||||||||
Exercisable
at the end of the period
|
3,246,299
|
$
|
1.12
|
5,214,149
|
$
|
1.17
|
Range of
Exercise Prices
|
Number
Outstanding
|
Weighted Average
Contractual Life
(Yrs)
|
Total Exercisable
|
|||||||||
0.50
|
-
|
-
|
-
|
|||||||||
0.58
|
-
|
-
|
-
|
|||||||||
1.00
|
2,400,900
|
0.35
|
2,400,900
|
|||||||||
1.30
|
700,000
|
3.30
|
445,400
|
|||||||||
1.50
|
140,000
|
1.97
|
140,000
|
|||||||||
1.70
|
260,000
|
2.17
|
260,000
|
|||||||||
1.80
|
-
|
-
|
-
|
|||||||||
Totals
|
3,500,900
|
1.14
|
3,246,299
|
Non-Current
|
2010
|
2009
|
||||||
Net
Operating Loss Carry Forward
|
$
|
18,106,000
|
$
|
17,736,000
|
||||
Valuation
Allowance
|
(18,106,000
|
)
|
(17,736,000
|
)
|
||||
Net
Deferred Tax Asset
|
$
|
-
|
$
|
-
|
2011
|
$
|
218,517
|
||
2012
|
363,259
|
|||
2013
|
219,027
|
|||
2014
|
176,568
|
|||
2015
and thereafter
|
154,927
|
|||
Total
|
$
|
1,132,298
|
April 30,
2010
|
October 31,
2009
|
|||||||
The
Company has a secured convertible debenture for $12M with a life of 7
years from February 26, 2008, maturing at 130% of face value, and with
interest payable every six months, starting in February 2009, at a rate of
8.5%; During the term, the debentures are convertible into our common
stock at the option of the Noteholders at a conversion price of $1.05. We
may also force the conversion of these Notes into our common stock after
two years in the event that we obtain a listing on a national exchange and
our stock price closes on 40 consecutive trading days at or above $2.50
between the second and third anniversaries of this agreement; $2.90
between the third and fourth anniversaries of this agreement; and $3.50
after the fourth anniversary of this agreement or where the daily volume
weighted average price of our stock as quoted on OTCBB or any other US
National Exchange on which our securities are then listed has, for at
least 40 consecutive trading days closed at the agreed price. The Company
has failed to comply with certain covenants contained in the debenture
agreement.
|
$
|
13,835,072
|
$
|
13,067,929
|
||||
The
Company, through its UK subsidiary Coda Octopus Products Ltd has a 7 year
unsecured loan note for £100,000; interest rate of 12% annually; repayable
at borrower’s instigation or convertible into common stock when the share
price reaches $3.
|
152,993
|
165,594
|
||||||
Total
|
$
|
13,733,065
|
$
|
13,233,523
|
Six
months ended
|
||||||||
April 30,2010
|
April 30, 2009
|
|||||||
Net
Sales to External Customers:
|
||||||||
Contracting
|
$
|
3,026,557
|
$
|
4,899,495
|
||||
Products
|
3,755,238
|
2,607,058
|
||||||
Total
Sales to External Customers
|
$
|
6,781,795
|
$
|
7,506,553
|
||||
Depreciation
and Amortization:
|
||||||||
Contracting
|
$
|
120,288
|
$
|
151,837
|
||||
Products
|
11,053
|
31,006
|
||||||
Corporate
|
144,647
|
109,109
|
||||||
Total
Depreciation and Amortization
|
$
|
275,988
|
$
|
291,953
|
||||
|
||||||||
General
and Administrative Expense:
|
||||||||
Contracting
|
$
|
1,439,262
|
$
|
1,569,180
|
||||
Products
|
1,159,809
|
986,180
|
||||||
Corporate
|
885,293
|
2,733,819
|
||||||
Total
General and Administrative Expense
|
$
|
3,484,364
|
$
|
5,289,179
|
||||
Capital
Expenditures:
|
||||||||
Contracting
|
$
|
-
|
$
|
9,250
|
||||
Products
|
-
|
10,237
|
||||||
Corporate
|
7,690
|
33,327
|
||||||
Total
Capital Expenditures
|
$
|
7,690
|
$
|
52,814
|
||||
Operating
Income (Losses):
|
||||||||
Contracting
|
$
|
(1,216,105
|
)
|
$
|
1,191,605
|
|||
Products
|
1,737,780
|
|
1,029,483
|
|||||
Corporate
|
(885,293
|
)
|
(4,081,808
|
)
|
||||
Total
Segment Operating Losses
|
$
|
(363,618
|
)
|
$
|
(1,860,720
|
)
|
For the period ended
|
||||||||
April 30, 2010
|
October 31, 2009
|
|||||||
Segment
Assets:
|
||||||||
Contracting
|
$ | 7,370,611 | $ | 7,235,301 | ||||
Products
|
2,874,785 | 2,867,693 | ||||||
Corporate
|
2,358,837 | 3,034,386 | ||||||
Total
Segment Assets
|
$ | 12,604,233 | $ | 13,137,380 |
Six months ended
|
||||||||
April 30, 2010
|
April 30,
2009
|
|||||||
NET
SALES TO EXTERNAL CUSTOMERS:
|
||||||||
United
States
|
$ | 3,325,751 | $ | 3,382,695 | ||||
Europe
|
3,456,044 | 4,123,858 | ||||||
TOTAL
NET SALES TO EXTERNAL CUSTOMERS
|
$ | 6,781,795 | $ | 7,506,553 | ||||
For the period ended
|
||||||||
April 30, 2010
|
October 31,
2009
|
|||||||
ASSETS:
|
||||||||
United
States
|
$ | 8,372,318 | $ | 7,919,830 | ||||
Europe
|
4,231,915 | 5,217,550 | ||||||
TOTAL
ASSETS
|
$ | 12,604,233 | $ | 13,137,380 |
|
1.
|
It
raised approximately $33 million in funds, through three private
placements primarily with institutional investors. The Company raised
approximately $8 million in 2006, approximately $13 million in April/May
2007, and approximately $12 million in a convertible debt transaction that
was completed in February 2008.
|
|
2.
|
It
completed the commercialization of the Echoscope® and successfully
deployed its real-time 3D technology and products on three continents with
major corporations, governments, ports, law enforcement agencies and
security organizations.
|
|
3.
|
It
significantly broadened both its revenue base and its base of expertise in
engineering, defense electronics, military and security training, and
software development primarily through the acquisition of four privately
held companies. Management believes that broadening the base of the
Company in these specific areas was necessary to position Coda Octopus as
a reliable and experienced contractor, subcontractor and supplier of 3D
sonar products and systems on a worldwide
basis.
|
|
4.
|
Beginning
in July 2007, the US Department of Defense (DoD) Technical Support Working
Group (TSWG) funded Coda Octopus to build and deliver next-generation
Underwater Inspection Systems™ (UIS) for the US Coast Guard and other
potential users. The program has included money to build and deliver
current systems, as well as a roadmap for their future development. During
the year ended October 31, 2007, the Company delivered three UIS systems
to the US Coast Guard against a purchase order totaling $2.59 million. In
FY 2008 the Company was funded for an additional $1.53 million to develop
certain mutually agreed technical enhancements to the system. The
Company’s latest contract with TSWG covers the funding of an additional
$1.4 million for additional enhancements and the delivery of additional
systems. The Company believes it has successfully completed the key
second-stage enhancements sought by the DoD and the Coast Guard. As a
result, management believes that the Company is positioned to build and
deploy fully integrated systems that meet the highest standards in the
world.
|
|
5.
|
The
Company has also taken advantage of its first mover status in real-time 3D
sonar to start to open up several potentially significant vertical markets
in the private sector. Thus far, the three areas of focus have been
Dredging, Underwater Construction, and Security. In each of these areas,
the Company has selected a lead customer and has worked with that customer
to develop and deploy a system that management believes will have wide
application throughout the segment. In the case of Rotterdam-based Van
Oord, Coda Octopus was funded to develop a particular application, and in
other cases the Company has financed the development
internally.
|
|
¨
|
Marine
geophysical survey (commercial), which focuses on oil and gas, and
oceanographic research and exploration, where we market to survey
companies, research institutions and salvage companies. This was our
original focus, with current products spanning geophysical data collection
and analysis, through to printers to output geophysical data collected by
sonar.
|
|
¨
|
Underwater
defense/security, where we market to ports and harbors, state, local and
federal government agencies, law enforcement agencies and defense
contractors. We have recently completed developing and commenced marketing
our Underwater Inspection System (UIS™), the first real-time, high
resolution, three-dimensional underwater sonar imaging system, which we
believe has particularly important applications in the fields of port
security, defense and undersea oil and gas
development.
|
|
¨
|
Underwater
construction, where our products are used for real-time monitoring of
sub-sea construction, a particularly challenging environment. We have also
developed for one of our customers a tailored software application to
allow the laying of concrete Accropodes™ (large concrete blocks) used for
constructing breakwaters. The advantage of our real-time system is in
giving visibility where previously divers were used to help with the
construction, a dangerous and inefficient
process.
|
|
¨
|
Dredging,
where our products are used for pre-dredge survey and in a real-time mode
where they monitor the quality and precision of the dredge. The advantage
we give is in improving the dredge quality and drastically reducing the
time involved – for example, if a re-dredge is required, this can be done
immediately from the information our products provide, instead of days or
weeks later, when a new vessel may even have to be used, incurring much
greater cost.
|
|
¨
|
Other
applications, such as shallow water hydrography underwater logging, debris
survey and treasure hunting.
|
|
¨
|
First
mover advantage in 3D 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 the need for 3D 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.
|
Description
|
Amount
|
|||
Reduction
in Research and Development:
|
$
|
321,837
|
||
Reductions
in other SG&A costs
|
$
|
3,061,991
|
||
Total
SG& A Cost Savings
|
$
|
3,383,828
|
||
Reductions
in Capital Expenditure
|
$
|
179,725
|
Period
|
Amount
|
|||
Quarter
Ended January 31, 2009
|
$
|
237,000
|
||
Quarter
Ended April 30, 2009
|
$
|
419,000
|
||
Quarter
Ended July 31, 2009
|
$
|
750,000
|
||
Quarter
Ended October 31, 2009
|
$
|
707,000
|
||
Total
cost saving against budget for the 2009 Period
|
$
|
2,113,000
|
Pound Sterling
|
Norwegian Kroner
|
|||||||||||||||||||
Actual
Results
|
Constant
Rates
|
Actual
Results
|
Constant
Rates
|
Total Effect
|
||||||||||||||||
Revenues
|
$ | 3,456,044 | $ | 3,198,514 | $ | $ | $ | (257,530 | ) | |||||||||||
Costs
|
3,619,622 | 3,349,903 | 318,294 | 269,490 | (318,524 | ) | ||||||||||||||
Net
Income/(Losses)
|
(163,578 | ) | (151,389 | ) | (318,294 | ) | (269,490 | ) | 60,994 | |||||||||||
Assets
|
17,121,788 | 16,727,146 | 737,173 | 663,171 | (468,644 | ) | ||||||||||||||
Liabilities
|
13,999,717 | 12,549,821 | 796,755 | 714,238 | (1,532,413 | ) | ||||||||||||||
Net
Assets
|
3,122,071 | 4,177,326 | (59,582 | ) | (51,067 | ) | 1,063,769 |
10.28 |
Consultancy
Agreement between the Company and Taktos Limited dated June 1, 2010
|
10.29 |
Employment
Agreement between the Company and Judith Wallace dated June 1,
2010
|
10.30 |
Letter
of Appointment issued by the Company in respect of Rear Admiral
Christopher Parry dated June 1, 2010
|
31
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a)
|
32
|
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
Coda
Octopus Group, Inc.
(Registrant)
|
||
Date:
June 14, 2010
|
/s/ Geoff Turner
|
|
Geoff
Turner
|
||
Chief
Executive Officer
|
||
Date:
June 14, 2010
|
/s/Judith Wallace, CA, CPA, Msc, FCCA
|
|
Judith
Wallace
|
||
Chief
Financial Officer
|