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 ¨ 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 or a smaller reporting
company.
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company 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.
$16,968,922
|
·
|
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 March 17, 2009, the aggregate market value of the registrant's common
stock held by non-affiliates was approximately $1.85m. 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: 48,897,358 as of March 13,
2009.
|
PART I
|
||
ITEM
1.
|
DESCRIPTION
OF BUSINESS
|
3
|
ITEM
2.
|
DESCRIPTION
OF PROPERTY
|
15
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
16
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
16
|
PART II
|
||
ITEM
5.
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
17
|
ITEM
6.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|
18
|
ITEM
7.
|
FINANCIAL
STATEMENTS
|
27
|
ITEM
8.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
27
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
|
27
|
ITEM
8B.
|
OTHER
INFORMATION
|
28
|
PART III
|
||
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS,CONTROL PERSON AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|
29
|
ITEM
10.
|
EXECUTIVE
COMPENSATION
|
32
|
ITEM
11.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
41
|
ITEM
12.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
42
|
ITEM
13.
|
EXHIBITS
|
45
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
46
|
SIGNATURES
|
48
|
·
|
Marine
geophysical survey (commercial), which focuses on oil and gas,
construction and oceanographic research and exploration. Our current
products encompass geophysical data collection and analysis, through to
printers to output geophysical data collected by sonar that are marketed
to survey companies, research institutions, salvage companies. This was
our original focus, from founding in 1994. 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,
which focuses on 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). Omnitech
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 important applications in the fields of port
security, defense and undersea oil and gas
development.
|
·
|
First mover advantage in 3D 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 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. 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 3D
real-time sonar in defense/security applications. We believe that we are
the first to bring to market a product with the 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 and underwater construction with
innovative products.
|
·
|
Recent sole source classification
for one of our products and its derivatives by certain government
procurement agencies.
|
·
|
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 3D 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
|
Completed
|
|||
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
|
Completed
|
|||
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 alert
end-user to the changes (i.e the presence of something that was not there
on the last inspection - example of a harbor wall).
|
$
|
1,152,948
|
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
|
Completed
|
|||
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
|
Completed
|
·
|
Coda Octopus Products - nine
persons distributed between the UK and Florida,
USA
|
·
|
Coda Octopus Martech - two full
time and one part time based in Weymouth,
UK
|
·
|
Coda Octopus Colmek – three full
time staff
|
·
|
Coda Octopus Innalogic - one
staff member based in New York City,
USA
|
·
|
Port Security Group - currently
being developed by Group-level
staff
|
·
|
Group level – two members
of staff, one based in New York City, USA and one based in St Petersburg,
Florida, 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.
|
|
·
|
Flagship Government Relations, a
lobbying firm based in Washington, D.C., is assisting in reaching
government officials and government agencies to assist with 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 Grossman Group, LLC, a
lobbying firm based in Washington, D.C, is assisting in helping to gain
governmental support for our operations in
Utah;
|
|
·
|
Dan
Tate, LLC, a lobbying firm based in Washington, D.C., is assisting in
helping to gain governmental support for our operations in Panama
City.
|
·
|
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.
|
|
·
|
Application
number US2008043572 concerns the “Method of constructing mathematical
representations of objects from reflected sonar
signals”;
|
|
·
|
Application
number US11760417 concerns “Combined pressure compensator and cooling
unit”;
|
|
·
|
Application
number US11676427 concerns “Patch test for 3D sonar
data”;
|
|
·
|
Application
number US61026163 concerns “2D sonar beamforming using a real-time 3D
sonar”;
|
|
·
|
Application
number US12061298 concerns “Acoustic
coating”;
|
|
·
|
Application
number US12103839 concerns “Fast averaged volumetric rendering of large
sets polar/range data using minimal intermediate storage”;
and
|
|
·
|
Application
number US12138702 concerns “Edge enhancement of 2D polar range data using
a common cartesian coordinate
system”.
|
·
|
6 are employed in research and
development in our Bergen
facility
|
·
|
10 are employed in research and
development in Edinburgh
|
·
|
20 are employed in sales,
marketing, production and administration in
Edinburgh
|
·
|
8 are employed in management and
administration at our New York City
office
|
·
|
3 are employed in product
development, sales and support in New York
City
|
·
|
10 are employed in sales,
marketing and support at our Florida
office
|
·
|
2 are employed in Government
Relations at our Washington, DC,
office
|
·
|
38 are employed in
Weymouth
|
·
|
17 are employed in Colmek in Salt
Lake City, the main categories of employees being engineers and
technician.
|
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 | ||||
Second
Quarter
|
$ | 0.80 | $ | 0.35 | ||||
Third
Quarter
|
$ | 0.39 | $ | 0.28 | ||||
Fourth
Quarter
|
$ | 0.30 | $ | 0.11 |
Year
Ending October 31, 2009
|
HIGH
|
LOW
|
||||||
First
Quarter
|
$ | 0.20 | $ | 0.11 | ||||
Second
Quarter
|
$ | 0.16 | $ | 0.05 |
|
1.
|
It
has 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
has 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
has 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. They enable users to
“see” objects that are smaller than a baseball from a distance of more
than 100 meters, and to do so in all kinds of ocean or water conditions at
virtually any depth. In addition, the Company
through its Colmek subsidiary,
has more than 20 years of successful experience as contractor with the
Department of Defense, and as a subcontractor with various large primes,
most particularly Raytheon.
|
|
5.
|
The
Company
has 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 around oil and gas,
oceanographic research and exploration, where we market to survey
companies, research institutions, 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. 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 the 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, which is still having some effect on the market
even with lower current
prices.
|
·
|
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
construction which is conducted subsea, a particularly challenging
environment. We have also developed for one of our customers a tailored
software application to allow the laying of concrete Accropodes™ 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 we provide, instead of days or weeks
later, when a new vessel may even have to be
used.
|
·
|
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 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.
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Instruments
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|
||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Short
term Investment
|
$
|
153,000
|
$
|
153,000
|
||||||||||||
Total
|
$
|
153,000
|
$
|
153,000
|
$
|
-
|
-
|
Pound
Sterling
|
Norwegian
Kroner
|
|||||||||||||||||||
Actual
Results
|
Constant
Rates
|
Actual
Results
|
Constant
Rates
|
Total
Effect
|
||||||||||||||||
Revenues
|
$ | 9,825,663 | $ | 10,040,931 | $ | 63,705 | $ | 57,134 | $ | 208,697 | ||||||||||
Costs
|
7,267,630 | 7,426,854 | 92,701 | 83,139 | 149,663 | |||||||||||||||
Net
Income/(Losses)
|
2,558,033 | 2,614,077 | (28,996 | ) | (26,005 | ) | 59,034 | |||||||||||||
Assets
|
10,561,905 | 12,679,655 | 482,824 | 590,672 | 2,225,597 | |||||||||||||||
Liabilities
|
7,289,881 | 9,057,984 | 291,014 | 361,597 | 1,838,686 | |||||||||||||||
Net
Assets
|
3,272,024 | 3,621,670 | 191,810 | 229,074 | 386,911 |
Name
|
Age
|
Position(s)
|
||
Jason
Reid
|
43
|
President,
Chief Executive Officer and Director
|
||
Paul
Nussbaum
|
61
|
Chairman
of the Board of Directors
|
||
Jody
E. Frank
|
57
|
Chief
Financial Officer
|
||
Blair
Cunningham
|
40
|
Chief
Technology Officer
|
||
Anthony
Davis
|
43
|
President
US Operations
|
||
Frank
B. Moore
|
73
|
Senior
Vice President, Government Relations and Director
|
||
Geoff
Turner
|
56
|
President
European Operations
|
||
Angus
Lugsdin
|
32
|
Senior
Vice President, Market Development
|
||
Richard
Lewis
|
42
|
Senior
Vice President, Corporate Administration and
Development
|
||
Rodney
Peacock
|
62
|
Director
|
||
Faith
Griffin
|
59
|
Chairman
of the Audit Committee and
Director
|
·
|
be
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
|
2007
|
350,000 | -0- | 100,000 | (5) | -0- | 50,385 | 500,385 | |||||||||||||||||
President
& CEO
|
2008
|
375,000 | -0- | -0- | 15,635 | 10,200 | 400,835 | ||||||||||||||||||
Blair
Cunningham (1)
|
2007
|
175,000 | -0- | 50,000 | (6) | -0- | 18,866 | 243,866 | |||||||||||||||||
Chief
Technology Officer
|
2008
|
178,815 | -0- | -0- | 10,423 | 50,095 | 239,333 | ||||||||||||||||||
Anthony
Davis (1)
|
2007
|
175,000 | -0- | 50,000 | (6) | -0- | 11,962 | 236,962 | |||||||||||||||||
President
US Operations
|
2008
|
178,815 | -0- | -0- | 10,423 | 72,825 | 262,063 | ||||||||||||||||||
Jody
Frank
|
2007
|
104,808 | (4) | -0- | 14,400 | (8) | 281,243 | (9) | 1,750 | 402,201 | |||||||||||||||
Chief
Financial Officer
|
2008
|
350,000 | -0- | 60,000 | 10,423 | 11,000 | 431,423 | ||||||||||||||||||
Frank
Moore
|
2007
|
175,000 | -0- | 50,000 | (6) | -0- | -0- | 225,000 | |||||||||||||||||
SVP
Governmt Relations
|
2008
|
147,500 | (7) | -0- | -0- | 10,423 | -0- | 157,923 | |||||||||||||||||
Geoff
Turner (1)
|
2007
|
175,000 | -0- | 50,000 | (6) | -0- | 15,833 | 240,833 | |||||||||||||||||
President
European Ops
|
2008
|
178,815 | -0- | -0- | 10,423 | 15,328 | 204,566 | ||||||||||||||||||
Angus
Lugsdin
|
2007
|
151,667 | (10) | -0- | 50,000 | (6) | -0- | 3,619 | 205,286 | ||||||||||||||||
SVP
Market Develpmnt
|
2008
|
174,458 | -0- | -0- | 10,423 | 14,285 | 199,708 |
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
|
400,000 | $ | 1.00 |
May
2010
|
|||||||||
President
and Chief Executive Officer
|
25,500 | 49,500 | 1.30 |
August
2013
|
|||||||||
Blair
Cunningham
|
200,000 | $ | 1.00 |
May
2010
|
|||||||||
Chief Technology
Officer
|
17,000 | 33,000 | 1.30 |
August
2013
|
|||||||||
Anthony
Davis
|
150,000 | $ | 1.00 |
May
2010
|
|||||||||
President US Operations
|
17,000 | 33,000 | 1.30 |
August
2013
|
|||||||||
Jody
Frank
|
237,500 | $ | 1.30 |
May
2012
|
|||||||||
Chief
Financial Officer
|
17,000 | 33,000 | 1.30 |
August
2013
|
|||||||||
Geoff
Turner
|
150,000 | $ | 1.00 |
November 2010
|
|||||||||
President European
Operations
|
17,000 | 33,000 | 1.30 |
August
2013
|
|||||||||
Frank
Moore
|
150,000 | $ | 1.00 |
May
2011
|
|||||||||
Senior VP Government Relations
|
17,000 | 33,000 | 1.30 |
August
2013
|
|||||||||
Angus
Lugsdin
|
150,000 | $ | 1.00 |
May
2010
|
|||||||||
Senior
VP Market Development
|
17,000 | 33,000 | 1.30 |
August
2013
|
Name
(a)
|
Fees Earned or Paid
in Cash
($)
(b)
|
Stock
Awards ($)
(c)
|
Option
Awards ($)
(d) (6)
|
Total
($)
(j)
|
||||||||||||
Paul
Nussbaum
|
$ | 30,000 | (2) | $ | -0- | $ | 57,675 | (6a) | $ | 87,675 | ||||||
Rodney
Peacock
|
$ | 20,000 | (3) | $ | -0- | $ | 38,450 | (6b) | $ | 58,450 | ||||||
Frank
Moore
|
$ | 6,667 | (4) | $ | 60,000 | $ | -0- | $ | 66,667 | |||||||
Faith
Griffin
|
$ | 9,333 | (5) | $ | 60,000 | $ | 52,016 | (6c) | $ | 121,349 |
(2)
|
Consists
of an annual retainer in the amount of $22,500 and $1,875 per board
meeting attended.
|
|
(3)
|
Consists
of an annual retainer in the amount of $12,500 and $1,875 per board
meeting attended.
|
|
(4)
|
Consists
of an annual retainer of $12,500 and $1,875 per board meeting
attended. Pro-rated in accordance with appointment as a
director with effect from July 1, 2008.
|
|
(5)
|
Consists
of an annual retainer of $12,500 and $1,875 per board meeting attended,
$4,000 per annum as Chair of the Audit Committee, and $4,000 per annum as
member of the advisory board. Pro-rated in accordance with
appointment as a director with effect from July 1,
2008.
|
|
(6a)
|
Comprising
75,000 options valued based on date of issue using Black Scholes method
and booked into our accounts as an
expense.
|
(6b)
|
Comprising
50,000 options valued based on date of issue using Black Scholes method
and booked into our accounts as an expense.
|
|
(6c)
|
Comprising
250,000 options valued based on date of issue using Black Scholes method
and booked into our accounts as an
expense.
|
(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.
|
·
|
the
unpaid portion of his or her base salary;
|
|
·
|
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 of Reporting Person
|
Form
|
Date Filed
|
Earliest Transaction Reported
|
|||
Jason
Reid
|
4
|
July
3, 2008
|
June
21, 2008
|
|||
4
|
August
21, 2008
|
August
16, 2008
|
||||
Paul
Nussbaum
|
4
|
August
21, 2008
|
August
16, 2008
|
|||
4
|
October
16, 2008
|
October
11, 2008
|
||||
Rodney
Peacock
|
4
|
August
21, 2008
|
August
16, 2008
|
|||
Blair
Cunningham
|
4
|
August
21, 2008
|
August
16, 2008
|
|||
Anthony
Davis
|
4
|
August
21, 2008
|
August
16, 2008
|
|||
4
|
August
21, 2008
|
August
14, 2008
|
||||
Frank
Moore
|
4
|
August
21, 2008
|
August
16, 2008
|
|||
4
|
August
13, 2008
|
July
13, 2008
|
||||
Geoff
Turner
|
4
|
July
3, 2008
|
June
21, 2008
|
|||
Jody
Frank
|
4
|
March
25, 2008
|
March
13, 2008
|
|||
4
|
August
21, 2008
|
August
16, 2008
|
||||
Angus
Lugsdin
|
3
|
August
15, 2008
|
June
13, 2008
|
|||
4
|
October
8, 2008
|
October
5, 2008
|
||||
Faith
Griffin
|
3
|
August
21, 2008
|
July
13,
2008
|
Name and Address of Beneficial Owner (1)
|
Amount and Nature of Beneficial
Ownership of Common Stock (2)
|
Percent of
Common Stock
|
||||||
Jason
Reid (3)
|
23,750,089 | 45.5 | % | |||||
Paul
Nussbaum (4)
|
863,295 | 1.8 | % | |||||
Rodney
Peacock (5)
|
617,064 | 1.3 | % | |||||
Blair
Cunningham (6)
|
806,446 | 1.6 | % | |||||
Anthony
Davis (7)
|
423,659 | * | ||||||
Frank
B. Moore (8)
|
298,659 | * | ||||||
Geoff
Turner (9)
|
223,659 | * | ||||||
Jody
Frank (10)
|
335,033 | * | ||||||
Angus
Lugsdin (11)
|
543,087 | 1.1 | % | |||||
Faith
Griffin (12)
|
336,500 | * | ||||||
Richard
Lewis (13)
|
332,428 | * | ||||||
The
Royal Bank of Scotland plc (14)
135
Bishopsgate, London EC2M 3UR, England
|
11,428,571 | 18.9 | % | |||||
Vision
Opportunity Master Fund Limited (15)
317
Madison Avenue, Suite 1220.New York, NY 10017
|
4,943,276 | 9.9 | % | |||||
All
Directors and Executive Officers as a Group
(eleven
persons):
|
28,529,919 | 52.2 | % |
·
|
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 – note that
none of these transactions was interest
bearing:
|
|
·
|
An additional $10,491 in cash was
loaned to us by Fairwater Technology Group in April
2006.
|
|
·
|
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.
|
|
·
|
This
amount was repaid to Fairwater over the year, leaving no balance
outstanding at October 31, 2008.
|
·
|
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 – note that none of these transactions was interest
bearing:
|
|
·
|
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, the Company supplied to
Weight Management software development and support services totaling
$42,418. The Company made some repayments, both in cash and through the
provision of services, to leave a balance of $78,740 owing to Weight
Management at October 31,
2007.
|
|
·
|
Since that point, cash payments
of $37,219 have been made to Weight Management, taking the balance owed by
the Company to $41,521 as at October 31, 2008. In addition, software
development and support services totaling $244,604 have been provided to
Weight Management by our subsidiary company, Coda Octopus R&D Ltd,
leaving a net amount outstanding of $203,083, which has, subsequent to the
year end, become subject of a lease/license agreement through which this
amount is repaid over the coming 3
years.
|
·
|
At
October 31, 2006, Mr. Reid owed a balance of $104,720 to the Company,
which was expense incurred by Mr. Reid in moving both himself and the
Company’s headquarters to New York in 2004 and 2005. This amount increased
by $965 in the twelve months to October 31, 2007 as a result of a
payment made on Mr. Reid’s behalf. This left a balance outstanding of
$105,685 at October 31, 2007. This amount was expensed in the past year, a
non-cash cost hitting the Company’s Statement of Operations in
2008.
|
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*
|
|
3.1(
d )
|
Certificate
of Amendment to Certificate of Incorporation
|
|
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
Coda Octopus
|
|
10.12
|
Amendment
to Securities Purchase Agreements dated March 21, 2007 between Vision
Opportunity Master Fund Ltd. and Coda Octopus*
|
|
10.13
|
Securities
Repurchase Agreement dated April 10, 2007 between Coda Octopus 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*
|
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**
|
|
10.25
|
2008
Incentive Stock Option Plan***
|
|
10.26
|
2008
Stock Purchase Plan****
|
|
10.27
|
Cash
Control Framework Agreement dated March 16, 2009 by and between the
Company, The Royal Bank of Scotland and Greenhouse Investment
Limited
|
|
23.1 | Consent by RBSM LLP | |
31.1
|
Chief
Executive Officer Certification
|
|
31.2
|
Chief Financial
Officer Certification
|
|
32
|
Certification
Pursuant to 18 U.S.C. Section 1350
|
*
|
Incorporated
by reference to the Company’s Registration Statement on Form SB-2 (SEC
File No.143144)
|
**
|
Incorporated
by reference to the Company’s Anuual Report on Form 10-KSB for the year
ended October 31, 2007
|
***
|
Incorporated
by reference to the Company’s Proxy Statement filed with the Securities
and Exchange Commission June 13,
2008
|
****
|
Incorporated
by reference to the Company’s Registration Statement on Form S-8 (SEC File
No. 153254)
|
DATE:
March 18,
2009
|
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
|
March
18, 2009
|
||
(Principal
Executive Officer)
|
|||||
/s/
|
Jody
Frank
|
Chief
Financial Officer
|
March
18, 2009
|
||
(Principal
Financial and Accounting Officer)
|
|||||
/s/
|
Paul
Nussbaum
|
Chairman
|
March
18, 2009
|
||
/s/
|
Rodney Peacock
|
Director
|
March
18, 2009
|
||
/s/
|
Frank Moore
|
Director
|
March
18, 2009
|
||
/s/
|
Faith Griffin
|
Director
|
March
18,
2009
|
PAGE
|
||||
REPORT
OF INDEPENDENT REGISTERED CERTIFIED
|
F-1
|
|||
PUBLIC
ACCOUNTING FIRM
|
||||
CONSOLIDATED
BALANCE SHEETS
|
||||
OCTOBER
31, 2008 and 2007
|
F-2
|
|||
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
||||
FOR
THE YEARS ENDED OCTOBER 31, 2008 and 2007
|
F-3
|
|||
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
|
||||
FOR
THE TWO YEARS ENDED OCTOBER 31, 2008
|
F-4
|
|||
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
||||
FOR
YEARS ENDED OCTOBER 31, 2008 and 2007
|
F-5
|
|||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-6 - F-26
|
/S/RBSM
LLP
|
|
New
York, New York
|
RBSM
LLP
|
March
17, 2009
|
2008
|
2007
|
|||||||
ASSETS
|
|
|||||||
Current
assets:
|
|
|||||||
Cash
and cash equivalents
|
$ | 3,896,149 | $ | 916,257 | ||||
Restricted
cash, Note 2
|
1,017,007 | - | ||||||
Short
term investments, Note 4
|
153,000 | 935,000 | ||||||
Accounts
receivable, net of allowance for doubtful accounts
|
2,589,174 | 2,720,151 | ||||||
Inventory
|
2,317,322 | 2,926,517 | ||||||
Due
from related parties, Note 13
|
54,166 | 105,685 | ||||||
Unbilled
receivables, Note 3
|
518,326 | 380,017 | ||||||
Other
current assets, Note 5
|
407,080 | 691,560 | ||||||
Prepaid
expenses
|
385,831 | 476,283 | ||||||
Total
current assets
|
11,338,055 | 9,151,470 | ||||||
Property
and equipment, net, Note 6
|
355,909 | 422,738 | ||||||
Deferred
financing costs, net of accumulated amortization of $181,596 in 2008 and
$0 in 2007, Note 12
|
1,513,297 | - | ||||||
Goodwill
and other intangible assets, net, Note 7
|
3,832,023 | 4,007,253 | ||||||
Total
assets
|
$ | 17,039,284 | $ | 13,581,461 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$ | 1,159,849 | $ | 1,618,250 | ||||
Accrued
expenses and other current liabilities
|
2,347,522 | 1,937,569 | ||||||
Deferred
revenues, Note 3
|
268,650 | 593,325 | ||||||
Deferred
payment related to acquisitions, Note 14
|
- | 763,936 | ||||||
Accrued
preferred stock dividends
|
53,874 | 86,766 | ||||||
Due
to related parties, Note 13
|
41,904 | 184,425 | ||||||
Loans
and notes payable, short term, Notes 12 and 16
|
12,358,597 | 56,382 | ||||||
Total
current liabilities
|
16,230,396 | 5,240,653 | ||||||
Loans
and notes payable, long term, Notes 12 and 16
|
162,700 | 265,139 | ||||||
Total
liabilities
|
16,393,096 | 5,505,792 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized, 6,287 and 6,407
shares Series A issued and outstanding, as of October 31, 2008 and 2007,
respectively, Note 8
|
6 | 6 | ||||||
Common
stock, $.001 par value; 150,000,000 shares authorized, 48,853,664 and
48,245,768 shares issued and outstanding as of October 31, 2008 and 2007,
respectively, Note 8
|
48,854 | 48,246 | ||||||
Common
stock subscribed
|
131,790 | 80,000 | ||||||
Additional
paid-in capital
|
51,433,049 | 49,785,244 | ||||||
Accumulated
other comprehensive loss
|
(1,317,696 | ) | (238,097 | ) | ||||
Accumulated
deficit
|
(49,649,815 | ) | (41,599,730 | ) | ||||
Total
stockholders' equity
|
646,188 | 8,075,669 | ||||||
Total
liabilities and stockholders' equity
|
$ | 17,039,284 | $ | 13,581,461 |
2008
|
2007
|
|||||||
|
||||||||
Net
revenue
|
$ | 16,968,922 | $ | 13,853,313 | ||||
Cost
of revenue
|
6,941,287 | 6,398,042 | ||||||
Gross
profit
|
10,027,635 | 7,455,271 | ||||||
Research
and development
|
3,525,023 | 3,019,090 | ||||||
Selling,
general and administrative expenses
|
13,204,254 | 12,385,250 | ||||||
Other
operating expenses
|
- | 435,000 | ||||||
Total
operating expenses
|
16,729,278 | 15,839,340 | ||||||
Operating
loss
|
(6,701,642 | ) | (8,384,069 | ) | ||||
Other
(income) expense
|
||||||||
Other
income
|
323,866 | 87,143 | ||||||
Interest
expense
|
(1,538,724 | ) | (6,655,283 | ) | ||||
Total
other expense, net
|
(1,214,858 | ) | (6,568,140 | ) | ||||
Loss
before income taxes
|
(7,916,500 | ) | (14,952,209 | ) | ||||
Provision
for income taxes
|
4,017 | 106 | ||||||
Net
loss
|
(7,920,517 | ) | (14,952,315 | ) | ||||
Preferred
stock dividends:
|
||||||||
Series
A
|
(129,568 | ) | (281,289 | ) | ||||
Series
B
|
- | (107,680 | ) | |||||
Beneficial
conversion feature
|
- | (800,000 | ) | |||||
Net
loss applicable to common shares
|
$ | (8,050,085 | ) | $ | (16,141,284 | ) | ||
Loss
per share, basic and diluted
|
$ | (0.17 | ) | $ | (0.42 | ) | ||
Weighted
average shares outstanding
|
48,486,291 | 38,476,352 | ||||||
Comprehensive
loss:
|
||||||||
Net
loss
|
$ | (7,920,517 | ) | $ | (14,952,315 | ) | ||
Foreign
currency translation adjustment
|
(297,599 | ) | (30,276 | ) | ||||
Unrealized
(loss) gain on investment
|
(782,000 | ) | 85,000 | |||||
Comprehensive
loss
|
$ | (9,000,116 | ) | $ | (14,897,591 | ) |
Preferred Stock
Series A
|
Preferred Stock
Series B
|
Common Stock
|
Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
|
Accumulated
|
||||||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Subscribed
|
Capital
|
Loss
|
Deficit
|
Total
|
||||||||||||||||||||||||||||||||||
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 | ) | (18 | ) | 2,878,418 | 2,879 | (2,861 | ) | - | |||||||||||||||||||||||||||||||||||
Series
B
|
(30,819 | ) | (31 | ) | 3,081,900 | 3,082 | (3,051 | ) | - | |||||||||||||||||||||||||||||||||||
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 for
|
||||||||||||||||||||||||||||||||||||||||||||
compensation
|
1,428,597 | 1,428,597 | ||||||||||||||||||||||||||||||||||||||||||
financing
|
6,105,918 | 6,105,918 | ||||||||||||||||||||||||||||||||||||||||||
Preferred
dividend, beneficial conversion feature
|
||||||||||||||||||||||||||||||||||||||||||||
Series
B
|
800,000 | (800,000 | ) | - | ||||||||||||||||||||||||||||||||||||||||
Preferred
dividend
|
||||||||||||||||||||||||||||||||||||||||||||
Series
A
|
(281,288 | ) | (281,288 | ) | ||||||||||||||||||||||||||||||||||||||||
Series
B
|
(107,680 | ) | (107,680 | ) | ||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||
Shares
issued for compensation
|
448,737 | 449 | 258,827 | 259,276 | ||||||||||||||||||||||||||||||||||||||||
Shares
issued for
financing
|
4,200 | 4 | 4,196 | 4,200 | ||||||||||||||||||||||||||||||||||||||||
Stock
subscribed
|
||||||||||||||||||||||||||||||||||||||||||||
Preferred
stock
|
(120 | ) | (0 | ) | 116,640 | 117 | (80,000 | ) | 79,883 | - | ||||||||||||||||||||||||||||||||||
Common
stock
|
131,790 | 131,790 | ||||||||||||||||||||||||||||||||||||||||||
Fair
value of options and warrants issued as
|
||||||||||||||||||||||||||||||||||||||||||||
compensation
|
872,170 | 872,170 | ||||||||||||||||||||||||||||||||||||||||||
financing
|
391,230 | 391,230 | ||||||||||||||||||||||||||||||||||||||||||
Preferred
stock dividends
|
||||||||||||||||||||||||||||||||||||||||||||
Series
A
|
38,319 | 38 | 41,498 | (129,568 | ) | (88,032 | ) | |||||||||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(297,599 | ) | (297,599 | ) | ||||||||||||||||||||||||||||||||||||||||
Unrealized
loss from marketable securities
|
(782,000 | ) | (782,000 | ) | ||||||||||||||||||||||||||||||||||||||||
Net
loss
|
(7,920,517 | ) | (7,920,517 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance,
October 31, 2008
|
6,287 | $ | 6 | - | $ | - | 48,853,664 | $ | 48,854 | $ | 131,790 | $ | 51,433,049 | $ | (1,317,696 | ) | $ | (49,649,815 | ) | $ | 646,188 |
2008
|
2007
|
|||||||
|
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
||||||
Net
loss
|
$ | (7,920,517 | ) | $ | (14,952,315 | ) | ||
Adjustments to
reconcile net loss to net cash used
by operating activities:
|
||||||||
Depreciation
and amortization
|
547,369 | 337,658 | ||||||
Stock
based compensation
|
1,067,221 | 3,318,460 | ||||||
Financing
costs
|
1,057,843 | 6,105,918 | ||||||
Bad
debt expense
|
74,897 | 17,910 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
decrease in:
|
||||||||
Restricted
cash
|
(1,017,017 | ) | - | |||||
Accounts
receivable
|
56,080 | (1,800,802 | ) | |||||
Inventory
|
609,195 | (975,125 | ) | |||||
Prepaid
expenses
|
90,452 | (316,367 | ) | |||||
Other
receivables
|
37,581 | (672,216 | ) | |||||
Increase
(decrease) in:
|
||||||||
Accounts
payable and accrued expenses
|
(800,885 | ) | (1,033,074 | ) | ||||
Due
to related parties
|
(63,781 | ) | (118,452 | ) | ||||
Net
cash used by operating activities
|
(6,261,562 | ) | (10,088,405 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of property and equipment
|
(131,502 | ) | (288,803 | ) | ||||
Purchases
of intangible assets
|
(11,466 | ) | (118,475 | ) | ||||
Acquisitions
|
(763,936 | ) | (1,358,470 | ) | ||||
Cash
acquired in acquisitions
|
- | 35,515 | ||||||
Net
cash used by investing activities
|
(906,904 | ) | (1,730,233 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from (payments of) loans, net of repayments
|
11,909,040 | (884,405 | ) | |||||
Proceeds
from sale of stock
|
- | 14,677,980 | ||||||
Redemption
of preferred stock
|
- | (1,818,100 | ) | |||||
Payment of deferred financing cost | (1,303,663 | ) | - | |||||
Preferred
stock dividend
|
(127,541 | ) | (637,476 | ) | ||||
Net
cash provided by financing activities
|
10,477,836 | 11,337,999 | ||||||
Effect
of exchange rate changes on cash
|
(329,477 | ) | 18,924 | |||||
Net
increase (decrease) in cash
|
2,979,892 | (461,715 | ) | |||||
Cash
and cash equivalents, beginning of year
|
916,257 | 1,377,972 | ||||||
Cash
and cash equivalents, end of year
|
$ | 3,896,149 | $ | 916,257 | ||||
Cash
paid for:
|
||||||||
Interest
|
$ | 480,881 | $ | 549,365 | ||||
Income
taxes
|
- | - | ||||||
Supplemental Disclosures:
|
||||||||
During
the twelve months ended October 31, 2008, 452,937 shares of common
stock were issued as payment of $263,476 of compensation that
was earned.
|
||||||||
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.
|
||||||||
The
acquisitions figure consists of the acquisitions of Colmek and Martech in
2007 and Colmek in 2008:
|
||||||||
Deferred
note payable
|
$ | 763,936 | $ | (763,936 | ) | |||
Cash
acquired
|
- | 35,515 | ||||||
Equipment
acquired
|
- | 80,007 | ||||||
Goodwill
and intangible assets
|
- | 2,773,613 | ||||||
Liabilities
assumed
|
- | (727,913 | ) | |||||
Current
assets acquired
|
- | 195,528 | ||||||
Amount
paid in common stock
|
- | (792,814 | ) | |||||
Associated
costs of acquisition
|
- | 158,470 | ||||||
Cash
paid for acquisition
|
$ | 763,936 | $ | 958,470 |
2008
|
2007
|
|||||||
Raw
materials
|
$ | 1,917,566 | $ | 1,789,051 | ||||
Work
in process
|
113,942 | 334,813 | ||||||
Finished
goods
|
285,814 | 802,653 | ||||||
Total
inventory
|
$ | 2,317,322 | $ | 2,926,517 |
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Instruments
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|
|||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Short
term Investment
|
$
|
153,000
|
$
|
153,000
|
||||||||||||
Total
|
$
|
153,000
|
$
|
153,000
|
$
|
-
|
-
|
2008
|
2007
|
|||||||
Deposits
|
$ | 110,548 | $ | 191,352 | ||||
Value
added tax (VAT) receivable
|
262,090 | 293,934 | ||||||
Other
receivables
|
34,442 | 206,274 | ||||||
Total
|
$ | 407,080 | $ | 691,560 |
2008
|
2007
|
|||||||
Machinery
and equipment
|
$ | 1,076,950 | $ | 983,115 | ||||
Accumulated
depreciation
|
(721,041 | ) | (560,377 | ) | ||||
Net
property and equipment assets
|
$ | 355,909 | $ | 422,738 |
2008
|
2007
|
|||||||
Rental
equipment
|
$ | 240,876 | $ | 240,876 | ||||
Accumulated
depreciation
|
(240,876 | ) | (240,876 | ) | ||||
Net
rental equipment assets
|
$ | - | $ | - |
2008
|
2007
|
|||||||
Customer
relationships (weighted average life of 10 years)
|
$ | 694,503 | $ | 694,503 | ||||
Non-compete
agreements (weighted average life of 3 years)
|
198,911 | 198,911 | ||||||
Patents
(weighted average life of 10 years)
|
63,695 | 48,530 | ||||||
Licenses
(weighted average life of 2 years)
|
100,000 | 100,000 | ||||||
Total
amortized identifiable intangible assets - gross carrying
value
|
1,057,109 | 1,041,944 | ||||||
Less
accumulated amortization
|
(324,661 | ) | (134,266 | ) | ||||
Net
|
732,448 | 907,678 | ||||||
Residual
value
|
$ | 732,448 | $ | 907,678 |
2009
|
$
|
167,337
|
||
2010
|
86,227
|
|||
2011
|
74,172
|
|||
2012
|
74,172
|
|||
2013
and thereafter
|
330,540
|
|||
Total
|
$
|
732,448
|
2008
|
2007
|
|||||||
Beginning
goodwill balance at November 1
|
$ | 3,099,575 | $ | 1,060,906 | ||||
Goodwill
recorded upon acquisition
|
- | 2,038,669 | ||||||
Balance
at October 31
|
$ | 3,099,575 | $ | 3,099,575 |
2008
|
2007
|
|||||||||||||||
Number
|
Weighted
Average Exercise
Price
|
Number
|
Weighted
Average Exercise
Price
|
|||||||||||||
Outstanding
at beginning of the period
|
36,519,318 | $ | 1.29 | 13,410,000 | $ | 1.29 | ||||||||||
Granted
during the period
|
1,870,000 | 1.36 | 23,473,418 | 1.44 | ||||||||||||
Exercised
during the period
|
- | - | (34,100 | ) | 1.00 | |||||||||||
Terminated
during the period
|
(50,000 | ) | 1.70 | (330,000 | ) | 1.22 | ||||||||||
Outstanding
at the end of the period
|
38,339,318 | $ | 1.39 | 36,519,318 | $ | 1.39 | ||||||||||
Exercisable
at the end of the period
|
37,161,417 | $ | 1.39 | 35,467,518 | $ | 1.39 |
Range of
Exercise Prices
|
Number Outstanding
|
Weighted Average Contractual
Life (Yrs)
|
Total Vested
|
|||||||
0.50
|
750,000
|
2.50
|
750,000
|
|||||||
0.58
|
400,000
|
2.41
|
400,000
|
|||||||
1.00
|
5,845,900
|
2.57
|
5,789,800
|
|||||||
1.30
|
16,106,709
|
3.28
|
15,196,959
|
|||||||
1.50
|
525,000
|
3.10
|
435,250
|
|||||||
1.70
|
14,651,709
|
3.16
|
14,549,409
|
|||||||
1.80
|
60,000
|
3.90
|
40,000
|
|||||||
Totals
|
38,339,318
|
3.10
|
37,161,417
|
Non-Current
|
2008
|
2007
|
||||||
Net
operating losses carried forward
|
$ | 16,485,000 | $ | 10,455,000 | ||||
Valuation
allowance
|
(16,485,000 | ) | (10,455,000 | ) | ||||
Net
deferred tax asset
|
$ | - | $ | - |
2009
|
$
|
443,781
|
||
2010
|
411,307
|
|||
2011
|
359,109
|
|||
2012
|
121,499
|
|||
2013
and thereafter
|
53,398
|
|||
Total
|
$
|
1,389,094
|
2008
|
2007
|
|||||||
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 (see Note 16)
|
$ | 12,348,493 | $ | - | ||||
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.
|
162,700 | 200,000 | ||||||
The
Company, through its US subsidiary Coda Octopus Innalogic, Inc., had 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 at October 31, 2007 in
relation to this capital lease. See Note 2. This capital lease was repaid
in April 2008.
|
- | 41,091 | ||||||
The
Company has an unsecured revolving line of credit with a US bank through
its US subsidiary Coda Octopus Colmek, Inc., for $50,000 with an interest
rate of 12.5% annually; repayable at borrower’s instigation. The facility
was repaid and closed during 2008.
|
- | 17,181 | ||||||
The
Company through its US subsidiary Coda Octopus Colmek, Inc., had 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%. The vehicle
was disposed of during 2008 and the loan repaid in full.
|
- | 29,145 | ||||||
The
Company through its US subsidiary Coda Octopus Colmek, Inc., has an
unsecured loan note payable to a director and former officer of the
Company, which is being repaid in the short term.
|
10,104 | 34,104 | ||||||
Total
|
$ | 12,521,297 | $ | 321,521 | ||||
Less:
current portion
|
12,358,597 | 56,382 | ||||||
Total
long-term portion
|
$ | 162,700 | $ | 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
|
||||
Revenue
|
$
|
14,757,876
|
||
Net
loss
|
(15,259,562
|
)
|
||
Loss
per common share
|
$
|
(0.43
|
)
|
Contracting
|
Products
|
Corporate
|
Totals
|
|||||||||||||
Revenues
|
$ | 5,859,259 | $ | 9,269,121 | $ | 1,840,542 | $ | 16,968,922 | ||||||||
Operating
income/(loss)
|
(1,418,649 | ) | 2,266,490 | (7,549,484 | ) | (6,701,643 | ) | |||||||||
Identifiable
assets
|
5,450,331 | 4,384,945 | 7,204,009 | 17,039,284 | ||||||||||||
Capital
expenditure
|
26,922 | 58,064 | 57,981 | 142,967 | ||||||||||||
Selling,
general & administrative
|
3,586,636 | 2,414,753 | 7,202,865 | 13,204,254 | ||||||||||||
Depreciation
& amortization
|
263,632 | 76,216 | 207,519 | 547,367 | ||||||||||||
Interest
expense
|
123,941 | 307,700 | 1,107,083 | 1,538,724 |
2008
|
2007
|
|||||||
Revenues:
|
||||||||
United
States
|
$ | 7,362,966 | $ | 7,129,507 | ||||
United
Kingdom
|
9,605,956 | 6,723,806 | ||||||
Total
Revenues
|
$ | 16,968,922 | $ | 13,853,313 | ||||
Assets:
|
||||||||
United
States
|
$ | 4,357,042 | $ | 5,529,261 | ||||
United
Kingdom
|
5,478,233 | 6,597,202 | ||||||
Corporate
and other
|
7,204,009 | 1,454,998 | ||||||
Total
Assets
|
$ | 17,039,284 | $ | 13,581,461 |
|
·
|
Establish
a segregated cash account of approximately
$2,151,000
|
|
·
|
The
Company shall have access to the funds with the debenture holders’
approval, up to 80% of the account balance subject to agreed upon terms
and conditions.
|
|
·
|
The
Company has agreed to take steps to reduce its operating costs and capital
expenditures to a specified
amount.
|