Company Quick10K Filing
Coda Octopus Group
Price9.31 EPS0
Shares11 P/E20
MCap100 P/FCF20
Net Debt-9 EBIT4
TEV91 TEV/EBIT21
TTM 2019-07-31, in MM, except price, ratios
10-Q 2020-04-30 Filed 2020-06-15
10-Q 2020-01-31 Filed 2020-03-16
10-K 2019-10-31 Filed 2020-01-28
10-Q 2019-07-31 Filed 2019-09-16
10-Q 2019-04-30 Filed 2019-06-13
10-Q 2019-01-31 Filed 2019-03-18
10-K 2018-10-31 Filed 2019-02-01
10-Q 2018-07-31 Filed 2018-09-13
10-Q 2018-04-30 Filed 2018-06-14
10-Q 2018-01-31 Filed 2018-03-19
10-K 2017-10-31 Filed 2018-01-30
10-Q 2017-07-31 Filed 2017-09-14
10-Q 2017-04-30 Filed 2017-06-14
10-Q 2011-01-31 Filed 2016-08-22
10-Q 2011-01-31 Filed 2016-08-22
10-K 2010-10-31 Filed 2016-08-19
10-Q 2010-07-31 Filed 2010-09-20
10-Q 2010-04-30 Filed 2010-06-14
10-Q 2010-01-31 Filed 2010-03-17
10-K 2009-10-31 Filed 2010-01-29
8-K 2020-07-20 Regulation FD, Exhibits
8-K 2020-04-06
8-K 2020-03-26
8-K 2020-02-11
8-K 2020-01-01
8-K 2019-11-27
8-K 2019-09-10
8-K 2019-07-26
8-K 2019-06-21
8-K 2019-06-12
8-K 2018-07-24
8-K 2018-05-23
8-K 2018-02-05
8-K 2018-01-29
8-K 2018-01-16

CODA 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Revenue Recognition
Note 3 - Fair Value of Financial Instruments
Note 4 - Foreign Currency Translation
Note 5 - Inventory
Note 6 - Fixed Assets
Note 7 - Other Current Assets
Note 8 - Estimates
Note 9 - Contracts in Progress
Note 10 - Concentrations
Note 11 - Notes Payable
Note 12 - Recent Accounting Pronouncements
Note 13 - Earnings per Common Share
Note 14 - Segment Analysis
Note 15 - Income Taxes
Note 16 - Reclassification of Prior Year Presentation
Note 17 - Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Qualitative and Quantitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risks Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31 ex31.htm
EX-32 ex32.htm

Coda Octopus Group Earnings 2020-04-30

Balance SheetIncome StatementCash Flow
35282114702017201820192020
Assets, Equity
10.07.95.73.61.4-0.72017201820192020
Rev, G Profit, Net Income
4.62.70.8-1.0-2.9-4.82017201820192020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended April 30, 2020

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number 001-38154

 

CODA OCTOPUS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   34-200-8348

(State or other jurisdiction of

Incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

3300 S Hiawassee Rd, Suite 104-105,
Orlando, Florida
  32835
(Address of principal executive offices)   (Zip Code)
     
Registrant’s telephone number, including area code:   (863) 937 8985

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   CODA   Nasdaq

 

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. Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one): [  ]

 

Large accelerated filer [  ]   Accelerated filer [  ]   Non-accelerated filer [  ]   Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The number of shares outstanding of issuer’s common stock, $0.001 par value as of June 15, 2020 is 10,751,881.

 

 

 

 

 

 

INDEX

 

  Page
PART I - Financial Information  
   
Item 1: Financial Statements 3
   
Consolidated Balance Sheets as of April 30, 2020 (Unaudited) and October 31, 2019 3
   
Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended April 30, 2020 and 2019 (Unaudited) 6
   
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended April 30, 2020 and 2019 (Unaudited) 7
   
Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2020 and 2019 (Unaudited) 8
   
Notes to Unaudited Consolidated Financial Statements 9
   
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
   
Item 3: Quantitative and Qualitative Disclosures about Market Risks 41
   
Item 4: Controls and Procedures 41
   
PART II - Other Information 42
   
Item 1: Legal Proceedings 42
   
Item 1A: Risk Factors 42
   
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 42
   
Item 3: Default Upon Senior Securities 42
   
Item 4: Mine Safety Disclosures 42
   
Item 5: Other Information 42
   
Item 6: Exhibits 42
   
Signatures 43

 

 2 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

Unaudited Consolidated Financial Statements

For the Three Months Ended April 30, 2020 and 2019

 

Contents

 

 

 3 

 

 

CODA OCTOPUS GROUP, INC.

Consolidated Balance Sheets

April 30, 2020 and October 31, 2019

 

   2020   2019 
   Unaudited     
ASSETS          
           
CURRENT ASSETS          
           
Cash  $12,808,662   $11,721,683 
Accounts Receivable, net   3,150,117    4,431,971 
Inventory   7,511,958    5,350,514 
Unbilled Receivables   2,021,496    2,279,362 
Other Current Assets   277,892    298,187 
Prepaid Expenses   417,466    198,140 
           
Total Current Assets   26,187,591    24,279,857 
           
FIXED ASSETS          
Property and Equipment, net   6,115,862    5,986,812 
           
OTHER ASSETS          
Goodwill and Other Intangibles, net   3,640,819    3,612,891 
Deferred Tax Asset   594,395    631,684 
           
Total Other Assets   4,235,214    4,244,575 
           
Total Assets  $36,538,667   $34,511,244 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 4 

 

 

CODA OCTOPUS GROUP, INC.

Consolidated Balance Sheets (Continued)

April 30, 2020 and October 31, 2019

 

 

   2020   2019 
   Unaudited     
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES         
           
Accounts Payable  $1,085,297   $1,273,490 
Accrued Expenses and Other Current Liabilities   512,095    576,672 
Notes Payable, current   673,835    487,140 
Deferred Revenue, current   2,036,612    830,148 
           
Total Current Liabilities   4,307,839    3,167,450 
           
LONG TERM LIABILITIES          
           
Deferred Revenue, long term   230,425    143,587 
Notes Payable, long term   671,872    572,434 
           
Total Long Term Liabilities   902,297    716,021 
           
Total Liabilities   5,210,136    3,883,471 
           
STOCKHOLDERS’ EQUITY          
          
Common Stock, $.001 par value; 150,000,000 shares authorized, 10,721,881 shares issued and outstanding as of April 30, 2020 and October 31, 2019   10,723    10,723 
Additional Paid-in Capital   59,609,964    59,521,665 
Accumulated Other Comprehensive Loss   (2,604,642)   (2,135,408)
Accumulated Deficit   (25,687,514)   (26,769,207)
           
Total Stockholders’ Equity   31,328,531    30,627,773 
           
Total Liabilities and Stockholders’ Equity  $36,538,667   $34,511,244 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 5 

 

 

CODA OCTOPUS GROUP, INC.

Unaudited Consolidated Statements of Income and Comprehensive Income

For the Periods Indicated

 

    Three Months Ended April 30,     Six Months Ended April 30,  
    2020     2019     2020     2019  
                         
Net Revenues   $ 3,289,218     $ 6,783,272     $ 9,970,197     $ 12,541,780  
Cost of Revenues     1,363,804       2,058,610       3,770,343       4,284,046  
                                 
Gross Profit     1,925,414       4,724,662       6,199,854       8,257,734  
                                 
OPERATING EXPENSES                                
Research & Development     713,641       745,227       1,641,906       1,316,553  
Selling, General & Administrative     1,533,210       1,696,682       3,424,888       3,315,957  
                                 
Total Operating Expenses     2,246,851       2,441,909       5,066,794       4,632,510  
                                 
(LOSS) INCOME FROM OPERATIONS     (321,437 )     2,282,753       1,133,060       3,625,224  
                                 
OTHER INCOME (EXPENSE)                                
Other (Expense) Income     (311 )     26,228       12,513       59,069  
Interest Expense     (18,456 )     (24,347 )     (38,070 )     (49,408 )
                                 
Total Other (Expense) Income     (18,767 )     1,881       (25,557 )     9,661  
                                 
NET (LOSS) INCOME BEFORE INCOME TAXES     (340,204 )     2,284,634       1,107,503       3,634,885  
                                 
INCOME TAX BENEFIT (EXPENSE)                                
Current Tax Benefit     34,826       24       11,479       77,991  
Deferred Tax Benefit (Expense)     40,298       (311,164 )     (37,289 )     (500,369 )
                                 
Total Income Tax Benefit (Expense)     75,124       (311,140 )     (25,810 )     (422,378 )
                                 
                                 
NET (LOSS) INCOME   $ (265,080 )   $ 1,973,494     $ 1,081,693     $ 3,212,507  
                                 
NET (LOSS) INCOME PER SHARE:                                
Basic   $ (0.02 )   $ 0.18     $ 0.10     $ 0.30  
Diluted   $ (0.02 )   $ 0.18     $ 0.10     $ 0.30  
                                 
WEIGHTED AVERAGE SHARES:                                
Basic     10,721,881       10,671,443       10,721,881       10,665,970  
Diluted     11,276,881       10,671,443       11,276,881       10,665,970  
                                 
NET (LOSS) INCOME   $ (265,080 )   $ 1,973,494     $ 1,081,693     $ 3,212,507  
Foreign Currency Translation Adjustment     (553,985 )     94,981       (469,234 )     392,836  
                                 
Total Other Comprehensive (Loss) Income     (553,985 )     94,981       (469,234 )     392,836  
                                 
COMPREHENSIVE (LOSS) INCOME   $ (819,065 )   $ 2,068,475     $ 612,459     $ 3,605,343  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 6 

 

 

CODA OCTOPUS GROUP, INC.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Six Months Ended April 30, 2020 and 2019

 

               Accumulated         
           Additional   Other         
   Common Stock   Paid-in   Comprehensive   Accumulated     
   Shares   Amount   Capital   Income (Loss)   Deficit   Total 
                         
Balance, October 31, 2018   10,640,416   $10,641   $58,599,378   $(2,228,663)  $(31,994,406)  $24,386,950 
                               
Stock Issued to Investors   23,965    23    105,422    -    -    105,445 
Foreign currency translation adjustment   -    -    -    297,855    -    297,855 
Net Income   -    -    -    -    1,239,013    1,239,013 
Balance, January 31, 2019   10,664,381    10,664    58,704,800    (1,930,808)   (30,755,393)   26,029,263 
                               
Stock Issued to Director   7,143    8    42,281    -    -    42,289 
Foreign currency translation adjustment   -    -    -    94,981    -    94,981 
Net Income   -    -    -    -    1,973,494    1,973,494 
Balance, April 30, 2019   10,671,524   $10,672   $58,747,081   $(1,835,827)  $(28,781,899)  $28,140,027 

 

               Accumulated         
           Additional   Other         
   Common Stock   Paid-in   Comprehensive   Accumulated     
   Shares   Amount   Capital   Income (Loss)   Deficit   Total 
                         
Balance, October 31, 2019   10,721,881   $10,723   $59,521,665   $(2,135,408)  $(26,769,207)  $30,627,773 
                               
Foreign currency translation adjustment   -    -    -    84,751    -    84,751 
Net Income   -    -    -    -    1,346,773    1,346,773 
Balance, January 31, 2020   10,721,881    10,723    59,521,665    (2,050,657)   (25,422,434)   32,059,297 
                               
Stock based compensation   -    -    88,299    -    -    88,299 
Foreign currency translation adjustment   -    -    -    (553,985)   -    (553,985)
Net Loss   -    -    -    -    (265,080)   (265,080)
Balance, April 30, 2020   10,721,881   $10,723   $59,609,964   $(2,604,642)  $(25,687,514)  $31,328,531 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 7 

 

 

CODA OCTOPUS GROUP, INC.

Unaudited Consolidated Statements of Cash Flows

For the Periods Indicated

Unaudited

 

    Six Months Ended April 30,  
    2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 1,081,693     $ 3,212,507  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     333,420       394,412  
Stock based compensation     88,299       42,289  
Gain on the sale of property and equipment     -       (33,118 )
(Increase) decrease in operating assets:                
Accounts receivable     1,281,854       129,720  
Inventory     (2,161,444 )     (341,846 )
Unbilled receivables     257,866       (769,669 )
Other current assets     20,295     (60,424 )
Prepaid expenses     (219,326 )     (55,129 )
Deferred tax asset     37,289       500,370  
Increase (decrease) in operating liabilities:                
Accounts payable and other current liabilities     (252,770 )     78,221  
Deferred revenue     1,293,302       111,286  
Net Cash Provided by Operating Activities     1,760,478       3,208,619  
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment     (445,160 )     (2,099,714 )
Proceeds from sales of property and equipment    

-

     

725,000

 
Purchases of patents     (45,238 )     -  
Net Cash Used in Investing Activities     (490,398 )     (1,374,714 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Repayment of loans     (240,411 )     (586,676 )
Proceeds from loan    

526,544

     

-

 
Issuance of common stock for cash     -       105,445  
Net Cash Provided by (Used in) Financing Activities     286,133       (481,231 )
EFFECT OF CURRENCY EXCHANGE RATE ON CHANGES IN CASH     (469,234 )     392,836  
                 
NET INCREASE IN CASH     1,086,979       1,745,510  
                 
CASH AT THE BEGINNING OF THE PERIOD     11,721,683       7,512,422  
                 
CASH AT THE END OF THE PERIOD   $ 12,808,662     $ 9,257,932  
SUPPLEMENTAL CASH FLOW INFORMATION                
Cash paid for interest   $ 37,853     $ 40,807  
Cash paid for taxes   $ -     $ 7,840  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 8 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited interim consolidated financial statements have been prepared based upon U.S. Securities and Exchange Commission rules that permit reduced disclosure for interim periods. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of Coda Octopus Group, Inc.’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. Coda Octopus Group, Inc. (the “Company”, “Coda Octopus”, “we” or “us”) filed audited consolidated financial statements as of and for the fiscal years ended October 31, 2019 and 2018 which included all information and notes necessary for such complete presentation as part of its annual report on Form 10-K filed on January 28, 2020, (“the “Form 10-K”). The results of operations for the interim period ended April 30, 2020 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended October 31, 2019, which are contained in the Form 10-K. The accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of April 30, 2020 and the results of operations, comprehensive income and cash flows for the interim periods ended April 30, 2020 and 2019. The unaudited interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company uses the US dollar as the reporting currency for financial reporting. The financial position and results of operations of the Company’s UK-based operations are measured using the British Pound Sterling, Australian based operations are measured using Australian Dollars and Danish based operations are measured using Danish Kroner as the functional currencies. Foreign currency translation gains and losses are recorded as a change in other comprehensive income. Transaction gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of our foreign operations are also included in other comprehensive income.

 

NOTE 2 – REVENUE RECOGNITION

 

Beginning on November 1, 2018, the Company adopted the Financial Accounting Standards Board’s Topic 606, Revenue from Contracts with Customers (“Topic 606”). Previously, we had recognized revenue in accordance with FASB Topic 605, Revenue Recognition. After carefully comparing the old and the new revenue standards, we believe that our previous revenue recognition policy is substantially consistent with our new revenue recognition policy and that revenues are consistently stated between periods and was not a cumulative effect adjustment.

 

Topic 606 has established a five-step process to determine the amount of revenue to record from contracts with customers. The five steps are:

 

  Determine if we have a contract with a customer;
     
  Determine the performance obligations in that contract;
     
  Determine the transaction price;
     
  Allocate the transaction price to the performance obligations; and
     
  Determine when to recognize revenue.

 

 9 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 2 – REVENUE RECOGNITION (Continued)

 

Our revenues are earned under formal contracts with our customers and are derived from both sales and rental of underwater technologies and equipment for real time 3D imaging, mapping, defense and survey applications and from the engineering services that we provide broadly to prime defense contractors. Our contracts do not include the possibility for additional contingent consideration so that our determination of 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.

 

With regard to our Marine Technology Business (“Products Segment”), all of 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 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 provided to the customer and evidence of the provision of those services exist.

 

Revenue derived from either our subscription package offering or rental of our equipment 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 the relative fair value of each deliverable and recognize revenue when performance obligations are met including when equipment is delivered, and for rental of equipment, when installation and other services are performed.

 

Our contracts sometimes require customer payments in advance of revenue recognition and are recognized as revenue when the Company has fulfilled its obligations under the respective contracts. Until such time, we recognize this prepayment as deferred revenue.

 

For software license sales for which any services rendered are not considered essential to the functionality of the software, we recognize revenue upon delivery of the software.

 

With respect to revenues related to our Services Segment, 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 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 services (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.

 

Quarterly, we examine all of 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.

 

 10 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 2 – REVENUE RECOGNITION (Continued)

 

Recoverability of Deferred Costs

 

In accordance with Topic 606, we defer costs on projects for service revenue. Deferred costs consist primarily of direct and incremental 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.

 

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 products are delivered or services 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.

 

Deferred Commissions

 

Our incremental direct costs of obtaining a contract, which consists of sales commissions are deferred and amortized over the period of the contract performance. We classify deferred commissions as current or noncurrent based on the timing of when we expect to recognize the expense. The current and noncurrent portions of deferred commissions are included in prepaid expenses and other current assets, and other assets, net, respectively, in our consolidated balance sheets. At April 30, 2020 and October 31, 2019, we had deferred commissions of $1,913 and $0, respectively. Amortization expense related to deferred commissions was $80,973 and $0 in the first quarters of 2020 and 2019, respectively.

 

Other Revenue Disclosures

 

See Note 14 – Segment Analysis for a breakdown of revenues from external customers and cost of those revenues between our Product Segment and Services Segment including information on the split of revenues by geography.

 

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company’s short term financial instruments consist of cash, receivables, accounts payable, accrued expenses and a revolving line of credit. The Company adjusts the carrying value of financial assets and liabilities denominated in other currencies such as cash, receivables, accounts payable and the lines of credit using the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short-term financial instruments approximate their estimated fair values.

 

 11 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 4 – FOREIGN CURRENCY TRANSLATION

 

The financial position and results of operations of the Company’s foreign subsidiaries are measured using the local currency in the jurisdiction in which the subsidiary operates as the functional currency. Assets and liabilities of operations denominated in foreign currencies are translated into US dollars at exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the weighted average exchange rates during the reporting period. The resulting translation gains and/or losses on assets and liabilities are recorded in accumulated other comprehensive income (loss), and are excluded from net income (loss) until realized through a sale or liquidation of the investment.

 

NOTE 5 - INVENTORY

 

Inventory is stated at the lower of cost (weighted average method) or net realizable value. Inventory consisted of the following components:

 

   April 30,   October 31, 
Inventory  2020   2019 
         
Raw materials and parts  $5,866,227   $4,379,260 
Work in progress   931,125    517,354 
Finished goods   714,606    453,900 
Total Inventory  $7,511,958   $5,350,514 

 

 12 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 6 – FIXED ASSETS

 

Fixed assets consist of the following components:

 

   April 30,   October 31, 
   2020   2019 
         
Buildings  $5,012,099   $4,654,029 
Land   200,000    200,000 
Office machinery and equipment   1,976,556    1,954,938 
Rental assets   

1,476,977

    

1,468,124

 
Furniture, fixtures and improvements   1,145,720    1,158,033 
Totals   9,811,352    9,435,124 
Less: accumulated depreciation   (3,695,490)   (3,448,312)
           
Property and Equipment - Net  $6,115,862   $5,986,812 

 

NOTE 7 – OTHER CURRENT ASSETS

 

Other current assets consisted of the following components:

 

   April 30,   October 31, 
Other Current Assets  2020   2019 
         
Deposits  $219,614   $42,932 
Tax receivables   58,278    255,255 
Total Other Current Assets  $277,892   $298,187 

 

 13 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 8 – ESTIMATES

 

The preparation of consolidated financial statements in conformity with US Generally Accepted Accounting Principles (“US 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 costs and estimated earnings in excess of billings, billings in excess of costs and estimated earnings, and valuation of accounts receivable, valuation of fixed assets, valuation of inventory, valuation of deferred tax assets and the valuation of goodwill.

 

NOTE 9 – CONTRACTS IN PROGRESS

 

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 date of the consolidated balance sheets. These amounts are stated on the consolidated balance sheets as unbilled receivables of $2,021,496 and $2,279,362 as of April 30, 2020 and October 31, 2019, respectively.

 

Our deferred revenue of $2,267,037 and $973,735 as of April 30, 2020 and October 31, 2019, respectively, consists of billings in excess of costs and estimated earnings and revenues received as part of our subscription package offering, warranty or Through Life Support (“TLS”) obligations upon completing a sale.

 

Revenue received as part of sales of products via our Products Segment includes a provision for subscription package offering, warranty or TLS. Subscription package offering is essentially a rental agreement for a fixed period of twelve months under which we supply full equipment suite including hardware, software and technical support during the subscription period. TLS offers the customer extended post-sales technical support along with software and hardware assurances. These post-sales obligations (subscription package offering, warranty and TLS) are treated as deferred revenue and are amortized over the period when the contractual obligations subsist, which for subscription package offering and warranty is 12 months and TLS varies between 36 and 60 months depending on the package purchased by the customer. These amounts are stated on the consolidated balance sheets as a component of deferred revenue of $503,210 and $497,819 as of April 30, 2020 and October 31, 2019, respectively.

 

 14 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 10 – CONCENTRATIONS

 

Significant Customers

 

During the three months ended April 30, 2020, the Company had two customers from whom it generated sales greater than 10% of net revenues. Revenues from these customers was $1,085,570, or 33% of net revenues during the period.

 

During the three months ended April 30, 2019, the Company had a customer from whom it generated sales greater than 10% of net revenues. Revenue from this customer was $1,460,260, or 22% of net revenues during the period.

 

During the six months ended April 30, 2020, the Company had two customers from whom it generated sales greater than 10% of net revenues. Revenues from these customers was $3,458,537, or 35% of net revenues during the period.

 

During the six months ended April 30, 2019, the Company had a customer from whom it generated sales greater than 10% of net revenues. Revenue from this customer was $3,209,220, or 26% of net revenues during the period.

 

NOTE 11 – NOTES PAYABLE

 

   April 30,   October 31, 
Loans and Notes Payable  2020   2019 
         
Secured note payable to HSBC NA with interest payable on the 28th day of each month at 4.56% per annum. Our monthly repayment obligation under this loan is $43,777 (comprising both principal and interest repayment).
  $819,163   $1,059,574 
Unsecured Payroll Protection Program loan from the SBA that carries an interest rate of 1%. Principal payments begin on October 1, 2020 in the amount of $29,252.   526,544    - 
           
Total   1,345,707    1,059,574 
Less: current portion   (673,835)   (487,140)
Total Long Term Loan and Note Payable  $671,872   $572,434 

 

The Company entered into a $4,000,000 revolving line of credit with HSBC NA on November 27, 2019, at prime. The outstanding balance on the line of credit was $0 as of April 30, 2020. The credit line expires on November 26, 2020.

 

 15 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 12 – RECENT ACCOUNTING PRONOUNCEMENTS

 

On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the balance sheet. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU No. 2016-02 effective November 1, 2019. We own substantially all of our facilities. Accordingly, the adoption of ASU No. 2016-02 did not have a material impact on our interim consolidated financial statements.

 

With the exception of the updated standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our consolidated financial statements.

 

NOTE 13 – EARNINGS PER COMMON SHARE

 

   Three Months   Three Months   Six Months   Six Months 
   Ended   Ended   Ended   Ended 
   April 30,   April 30,   April 30,   April 30, 
Fiscal Period  2020   2019   2020   2019 
Numerator:                    
Net (Loss) Income  $(265,080)  $1,973,494   $1,081,693   $3,212,507 
                     
Denominator:                    
Basic weighted average common shares outstanding   10,721,881    10,671,443    10,721,881    10,665,970 
Options issued   555,000    -    555,000    - 
Diluted outstanding shares   11,276,881    10,671,443    11,276,881    10,665,970 
                     
Basic  $(0.02)  $0.18   $0.10   $0.30 
Diluted  $(0.02)  $0.18   $0.10   $0.30 

 

 16 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS

 

We operate in two reportable segments, which are managed separately based upon fundamental differences in their operations. Coda Octopus Martech and Coda Octopus Colmek (together “Marine Engineering Business” or “Service Segments”) operate as contractors and Coda Octopus Products operations are comprised primarily of product sales, rental of equipment and/or software and associated services (“Marine Technology Business” or “Products Segment”).

 

Segment operating income is total segment revenue reduced by operating expenses identifiable with the business segment. Corporate includes general corporate administrative costs (“Overhead”).

 

The Company evaluates performance and allocates resources based upon segment operating income. The accounting policies of the reportable segments are the same as those described in the summary of accounting policies in our Consolidated Financial Statements of October 31, 2019.

 

There are inter-segment sales which have been eliminated in our financial statements but are disclosed in the tables below for information purposes.

 

The following table summarizes segment asset and operating balances by reportable segment as of and for the three and six months ended April 30, 2020 and 2019, respectively.

 

The Company’s reportable business segments operate in four geographic locations:

 

  Americas
  Europe
  Australia/Asia
  Middle East/Africa

 

Information concerning principal geographic areas is presented below according to the area where the activity has taken place for the three and six months ended April 30, 2020 and 2019 respectively:

 

 17 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

    Marine Technology Business (Products)     Marine Engineering Business (Services)     Overhead     Total  
                         
Three Months Ended April 30, 2020                                
                                 
Revenues from External Customers   $ 1,691,199     $ 1,598,019     $ -     $ 3,289,218  
                                 
Cost of Revenues     406,853       956,951       -       1,363,804  
                                 
Gross Profit     1,284,346       641,068       -       1,925,414  
                                 
Research & Development     442,696       270,945       -       713,641  
Selling, General & Administrative     692,177       527,039       313,994       1,533,210  
                                 
Total Operating Expenses     1,134,873       797,984       313,994       2,246,851  
                                 
Income (Loss) from Operations     149,473       (156,916 )     (313,994 )     (321,437 )
                                 
Other Expense (Income)                                
                                 
Other (Expense) Income     (327 )     16       -       (311 )
Interest Expense     (2,395 )     (3,959 )     (12,102 )     (18,456 )
                                 
Total Other Income (Expense)     (2,722 )     (3,943 )     (12,102 )     (18,767 )
                                 
Net Income (Loss) before Income Taxes     146,751       (160,859 )     (326,096 )     (340,204 )
                                 
Income Tax Benefit (Expense)                                
Current Tax Benefit (Expense)     (6,397 )     (4,045 )     45,268      

34,826

 
Deferred Tax (Expense)     (1,354 )     142,793       (101,141 )     40,298  
                                 
Total Income Tax (Expense)     (7,751 )     138,748       (55,873 )     75,124  
                                 
Net Income (Loss)   $ 139,000     $ (22,111 )   $ (381,969 )   $ (265,080 )
                                 
Supplemental Disclosures                                
                                 
Total Assets   $ 21,256,131     $ 14,231,702     $ 1,050,834     $ 36,538,667  
                                 
Total Liabilities   $ 2,907,719     $ 1,380,925     $ 921,492     $ 5,210,136  
                                 
Revenues from Intercompany Sales - eliminated from sales above   $ 277,658     $ 4,687     $ 675,000     $ 957,345  
                                 
Depreciation and Amortization   $ 94,599     $ 2,745     $ 4,112     $ 101,456  
                                 
(Sales) Purchases of Long-lived Assets   $ (158,874 )   $ (8,441 )   $ 14,554     $ (152,761 )

 

 18 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   Marine Technology Business (Products)   Marine Engineering Business (Services)   Overhead   Total 
                 
Three Months Ended April 30, 2019                    
                     
Revenues from External Customers  $3,420,183   $3,363,089   $-   $6,783,272 
                     
Cost of Revenues   488,909    1,569,701    -    2,058,610 
                     
Gross Profit   2,931,274    1,793,388    -    4,724,662 
                     
Research & Development   558,579    64,665    121,983    745,227 
Selling, General & Administrative   743,801    611,059    341,822    1,696,682 
                     
Total Operating Expenses   1,302,380    675,724    463,805    2,441,909 
                     
Income (Loss) from Operations   1,628,894    1,117,664    (463,805)   2,282,753 
                     
Other Income (Expense)                    
                     
Other Income   26,228    -    -    26,228 
Interest Expense   (3,392)   (5,118)   (15,837)   (24,347)
                     
Total Other Income (Expense)   22,836    (5,118)   (15,837)   1,881 
                     
Net Income (Loss) before Income Taxes   1,651,730    1,112,546    (479,642)   2,284,634 
                     
Current Tax Benefit   18,375    (9,939)   (8,412)   24 
Deferred tax (Expense)   (144,381)   (117,529)   (49,254)   (311,164)
                     
Income benefit (expense)   (126,006)   (127,468)   (57,666)   (311,140)
                     
Net Income (Loss)  $1,525,724   $985,078   $(537,308)  $1,973,494 
                     
Supplemental Disclosures                    
                     
                     
Total Assets  $17,403,981   $12,980,885   $1,564,066   $31,948,932 
                     
Total Liabilities  $1,357,163   $923,248   $1,528,494   $3,808,905 
                     
Revenues from Intercompany Sales - eliminated from sales above  $361,604   $173,723   $675,000   $1,210,327 
                     
Depreciation and Amortization  $134,516   $61,388   $3,790   $199,694 
                     
Purchases of Long-lived Assets  $1,149,245   $31,334   $-   $1,180,579 

 

 19 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

    Marine Technology Business (Products)     Marine Engineering Business (Services)     Overhead     Total  
                         
Six Months Ended April 30, 2020                                
                                 
Revenues from External Customers   $ 5,324,011     $ 4,646,186     $ -     $ 9,970,197  
                                 
Cost of Revenues     1,062,530       2,707,813       -       3,770,343  
                                 
Gross Profit     4,261,481       1,938,373       -       6,199,854  
                                 
Research & Development     999,425       477,383       165,098       1,641,906  
Selling, General & Administrative     1,560,175       1,163,335       701,378       3,424,888  
                                 
Total Operating Expenses     2,559,600       1,640,718       866,476       5,066,794  
                                 
Income (Loss) from Operations     1,701,881       297,655       (866,476 )     1,133,060  
                                 
Other Income (Expense)                                
                                 
Other Income     12,497       16       -       12,513  
Interest (Expense)     (5,627 )     (7,641 )     (24,802 )     (38,070 )
                                 
Total Other Income (Expense)     6,870       (7,625 )     (24,802 )     (25,557 )
                                 
Net Income (Loss) before Income Taxes     1,708,751       290,030       (891,278 )     1,107,503  
                                 
Income Tax Benefit (Expense)                                
Current Tax Benefit (Expense)     19,436       -       (7,957 )     11,479  
Deferred Tax (Expense)     (79,493 )     130,558       (88,354 )     (37,289 )
                                 
Total Income Tax (Expense)     (60,057 )     130,558       (96,311 )     (25,810 )
                                 
Net Income (Loss)   $ 1,648,694     $ 420,588     $ (987,589 )   $ 1,081,693  
                                 
Supplemental Disclosures                                
                                 
Total Assets   $ 21,256,131     $ 14,231,702     $ 1,050,834     $ 36,538,667  
                                 
Total Liabilities   $ 2,907,719     $ 1,380,925     $ 921,492     $ 5,210,136  
                                 
Revenues from Intercompany Sales - eliminated from sales above   $ 580,480     $ 105,216     $ 1,350,000     $ 2,035,696  
                                 
Depreciation and Amortization   $ 277,592     $ 46,425     $ 9,403     $ 333,420  
                                 
Purchases of Long-lived Assets   $ 440,727     $ 1,152     $ 48,519     $ 490,398  

 

 20 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   Marine Technology Business (Products)   Marine Engineering Business (Services)   Overhead   Total 
                 
Six Months Ended April 30, 2019                    
                     
Revenues from External Customers  $6,249,719   $6,292,061   $-   $12,541,780 
                     
Cost of Revenues   1,206,215    3,077,831    -    4,284,046 
                     
Gross Profit   5,043,504    3,214,230    -    8,257,734 
                     
Research & Development   1,030,004    97,214    189,335    1,316,553 
Selling, General & Administrative   1,498,461    1,205,105    612,391    3,315,957 
                     
Total Operating Expenses   2,528,465    1,302,319    801,726    4,632,510 
                     
Income (Loss) from Operations   2,515,039    1,911,911    (801,726)   3,625,224 
                     
Other Income (Expense)                    
                     
Other Income   59,069    -    -    59,069 
Interest Expense   (5,866)   (9,699)   (33,843)   (49,408)
                     
Total Other Income (Expense)   53,203    (9,699)   (33,843)   9,661 
                     
Net Income (Loss) before Income Taxes   2,568,242    1,902,212    (835,569)   3,634,885 
                     
Current Tax Benefit   25,668    34,985    17,338    77,991 
Deferred tax (Expense)   (151,305)   (233,396)   (115,668)   (500,369)
                     
Income benefit (expense)   (125,637)   (198,411)   (98,330)   (422,378)
                     
Net Income (Loss)  $2,442,605   $1,703,801   $(933,899)  $3,212,507 
                     
Supplemental Disclosures                    
                     
                     
Total Assets  $17,403,981   $12,980,885   $1,564,066   $31,948,932 
                     
Total Liabilities  $1,357,163   $923,248   $1,528,494   $3,808,905 
                     
Revenues from Intercompany Sales - eliminated from sales above  $908,467   $228,929   $1,350,000   $2,487,396 
                     
Depreciation and Amortization  $259,124   $127,678   $7,610   $394,412 
                     
Purchases of Long-lived Assets  $2,065,268   $34,446   $-   $2,099,714 

 

 21 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Three Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Disaggregation of Total Net Sales               
                
Americas               
Equipment Sales  $86,787   $-   $86,787 
Equipment Rentals   36,269    -    36,269 
Software Sales   -    -    - 
Engineering Parts   -    847,224    847,224 
Services   390,582    162,885    553,467 
Europe               
Equipment Sales   69,563    -    69,563 
Equipment Rentals   292,839    -    292,839 
Software Sales   7,155    -    7,155 
Engineering Parts   -    587,910    587,910 
Services   150,433    -    150,433 
Australia/Asia               
Equipment Sales   310,338    -    310,338 
Equipment Rentals   175,219    -    175,219 
Software Sales   8,591    -    8,591 
Services   126,238    -    126,238 
Middle East & Africa               
Equipment Sales   16,170    -    16,170 
Equipment Rentals   592    -    592 
Software Sales   -    -    - 
Services   20,423    -    20,423 
                
Total Net Sales  $1,691,199   $1,598,019   $3,289,218 

 

   For the Three Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Geographic Area               
Americas  $513,638   $1,010,109   $1,523,747 
Europe   519,990    587,910    1,107,900 
Australia/Asia   620,386    -    620,386 
Middle East & Africa   37,185    -    37,185 
                
Total Net Sales  $1,691,199   $1,598,019   $3,289,218 

 

 22 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Three Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Product Line               
Equipment Sales  $482,858   $-   $482,858 
Equipment Rentals   504,919    -    504,919 
Software Sales   15,746    -    15,746 
Engineering Parts   -    1,435,134    1,435,134 
Services   687,676    162,885    850,561 
                
Total Net Sales  $1,691,199   $1,598,019   $3,289,218 

 

   For the Three Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Disaggregation of Total Net Sales               
                
Americas               
Equipment Sales  $19,528   $54,536   $74,064 
Equipment Rentals   171,544    -    171,544 
Software Sales   7,250    -    7,250 
Engineering Parts   -    2,377,313    2,377,313 
Services   736,612    563,518    1,300,130 
Europe               
Equipment Sales   446,896    13,302    460,198 
Equipment Rentals   491,118    -    491,118 
Software Sales   59,069    -    59,069 
Engineering Parts   -    354,421    354,421 
Services   337,467    -    337,467 
Australia/Asia               
Equipment Sales   867,019    -    867,019 
Equipment Rentals   -    -    - 
Software Sales   58,289    -    58,289 
Services   115,666    -    115,666 
Middle East & Africa               
Equipment Sales   -    -    - 
Equipment Rentals   -    -    - 
Software Sales   16,578    -    16,578 
Services   93,147    -    93,147 
                
Total Net Sales  $3,420,183   $3,363,089   $6,783,272 

 

 23 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Three Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Geographic Area               
Americas  $934,934   $2,995,366   $3,930,300 
Europe   1,334,551    367,723    1,702,273 
Australia/Asia   1,040,974    -    1,040,974 
Middle East & Africa   109,724    -    109,724 
                
Total Net Sales  $3,420,183   $3,363,089   $6,783,272 

 

   For the Three Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Product Line               
Equipment Sales  $1,333,444   $67,838   $1,401,281 
Equipment Rentals   662,662    -    662,662 
Software Sales   141,185    -    141,185 
Engineering Parts   -    2,731,734    2,731,734 
Services   1,282,892    563,518    1,846,410 
                
Total Net Sales  $3,420,183   $3,363,089   $6,783,272 

 

 24 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Six Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Disaggregation of Total Net Sales            
             
Americas               
Equipment Sales  $421,175   $-   $421,175 
Equipment Rentals   81,338    -    81,338 
Software Sales   7,250    -    7,250 
Engineering Parts   -    2,493,597    2,493,597 
Services   545,207    652,416    1,197,623 
Europe               
Equipment Sales   407,710    -    407,710 
Equipment Rentals   345,483    -    345,483 
Software Sales   109,681    -    109,681 
Engineering Parts   -    1,494,765    1,494,765 
Services   276,133    5,407    281,540 
Australia/Asia               
Equipment Sales   2,338,648    -    2,338,648 
Equipment Rentals   401,151    -    401,151 
Software Sales   128,590    -    128,590 
Services   173,357    -    173,357 
Middle East & Africa               
Equipment Sales   38,244    -    38,244 
Equipment Rentals   592    -    592 
Software Sales   -    -    - 
Services   49,452    -    49,452 
                
Total Net Sales  $5,324,011   $4,646,186   $9,970,197 

 

 25 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Six Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Geographic Area               
Americas  $1,054,970   $3,146,013   $4,200,983 
Europe   1,139,007    1,500,172    2,639,179 
Australia/Asia   3,041,746    -    3,041,746 
Middle East & Africa   88,288    -    88,288 
                
Total Net Sales  $5,324,011   $4,646,186   $9,970,197 

 

   For the Six Months Ended April 30, 2020 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Product Line               
Equipment Sales  $3,205,777   $-   $3,205,777 
Equipment Rentals   828,564    -    828,564 
Software Sales   245,521    -    245,521 
Engineering Parts   -    3,988,363    3,988,363 
Services   1,044,149    657,823    1,701,972 
                
Total Net Sales  $5,324,011   $4,646,186   $9,970,197 

 

 26 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Six Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Disaggregation of Total Net Sales               
                
Americas               
Equipment Sales  $67,078   $57,545   $124,623 
Equipment Rentals   225,027    -    225,027 
Software Sales   7,250    -    7,250 
Engineering Parts   -    4,567,505    4,567,505 
Services   820,139    879,670    1,699,809 
Europe               
Equipment Sales   770,605    110,979    881,584 
Equipment Rentals   651,507    -    651,507 
Software Sales   148,644    -    148,644 
Engineering Parts   -    676,363    676,363 
Services   478,019    -    478,019 
Australia/Asia               
Equipment Sales   2,059,338    -    2,059,338 
Equipment Rentals   257,918    -    257,918 
Software Sales   201,878    -    201,878 
Services   339,041    -    339,041 
Middle East & Africa               
Equipment Sales   10,473    -    10,473 
Equipment Rentals   36,130    -    36,130 
Software Sales   37,565    -    37,565 
Services   139,107    -    139,107 
                
Total Net Sales  $6,249,719   $6,292,061   $12,541,780 

 

   For the Six Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Geographic Area               
Americas  $1,119,494   $5,504,719   $6,624,213 
Europe   2,048,776    787,342    2,836,117 
Australia/Asia   2,858,175    -    2,858,175 
Middle East & Africa   223,274    -    223,274 
                
Total Net Sales  $6,249,719   $6,292,061   $12,541,780 

 

 27 

 

 

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2020 and 2019

 

NOTE 14 – SEGMENT ANALYSIS (continued)

 

   For the Six Months Ended April 30, 2019 
   Marine   Marine     
   Technology   Engineering   Grand 
   Business   Business   Total 
Total Net Sales by Product Line               
Equipment Sales  $2,907,495   $168,524   $3,076,018 
Equipment Rentals   1,170,582    -    1,170,582 
Software Sales   395,336    -    395,336 
Engineering Parts   -    5,243,868    5,243,868 
Services   1,776,306    879,670    2,655,976 
                
Total Net Sales  $6,249,719   $6,292,061   $12,541,780 

 

NOTE 15 – INCOME TAXES

 

The Company’s effective tax rate for the three months ended April 30, 2020 and 2019 was 12.6% and 17.8%, respectively. The decrease in the effective tax rate for the six months ended April, 2020, as compared to April 30, 2019 was an increase in our AMT tax refund percentage from 5.2% in 2019 to 8.4% in 2020.

 

As of April 30, 2020, we had U.S. federal net operating losses (NOL) carryforwards of $3,011,790, which expire at various dates as follows:

 

2029  $2,707,158 
2028   304,632 
      
Total  $3,011,790 

 

NOTE 16 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statements of Cash Flows for the fiscal year ended October 31, 2019, to reclassify the Value Added Tax (VAT) receivable.

 

NOTE 17 – SUBSEQUENT EVENT

 

On May 5, 2020, one of the subsidiaries received an unsecured Payroll Protection Program loan from the SBA in the amount of $122,327, which carries an interest rate of 1%. That portion of the loan, which is not forgiven, will be paid back in eighteen equal installments starting in November 2020. Maturity date is May 5, 2022.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The information herein contains forward-looking statements. All statements other than statements of historical fact made herein are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

The following discussion and analysis should be read in conjunction with our financial statements, included herewith and the audited financial statements included in our annual report on Form 10-K filed with the Securities and Exchange Commission on January 28, 2020. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

General Overview

 

Throughout these discussions, the following terminologies listed immediately below are used and have the meanings ascribed to them below:

 

“Current Quarter” Three-month period ended April 30, 2020
“Previous Quarter” Three-month period ended April 30, 2019
“Current Six Month Period” The Six-month period ended April 30, 2020
“Previous Six Month Period” The Six-month period ended April 30, 2019
“2020 Second Quarter Period” Three month period ended April 30, 2020
“2019 Second Quarter Period” Three month period ended April 30, 2019

 

We have two distinct operating businesses within our Group.