UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from ______________ to ______________
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of Incorporation or organization) |
(I.R.S.
Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of the issuer’s common stock, $ par value as of September 16, 2024 is .
INDEX
| 2 |
PART I. FINANCIAL INFORMATION
CODA OCTOPUS GROUP, INC.
Consolidated Balance Sheets
July 31, 2024 and October 31, 2023
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Inventory | ||||||||
| Unbilled Receivables | ||||||||
| Prepaid Expenses | ||||||||
| Other Current Assets | ||||||||
| Total Current Assets | ||||||||
| FIXED ASSETS | ||||||||
| Property and Equipment, net | ||||||||
| OTHER ASSETS | ||||||||
| Goodwill | ||||||||
| Intangible Assets, net | ||||||||
| Deferred Tax Asset | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
CODA OCTOPUS GROUP, INC.
Consolidated Balance Sheets (Continued)
July 31, 2024 and October 31, 2023
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses and Other Current Liabilities | ||||||||
| Deferred Revenue | ||||||||
| Total Current Liabilities | ||||||||
| LONG TERM LIABILITIES | ||||||||
| Deferred Tax Liability, net | ||||||||
| Deferred Revenue, less current portion | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common Stock, $ par value; shares authorized, issued and outstanding as of July 31, 2024 and shares issued and outstanding as of October 31, 2023 | ||||||||
| Treasury Stock | ( | ) | ( | ) | ||||
| Additional Paid-in Capital | ||||||||
| Accumulated Other Comprehensive Loss | ( | ) | ( | ) | ||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
CODA OCTOPUS GROUP, INC.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, General & Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| INCOME FROM OPERATIONS | ||||||||||||||||
| OTHER INCOME | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| INCOME BEFORE INCOME TAX EXPENSE | ||||||||||||||||
| INCOME TAX (EXPENSE) BENEFIT | ||||||||||||||||
| Current Tax (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deferred Tax (Expense) Benefit | ( | ) | ( | ) | ||||||||||||
| Total Income Tax (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME | $ | $ | $ | $ | ||||||||||||
| NET INCOME PER SHARE: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| WEIGHTED AVERAGE SHARES: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| NET INCOME | $ | $ | $ | $ | ||||||||||||
| Foreign Currency Translation Adjustment | ||||||||||||||||
| Total Other Comprehensive Income | $ | $ | $ | $ | ||||||||||||
| COMPREHENSIVE INCOME | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
CODA OCTOPUS GROUP, INC.
Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months and Nine Months Ended July 31, 2024 and 2023
(Unaudited)
| Additional | Other | |||||||||||||||||||||||||||
| Common Stock | Paid-in | Comprehensive | Accumulated | Treasury | ||||||||||||||||||||||||
| Shares | Amount | Capital | Income (Loss) | Deficit | Stock | Total | ||||||||||||||||||||||
| Balance, October 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock issued for options exercised and stock grants | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock issued for options exercised and stock grants | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance, April 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock issued for options exercised and stock grants | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Balance, October 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock issued for options exercised and stock grants | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Treasury Stock | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Stock issued for options exercised and stock grants | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net Income | - | - | - | - | 1,415,238 | - | 1,415,238 | |||||||||||||||||||||
| Balance, April 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock issued for options exercised and stock grants | 6,250 | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance, July 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
CODA OCTOPUS GROUP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended July 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of intangible assets | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ||||||||
| Gain on sale of assets | ( | ) | ||||||
| (Increase) decrease in operating assets: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Unbilled receivables | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Other current assets | ( | ) | ||||||
| Increase (decrease) in operating liabilities: | ||||||||
| Accounts payable and other current liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Net Cash provided by Operating Activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of other intangible assets | ( | ) | ( | ) | ||||
| Proceeds from the sale of property and equipment | ||||||||
| Net Cash provided by (used in) Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Purchase of treasury stock | ( | ) | ( | ) | ||||
| Net Cash Used in Financing Activities | ( | ) | ( | ) | ||||
| EFFECT OF CURRENCY TRANSLATION ON CHANGES IN CASH AND CASH EQUIVALENTS | ||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Coda Octopus Group, Inc. (“Coda,” “the Company,” or “we”) operates two discrete operating business units. These are the Marine Technology Business (“Products Business,” or “Products Segment”) and the Marine Engineering Business (“Services Business,” “Engineering Business” or “Services Segment”).
The Marine Technology Business is an established supplier of underwater technologies and solutions to the underwater and diving markets. Its products and solutions include both hardware and software for which it is the patent holder, innovator, developer, manufacturer and distributor. It has key proprietary 4D/5D/6D imaging sonar technology marketed under the name of Echoscope® and Echoscope PIPE® and diving technology marketed under the name of CodaOctopus® DAVD (Diver Augmented Vision Display). We believe that the Echoscope® sonar series is the only sonar that can generate multiple real time 3D images of moving objects underwater in zero visibility conditions. In 2021, the Marine Technology Business started marketing the DAVD tethered system. The requirements for the DAVD solution emanated from the Office of Naval Research as part of its Future Naval Requirements Program. The DAVD embeds inside of the diver’s head-up display (HUD) a pair of transparent glasses which is used as the data hub for displaying real time data used for the diving mission to the diver. Amongst other things, it allows both the diver underwater and the dive supervisor on the surface to share the same data or visualize the underwater scene. In addition, by combining the DAVD solution with the Echoscope®, dive operations can be performed in zero visibility conditions. These conditions are a common barrier which impinges on the ability to perform these activities and therefore the DAVD solution combined with the Echoscope® is a real requirement for these operations. In addition, in fiscal year 2023 we were contracted by the US Navy and an allied foreign navy to develop the untethered version of the DAVD technology, for the target market of special forces (referred to as “DAVD Hardening Program”). Under the DAVD Hardening Program, we supplied in fiscal year 2023 eight untethered systems to these customers for their ongoing evaluation and have since been working on and supplying further hardening features for the DAVD untethered system which arise from the ongoing field evaluation by our customers under the DAVD Hardening Program.
The Engineering Business is an established sub-contractor to the prime defense contractors and generally supplies proprietary sub-assemblies for incorporation into broader mission critical defense systems. These sub-assemblies are typically supplied for the life of the program. The Marine Engineering Business’ scope of services for these defense programs typically covers: “concept, design, prototype, manufacture, and post-sale support”. The manufacturing contracts for these sub-assemblies can run over many years.
The consolidated financial statements include the accounts of Coda Octopus Group, Inc. and its wholly owned domestic and foreign subsidiaries. All of its subsidiaries are wholly owned by the Company. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues including unbilled and deferred revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates related to the percentage of completion method used to account for contracts including costs and earnings in excess of billings, billings in excess of costs and estimated earnings and the valuation of goodwill.
NOTE 2 – REVENUE RECOGNITION
The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s Topic 606, Revenue from Contracts with Customers (“Topic 606”).
Topic 606 has established a five-step process to determine the amount of revenue to record from contracts with customers. The five steps are:
| ● | Identify the contract with the customer; | |
| ● | Identify the performance obligations in the contract with customer; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to performance obligations; and | |
| ● | Recognize revenue when (or as) a performance obligation is satisfied. |
Our revenues are earned under written contracts with our customers. The Marine Technology Business model includes both rentals with associated services and outright sales of underwater technologies which are utilized for a wide range of subsea applications along with technical support services. The Engineering Business supplies engineering services to mainly the prime defense contractors which may include concept, design, prototyping, and contract manufacturing. Our contracts do not include the possibility for additional consideration as the determination for the contract price does not involve having to consider potential additional variable consideration. Our sales do not include a right of return by the customer. Where there are contractual failures giving rise to post-sale obligations these are addressed under our warranty or through life support provisions.
| 8 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 2 – REVENUE RECOGNITION (Continued)
Regarding our Marine Technology Business, all our products are sold on a stand-alone basis and those market prices are evidence of the value of the products. To the extent that we also provide services (e.g., installation, training, post-sales technical support, customization of our technology for bespoke application, etc.), those services are either included as part of the product or are subject to written contracts based on the stand-alone value of those services. Revenue from the sale of services is recognized when those services have been performed.
Revenue derived by the Marine Technology Business from subscription package offerings or equipment rental is recognized when performance obligations are met, in particular, on a daily basis during the subscription or rental period.
For arrangements with multiple performance obligations, we recognize product revenue by allocating the transaction revenue to each performance obligation based on a relative standalone selling price basis and recognize revenue when performance obligations are met including when equipment is delivered, and for rental of equipment, when installation, training and other services prescribed by the contract are performed.
Our contracts sometimes require customer payments in advance of revenue recognition. These are recognized as revenue when the Company has fulfilled its obligations under the respective contracts. Until such time, we recognize these prepayments as deferred revenue.
For software license sales for which any services rendered are not considered distinct to the functionality of the software, we recognize revenue upon delivery of the software by the provision of the software installers and activation codes to the software.
With respect to revenues related to our Services Business, there are contracts in place that specify the fixed hourly rate and other reimbursable costs to be billed based on material and direct labor hours incurred and revenue is recognized on these contracts based on material and the direct labor hours incurred. Revenues from fixed-price contracts are recognized on the percentage of completion method, measured by the percentage of costs incurred (materials and direct labor hours) to date to estimated total cost (materials and direct labor hours) for each contract. This method is used as we consider expenditures for direct materials and labor hours to be the best available measure of progress on these contracts.
On a quarterly basis, we examine all our fixed-price contracts to determine if there are any losses to be recognized during the period. Any such loss is recorded in the quarter in which the loss first becomes apparent based upon costs incurred to date and the estimated costs to complete as determined by experience from similar contracts. Variations from estimated contract performance could result in adjustments to operating results.
Recoverability of Deferred Costs
In accordance with Topic 606, we defer certain costs on projects for service revenue. Deferred costs consist primarily of incremental direct costs to customize and install systems, as defined in individual customer contracts, including costs to acquire hardware and software from third parties and payroll costs for our employees and other third parties. The pricing of these service contracts is intended to provide for the recovery of these types of deferred costs over the life of the contract.
| 9 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 2 – REVENUE RECOGNITION (Continued)
We recognize such costs in accordance with our revenue recognition policy by contract. For revenue recognized under the percentage of completion method, costs are recognized as contract deliverables are provided in accordance with the percentage of completion calculation. For revenue recognized over time, costs are recognized ratably over the term of the contract, commencing on the date of revenue recognition. At each quarterly balance sheet date, we review deferred costs, to ensure they are ultimately recoverable.
Any anticipated losses on uncompleted contracts are recognized when evidence indicates the estimated total cost of a contract exceeds its estimated total revenue.
Other Revenue Disclosures
See Notes 12 and 13 – Segment Analysis and Disaggregation of Revenue. These Notes provide disclosure of our revenue by segment (Products Business versus Services Business); revenues from external customers and cost of those revenues; and split of revenue by geography including in and outside the USA.
NOTE 3 – COST OF GOODS SOLD
Our
cost of goods sold includes the cost of materials and related direct costs. With respect to sales made through the operating segments’
sales agents distribution network, we include in our costs of goods sold commissions paid to agents for the specific sales they make.
Without using agents, we would not be eligible to participate in the Request for Proposals (“RFP”) for these sales on which
we incur commission costs. All other sales-related expenses, including those related to unsuccessful bids, are included in selling, general
and administrative (SG&A) costs. As a component of cost of goods sold, sales commission costs in the three month period ended July
31, 2024, and 2023 were $
NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term nature of these instruments.
NOTE 5 – FOREIGN CURRENCY TRANSLATION
Assets and liabilities are translated at the prevailing exchange rates at the balance sheet dates. Related revenues and expenses are translated at average exchange rates in effect during the reporting period. Stockholders’ equity is recorded at historical exchange rates. Resulting translation adjustments are recorded as a separate component in stockholders’ equity as part of accumulated other comprehensive income or (loss) as may be appropriate. Foreign currency transaction gains and losses are included in the consolidated statements of income and comprehensive income.
| 10 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 6 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
Certified Deposit Interest Bearing Accounts as of July 31, 2024 and October 31, 2023.
The
Company has certified deposit interest-bearing accounts with its current bankers HSBC NA and HSBC UK. These interest-bearing accounts
are for rolling fixed short-term periods not exceeding three (3) months and are classified in our financial statements as “cash
equivalent”. In addition, we have an interest-bearing deposit account with HSBC UK that tracks the Bank of England base rate, and
which has no access restrictions and has a current rate of
| Currency Denomination | Bank | July 31, 2024 | October 31, 2023 | |||||||||||||||
| Amount | Rate | Amount | Rate | |||||||||||||||
| USD | HSBC | $ | % | $ | % | |||||||||||||
| GBP | HSBC | £ | % | £ | % | |||||||||||||
| GBP (Unrestricted access) | HSBC | £ | % | £ | % | |||||||||||||
| GBP (Unrestricted access) | HSBC | £ | % | |||||||||||||||
| USD | Jyske Bank (Denmark) | $ | % | |||||||||||||||
Inventory consisted of the following as of:
| July 31, | October 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials and parts | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total Inventory | $ | $ | ||||||
Other current assets consisted of the following as of:
| July 31, | October 31, | |||||||
| 2024 | 2023 | |||||||
| Deposits | $ | $ | ||||||
| Other Corporation Tax Receivables and Prepaid | ||||||||
| Employee Retention Credit Receivables | ||||||||
| Other Receivables | ||||||||
| Total Other Current Assets | $ | $ | ||||||
Property and equipment consisted of the following as of:
| July 31, | October 31, | |||||||
| 2024 | 2023 | |||||||
| Buildings | $ | $ | ||||||
| Land | ||||||||
| Office machinery and equipment | ||||||||
| Rental assets | ||||||||
| Furniture, fixtures and improvements | ||||||||
| Totals | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total Property and Equipment, net | $ | $ | ||||||
Depreciation
expense for the three months ended July 31, 2024, and 2023 was $
| 11 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 6 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (Continued)
Property and equipment, net, by geographic areas were as follows:
| July 31, | October 31, | |||||||
| 2024 | 2023 | |||||||
| USA | $ | $ | ||||||
| Europe | ||||||||
| Total Property and Equipment, net | $ | $ | ||||||
Accrued Expenses and Other Current Liabilities consisted of the following as of:
| July 31, | October 31, | |||||||
| 2024 | 2023 | |||||||
| Accruals | $ | $ | ||||||
| Other Tax Payables | ||||||||
| Employee Payroll and Pensions | ||||||||
| Total Other Current Liabilities | $ | $ | ||||||
Total Other Income, net consisted of the following:
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| July 31, | July 31, | July 31, | July 31, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Grant Income | $ | $ | $ | $ | ||||||||||||
| Other | ||||||||||||||||
| Interest | $ | |||||||||||||||
| Total Other Income, net | $ | $ | $ | $ | ||||||||||||
NOTE 7 – CONTRACTS IN PROGESS
Costs
and estimated earnings in excess of billings on uncompleted contracts represent accumulated project expenses and fees which have not
been invoiced to customers as of the balance sheet date. These amounts are stated on the consolidated balance sheets as Unbilled Receivables
and as of July 31, 2024, and October 31, 2023, these were of $
Deferred
Revenue as of July 31, 2024, and October 31, 2023, was respectively $
Sales
of equipment include a separate performance obligation for warranty or TLS, the latter may be optionally purchased by the customer. This
is treated as deferred revenue which is amortized over the relevant obligation period (12 months is our standard warranty or 36 or 60-months
from the date of delivery for our TLS product). These amounts are stated on the consolidated balance sheets as a component of Deferred
Revenue and were $
| 12 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 8 – CONCENTRATIONS
Significant Customers
During
the three months ended July 31, 2024, the Company had one customer from whom it generated sales greater than 10% of net revenues. Revenue
from this customer was $
During
the three months ended July 31, 2023, the Company had three customers from whom it generated sales greater than 10% of net revenues. Revenue
from these customers was $
During
the nine months ended July 31, 2024, the Company had one customer from whom it generated sales greater than 10% of net revenues. Revenue
from this customer was $
During
the nine months ended July 31, 2023, the Company had one customer from whom it generated sales greater than 10% of net revenues. Revenue
from this customer was $
NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS
On October 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 will affect how we report segment information, starting with our Form 10-K for the year ended October 31, 2025, and our quarterly reports on Form 10-Q starting with our quarterly report for the quarter ended January 31, 2026. The ASU requires that we provide disclosures of significant segment expenses and other segment items that are regularly provided to our Chief Operating Decision Maker (“the CODM”) and included in each reported measure of segment profit or loss. We will also have to disclose other segment items by reportable segment (i.e., the difference between reported segment revenues less the significant segment expenses (which are disclosed) less reported segment profit or loss). The information needed for these disclosures is available, but we are determining the best way to provide that information for these required segment disclosures.
On December 14, 2023, the FASB issued Accounting Standards Update 2023-09 entitled Improvements to Income Tax Disclosures (ASU 2023-09), which is primarily applicable to public companies and requires a significant expansion of the granularity of the income tax rate reconciliation as well as an expansion of other income tax disclosures. The majority of the disclosures will only be made on an annual basis, although there is a modest expansion of required quarterly income tax disclosures. The amendments in ASU 2023-09 require disclosure of specific income tax categories in the rate and reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. There are also additional disclosures related to taxes paid to local jurisdictions, and to income taxes paid. This information is currently available to the Company but was not a required disclosure. The Company expects to adopt ASU 2023-09 on November 1, 2025.
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| July 31, | July 31, | July 31, | July 31, | |||||||||||||
| Fiscal Period | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Numerator: | ||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Unexercised portion of options and restricted stock awards | ||||||||||||||||
| Diluted outstanding shares | ||||||||||||||||
| Net income per share | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
NOTE 11 – 2017 STOCK INCENTIVE PLAN
2017 Stock Incentive Plan
On December 6, 2017, the Board of Directors adopted the 2017 Stock Incentive Plan (the “2017 Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company, and to reward those individuals who contribute to the Company’s achievement of its economic objectives. The Plan was adopted subject to stockholders’ approval and was approved by Stockholders at the Company’s Annual General Meeting held on July 24, 2018.
The maximum number of shares of Common Stock allocated for issuance under the 2017 Plan is . The shares allocated for issuance under the 2017 Plan may, at the election of the Compensation Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the 2017 Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury.
During
the three month period ended July 31, 2024, the Company granted restricted
stock awards pursuant to the terms of the 2017 Plan, restricted
stock awards matured but were not issued as of July 31, 2024 and stock
awards which had previously matured were issued. No restricted stock awards were forfeited. The total stock compensation expense relating to issuances under the 2017 Plan
during the three month period ended July 31, 2024 and 2023 was $ and
$,
respectively. During the nine month period ended July 31, 2024 and 2023, stock compensation expense was $ (including $
As of July 31, 2024, there were shares available for future issuance under the 2017 Plan.
| 13 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 11 – 2017 STOCK INCENTIVE PLAN (Continued)
2021 Stock Incentive Plan
On July 12, 2021, the Board of Directors adopted the 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan was approved by the Company’s stockholders at its Annual General Meeting held on September 14, 2021. The 2021 Plan is identical to the 2017 Plan in all material respects, except that the number of shares allocated for issuance thereunder is .
The total number of shares available for issuance under the 2017 and 2021 Plans is .
NOTE 12 – SEGMENT ANALYSIS
We operate in two reportable segments, “Products Business” and “Service Business” which are managed separately based upon fundamental differences in their operations. Segment operating income is total segment revenue reduced by cost of revenues and operating expenses, Research and Development (“R&D”), and Selling, General & Administrative (“SG&A”) identifiable with the reporting business segment. Overheads include general corporate administrative costs.
The Company evaluates performance and resources based upon operating income.
The Net Revenues shown in this Note 12 in the tables below comprise sales which have been made externally and exclude intercompany sales (sales between companies in our Group). For segment reporting purposes we have, nevertheless, included in the Supplemental Disclosures in the tables below, information on intercompany sales in the reporting period. Intercompany sales are not included in Net Revenues.
Coda Octopus Products (with entities operating in the UK, USA and Denmark) constitute the Marine Technology Business (“Products Segment”) is a supplier to the underwater/subsea market and selling both hardware and software solutions which include imaging sonar technology solutions, diving and diving communications technology, geophysical products, rental equipment, customization, and field operations services. Coda Octopus Colmek, Inc. (a Utah corporation) and Coda Octopus Martech Ltd (a UK corporation) constitute the Marine Engineering Business (“Services Segment”) and are subcontractors mainly to prime defense contractors where they provide engineering services.
The following tables summarize segment asset and operating balances by reportable segment for the three months and nine months ended July 31, 2024 and 2023, respectively.
The Company’s reportable business segments sell their goods and services in four geographic locations:
| ● | Americas | |
| ● | Europe | |
| ● | Australia/Asia | |
| ● | Middle East/Africa |
| 14 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 12 – SEGMENT ANALYSIS (Continued)
Marine Technology Business (Products) | Marine Engineering Business (Services) | Overhead | Total | |||||||||||||
| Three Months Ended July 31, 2024 | ||||||||||||||||
| Net Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, General & Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ||||||||||||||
| Other Income | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Income (Loss) before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Expense) | ||||||||||||||||
| Current Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Deferred Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Income Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Supplemental Disclosures | ||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
| Intercompany sales that are not included in Net Revenues shown above | $ | $ | $ | $ | ||||||||||||
| Depreciation and Amortization | $ | $ | $ | $ | ||||||||||||
| Purchases of Long-lived Assets | $ | $ | $ | $ | ||||||||||||
| 15 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 12 – SEGMENT ANALYSIS (Continued)
Marine Technology Business (Products) | Marine Engineering Business (Services) | Overhead | Total | |||||||||||||
| Three Months Ended July 31, 2023 | ||||||||||||||||
| Net Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, General & Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ||||||||||||||
| Other Income | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Income (Loss) before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Expense) Benefit | ||||||||||||||||
| Current Tax (Expense) Benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Deferred Tax Benefit | ||||||||||||||||
| Total Income Tax (Expense) Benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Supplemental Disclosures | ||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | ( | ) | $ | ||||||||||
| Intercompany sales that are not included in Net Revenues shown above | $ | $ | $ | $ | ||||||||||||
| Depreciation and Amortization | $ | $ | $ | $ | ||||||||||||
| Purchases of Long-lived Assets | $ | $ | $ | $ | ||||||||||||
| 16 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 12 – SEGMENT ANALYSIS (Continued)
Marine Technology Business (Products) | Marine Engineering Business (Services) | Overhead | Total | |||||||||||||
| Nine Months Ended July 31, 2024 | ||||||||||||||||
| Net Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, General & Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ||||||||||||||
| Other Income | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Income (Loss) before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Expense) | ||||||||||||||||
| Current Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Deferred Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Income Tax (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Supplemental Disclosures | ||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
| Intercompany sales that are not included in Net Revenues shown above | $ | $ | $ | $ | ||||||||||||
| Depreciation and Amortization | $ | $ | $ | $ | ||||||||||||
| Purchases of Long-lived Assets | $ | $ | $ | $ | ||||||||||||
| 17 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 12 – SEGMENT ANALYSIS (Continued)
Marine Technology Business (Products) | Marine Engineering Business (Services) | Overhead | Total | |||||||||||||
| Nine Months Ended July 31, 2023 | ||||||||||||||||
| Net Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, General & Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ||||||||||||||
| Other Income | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Income (Loss) before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Expense) Benefit | ||||||||||||||||
| Current Tax (Expense) Benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Deferred Tax Benefit | ||||||||||||||||
| Total Income Tax (Expense) Benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Supplemental Disclosures | ||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | ( | ) | $ | ||||||||||
| Intercompany sales that are not included in Net Revenues shown above | $ | $ | $ | $ | ||||||||||||
| Depreciation and Amortization | $ | $ | $ | $ | ||||||||||||
| Purchases of Long-lived Assets | $ | $ | $ | $ | ||||||||||||
| 18 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 13 – DISAGGREGATION OF REVENUE
| For the Three Months Ended July 31, 2024 | ||||||||||||
| Marine | Marine | |||||||||||
| Technology | Engineering | Grand | ||||||||||
| Business | Business | Total | ||||||||||
| Disaggregation of Total Net Sales | ||||||||||||
| Primary Geographical Markets | ||||||||||||
| Americas | $ | $ | $ | |||||||||
| Europe | ||||||||||||
| Australia/Asia | ||||||||||||
| Middle East/Africa | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Major Goods/Service Lines | ||||||||||||
| Equipment Sales | $ | $ | $ | |||||||||
| Equipment Rentals | ||||||||||||
| Software Sales | ||||||||||||
| Engineering Parts | ||||||||||||
| Services | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Goods transferred at a point in time | $ | $ | $ | |||||||||
| Services transferred over time | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| 19 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 13 –DISAGGREGATION OF REVENUE (Continued)
| For the Three Months Ended July 31, 2023 | ||||||||||||
| Marine | Marine | |||||||||||
| Technology | Engineering | Grand | ||||||||||
| Business | Business | Total | ||||||||||
| Disaggregation of Total Net Sales | ||||||||||||
| Primary Geographical Markets | ||||||||||||
| Americas | $ | $ | $ | |||||||||
| Europe | ||||||||||||
| Australia/Asia | ||||||||||||
| Middle East/Africa | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Major Goods/Service Lines | ||||||||||||
| Equipment Sales | $ | $ | $ | |||||||||
| Equipment Rentals | ||||||||||||
| Software Sales | ||||||||||||
| Engineering Parts | ||||||||||||
| Services | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Goods transferred at a point in time | $ | $ | $ | |||||||||
| Services transferred over time | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| 20 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 13 –DISAGGREGATION OF REVENUE (Continued)
| For the Nine Months Ended July 31, 2024 | ||||||||||||
| Marine | Marine | |||||||||||
| Technology | Engineering | Grand | ||||||||||
| Business | Business | Total | ||||||||||
| Disaggregation of Total Net Sales | ||||||||||||
| Primary Geographical Markets | ||||||||||||
| Americas | $ | $ | $ | |||||||||
| Europe | ||||||||||||
| Australia/Asia | ||||||||||||
| Middle East/Africa | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Major Goods/Service Lines | ||||||||||||
| Equipment Sales | $ | $ | $ | |||||||||
| Equipment Rentals | ||||||||||||
| Software Sales | ||||||||||||
| Engineering Parts | ||||||||||||
| Services | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| Goods transferred at a point in time | $ | $ | $ | |||||||||
| Services transferred over time | ||||||||||||
| Total Revenues | $ | $ | $ | |||||||||
| 21 |
CODA OCTOPUS GROUP, INC.
Notes to the Consolidated Financial Statements
July 31, 2024 and October 31, 2023
NOTE 13 –DISAGGREGATION OF REVENUE (Continued)
| For the Nine Months Ended July 31, 2023 | ||||||||||||
| Marine | Marine | |||||||||||
| Technology | Engineering | Grand | ||||||||||
| Business | Business | Total | ||||||||||
| Disaggregation of Total Net Sales | ||||||||||||
| Primary Geographical Markets | ||||||||||||
| Americas | $ | $ | ||||||||||