Coda Octopus Group Inc
For the period ended Apr 30, 2024. Filed Jun 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Apr 30, 2024 · Filed Jun 12, 2024
CODA$8.34+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-01-31; filed 2024-03-18.
0001493152-24-010216
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-04-30; filed 2024-06-12.
0001493152-24-023544
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 146 current paragraphs.
53 unchanged; 35 reworded; 51 added; 13 removed; 1 previous and 7 current paragraphs rearranged.
Tables are not compared: 12 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (51)
Current report
Throughout these discussions, the following terms shall have the meanings set forth below:
Current report
Our digital audio communications system, (marketed under the name “Voice-HUB 4”), offers a digital audio communications system which advances the market from analog underwater communications to digital and provides much clearer underwater communications, thereby removing the risk of miscommunication.
Current report
The DAVD untethered variant (“DUS”) is going through evaluation, and we are contracted under a program designed to “harden” the technology for fast adoption by special forces (“DAVD Hardening Program”). Under the DAVD Hardening Program, since fiscal year 2023, we have received $1 million in funding and, pursuant to this, have supplied eight (8) systems which are currently used by the Program Sponsor for ongoing field evaluation. We are expecting to receive another $950,000 in funding but this is currently delayed due to many defense programs being funded through the use of continuing resolution until funding is available under a fully appropriated federal budget. This is not unusual during a Presidential election year. The DUS system represents our most significant market opportunity for the DAVD technology, and we continue to advance the technology based on field feedback arising from use of the evaluation systems.
Current report
Although inflation is falling, prices which have increased due to inflation over the last year including material costs and wages have remained at their inflationary-inspired level and have become the base price.
Current report
The ongoing war in Ukraine impacts our Services Business as most defense spending is now directed toward land-based applications rather than naval based applications. In addition, the ongoing political tension with China reduces demand for our product in in that country where we understand from our agent network that there is a “Buy-China” policy in place. Furthermore, ongoing addition of Chinese Suppliers on the US Bureau of Industry and Security (“BIS”) list may affect supply of components which are relevant for our products, making these obsolete and subject to significant re-engineering costs.
Current report
Limitations caused by the use of Continuing Resolutions to authorize ongoing spending under Defense Programs
Current report
Year to date, we have been affected by funding delays under Defense Programs in the USA including the DAVD Hardening Program. Delays in approving the federal budget and making appropriations are not unusual in a Presidential election year. Although a federal budget was approved in March 2024, many programs are still awaiting the necessary funding appropriations and have therefore been operating under continuing resolutions until such appropriations are completed. This has adversely impacted on order intake and sales emanating from the Americas. As a result, our year to date sales in the Americas was $2,232,643 compared to $4,708,411 in the previous year to date period.
Current report
Our consolidated financial results include the results of the Company’s foreign subsidiaries (UK and Danish operations). Foreign subsidiaries’ results are translated from their functional currencies into USD for reporting purposes. Fluctuations in currency can therefore impact our translated results, including revenue and income. Revenue and expenses are translated using the average exchange rates in effect during the reporting period. During the Current Quarter, the British Pound strengthened against the USD when compared to the Previous Quarter exchange rate (“the Constant Rate”); whereas the Danish Kroner slightly weakened against the USD. During the Current Quarter our total consolidated revenue was $5,323,178 compared to $5,301,509 in the Previous Quarter. The impact of foreign exchange rate fluctuation between the Previous Quarter and our Current Quarter is that our reported revenue would have been $62,281 or 1.2% lower in the Current Quarter when applying the Constant Rate and therefore the movement in exchange rates between the two periods, had a positive impact on our total consolidated revenue by increasing this by 1.2%. During the Current Quarter total operating expense decreased by 13.7%. Income from operations increased by 57.9%. Income before taxes increased by 59.6% and was $1,641,215 compared to $1,028,484 in the Previous Quarter. Further details concerning our financial results in the Current Quarter and the Current Six Month Period are discussed immediately below.
Current report
In the Current Quarter, the Products Business generated $3,524,714 or 66.2% of our consolidated revenues compared to $3,583,429 or 67.6% in the Previous Quarter, representing a slight fall of 1.6%. Gross profit margin increased from 75.3% in the Previous Quarter to 80.2% in the Current Quarter. In the Current Quarter we recorded sales commissions for this segment of $131,209 compared to $89,195 in the Previous Quarter, representing an increase of 47.1%. In the Current Quarter total operating expenses decreased by 8.5% in the Products Business and were $1,277,881 compared to $1,396,366 in the Previous Quarter. Income before tax was $1,736,910 in the Current Quarter compared to $1,451,588 in the Previous Quarter. Notable in the Current Quarter, sales generated by the Products Business from the USA decreased from $1,754,250 in the Previous Quarter compared to $640,943. This reflects the effects of the reduced funding available for Defense Programs (such as the DAVD Program), due to the use of continuing resolutions to fund these programs in the absence of appropriations under the federal budget.
Current report
In the Current Quarter, the Services Business generated $1,798,464 or 33.8% of our consolidated revenues compared to $1,718,080 or 32.4% in the Previous Quarter, representing an increase in sales of 4.7%. Gross profit margin decreased from 53.9% in the Previous Quarter to 50.7% in the Current Quarter. In the Current Quarter total operating expenses decreased by 1.4% in the Services Business and were $653,871 compared to $663,273 in the Previous Quarter. In the Current Quarter the Services Business Income before tax was $321,360 compared to $285,390 in the Previous Quarter. This Business is reliant on funding from Defense Programs. Notable in the Current Quarter, sales generated by the Services Business from the USA decreased from $1,144,891 in the Previous Quarter compared to $799,214. This reflects the effects of the reduced funding available for Defense Programs (such as the AQS24 Mine Hunting Program), due to the use of continuing resolutions to fund these programs as opposed to a fully appropriated budget.
Current report
Revenue: Total consolidated revenues for the Current Quarter and the Previous Quarter were $5,323,178 and $5,301,509 respectively, representing an increase of 0.4%. In the Current Quarter, the Products Business saw an increase of 34% in rentals but a decrease in outright products sales of 19.8%. In the Current Quarter, outright sales were less than projected in key strategic markets such as the USA, for ongoing DAVD and related sales, where we saw curtailment of funding for defense programs for the reasons discussed earlier. In addition, the Services Business in the USA is dependent on funding under Defense Programs. In the Current Quarter, order intake by this business unit was weak, due to the ongoing limitation of funding released under continuing resolution instruments. The limitation on Defense funding has resulted in sales generated from the USA in the Current Quarter being $1,440,157 compared to $2,899,141 in the Previous Quarter. We do not believe that these orders have gone away but simply postponed until the budgetary constraints are removed.
Current report
Gross Profit Margins*:* Margin percentage was stronger in the Current Quarter at 70.2% (gross profit of $3,738,434) compared to 68.3% (gross profit of $3,623,241) in the Previous Quarter.
Current report
The decrease in Equipment Sales in the Current Quarter reflects the reduction in orders and sales emanating from the Americas caused by the funding gaps on Defense Programs described earlier. This has affected programs like the DAVD, resulting in reduced orders and sales in the Americas which in the Current Quarter was $640,943 compared to $1,754,250 in the Previous Quarter.
Current report
In the Current Quarter Depreciation expenses relating to our rental assets increased by 6.1% and was $105,623 compared to $99,519 in the Previous Quarter.
Current report
The main factors impacting the Gross Profit Margin of the Marine Technology Business in the Current Quarter are the increase in rental revenue and associated services (engineering support for rental projects).
Current report
The main reason for the reduction in our SG&A expenses in the Current Quarter when compared to the Previous Quarter is the reduction in stock based compensation charges, which were ($60,862) in the Current Quarter compared to $196,261 in the Previous Quarter.
Current report
Wages and Salaries – In the Current Quarter this category of expense increased by 2.8%. We anticipate that on a full year basis in the fiscal year 2024 this category will increase materially over the fiscal year 2023. We are currently operating on a reduced headcount and have several vacancies and are also expanding our management team.
Current report
Legal and Professional fees decreased and reflect the timing of services performed. On a full year basis, we anticipate this category of expenditures will largely be in line with the Previous Year.
Current report
Operating Income: In the Current Quarter operating income increased by 57.9% and was $1,350,383 as compared to $855,108 in the Previous Quarter. The increase in operating income is attributed to several factors including an increase in gross profit, and a reduction in total operating expenses by 13.7% which is largely due to a reduction in stock compensation costs which fell from $196,261 to ($60,862). On a full year basis, we do not expect total operating expenses to be lower than the previous fiscal year as we are hiring additional staff and therefore expect wages and salaries to increase over the full year period. We are currently operating on a reduced head count, particularly in our US Engineering Business.
Current report
Results of Operations for the Current Six Month Period compared to the Previous Six month Period
Current report
Revenue: Total consolidated revenues for the Current Six Month Period and the Previous Six Month Period were $9,784,369 and $10,897,793 respectively, representing a decrease of 10.2%. In the Current Six Month Period, the Marine Technology Business revenues were $7,067,480 compared to $7,407,588 representing a reduction of 4.6% when compared to the Previous Six Month Period. The Services Business revenues in the Current Six Month Period and the Previous Six Month Period were $2,716,889 and $3,490,205, representing a fall of 22.2%. The decrease in our consolidated revenue in the Current Six Month Period is largely due to the decrease in the Services Business revenue. During the Current Six Month Period, the Services Business who is a supplier to prime defense contractors has experienced delays in receiving orders under its existing Defense Programs due to funding gaps caused by the use of continuing resolutions to fund Defense Programs. This means that limited funds are available for these programs until detailed appropriations are made under the federal budget. This has affected order intake for both our Services Business and Marine Technology Business and sales generated in the Current Six Month Period in the USA were $2,232,643 compared to $4,708,411 in the Previous Six Month Period.
Current report
Gross Profit Margins*:* Consolidated Margin percentage was higher in the Current Six Month Period at 69.8% (gross profit of $6,825,170) compared to 67.7% (gross profit of $7,376,246). The main factors which have resulted in the higher margins in the Current Six Month Period are attributable to our Marine Technology Business which realized an increase in rental revenue and associated engineering support services and incurred lower commission costs. In the Current Six Month Period gross profit margins for the Marine Technology Business were 76.4% compared to 73.7% in the Previous Six Month Period and the Services Business was 52.6% in the Current Six Month Period compared to 55.0% in the Previous Six Month Period.
Current report
Services Business
Current report
Gross Profit Margins for the Services Business were lower at 52.6% in the Current Six Month Period compared to 55.0% in the Previous Six Month Period. This is largely due to the types of engineering projects that are ongoing in the reporting period (contract manufacturing versus design and development work scopes), the former yielding a higher margin profile.
Current report
Marine Technology Business
Current report
In the Current Six Month Period gross profit margins for the Marine Technology Business were 76.4% compared to 73.7% in the Previous Six Month Period. The strengthening is largely because of the composition of our sales in conjunction with a reduction in commission costs incurred. In the Current Six Month Period there were more units of rental and associated engineering support sale (field engineers supporting ongoing customer projects) combined with a significant reduction in commission costs incurred and which were $424,393 in the Current Six Month Period compared to $575,536 in the Previous Six Month Period, representing a decrease of 26.3%. A significant percentage of our sales in foreign territories such as South Korea, Japan, China and South Africa are conducted through our sales agents and distributors. In general, gross profit margins are lower on our units of hardware sale than software, rentals with associated services and technology customization services.
Current report
The decrease in Equipment Sales in the Current Six Month Period reflects the reduction in orders and sales emanating from the Americas. We believe this is due to funding gaps caused by the use of continuing resolutions to fund Defense Programs as opposed to a fully appropriated funding program. This is not unusual in a Presidential election year. This has affected programs like the DAVD, thus reducing orders and sales in the USA, which was $978,015 in the Current Six Month Period compared to $2,240,543 in the Previous Six Month Period.
Current report
In the Current Six Month Period Depreciation expense relating to our rental assets increased by 12.5% and was $210,685 compared to $187,218 in the Previous Six Month Period.
Current report
Further information on the performance of each Segment including revenues by product and geography can be found in Notes 12 and 13 (Segment Analysis and Disaggregation of Revenue) to the unaudited consolidated financial statements.
Current report
Research and Development (R&D): R&D expenditures in the Current Six Month Period were $1,028,458 compared to the $970,397 in the Previous Six Month Period, representing an increase of 6.0%.
Current report
During the Current Six Month Period, the Services Business R&D expenditure increased by $68,338 or 499.4%. R&D expenditure is primarily incurred by the Services Business on its Thermite® range of mission computers and other developments which the business deem will advance its business strategy. The Thermite® product line remains important to the Services Business for growth and diversification of revenue. As we understand our customer base requirements for the Thermite® mission computers, we may incur more R&D expenditure on developing this range of products.
Current report
During the Current Six Month Period R&D expenditure in the Marine Technology Business decreased by 1.1% from $956,713 in the Previous Six Month Period to $946,436. R&D expenditure is incurred by this business in connection with investments in developing its products and solutions. This expenditure is an essential part of our business, as our market competitiveness is predicated on continued innovation.
Current report
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Six Month Period decreased by 7.5% and were $3,890,945 compared to $4,204,645 in the Previous Six Month Period.
Current report
The decrease in SG&A in the Current Six Month Period is largely attributed to the significant fall in stock compensation expense.
Current report
SG&A includes transactions which are cash charges and non-cash charges. The non-cash charges transactions comprise depreciation, amortization, stock-based compensation charges and exchange rate variance. In the Current Six Month Period non-cash transactions as a percentage of SG&A was 8.0% compared to 19.8% in the Previous Six Month Period. In the Current Six Month Period there was notably a significant reduction in stock based compensation charges which were $16,214 in the Current Six Month Period compared to $378,414 in the Previous Six Month Period. Exchange rate variance on transactions in the Current Six Month Period was $50,771 compared to $235,279 in the Previous Six Month Period. During the Six Month Period, the USD weakened against both the British Pound and Danish Kroner.
Current report
Wages and salaries in the Current Six Month Period increased by 4.8% over the Previous Six Month Period which largely reflects inflationary conditions. We anticipate that on a full year basis in the fiscal year 2024 this category will increase materially over the fiscal year 2023. We are currently operating on a reduced headcount and have several vacancies and are also expanding our management team.
Current report
The decrease in the “Legal and Professional” category of expenditures in the Current Six Month Period reflects the timing of services performed. On a full year basis we anticipate this category of expenditures will be in line with the Previous Year.
Current report
In general, the category “Rent” is not material for the Company as it owns substantially all of its premises and facilities. The current category of rent largely reflects our premises in Copenhagen and a storage facility that we maintain for our business operations.
Current report
Our marketing comprises a range of activities which include trade shows in different parts of the world, particularly in Europe, North America, Asia and the Middle East. As we increase our efforts around sales & marketing, we anticipate this area of expenditure will increase. In the Current Six Month Period, our marketing costs include fees associated with hiring our Business Development Focus Group Consultants in the USA which have been hired to assist with developing our Defense Market strategy and identifying opportunities for our technology within Defense Programs in the US. On a full year basis, the cost of this service will be $222,000 excluding expenses.
Current report
Operating Income: Our income from our operating activities in the Current Six Month Period was $1,905,767 as compared to $2,201,204 in the Previous Six Month Period which represents a decrease of 13.4%. This is due to a the decrease in our consolidated revenues in the Current Six Month Period due to reduced sales in the geography of in the Americas caused by funding gaps affecting US Defense Programs which are currently funded through continuing resolutions (which limits the availability of funding) as opposed to a fully funded appropriated federal budget.
Showing the first 40 of 51 passages. Open the source sections for the rest.
Removed paragraphs (13)
Previous report
Throughout these discussions “Current Quarter” means the Three-month period ended January 31, 2024 and “Previous Quarter” means the Three-month period ended January 31, 2023.
Previous report
The biggest opportunity for the DAVD technology in the USA is the DAVD untethered system (“DUS”), with the target market being special forces. The DUS system is going through evaluation and hardening process and the Company received in Fiscal Year 2023, $750,000 funding under this program and is expected to receive another $1.25m in this fiscal year. This Program is funded by the US Navy and one foreign navy who is interested in adopting the DUS.
Previous report
The ongoing war in Ukraine impacts our Services Business as most defense spending is now on land-based applications as opposed to naval based applications. In addition, we sell our products and solutions globally. The ongoing tensions in the Red Sea impacts on shipping and freight costs which may impact on demand for our products and solutions. The ongoing political tension with China is likely to reduce demand for our products in China.
Previous report
Our consolidated financial results include the results of the Company’s foreign subsidiaries. Foreign subsidiaries’ results are translated from their functional currencies to USD for reporting purposes. Fluctuations in currency can therefore impact on our translated revenue. During the Current Quarter, the USD weakened against the Pound and the Danish Kroner, resulting in translated foreign revenues being $140,827 higher when using the Previous Quarter’s exchange rate. Consolidated Revenue in the Current Quarter was $4,461,191 compared to $5,596,284 in the Previous Quarter. During the Current Quarter total operating expenses increased by 5.2% and income from operations fell by 58.7%, resulting from the decrease in our revenue. Agents’ sales commission costs incurred were 39% lower in the Current Quarter and were $293,184 compared to $486,341 in the Previous Quarter, (see Notes 12 and 13 to the Unaudited Consolidated Financial Statements for more information on Segment reporting and Disaggregation of Revenue by Segment and geography). Sales commission fell as a result of the reduction in sales from the Asia region in the Current Quarter. Net income before tax was $782,944 compared to $1,361,861, representing a decrease of 42.5%.
Previous report
In the Current Quarter, the Products Business generated $3,542,766 or 79.4% of our consolidated revenues compared to $3,824,159 or 68.3% in the Previous Quarter, representing a fall of 7.4%. The decrease in sales is a result of lower sales emanating from the key strategic region of Asia where we realized sales of $1,799,540 compared to $2,432,428, representing a decrease of 26.0%, largely attributed to weaker demand from China. Gross profit margin increased slightly from 72.2% in the Previous Quarter to 72.5% in the Current Quarter. In the Current Quarter we recorded sales commissions of $293,184 compared to $486,341 in the Previous Quarter, representing a decrease of 39.7% and which reflects the fall in sales from Asia. In the Current Quarter total operating expenses increased by 17.9% in the Products Business and were $1,296,766 compared to $1,100,067 in the Previous Quarter. Net income before tax was $1,428,157 in the Current Quarter compared to $1,674,868 in the Previous Quarter.
Previous report
In the Current Quarter, the Services Business generated $918,425 or 20.6% of our consolidated revenues compared to $1,772,125 or 31.7% in the Previous Quarter, representing a fall in sales of 48.2%. The decrease in revenue is a reflection of reduced order take and supply chain delays which impact on completing booked engineering projects and therefore conversion to revenue. The reduced order take is related to the fact that most defense programs are now funded by continuing resolutions (until approval of a federal budget) which result in change in spending priorities. Gross profit margin increased slightly from 56.0% in the Previous Quarter to 56.4% in the Current Quarter. In the Current Quarter total operating expenses decreased by 4.2% in the Services Business and were $625,086 compared to $652,460 in the Previous Quarter. In the Current Quarter the Services Business realized a net loss before tax of $35,713 compared to a net income before tax of $341,375 in the Previous Quarter.
Previous report
Revenue: Total consolidated revenues for the Current Quarter and the Previous Quarter were $4,461,191 and $5,596,284 respectively, representing a decrease of 20.3%. The reduction in our consolidated revenue is largely a result of the Services Business lower revenue by 48.2% due to reduced order and supply chain issues which have impacted on converting booked engineering projects to revenue in the Current Quarter. Although in the Current Quarter the Products Business had an increase in rentals and greater utilization of its rental assets, outright sales in the key strategic region of Asia fell by 26.0% compared to the Previous Quarter caused largely by weak demand from China. These factors impacted on our overall consolidated revenue.
Previous report
Gross Profit Margins*:* Margin percentage was slightly stronger in the Current Quarter at 69.2% (gross profit of $3,086,736) compared to 67.1% (gross profit of $3,753,005) in the Previous Quarter. One of the main factors is that in the Current Quarter we had less units of sales emanating from Asia and therefore we incurred less sales commission costs in the period. We also had increased units of rental sales, which also positively impacted on Gross Profit.
Previous report
Wages and Salaries –on a full-year basis we anticipate that this category of expenses will increase over the full year Fiscal 2023 by approximately 40% to cover replacement staff and new hires to fill open positions. We are currently operating on a reduced headcount basis and have several key vacancies. We are also seeking to expand our Management Team.
Previous report
Legal and Professional fees increased and reflect fees incurred for tax advisers’ services.
Previous report
Operating Income: In the Current Quarter operating income fell by 58.7% and was $555,384 as compared to $1,346,096 in the Previous Quarter. The decrease in operating income is largely due to the significant reduction in our revenue generated from the Engineering Segment for the reasons discussed earlier.
Previous report
Applying the Constant Rate, the impact of currency fluctuations on the three months ended January 31, 2024, is shown below. In this context “Constant Rates” is defined as:
Previous report
This table shows that the effect of Constant Rate versus the actual exchange rate applied for the Current Quarter, decreased our net income from operations in the Current Quarter by $39,076 and decreased net assets by $1,058,859.
Reworded paragraphs (35)
Previous wording
Our Marine Technology Business is an established technology solution provider to the subsea and underwater imaging, surveying, diving market and underwater communications market. It has been operating as a supplier of solutions comprising both hardware and software products for over 30 years. It owns key proprietary patented technology including real time volumetric 3D imaging sonar technology and cutting-edge diving technology, that are used in both the underwater defense and commercial markets. It recently launched its new underwater digital communications system which advances the offering in the market from analog voice communications underwater to digital voice communications underwater (Voice HUB-4). All design, development and manufacturing of our technology and solutions are performed within the Company.
Current wording
Our Marine Technology Business is an established technology solution provider to the subsea and underwater imaging, surveying, diving market and underwater communications market. It has been operating as a supplier of solutions which include both hardware and software products for over 30 years. It owns key proprietary patented technology including real time volumetric 4D/5D and 6D imaging sonar technology and cutting-edge diving technology, that are used in both the underwater defense and commercial markets. It recently launched its new AI based underwater digital communications system which advances the offering in the market from analog voice communications underwater to digital voice communications underwater. All design, development and manufacturing of our technology and solutions are performed within the Company.
Previous wording
Our imaging sonar technology products and solutions marketed under the name of Echoscope® and Echoscope PIPE® are used primarily in the underwater construction market, offshore wind energy industry (offshore renewables), offshore oil and gas, forward looking obstacle avoidance, complex underwater mapping, salvage operations, dredging, bridge inspection, underwater hazard detection, port security, mining, fisheries, real time 3D monitoring and inspection, commercial and defense diving, and marine sciences sectors. Uniquely our Echoscope® technology is a single sensor for multiple underwater applications.
Current wording
Our imaging sonar technology products and solutions marketed under the name of Echoscope® and Echoscope PIPE® are used primarily in the underwater construction market, offshore renewables, offshore oil and gas, forward looking obstacle avoidance, complex underwater mapping, salvage operations, dredging, bridge inspection, underwater hazard detection, port & harbor security, mining, fisheries, real time 3D monitoring and inspection, commercial and defense diving, and marine sciences sectors. Uniquely our Echoscope® technology is a single sensor for multiple underwater applications and therefore serves a number of discrete market verticals such as breakwater construction, dredging, salvage, landing operations, complex survey and mapping, commissioning and decommissioning of assets underwater.
Previous wording
Our novel diving technology is distributed under the name “CodaOctopus®DAVD” (Diver Augmented Vision Display) to the global defense and commercial diving markets. The DAVD embeds inside of the diver Head up Display (HUD) a pair of transparent glasses which is used as the data hub for displaying real time data to the diver. We believe that the DAVD system has the potential to radically transform how diving operations are performed globally because it provides a fully integrated singular system for topside control and a fully connected HUD system for the diver allowing both the topside and diver to share a range of critical information including depth (pressure and temperature), compass and head tracking, real time dive timers and alerts, diver position and navigation, ultra-low light enhanced video system and enhanced digital voice communications. Current diving operations are that the diver only shares analog voice communications with the topside and there is no real time information including real time navigation, tracking and mapping of the dive area. The topside must also manage several independent systems for video, communications, and positioning. The Company’s solution addresses these deficiencies. Also, using our sonar technology, diving can be performed in zero visibility conditions, a common problem which besets these operations.
Current wording
Our novel diving technology is distributed under the name “CodaOctopus®DAVD” (Diver Augmented Vision Display) to the global defense and commercial diving markets. 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 to the diver. We believe that the DAVD system has the potential to radically transform how diving operations are performed globally because it provides a fully integrated singular system for topside control and a fully connected HUD system for the diver allowing both the topside and diver to share a range of critical information including depth (pressure and temperature), compass and head tracking, real time dive timers and alerts, diver position and navigation, ultra-low light enhanced video system and enhanced digital voice communications. Current diving operations are limited in that the diver only shares analog voice communications with the topside without real time information including real time navigation, tracking and mapping of the dive area. The topside must also manage several independent systems for video, communications, and positioning. The Company’s solution addresses these deficiencies. Also, using our sonar technology, diving can be performed in zero visibility conditions, a common problem which besets these operations.
Previous wording
Although we generate most of our revenues from our real time 3D sonar which includes both proprietary hardware and software, we have a number of other products such as our inertial navigation systems (F280 Series®) and our geophysical hardware (DA4G) and software solutions (GeoSurvey and Survey Engine®, which include artificial intelligence based automatic detection systems). Our customers include offshore service providers to major oil and gas companies, renewable energy companies, underwater construction companies, law enforcement agencies, ports, mining companies, defense bodies, prime defense contractors, navies, research institutes and universities and diving companies.
Current wording
Although we generate most of our revenues from our real time 3D sonar which includes proprietary hardware and software, we have several other products such as our inertial navigation systems (F280 Series®) and our geophysical hardware (DA4G) and software solutions (GeoSurvey and Survey Engine®, which include artificial intelligence based automatic detection systems), DAVD and our digital audio communications system (Voice-HUB- 4).
Previous wording
The Services Business has operations in the USA and UK. Its central business model is working with Prime Defense Contractors to design and manufacture sub-assemblies for utilization into larger defense mission critical integrated systems (“MCIS”). An example of such MCIS is the US Close-In-Weapons Support (CIWS) Program for the Phalanx radar-guided cannon used on combat ships. These proprietary sub-assemblies, once approved within the MCIS program, afford the Services Business the status of preferred supplier. Such status permits it to supply these sub-assemblies and upgrades in the event of obsolescence or advancement of technology for the life of the MCIS program. Clients include prime defense contractors such as Raytheon, Northrop Grumman, Thales Underwater and BAE Systems. The scope of services provided by the Services Business encompasses concept, design, prototype and manufacturing.
Current wording
The Services Business has operations in the USA and UK. Its central business model is working with the prime defense contractors to design and manufacture sub-assemblies for utilization into larger defense mission critical integrated systems (“MCIS”). Examples of such MCIS are the US Close-In-Weapons Support (CIWS) Program for the Phalanx radar-guided cannon used on combat ships and the AN/AQS24 Mine Hunting System Program, both of these being programs of record. These proprietary sub-assemblies, once approved within the MCIS program, afford the Services Business the status of preferred supplier. Such status permits it to supply these sub-assemblies and upgrades in the event of obsolescence or advancement of technology for the life of the MCIS program. Clients include prime defense contractors such as Raytheon, Northrop Grumman, Thales Underwater and BAE Systems. The scope of services provided by the Services Business for the subassemblies they supply extend to concept, design, prototype and contract manufacturing and post-sale support.
Previous wording
Our volumetric real time imaging sonar technology and our DAVD are our most promising products for the Company’s near-term growth.
Current wording
Our volumetric real time imaging sonar technology, Echoscope®, and DAVD are the most promising products for the Company’s near-term growth. We are widely regarded as the leading solution providers for underwater real time 3D visualization.
Previous wording
Our real time 3D/4D/5D/6D Imaging sonars are the only underwater imaging sonars which are capable of providing complex seabed mapping, real time inspection and monitoring and providing 3D/4D/5D/6D data of moving underwater objects irrespective of water conditions including in zero visibility (which is a common and costly problem in underwater operations). Competing products such as the multibeam sonar can perform mapping (but not complex mapping) without the ability to perform real time inspection and monitoring of moving objects underwater. We also believe our Echoscope PIPE® is the only technology that can generate multiple real time 3D/4D/5D/6D acoustic images using different acoustic parameters such as frequency, field of view, pulse length, filters and different beamforming modes.
Current wording
Our real time 4D/5D/6D Imaging sonars are the only underwater imaging sonars which are capable of providing complex seabed mapping, real time inspection and monitoring and providing 4D/5D/6D data of moving underwater objects irrespective of water conditions including in zero visibility (which is a common and costly problem in underwater operations). Competing products such as the multibeam sonar can perform mapping (but not complex mapping) without the ability to perform real time inspection and monitoring of moving objects underwater. We also believe our Echoscope PIPE® is the only technology that can generate multiple real time 4D/5D/6D acoustic images using different acoustic parameters such as frequency, field of view, pulse length, filters and different beamforming modes.
Previous wording
The DAVD tethered variant is now in early-stage adoption by different teams within the US Navy such as the underwater construction and salvage teams. The DAVD which is included on the Approved Navy Use (“ANU”) list is a standard item available for purchase within the Navy community and some of these commands are now requesting this solution for their operations. We have also starting realizing sale of the DAVD in the offshore commercial market and have sold our first DAVD tethered system to a significant offshore service provider in Asia.
Current wording
The DAVD tethered variant is now in early-stage adoption by different teams within the US Navy. The DAVD which is included on the Approved Navy Use (“ANU”) list is a standard item available for purchase within the Navy community and some of these commands are now requesting this solution for their operations. We have also started realizing sales of the DAVD in the offshore commercial market and have sold our first DAVD tethered system to a significant offshore service provider in Asia.
Previous wording
The concept of utilizing a pair of transparent glasses in the Head Up Display (HUD) underwater, is protected by patent. All component parts of the DAVD system are proprietary to the Company and include software (4G USE®), Diver Processing Pack – telemetry system (DPP), Top Side Controller and real time 3D Sonar. The Company benefits from the exclusive license from the United States Department of the Navy at Naval Surface Warfare Center Panama City Division to exploit the utility patent covering the concept of using the pair of transparent glasses as a data hub underwater. The DAVD is an “Approved Navy Use” item and benefits from CE Marking required under UK and European Union safety regulations.
Current wording
The concept of utilizing a pair of transparent glasses in the Head Up Display (HUD) underwater, is protected by patent. All component parts of the DAVD system are proprietary to the Company and include overall systems designs, software (4G USE® DAVD Edition), Diver Processing Pack – telemetry system (DPP), Top Side Controller and real time 3D Sonar. The Company benefits from the exclusive license from the United States Department of the Navy at Naval Surface Warfare Center Panama City Division to exploit the utility patent covering the concept of using the pair of transparent glasses as a data hub underwater. The DAVD is an “Approved Navy Use” item and benefits from CE Marking required under UK and European Union safety regulations.
Previous wording
The following is a brief summary of some of the most critical factors that affect our business. For a more detailed discussion of these and additional factors, refer to our Form 10-K for the fiscal year ended October 31, 2023.
Current wording
The following is a brief summary of the most critical factors that affect our business. For a more detailed discussion of these and additional factors, refer to our Form 10-K for the fiscal year ended October 31, 2023.
Previous wording
The change in monetary policy vis-à-vis interest rates has in general affected some of our key sectors such as offshore renewables and underwater construction. The increase in interest rates has impacted on the viability of a number of underwater projects resulting in increased costs of operation, which in turn has reduced the demand for our underwater solutions.
Current wording
The change in monetary policy vis-à-vis interest rates has in general affected some of our key sectors such as offshore renewables and underwater construction. The increase in interest rates has impacted on the viability of a number of underwater projects resulting in increased operational costs, which in turn has reduced the demand for our underwater solutions.
Previous wording
The Company has operations in the UK, USA, Denmark, Australia and India. Our consolidated results include the Company’s foreign subsidiaries’ results which are translated into USD, our reporting currency. Revenue and expenses are translated using the weighted average exchange rates in effect during the reporting period. In the Current Quarter the USD has weakened against major currencies including the British Pound, Euro and Danish Kroner (the functional currencies of the Company’s foreign subsidiaries). A significant part of our consolidated results is transacted in British Pounds and Danish Kroner and translated into USD for reporting purposes. In the Current Quarter, for the purposes of reporting revenues and expenses, the value of the Pound and Euro (the Danish Kroner is pegged to the Euro) respectively increased 4.7% and 2.8%, against the USD, when compared to the Previous Quarter. For the reporting of assets and liabilities, the Pound increased 3.3% when compared to the Previous Quarter and the Danish Kroner fell 0.2% over the same period. The impact of currency fluctuations is discussed more fully below under “Inflation and Foreign Currency”. See also Note 5 (Foreign Currency Translation) to the Unaudited Consolidated Financial Statements and the section of this report which concerns “Inflation and Foreign Currency”.
Current wording
The Company has operations in the UK, USA and Denmark. Our consolidated results include the Company’s foreign subsidiaries’ results which are transacted in their native functional currency and translated into USD for reporting purposes. Revenue and expenses are translated using the average exchange rates in effect during the reporting period. In the Current Quarter, for the purpose of reporting revenue and expenses, the value of the British Pound when compared to the Previous Quarter increased against the USD by 2.0% and the Danish Kroner decreased by 0.7%, respectively. For the purpose of reporting asset and liabilities, the British Pound and the Danish Kroner both decreased by 0.5% and 3.1% respectively. The impact of currency fluctuations is discussed more fully below under Item 2 - “Inflation and Foreign Currency”. See also Note 5 (Foreign Currency Translation) to the unaudited consolidated financial statements.
Previous wording
We are experiencing skill shortages in areas that are critical to our growth strategy including experienced sales and marketing personnel, software developers, skilled electronic technicians and a number of Management positions. The inflationary conditions in the countries in which we operate make it difficult for us to compete for these skills as there is extreme pressure on wages.
Current wording
We are experiencing skill shortages in areas that are critical to our growth strategy including experienced sales and marketing personnel, software developers, skilled electronic technicians and various management positions.
Previous wording
The Services Business revenues are highly concentrated and are generated from sub-contracts with Prime Defense Contractors. The sales cycle is generally protracted, and this may affect quarterly revenues. It is also dependent on the federal government appropriating budget for defense projects and where the federal government is unable to find consensus in the US Congress, this affects the timely award of sub-contract from Prime Defense Contractors to our Services Business, which is reliant on these awards. Furthermore, the Products Business key opportunities which are critical to its growth strategy are in the Defense Market for both its imaging sonars and the DAVD, both of which are key pillars of the Company’s growth strategy. Due to the protracted nature of the government procurement process and cycle for defense spending under federal and/or state budgets, the sales cycle can be long and unpredictable, thus affecting timing of orders and thus quarterly revenues.
Current wording
The Services Business revenues are highly concentrated and are mainly generated from sub-contracts with prime defense contractors. The sales cycle is generally protracted, and this may affect quarterly revenues. It is also dependent on the federal government approving and appropriating budget for defense projects and where the federal government is unable to find consensus in the US Congress, this affects the timely award of sub-contract from the prime defense contractors to our Services Business, which is reliant on these awards. Furthermore, the Products Business key opportunities which are critical to its growth strategy are in the Defense Market for both its imaging sonars and the DAVD, both of which are key pillars of the Company’s growth strategy. Due to the protracted nature of the government procurement process and cycle for defense spending under federal and/or state budgets, the sales cycle can be long and unpredictable, thus affecting timing of orders and thus quarterly revenues.
Previous wording
These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As of January 31, 2024, we had cash and cash equivalents of $25,003,984 and in the Current Quarter we used $297,959 of cash for operations. Based on our outstanding obligations and our cash balances, we believe we have sufficient working capital to effectively continue our business operations for the foreseeable future.
Current wording
These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As of April 30, 2024, we had cash and cash equivalents of $23,709,676 and we used $1,253,725 of cash for operations in the six months to April 30, 2024. Based on our outstanding obligations and our cash balances, we believe we have sufficient working capital to effectively continue our business operations for the foreseeable future.
Previous wording
Regarding our Products Business, 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, 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 exists.
Current wording
Regarding our Products 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, 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 delivery of those services exists.
Previous wording
Intangible assets consist principally of the excess of cost over the fair value of net assets acquired (or goodwill), customer relationships, non-compete agreements and licenses. Goodwill was allocated to our reporting units based on the original purchase price allocation. Goodwill is not amortized and is evaluated for impairment annually or more often if circumstances indicate impairment may exist. Customer relationships, non-compete agreements, patents and licenses are being amortized on a straight-line basis over periods of 2 to 15 years. The Company amortizes its limited lived intangible assets using the straight-line method over their estimated period of benefit. Annually, or sooner if there is indication of a loss in value, we evaluate the recoverability of intangible assets and consider events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. There were no impairment charges during the periods presented.
Current wording
Intangible assets consist principally of the excess of cost over the fair value of net assets acquired (or goodwill) and customer relationships. Goodwill was allocated to our reporting units based on the original purchase price allocation. Goodwill is not amortized and is evaluated for impairment annually or more often if circumstances indicate impairment may exist. Customer relationships are being amortized on a straight-line basis over periods of 2 to 15 years. The Company amortizes its limited lived intangible assets using the straight-line method over their estimated period of benefit. Annually, or sooner if there is indication of a loss in value, we evaluate the recoverability of intangible assets and consider events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. There were no impairment charges during the periods presented.
Previous wording
In the Current Quarter, gross profit margins for the Marine Technology Business were 72.5% compared to 72.2% in the Previous Quarter. For the Services Business these were 56.4% in the Current Quarter compared to 56.0% in the Previous Quarter. In the Current Quarter, the main factor affecting gross profit margin in the Marine Technology Business is the reduction of sales commission costs by 39.7% when compared to the Previous Quarter.
Current wording
In the Current Quarter, gross profit margins for the Marine Technology Business were 80.2% compared to 75.3% in the Previous Quarter. For the Services Business these were 50.7% in the Current Quarter compared to 53.9% in the Previous Quarter and this change largely reflects the types of engineering projects contracted in the reporting period.
Previous wording
In the Current Quarter the Marine Technology Business incurred commission costs of $293,184 compared to $486,341 in the Previous Quarter, representing a decrease of 39.7%. This is largely due to the reduction in sales emanating from Asia, which fell by 26.0% and was $1,799,540 compared to $2,432,428. This resulted in less commission costs being incurred in the reporting period.
Current wording
In the Current Quarter the Marine Technology Business incurred commission costs of $131,209 compared to $89,195 in the Previous Quarter, representing an increase of 47.1%.
Previous wording
Research and Development (R&D): R&D expenditures in the Current Quarter were $485,977 compared to $444,458 in the Previous Quarter, representing an increase of 9.3%.
Current wording
Research and Development (R&D): R&D expenditures in the Current Quarter were $542,481 compared to $525,939 in the Previous Quarter, representing an increase of 3.1%.
Previous wording
During the Current Quarter the Products Business R&D expenditure increased by 5.3% and was $461,375 as compared to $438,308 in the Previous Quarter. R&D expenditure is incurred by this business in connection with investments it makes in developing its products and solutions. This expenditure is an essential part of our business, as we need to continue to innovate our solutions on an ongoing basis.
Current wording
During the Current Quarter the Products Business R&D expenditure decreased by 6.4% and was $485,061 as compared to $518,405 in the Previous Quarter. R&D expenditure is incurred by this business in connection with investments it makes in developing its products and solutions. This expenditure is an essential part of our business, as our market competitiveness is predicated on continued innovation.
Previous wording
During the Current Quarter the Services Business R&D expenditure increased by 300.0% and was $24,602 compared to $6,150 in the Previous Quarter. The Services Business incurs research and development expenses on advancing its Thermite® Octal range of mission computer products with the strategic goals of increasing and diversifying its revenues and improving gross profit margins.
Current wording
During the Current Quarter the Services Business R&D expenditure increased by 662.1% and was $57,420 compared to $7,534 in the Previous Quarter. The Services Business incurs research and development expenses primarily on advancing its Thermite® Octal range of mission computer products with the strategic goals of increasing and diversifying its revenues and improving gross profit margins. As we understand our customer base requirements for these mission computers, we may incur more R&D expenditure on developing this range of products.
Previous wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Quarter increased by 4.2% to $2,045,375 from $1,962,451 in the Previous Quarter.
Current wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Quarter decreased by 17.7% to $1,845,570 from $2,242,194 in the Previous Quarter.
Previous wording
SG&A includes both cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization, Stock-based compensation, and Exchange Rate Variance charges. In the Current Quarter non-cash items as a percentage of SG&A expenses were 15.5% compared to 18.2% in the Previous Quarter.
Current wording
SG&A includes transactions which are cash charges and non-cash charges. The non-cash charges transactions comprise depreciation, amortization, stock-based compensation, and exchange rate variance charges. In the Current Quarter non-cash transactions as a percentage of SG&A expenses were (0.3) % compared to 21.1% in the Previous Quarter.
Previous wording
Marketing –the increase in marketing is anticipated within our plans. This is an area of expenditure which we anticipate will increase materially in this fiscal year and subsequent years. As we shift our focus from R&D to business development and marketing, including undertaking efforts to build our brands, we anticipate a significant increase in this area of expenditure.
Current wording
Marketing– the increase in marketing is anticipated within our plans. This is an area of expenditure which we anticipate will increase materially in this fiscal year and subsequent years. As we shift our focus from R&D to business development and marketing, including undertaking efforts to build our brands, we anticipate a significant increase in this area of expenditure. In the Current Quarter, the increased costs are largely a reflection of the fees associated with hiring our Business Development Focus Group Consultants in the USA to assist the Company with developing its Defense Market strategy and identifying opportunities for the Company’s technology within US Defense Programs. On a full year basis, the cost of this service will be $222,000 excluding travel expenses.
Previous wording
General corporate administrative expenses in the Current Quarter were $609,500 or 13.7% of revenue and $654,382 or 11.7% of revenue in the Previous Quarter, respectively. For more information on general corporate administrative expenses, please see Note 12 (Segment Analysis).
Current wording
General corporate administrative expenses in the Current Quarter were $456,299 or 8.6% of revenue and $708,494 or 13.4% of revenue in the Previous Quarter, respectively. For more information on general corporate administrative expenses, please see Note 12 (Segment Analysis).
Previous wording
Other Income: In the Current Quarter, we had other income of $227,560 compared to $15,765, representing an increase of 1,343.5% from the Previous Quarter. In Current Quarter $192,540 of this amount represents interest income earned on our certified deposit accounts. In February 2023, the Company established certified deposit accounts with its existing bankers. These accounts are for fixed 3-month rolling periods and constitute “cash equivalents” in our current unaudited Consolidated Financial Statements for the period ended January 31, 2024 (see Note 12 (Composition of Certain Financial Statement Captions for more detailed analysis of this). We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain the same or continue to rise.
Current wording
Other Income: In the Current Quarter, we had “total other income” of $290,832 compared to $173,376, representing an increase of 67.7% from the Previous Quarter. In the Current Quarter we had $293,468 interest income earned on our certified deposit accounts. These accounts are for fixed 3-month rolling periods and constitute “cash equivalents” in our current unaudited Consolidated Financial Statements for the period ended April 30, 2024 (see Note 6 (Composition of Certain Financial Statement Captions) for more detailed analysis of this. We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain the same or continue to rise.
Previous wording
Net Income before income taxes: In the Current Quarter, we had income before income taxes of $782,944 as compared to $1,361,861 in the Previous Quarter, representing a decrease of 42.5%. Net income before income taxes fell due to the decrease in our consolidated revenues compounded by the increase in total operating expenses.
Current wording
Income before income taxes: In the Current Quarter, we had income before income taxes of $1,641,215 as compared to $1,028,484 in the Previous Quarter, representing an increase of 59.6%. Income before income taxes increased due to an increase in gross profit in conjunction with a reduction in total operating expenses, and an increase in total other income attributable to an increase in interests earned on our certified deposits detailed in Note 6 (Composition of Certain Financial Statement Captions).
Previous wording
Net Income: In the Current Quarter we had Net Income of $629,888 compared to $1,397,857 in the Previous Quarter, representing a decrease of 54.9%. In the Previous Quarter we recorded Current Tax Expense of $11 compared to a Current Tax Benefit of $34,015 in the Current Quarter. We also recorded Deferred Tax Expense of $187,071 in the Current Quarter compared to a benefit of $36,007 in the Previous Quarter. Our tax liability included in our consolidated financial results will depend on the composition of our consolidated income, whether they relate to the Company’s foreign subsidiaries or US subsidiaries and similarly the percentage of consolidated income from US and Foreign subsidiaries. In the Current Quarter, the Company and its US subsidiaries had a taxable loss. The UK companies have carryforward losses which are applied to defray income tax liability and therefore no provision has been made for tax liability for the UK subsidiaries in our consolidated results for the Current Quarter. We have made a provision for our Danish subsidiary of 22.0% for the Current Quarter in addition to $42,500 for Global Intangible Low Tax Income (GILTI Tax).
Current wording
Net Income: In the Current Quarter we had Net Income of $1,415,238 compared to $1,008,477 in the Previous Quarter, representing an increase of 40.3%. Net Income increased in the Current Quarter over the Previous Quarter as a result of the increase in “Income before taxes” for the reasons explained above. In general, our tax liability included in our consolidated financial results will depend on the composition of our consolidated income, whether they relate to the Company and its US-owned subsidiaries and/or its foreign-owned subsidiaries, and similarly the percentage of consolidated income from the Company and its US-owned subsidiaries and its foreign owned subsidiaries. In the Current Quarter, the US companies did not generate a taxable income. In the Current and Previous Quarters we recorded Current Tax Expense of $191,073 and $68,773, respectively. We also recorded Deferred Tax Expense of $34,904 in the Current Quarter compared to a Deferred Tax Benefit of $48,766 in the Previous Quarter. In the Current Quarter the Company’s UK subsidiaries generated a taxable income but have carryforward losses and R&D tax credits which will be used to defray tax liability for these subsidiaries and therefore no provision for tax liability has been made in our consolidated results for the UK subsidiaries in the Current Quarter. The Company’s Danish subsidiary generated a taxable income in the Current Quarter, resulting in a tax provision of 22.0% in our consolidated results. We also made provision for Global Intangible Low-Taxed Income of $130,500.
Previous wording
Comprehensive Income*.* In the Current Quarter comprehensive income was $1,659,468 compared to comprehensive income of $3,005,507 for the Previous Quarter reflecting adjustments resulting from foreign currency translations. This category is affected by fluctuations in foreign currency exchange transactions both relating to our profit and loss expenses and valuation of our assets and liabilities on our balance sheet. In the Current Quarter we had a gain of $1,029,580 on foreign currency translation adjustment transactions compared to a gain of $1,607,650 in the Previous Quarter. A significant part of the Company’s operations is based in the UK and Denmark, and therefore a major part of our assets and liabilities recorded in our consolidated balance sheet and financial transactions are translated from the functional currencies of these subsidiaries into USD for reporting purposes. See the section below which concerns “Inflation & Foreign Currency” which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in the Current Quarter compared to the Previous Quarter.
Current wording
Comprehensive Income*.* In the Current Quarter comprehensive income was $977,555 compared to comprehensive income of $1,546,850 for the Previous Quarter reflecting adjustments resulting from foreign currency translations. This category is affected by fluctuations in foreign currency exchange transactions both relating to our profit and loss expenses and valuation of our assets and liabilities on our balance sheet. A significant part of the Company’s operations is based in the UK and Denmark, and therefore a major part of our assets and liabilities recorded in our consolidated balance sheet and financial transactions are translated from the functional currencies of these subsidiaries into USD for reporting purposes. In the Current Quarter, for the purpose of reporting revenue and expenses, the value of the British Pound when compared to the Previous Quarter increased against the USD by 2.0% and the Danish Kroner decreased by 0.7%, respectively. For the purpose of reporting asset and liabilities, the British Pound and the Danish Kroner both decreased by 0.5% and 3.1% respectively. Therefore, in the Current Quarter we had a loss of $437,638 on foreign currency translation adjustment transactions compared to a gain of $538,373 in the Previous Quarter. See the section below which concerns “Inflation & Foreign Currency” which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in the Current Quarter compared to the Previous Quarter.
Previous wording
As of January 31, 2024, the Company had an accumulated deficit of $10,422,599, working capital of $40,020,217, cash of $25,003,984 and stockholders’ equity of $50,149,677. For the Current Quarter, the Company’s operating activities used cash of $297,959.
Current wording
As of April 30, 2024, the Company had an accumulated deficit of $9,007,361, working capital of $41,013,701, cash and cash equivalent of $23,709,676 and stockholders’ equity of $51,066,370. For the six months ended April 30, 2024, the Company’s operating activities used cash of $1,253,725.
Previous wording
The Company’s consolidated results are a combination of its US and foreign operations and these companies maintain their accounts in the functional currencies of their jurisdictions which are noted above. Fluctuations in currency exchange rates can directly impact on the Company’s sales, profitability and financial position when the transactions of the foreign subsidiaries are translated from their functional currencies into USD for financial reporting. In addition, the Company is also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables incurred in the ordinary course of its business operations (cross-border transactions such as inventory purchasing). In general, the Company’s subsidiaries perform financial transactions in their native currencies. Exceptionally, a subsidiary may perform financial transactions in currencies other than its native or functional currency (purchasing inventory from a foreign supplier, for example, in foreign currency). Furthermore, the Company holds significant cash balances in foreign currencies, such as British Pound, Euro and Danish Kroner. The Company cannot predict the extent to which currency fluctuations may affect its business and financial position, and there is a risk that such fluctuations may have an adverse impact on the Company’s sales, profits and financial position.
Current wording
The Company’s consolidated results are a combination of its US and foreign operations and these companies maintain their accounts in the functional currencies of their jurisdictions, which are noted above. Fluctuations in currency exchange rates can directly impact on the Company’s sales, profitability and financial position when the transactions of the foreign subsidiaries are translated from their functional currencies into USD for financial reporting. In addition, the Company is also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables incurred in the ordinary course of its business operations (cross-border transactions such as inventory purchasing). In general, the Company’s subsidiaries perform financial transactions in their native currencies. Occasionally a subsidiary may perform financial transactions in currencies other than its native or functional currency (purchasing inventory from a foreign supplier, for example, in foreign currency). Furthermore, the Company holds significant cash balances in foreign currencies, such as British Pound, Euro and Danish Kroner. The Company cannot predict the extent to which currency fluctuations may affect its business and financial position, and there is a risk that such fluctuations may have an adverse impact on the Company’s sales, profits and financial position.
Previous wording
“Revenue and Expenses (Income Statement Transactions)”: this is the prevailing weighted average exchange rate in the Previous Quarter.
Current wording
“Revenue and Expenses (Income Statement Transactions) for the three months ended April 30, 2024” the Constant Rate is defined as the prevailing average exchange rate which was applied in the Previous Quarter.
Previous wording
“Balance Sheet Transaction”: this is the prevailing exchange rate as of October 31, 2023
Current wording
“Balance Sheet Transaction” the Constant Rate is defined as this is the prevailing exchange rate as of October 31, 2023.
Previous wording
Information is not specified for INR and AUD as there is limited scope of operations in these jurisdictions and therefore contributions are immaterial. However, the information for INR and AUD is included in the totals.
Current wording
Information is not specified for INR as there is limited scope of operations in this jurisdiction and therefore contributions are immaterial. However, the information for INR is included in the totals.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Our customers include offshore service providers to major oil and gas companies, renewable energy companies, underwater construction companies, law enforcement agencies, ports, mining companies, defense bodies (such as navies), prime defense contractors, research institutes and universities and diving companies.
Current report — wording carried from elsewhere
Gross profit margins reported in our financial results may vary according to several factors. These include:
Current report — wording carried from elsewhere
Since there are more variable factors affecting gross profit margins in the Marine Technology Business, a breakdown of sales for this business in the Current Six Month Period is set out below:
Current report — wording carried from elsewhere
Key Areas of SG&A Expenditure across the Group for the Current Quarter compared to the Previous Quarter are:
Current report — wording carried from elsewhere
Overhead related costs as a percentage of revenue for Current Six Month Period, compared to the Previous Six Month Period
Current report — wording carried from elsewhere
General corporate administrative expenses in the Current Six Month Period were $1,065,799 or 10.9% of revenue and $1,362,876 or 12.5% of revenue in the Previous Six Month Period, respectively. For more information on general corporate administrative expenses, please see Note 12 (Segment Analysis).
Current report — wording carried from elsewhere
Other Income: In the Current Six Month Period, this increased by 174.1% and was $518,392 as compared to $189,141 in the Previous Six Month Period. In the Current Six Month Period $486,008 of our Other Income is attributable to interest earned on our 3-month rolling certified deposit accounts. See Note 6 (Composition of Certain Financial Statement Captions) for more detailed analysis of this. We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain the same or continue to rise.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We are widely regarded as the leading solution providers for underwater real time 3D visualization.