x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
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)
|
|
|
|
164
West, 25th
Street, 6th
Floor, New York
|
|
10001
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
|
|
Registrant's
telephone number, including area code:
|
|
(212)
924-3442
|
Large
accelerated filer o
|
Accelerated
filer o
|
Smaller
reporting company x
|
|
Page
|
|||
PART
I - Financial Information
|
1
|
|||
|
||||
Item
1: Financial Statements
|
1
|
|||
|
||||
Nine
Months Ended July 31, 2008 and 2007
|
||||
|
||||
Condensed
Consolidated Balance Sheet as of July 31, 2008 (Unaudited) and October
31,
2007
|
1
|
|||
|
||||
Condensed
Consolidated Statements of Operations and Comprehensive Loss for
the Three
and Nine Months Ended July 31, 2008 and 2007 (Unaudited)
|
2
|
|||
|
||||
Condensed
Consolidated Statement of Stockholders’ Equity for the Nine Months
Ended July 31, 2008 (Unaudited)
|
3
|
|||
|
||||
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended July
31,
2008 and 2007 (Unaudited)
|
4
|
|||
|
||||
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
5
|
|||
|
||||
Item
2: Management's Discussion and Analysis or Plan of
Operation
|
16
|
|||
|
||||
Item
3:
Controls
and Procedures
|
23
|
|||
|
||||
PART
II - Other Information
|
24
|
|||
|
||||
Item
1: Legal Proceedings
|
24
|
|||
|
||||
Item
2: Unregistered Sales of Equity Securities and Use of
Proceeds
|
24
|
|||
|
||||
Item
3: Defaults Upon Senior Securities
|
24
|
|||
|
||||
Item
4: Submission of Matters to a Vote of Security
Holders
|
24
|
|||
|
||||
Item
5: Other Information
|
24
|
|||
|
||||
Item
6: Exhibits
|
24
|
|||
|
||||
Signatures
|
24
|
|
July
31,
2008
(Unaudited)
|
October
31, 2007
|
|||||
ASSETS
|
|
|
|||||
Current
assets:
|
|
||||||
Cash
and cash equivalents
|
$
|
6,050,996
|
$
|
916,257
|
|||
Short-term
investments, Note 3
|
272,000
|
935,000
|
|||||
Accounts
receivable, net of allowance for doubtful accounts
|
2,400,265
|
2,720,151
|
|||||
Inventory
|
2,502,292
|
2,926,517
|
|||||
Due
from related parties, Note 12
|
160,289
|
105,685
|
|||||
Unbilled
receivables, Note 2
|
1,518,073
|
380,017
|
|||||
Other
current assets, Note 4
|
717,818
|
691,560
|
|||||
Prepaid
expenses
|
542,208
|
476,283
|
|||||
|
|||||||
Total
current assets
|
14,163,941
|
9,151,470
|
|||||
|
|||||||
Property
and equipment, net, Note 5
|
395,629
|
422,738
|
|||||
Goodwill
and other intangible assets, net, Note 6
|
5,566,171
|
4,007,253
|
|||||
Total
assets
|
$
|
20,125,741
|
$
|
13,581,461
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable, trade
|
$
|
962,029
|
$
|
1,618,250
|
|||
Accrued
expenses and other current liabilities
|
1,821,150
|
1,937,569
|
|||||
Deferred
revenues, Note 2
|
355,796
|
593,325
|
|||||
Deferred
payment related to acquisitions, Note 13
|
-
|
763,936
|
|||||
Accrued
dividends on Series A&B Preferred Stock
|
31,149
|
86,766
|
|||||
Due
to related parties, Note 12
|
63,740
|
184,425
|
|||||
Loans
and notes payable, short term, Note 11
|
38,051
|
56,382
|
|||||
|
|||||||
Total
current liabilities
|
3,271,915
|
5,240,653
|
|||||
|
|||||||
Loans
and notes payable, long term, Note 11
|
12,429,845
|
265,139
|
|||||
|
|||||||
Total
liabilities
|
15,701,760
|
5,505,792
|
|||||
|
|||||||
Stockholders'
equity:
|
|||||||
Preferred
stock, $.001 par value; 5,000,000 shares authorized, 6,287 and 6,407
Series A issued and outstanding, as of July 31, 2008 and October
31, 2007
respectively
|
6
|
6
|
|||||
Common
stock, $.001 par value; 150,000,000 shares authorized, 48,753,664
and
48,245,768 shares issued and outstanding as of July 31, 2008 and
October
31, 2007 respectively
|
48,754
|
48,246
|
|||||
Common
Stock subscribed
|
-
|
80,000
|
|||||
Additional
paid-in capital
|
51,166,908
|
49,785,244
|
|||||
Accumulated
other comprehensive loss
|
(924,657
|
)
|
(238,097
|
)
|
|||
Accumulated
deficit
|
(
45,867,030
|
)
|
(41,599,730
|
)
|
|||
|
|||||||
Total
stockholders' equity
|
4,423,981
|
8,075,669
|
|||||
|
|||||||
Total
liabilities and stockholders' equity
|
$
|
20,125,741
|
$
|
13,581,461
|
|
For
the three months
|
For the three months
|
For the nine months
|
For the nine months
|
|||||||||
|
ended
July 31,
|
ended July 31,
|
ended July 31,
|
ended July 31,
|
|||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||
|
|
|
|
|
|||||||||
Net
revenue
|
$
|
5,008,525
|
$
|
5,859,907
|
$
|
13,232,440
|
$
|
10,794,621
|
|||||
|
|||||||||||||
Cost
of revenue
|
1,984,714
|
2,300,728
|
4,934,266
|
4,513,101
|
|||||||||
|
|||||||||||||
Gross
profit
|
3,023,811
|
3,559,179
|
8,298,174
|
6,281,520
|
|||||||||
|
|||||||||||||
Research
and development
|
880,339
|
634,679
|
2,333,840
|
1,736,437
|
|||||||||
Selling,
general and administrative expenses
|
3,311,267
|
3,594,560
|
9,170,389
|
8,883,099
|
|||||||||
Other
operating expenses
|
-
|
-
|
-
|
435,000
|
|||||||||
|
|||||||||||||
Operating
income (loss)
|
(1,167,795
|
)
|
(670,060
|
)
|
(3,206,055
|
)
|
(4,773,016
|
)
|
|||||
|
|||||||||||||
Other
income (expense)
|
|||||||||||||
|
|||||||||||||
Other
income
|
47,554
|
35,745
|
96,779
|
73,540
|
|||||||||
Interest
expense
|
(481,876
|
)
|
(561,350
|
)
|
(1,051,181
|
)
|
(6,349,946
|
)
|
|||||
|
|||||||||||||
Total
other income (expense)
|
(434,322
|
)
|
(525,605
|
)
|
(954,402
|
)
|
(6,276,406
|
)
|
|||||
|
|||||||||||||
Loss
before income taxes
|
(1,602,117
|
)
|
(1,195,665
|
)
|
(4,160,457
|
)
|
(11,049,422
|
)
|
|||||
|
|||||||||||||
Provision
for income taxes
|
-
|
-
|
-
|
-
|
|||||||||
|
|||||||||||||
Net
loss
|
(1,602,117
|
)
|
(1,195,665
|
)
|
(4,160,457
|
)
|
(11,049,422
|
)
|
|||||
|
|||||||||||||
Preferred
Stock Dividends:
|
|||||||||||||
Series
A
|
(31,819
|
)
|
(31,851
|
)
|
(106,843
|
)
|
(238,950
|
)
|
|||||
Series
B
|
-
|
-
|
-
|
(107,680
|
)
|
||||||||
Beneficial
Conversion Feature
|
-
|
-
|
-
|
(800,000
|
)
|
||||||||
|
|||||||||||||
Net
Loss Applicable to Common Shares
|
$
|
(1,633,936
|
)
|
$
|
(1,227,516
|
)
|
$
|
(4,267,300
|
)
|
$
|
(12,196,051
|
)
|
|
|
|||||||||||||
Loss
per share, basic and diluted
|
(0.03
|
)
|
(0.03
|
)
|
(0.09
|
)
|
(0.34
|
)
|
|||||
|
|||||||||||||
Weighted
average shares outstanding
|
48,540,133
|
47,986,242
|
48,369,873
|
35,490,398
|
|||||||||
|
|||||||||||||
Comprehensive
loss:
|
|||||||||||||
|
|||||||||||||
Net
loss
|
$
|
(1,602,117
|
)
|
$
|
(1,195,665
|
)
|
$
|
(4,160,457
|
)
|
$
|
(11,049,422
|
)
|
|
|
|||||||||||||
Foreign
currency translation adjustment
|
98,390
|
55,209
|
(23,560
|
)
|
150,458
|
||||||||
Unrealized
loss on investment
|
(280,500
|
)
|
-
|
(663,000
|
)
|
-
|
|||||||
|
|||||||||||||
Comprehensive
loss
|
$
|
(1,784,227
|
)
|
$
|
(1,140,456
|
)
|
$
|
(4,847,017
|
)
|
$
|
(10,898,964
|
)
|
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, 2007
|
6,407
|
$
|
6
|
-
|
$
|
-
|
48,245,768
|
$
|
48,246
|
80,000
|
$
|
49,785,244
|
$
|
(238,097
|
)
|
$
|
(41,599,730
|
)
|
$
|
8,075,669
|
||||||||||||||
|
||||||||||||||||||||||||||||||||||
Sale
of preferred stock
|
200
|
0
|
(20,000
|
)
|
20,000
|
-
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Sale
of common stock
|
60,000
|
$
|
60
|
(60,000
|
)
|
$
|
59,940
|
-
|
||||||||||||||||||||||||||
Conversion
of preferred stock to common
|
(320
|
)
|
0
|
56,640
|
$
|
57
|
(56
|
)
|
-
|
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Stock
issued for compensation
|
352,937
|
353
|
$
|
238,123
|
$
|
238,476
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Fair
value of options and warrants issued for compensation and
financing
|
$
|
1,022,160
|
$
|
1,022,160
|
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Preferred
stock dividends
|
||||||||||||||||||||||||||||||||||
Series
A
|
$
|
(106,843
|
)
|
$
|
(106,843
|
)
|
||||||||||||||||||||||||||||
Series B | - | - |
$
|
- | $ | - | $ | - | ||||||||||||||||||||||||||
Stock
issued for preferred stock dividends
|
38,319
|
38
|
$
|
41,498
|
$
|
41,536
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Accumulated
other comprehensive loss
|
||||||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
$
|
(23,560
|
)
|
$
|
(23,560
|
)
|
||||||||||||||||||||||||||||
Unrealized
loss from marketable securities
|
$
|
(663,000
|
)
|
$
|
(663,000
|
)
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Net
loss
|
$
|
(4,160,457
|
)
|
$
|
(
4,160,457
|
)
|
||||||||||||||||||||||||||||
Balance
July 31, 2008
|
6,287
|
$
|
6
|
-
|
$
|
-
|
48,753,664
|
$
|
48,754
|
$
|
-
|
$
|
51,166,909
|
$
|
(924,657
|
)
|
$
|
(45,867,030
|
)
|
$
|
4,423,981
|
|
2008
|
2007
|
|||||
|
|
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|||||
Net
loss
|
$
|
(
4,160,457
|
)
|
$
|
(11,049,422
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
used
by operating activities:
|
|||||||
Depreciation
and amortization
|
453,623
|
226,309
|
|||||
Stock
based compensation
|
865,206
|
2,600,378
|
|||||
Financing
costs
|
395,430
|
5,989,488
|
|||||
Dividends
|
-
|
164,819
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
|
319,886
|
(2,266,830
|
)
|
||||
Inventory
|
424,225
|
(391,865
|
)
|
||||
Prepaid
expenses
|
(65,927
|
)
|
(335,974
|
)
|
|||
Other
receivables
|
(1,515,028
|
)
|
(613,707
|
)
|
|||
Increase
(decrease) in:
|
|||||||
Accounts
payable and accrued expenses
|
(792,797
|
)
|
(2,309,944
|
)
|
|||
Due
to related parties
|
(41,945
|
)
|
(44,419
|
)
|
|||
|
|||||||
Net
cash used in operating activities
|
(4,117,784
|
)
|
(8,031,167
|
)
|
|||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchases
of property and equipment
|
(110,416
|
)
|
(206,662
|
)
|
|||
Purchases
of intangible assets
|
(180,123
|
)
|
(136,854
|
)
|
|||
Acquisitions
|
(763,936
|
)
|
(1,358,470
|
)
|
|||
Cash
acquired from acquisitions
|
-
|
35,515
|
|||||
|
|||||||
Net
cash used by investing activities
|
(1,054,475
|
)
|
(1,666,471
|
)
|
|||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from (repayment of) loans
|
10,453,421
|
(1,124,447
|
)
|
||||
Proceeds
from sale of stock
|
-
|
14,677,980
|
|||||
Redemption
of preferred stock
|
-
|
(1,818,100
|
)
|
||||
Preferred
stock dividend paid
|
(127,541
|
)
|
(606,597
|
)
|
|||
|
|||||||
Net
cash provided by financing activities
|
10,325,880
|
11,128,836
|
|||||
|
|||||||
Effect
of exchange rate changes on cash
|
(18,882
|
)
|
85,737
|
||||
|
|||||||
Net
increase in cash
|
5,134,739
|
1,516,935
|
|||||
|
|||||||
Cash
and cash equivalents, beginning of period
|
916,257
|
1,377,972
|
|||||
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
6,050,996
|
$
|
2,894,907
|
|||
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
376,909
|
$
|
359,907
|
|||
Income
taxes
|
-
|
-
|
|
2008
|
2007
|
|||||
Raw
materials
|
$
|
2,057,969
|
$
|
1,789,051
|
|||
Work
in process
|
22,745
|
334,813
|
|||||
Finished
goods
|
421,578
|
802,653
|
|||||
|
|||||||
Total
inventory
|
$
|
2,502,292
|
$
|
2,926,517
|
|
2008
|
2007
|
|||||
Deposits
|
$
|
117,698
|
$
|
191,352
|
|||
Value
added tax (VAT)
|
284,855
|
293,934
|
|||||
Other
receivables
|
315,265
|
206,274
|
|||||
|
|||||||
Total
|
$
|
717,818
|
$
|
691,560
|
|
|
2008
|
|
2007
|
|
||
Machinery
and equipment
|
|
$
|
1,093,531
|
|
$
|
983,115
|
|
Accumulated
depreciation
|
|
|
(697,902
|
)
|
|
(560,377
|
)
|
|
|
|
|
|
|
|
|
Net
property and equipment assets
|
|
$
|
395,629
|
|
$
|
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
|
|||||
Convertible
debenture raise costs (expected life of 7 years)
|
1,694,893
|
-
|
|||||
Product
development (weighted average life of 3 years)
|
119,491
|
-
|
|||||
Licenses
(weighted average life of 2 years)
|
100,000
|
100,000
|
|||||
|
|||||||
Total
amortized identifiable intangible assets - gross carrying
value
|
2,871,493
|
1,041,944
|
|||||
Less
accumulated amortization
|
(404,897
|
)
|
(134,266
|
)
|
|||
|
|||||||
Net
|
2,466,596
|
907,678
|
|||||
|
|||||||
Residual
value
|
$
|
2,466,596
|
$
|
907,678
|
2008
|
$
|
167,236
|
||
2009
|
430,189
|
|||
2010
|
349,054
|
|||
2011
|
325,330
|
|||
2012
and thereafter
|
1,194,787
|
|||
|
||||
Total
|
$
|
2,466,596
|
|
2008
|
2007
|
|||||
Beginning
goodwill balance at November 1
|
$
|
3,099,575
|
$
|
1,060,906
|
|||
Goodwill
recorded upon acquisition
|
-
|
2,038,669
|
|||||
|
|||||||
Period
End Balance
|
$
|
3,099,575
|
$
|
3,099,575
|
|
Nine
months ended
July
31, 2008
|
Year
ended
October
31, 2007
|
|||||||||||
Number
|
Weighted
Average Exercise Price
|
Number
|
Weighted
Average Exercise Price
|
||||||||||
|
|
|
|||||||||||
Outstanding
at beginning of the period
|
36,519,318
|
$
|
1.39
|
13,410,000
|
$
|
1.29
|
|||||||
Granted
during the period
|
935,000
|
1.43
|
23,473,418
|
1.44
|
|||||||||
Exercised
during the period
|
-
|
-
|
(34,100
|
)
|
1.00
|
||||||||
Terminated
during the period
|
-
|
-
|
(330,000
|
)
|
1.22
|
||||||||
|
|||||||||||||
Outstanding
at the end of the period
|
37,454,318
|
$
|
1.39
|
36,519,318
|
$
|
1.39
|
|||||||
|
|||||||||||||
Exercisable
at the end of the period
|
36,860,517
|
$
|
1.39
|
35,467,518
|
$
|
1.39
|
Range
of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average Contractual Life (Yrs)
|
Total
Vested
|
|||||||
0.50
|
750,000
|
2.75
|
750,000
|
|||||||
0.58
|
400,000
|
2.67
|
400,000
|
|||||||
1.00
|
5,845,900
|
3.82
|
5,789,800
|
|||||||
1.30
|
15,171,709
|
3.43
|
14,879,059
|
|||||||
1.50
|
525,000
|
3.35
|
435,250
|
|||||||
1.70
|
14,701,709
|
3.41
|
14,566,409
|
|||||||
1.80
|
60,000
|
4.15
|
40,000
|
|||||||
Totals
|
37,454,318
|
3.30
|
36,860,517
|
Non-Current
|
2008
|
2007
|
|||||
|
|
|
|||||
Net
Operating Loss Carry Forward
|
$
|
14,626,000
|
$
|
10,455,000
|
|||
Valuation
Allowance
|
(14,626,000
|
)
|
(10,455,000
|
)
|
|||
|
|||||||
Net
Deferred Tax Asset
|
$
|
-
|
$
|
-
|
2008
|
$
|
98,452
|
||
2009
|
360,552
|
|||
2010
|
344,368
|
|||
2011
|
315,302
|
|||
2012
and thereafter
|
190,121
|
|||
|
||||
Total
|
$
|
1,308,794
|
|
July
31,
2008
|
October
31, 2007
|
|||||
The
Company, through its UK subsidiary Coda Octopus Products Ltd has
a 7 year
unsecured loan note ; interest rate of 12% annually; repayable at
borrower’s instigation or convertible into common stock when the share
price reaches $3.
|
|
198,060
|
|
200,000
|
|||
|
|||||||
The
Company, through its US subsidiary Innalogic, Inc., had a capital
lease
for equipment for monthly payments of $2,369.74 for 24
months.
|
-
|
41,091
|
|||||
|
|||||||
The
Company has an unsecured revolving line of credit with a US bank
through
its US subsidiary Colmek Systems Engineering, for $50,000 with an
interest
rate of 12.5% annually; repayable at borrower’s
instigation.
|
11,181
|
17,181
|
|||||
|
|||||||
The
Company through its US subsidiary Colmek Systems Engineering, has
an
outstanding loan note payable for the financing of a truck over 60
months;
monthly payments of $897.18; annual interest rate of
10.99%.
|
22,630
|
29,145
|
|||||
|
|||||||
The
Company through its US subsidiary Colmek Systems Engineering, has
an
unsecured loan note payable to a director and former officer of the
Company.
|
16,104
|
34,104
|
|||||
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%
|
12,219,921
|
-
|
|||||
|
|||||||
Total
|
$
|
12,467,896
|
$
|
321,521
|
|||
|
|||||||
Less:
current portion
|
38,051
|
56,382
|
|||||
|
|||||||
Total
long-term portion
|
$
|
12,429,845
|
$
|
265,139
|
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
|
$
|
11,026,496
|
||
Net
loss
|
(11,261,417
|
)
|
||
Loss
per common share
|
(0.35
|
)
|
|
Contracting
|
Products
|
Corporate
|
Totals
|
|||||||||
Revenues
|
$
|
4,806,132
|
$
|
6,832,011
|
$
|
1,594,297
|
$
|
13,232,440
|
|||||
Operating
profit/(loss)
|
(477,367
|
)
|
1,533,634
|
(
4,262,322
|
)
|
(3,206,055
|
)
|
||||||
Identifiable
assets
|
6,139,546
|
4,331,717
|
9,654,478
|
20,125,741
|
|||||||||
Capital
expenditure
|
13,999
|
170,543
|
225,486
|
410,028
|
|||||||||
Selling,
general & administrative
|
2,504,911
|
2,014,060
|
4,651,418
|
9,170,389
|
|||||||||
Depreciation
& amortization
|
196,161
|
66,086
|
191,376
|
453,623
|
|||||||||
Interest
expense
|
74,522
|
254,229
|
722,430
|
1,051,181
|
2008
|
2007
|
||||||
Revenues:
|
|
|
|||||
United
States
|
$
|
4,662,474
|
$
|
7,129,507
|
|||
United
Kingdom
|
6,975,669
|
6,723,806
|
|||||
Corporate
and other
|
1,594,297
|
-
|
|||||
Total
Revenues
|
$
|
13,232,440
|
$
|
13,853,313
|
|||
|
|||||||
Assets:
|
|||||||
United
States
|
$
|
5,087,371
|
$
|
5,529,261
|
|||
United
Kingdom
|
5,383,892
|
6,597,202
|
|||||
Corporate
and other
|
9,654,478
|
1,454,999
|
|||||
Total
Assets
|
$
|
20,125,741
|
$
|
13,581,462
|
·
|
marine
geophysical survey (commercial), which focuses around oil and gas,
construction and oceanographic research and exploration, where we
market
to survey companies, research institutions, salvage companies. This
was
our original focus, from original founding in 1994, with current
products
spanning geophysical data collection and analysis, through to printers
to
output geophysical data collected by sonar. We believe that our marine
geophysical survey markets are experiencing rapid growth due to:
1)
successful new product introductions in recent periods; 2)
market-proximity benefits derived from 2004 relocation to the United
States; 3) initial market penetration into new sub-sectors of the
marine
geophysical survey markets; 4) the high price of oil and gas in the
past
few years, resulting in unprecedented exploration and production
activity.
|
·
|
underwater
defense/ security, where we market to ports and harbors, state and
federal
government agencies and defense contractors. We started to focus
on this
market following the acquisition of OmniTech AS, a Norwegian Company,
in
December 2002, a company which had developed a prototype system,
the
Echoscope™,
a unique, patented instrument which permits accurate three-dimensional
visualization, measurement, data recording and mapping of underwater
objects. We have recently completed developing and commenced marketing
this first real time, high resolution, three-dimensional underwater
sonar
imaging device which we believe has particularly important applications
in
the fields of port security, defense and undersea oil and gas
development.
|
o |
First
mover advantage in 3-D sonar markets based on our patented technology,
our
research and development efforts and extensive and successful testing
in
this area that date back almost two decades as well as broad customer
acceptance.
|
o |
Early
recognition of need for 3-D real-time sonar in defense/security
applications.
|
o |
Expansion
into new geographies, such as North
America.
|
o |
Expansion
into new commercial markets, such as construction and dredging, with
innovative products.
|
o |
Recent
sole source classification for one of our products and its derivatives
by
certain government procurement
agencies.
|
o |
we
are now starting to bid (sometimes in partnership, where areas
of focus
other than underwater sonar and wireless video surveillance capability
are
demanded) for complete port security and other solutions. We have
bid on a
small number of these in the last six months and hope for our first
successes shortly. We have not yet been awarded any contracts for
the
purchase of complete solutions. However, in March of 2008, we received
a
$1.6 million follow on order from the U.S. Department of Defense
to
deliver an additional next-generation Underwater Inspection System
(UIS)™
for TSWG and other potential users, to enable rapid underwater
searches in
the nation’s ports and waterways. In addition to the additional hardware
(we delivered four original units in December of 2007) TSWG has
committed
to a $1 million development project to help advance the product.
The
contract includes additional options which, if fully funded, would
require
us to deliver further UIS™ systems in fiscal 2009. The contract was
awarded to us on a sole source basis, which means that the product
is
considered to be available from one source only and under Federal
rules
may be acquired from that source without competitive bidding process.
Although this is not a complete port security system, it represents
the
first step towards achieving this.
|
o |
we
are currently reviewing the possibility of launching next year,
in
partnership with others, a services business based on our product
set.
This business will be port based and will, for example, provide
ship hull
inspections by way of rental of equipment and provision of a team
to
operate the equipment for any ship entering that particular
port.
|
|
·
|
Continue
to sell our current range of products into a mixture of commercial,
defense and security markets, increasing sales of these products
over the
course of this financial year - we have seen strong growth over the
course
of the year so far.
|
|
·
|
Start
to sell complete turnkey systems based around our leading Echoscope™ 3-D
technology, to open markets in law enforcement and inspection - a
great
deal of our R&D expenditure has been directed towards refining our
product and completing sales this year that are currently in our
pipeline,
with first deliveries occurring in this financial
year.
|
|
·
|
Continue
to deliver to the Coast Guard on the contract we were awarded last
July.
Work on stage 2 began in the second quarter of this year and continues
until at least the end of the financial
year.
|
·
|
Deliver
on our first port security solution contract through the provision
of our
unique 3-D technology and other products and services, enabling us
to
provide complete solutions.
|
|
·
|
Leverage
our subsidiaries to take advantage of our lead in underwater sonar
technology by cross marketing all group products and services from
each
company.
|
|
·
|
Continue
to review and refocus our cost base where necessary to achieve a
cost
level commensurate with our current level of
activity.
|
|
·
|
Insufficient
disclosure controls in that we have experienced insufficient communication
between the various subsidiaries and departments and a lack of timely
financial reporting.
|
|
|
|
·
|
Insufficient
accounting procedures relating to areas including: revenue booking,
inventory control, expense sign off procedures and shipping
documentation.
|
Directors elected: | Paul Nussbaum, Jason Reid, Rodney Peacock | |
Proposal
1:
|
(Directors):
for 37,858,466; Withheld 10,422.
|
|
Proposal
2:
|
(2008
Employees, Directors, Officers and Consultants Stock Option and Stock
Award Plan): For 29,156,123; Against 17,692; Abstained
18,024.
|
|
Proposal
3:
|
(Increase
Authorized Share Capital): for 37,815,604; Against 39,339; Abstained
13,962.
|
|
Proposal
4:
|
(Appointment
of Audition): For 37,753,803; Against 10,015; Abstained
105,091.
|
31
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant
to
Rule 13a-14(a)
|
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:
September 15, 2008
|
|
/s/ Jason
Reid
|
|
Jason
Reid
|
|
|
President
and Chief Executive Officer
|
|
|
|
Date:
September 15, 2008
|
|
/s/ Jody
E. Frank
|
|
Jody
Frank
|
|
|
Chief
Financial Officer
|