Contingencies and Commitments
|12 Months Ended|
Oct. 31, 2010
|Commitments and Contingencies Disclosure [Abstract]|
|Contingencies and Commitments||
NOTE 12 - CONTINGENCIES AND COMMITMENTS
For the purpose of this disclosure, the 2010 period means November 1, 2009 through to and including October 31, 2010.
In the 2010 period we were engaged in three lawsuits.
The first one involves the former Chief Executive Officer (as the Plaintiff) of our wholly owned subsidiary Coda Octopus Colmek, Inc (Colmek) and Colmek as the Defendant. The Plaintiff alleged breach of his employment agreement with the Defendant. This litigation was settled in full by the parties on or around September 29, 2010 and all actions filed in court were dismissed by consent.
The second action involved Federal Engineering and Marketing Associates Inc. (FEMA) a Colorado corporation (Plaintiff) who acted as sales representative of our wholly owned subsidiary, Coda Octopus Colmek Inc (Colmek) and the said Colmek as Defendant. The Plaintiff claimed breach of contract. This litigation was fully settled by the parties on or around January 14, 2011 and all actions filed in court were dismissed by consent.
On April 28, 2010 we instituted legal action in the Supreme Court of the State of New York against 4 former employees. These actions were settled in full between November 2010 and January 2011 and all actions filed in court were dismissed by consent.
During 2009, the Company made provision for certain liabilities for claims against the Company. During 2010, those amounts were written down to the actual amounts as they became known. This write down resulted in a gain recorded in Other Income of $694,510 during the year ended October 31, 2010.
See Note 16 of the Consolidated Financial Statement for current information on litigation.
We may become subject to other legal proceedings and claims, which arise in the ordinary course of our business. Although occasional adverse decisions or settlements may occur, we believe that the final disposition of any matters should not have a material adverse effect on our financial position or results of operations.
On March 16, 2009, the Company and the holder of the secured convertible debenture (The Noteholder) entered into a Cash Control Framework Agreement, pursuant to which it is assumed that, subject to the Company being fully compliant with the terms of this agreement and those set out in the Transaction Documents entered into between the Company and the Noteholder on February 21, 2008, no adverse actions will be taken by the Noteholder. The agreement provides, among other things, for the placement of approximately $2.15 million into a segregated cash account. Under the terms of the agreement, we may request the release of funds from the account from time to time for working capital purposes, subject to the Noteholders consent and agreed upon terms and conditions. Under the terms of the agreement, we must also adhere to a strict cost cutting program which involves reducing our SG&A, R&D and capital expenditure by an annualized $3.35 million.
This agreement was extended for a further period of one year, expiring on March 16, 2009. On January 18, 2010, the noteholder notified us in writing that it had waived its right to demand repayment of the loan as a result of our failure to observe certain specified loan covenants. The agreement was extended for a further period of 12 months and now expires on March 16, 2011. We believe that the terms of this agreement may provide us with sufficient liquidity to operate for fiscal 2011.
On or around August 23, 2010, the Company failed to make a scheduled interest payment under the senior convertible debentures. This constituted an event of default under the Loan Note Instrument and the Cash Control Framework Agreement resulting in the Noteholder making a demand for the special purpose amount of $6,000,000 which was advanced to the Company for an approved acquisition under the original Loan Note Instrument and for which it had failed to make.
See Note 16 of the Consolidated Financial Statement for current information on the Cash Control Framework Agreement.
Company Voluntary Arrangement (CVA)
On or around October 18, 2010 our subsidiary, Coda Octopus Martech, entered into an arrangement under which it was agreed to re-schedule £503,335 an equivalent of $807,000 (using an exchange rate of 1.6035) amounts to trade creditors. Under the CVA this amount was scheduled to be repaid over 4 years.
See Note 16 of the Consolidated Financial Statement for current information on the CVA.
We occupy our various office and warehouse facilities pursuant to both term and month-to-month leases. Our term leases expire at various times through September 2015. Future minimum lease obligations are approximately $1,331,228, with the minimum future rentals due under these leases as of October 31, 2010 as follows:
During the year ended October 31, 2010, the company had one customer generate sales greater than 10% of total revenue. Sales to this customer were $2,434,524, or 21% of total revenues during the year. We had no sales concentrations of over 5% during the year ended 2009.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef