Annual report pursuant to Section 13 and 15(d)

Intangible Assets and Goodwill

Intangible Assets and Goodwill

12 Months Ended

Oct. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 3 - INTANGIBLE ASSETS AND GOODWILL

Goodwill and Other Intangible Assets are evaluated on an annual basis. If there is reason to believe that their values have been diminished or impaired. Write-downs, if any, will be included in results from operations.

The identifiable intangible assets acquired and their carrying value as of October 31, 2017 and 2016, are as follows:

	October 31,			October 31,
	2017			2016

Customer relationships (weighted average life of 10 years)	$	896,624		$	886,164
Non-compete agreements (weighted average life of 3 years)		198,911			198,911
Patents and other (weighted average life of 10 years)		294,175			294,175

Total identifiable intangible assets - gross carrying value		1,389,710			1,379,250

Less: accumulated amortization		(1,182,537	)		(1,011,833	)

Total intangible assets, net	$	207,173		$	367,417

Future estimated annual amortization expenses as of October 31, 2017 as follows:

Years Ending October 31	Amount

2018	$	40,595
2019		40,595
2020		40,595
2021		40,595
2022		40,595
Thereafter		4,198

Totals	$	207,173

Amortization of patents, customer relationships, non-compete agreements and licenses included as a charge to income amounted to $163,519 and $46,986 for the years ended October 31, 2017 and 2016, respectively. Goodwill is not being amortized.

As a result of the acquisitions of Coda Octopus Martech, Ltd., Coda Octopus Colmek, Inc., Coda Octopus Products, Ltd., and Dragon Design, Ltd., the Company has goodwill in the amount of $3,382,108 as of October 31, 2017 and 2016, respectively. The carrying amount of goodwill as of October 31, 2017 and 2016, respectively are recorded below:

	2017		2016
Breakout of Goodwill:

Coda Octopus Colmek, Inc.	$	2,038,669	$	2,038,669
Coda Octopus Products, Ltd		62,315		62,315
Coda Octopus Martech, Ltd		998,591		998,591
Coda Octopus Martech, Ltd (from Dragon Design Ltd Acquisition)		282,533		282,533

Total Goodwill	$	3,382,108	$	3,382,108

Considerable management judgment is necessary to estimate the fair value of goodwill. We enlisted the assistance of an independent valuation consultant to determine the values of our intangible assets and goodwill at the dates of acquisition and by management for the dates thereafter.

Based on various market factors and projections used by management, actual results could vary significantly from management’s estimates.

The Company’s policy is to test its goodwill balances for impairment on an annual basis, in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The goodwill assets of the Company arise chiefly from the acquisition of two wholly owned subsidiaries that comprise the Company’s services segments – Colmek and Martech. The goodwill impairment evaluation was conducted at the end of the financial year 2017 and management’s opinion is that the fair value exceeds the carrying values. As such no impairment was recorded by management.

Based on these evaluations, the fair value of goodwill exceeds its carrying value. As such no impairment was recorded by management.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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