Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets and Goodwill

Intangible Assets and Goodwill

3 Months Ended

Jan. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

The Company accounts for intangible assets and goodwill in accordance with ASC 350. Goodwill and Other Intangible Assets, are evaluated on an annual basis, and when there is reason to believe that their values have been diminished or impaired write-downs will be included in results from operations.

The identifiable intangible assets acquired and their carrying value at January 31, 2011 and October 31, 2010 is:

	2011			2010
Customer relationships (weighted average life of 10 years)	$	724,243		$	723,127
Non-compete agreements (weighted average life of 3 years)		233,754			230,981
Patents (weighted average life of 10 years)		95,191			86,539
Licenses (weighted average life of 2 years)		100,000			100,000
Total amortized identifiable intangible assets - gross carrying value		1,153,188			1,140,647
Less accumulated amortization and impairment		(584,834	)		(600,908	)

Net		568,354			539,739

Residual value	$	568,354		$	539,739

Our acquisition of Dragon Design Ltd (“Dragon”) in December 2008 resulted in the valuation of Dragon’s customer relationships and covenants not to compete as intangible assets, which have an estimated useful life of 3 years each, and as such are being amortized on a straight-line basis over that period. In addition, we recognized goodwill of $282,533 that represents the excess of the purchase price we paid over the fair value of Dragon’s net tangible and intangible assets we acquired. See Note 15 for current information on the status of Dragon Design Ltd.

Our acquisition of the assets of Tactical Intelligence, LLC (“Tactical”) In November 2008 resulted in the valuation of Tactical’s customer relationships and covenants not to compete as intangible assets, which have an estimated useful life of 3 years each, and as such are being amortized monthly over that period. In addition, we recognized goodwill of $142,430 that represents the excess of the purchase price we paid over the fair value of Tactical’s net tangible and intangible assets acquired. See Note 15 for current information on the status of Tactical Intelligence, LLC.

Estimated annual amortization expense as of January 31, 2011 is as follows:

2011 – remaining period	$	57,523
2012		76,696
2013		76,696
2014 and thereafter		357,439

Total	$	568,354

Amortization of patents, customer relationships, non-compete agreements and licenses included as a charge to operations amounted to $19,533 and $38,477 for the period ended January 31, 2011 and 2010, respectively. Goodwill is not being amortized.

As a result of the acquisitions of Martech, Colmek, Dragon and Tactical, the Company has goodwill in the amount of $3,350,168 as of January 31, 2011.The carrying amount of goodwill as of January 31, 2011 and October 31, 2010 is recorded below.

	2011			2010
Beginning goodwill balance at November 1:
Coda Octopus Colmek, Inc.	$	2,038,669		$	2,038,669
Coda Octopus Martech Ltd		998,591			998,591
Coda Octopus Products Ltd		62,315			62,315
Goodwill recorded upon acquisition:
Dragon Design Ltd		282,533			282,533

Total		3,382,108			3,382,108

Less impairment		(31,940	)		-

Balance at January 31, 2011 and October 31, 2010	$	3,350,168		$	3,382,108

Considerable management judgment is necessary to estimate fair value. We enlist the assistance of an independent valuation consultant to determine the values of our intangible assets and goodwill, both at the dates of acquisition and at specific dates annually. Based on various market factors and projections used by management, actual results could vary significantly from managements’ estimates.

See Note 15 of the Unaudited Condensed Consolidated Financial Statement for current information on the status of Dragon and Tactical.

- 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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