Coda Octopus Group, Inc. (NASDAQ:CODA) Q1 2024 Earnings Conference Call March 18, 2024 10:00 AM ET Company Participants Jackie Keshner - IR, The Gateway Group, Inc. Annmarie Gayle - Chair and Chief Executive Officer Gayle Jardine - Interim-CFO Conference Call Participants Brian Kinstlinger - Alliance Global Partners Operator Good morning. Welcome to Coda Octopus Group's First Quarter 2024 Earnings Conference Call. My name is Sherry, and I will be your operator today. Before this call, Coda Octopus issued it ...

Item 6. Exhibits 32 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | --- | --- | |----------------------------|-------------------------------------------------------| | | | | | Coda Octopus Group, Inc. (Registrant) | | Date: March 18, 2024 | /s/ Annmarie Gayle | | | Annmarie Gayle | | | Chief Executive Officer | | Date: March 18, 2024 | /s/ Gayle Jardine | | | Gayle Jardine Interi ...

Orlando, FL, March 08, 2024 (GLOBE NEWSWIRE) -- Coda Octopus Group, Inc. (“CODA” or the “Company”) (NASDAQ: CODA), a global market leader in real-time 3D/4D/5D and 6D imaging sonar technology for real-time subsea intelligence and diving technology, will host a conference call on Monday, March 18, 2024 at 10:00 a.m. Eastern time to discuss its results for its fiscal first quarter ended January 31, 2024 (“FQ2024”). A press release detailing these results will be issued before the open of trading on the same d ...

Orlando, FL, March 08, 2024 (GLOBE NEWSWIRE) -- Coda Octopus Group, Inc. ("CODA" or the "Company") (NASDAQ:CODA), a global market leader in real-time 3D/4D/5D and 6D imaging sonar technology for real-time subsea intelligence and diving technology, will host a conference call on Monday, March 18, 2024 at 10:00 a.m. Eastern time to discuss its results for its fiscal first quarter ended January 31, 2024 ("FQ2024"). A press release detailing these results will be issued before the open of trading on the same da ...

Financial Data and Key Metrics Changes - In fiscal year 2023, total revenue decreased by 12.9% to $19.4 million from $22.2 million in fiscal year 2022 [69] - Marine Technology Business revenue fell by 17.7% to $12.1 million compared to $14.7 million in the previous fiscal year [69] - Gross profit decreased to $13.0 million with a gross margin of 67.3%, down from 68.3% in fiscal year 2022 [70] - Operating income dropped by 45.3% to $2.7 million, with an operating margin of 14.2% compared to 22.5% in the previous year [95] - Net income after taxes was $3.1 million or $0.28 per diluted share, down from $4.3 million or $0.38 per diluted share in fiscal year 2022 [96] - Cash and cash equivalents increased to $24.4 million, up from $22.9 million in fiscal year 2022, with no debt [73] Business Line Data and Key Metrics Changes - Rental revenues in the Marine Technology Business fell by 31.4%, significantly impacting overall performance [13] - Engineering Services Business did not meet business plan goals due to order take being affected by the war in Ukraine [18] Market Data and Key Metrics Changes - Sales from Asia decreased by 19.5% due to weak demand and macroeconomic factors [17] - The marine industry faced cancellations and postponements of major offshore renewable projects due to inflation and supply chain issues [12] Company Strategy and Development Direction - The company is focused on growth pillars including Echoscope imaging sonar, DAVD systems, and digital audio communication systems [40][60] - Plans to expand growth strategy to include M&A activities to acquire complementary technologies [99] - Emphasis on business development in underwater imaging, defense underwater vehicles, offshore renewables, and underwater construction markets [77] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic factors have negatively impacted revenue and overall financial performance in fiscal year 2023 [26] - Positive signs of increased contracting and rental projects were observed in the first quarter of fiscal 2024, indicating potential recovery [4][5] - Confidence in the adoption of DAVD technology outside of the U.S. Navy is expected to increase in fiscal year 2024 [53][54] Other Important Information - The company has made progress in advancing the DAVD untethered system customization program and has delivered eight evaluation modified systems [65] - The company is working on a significant project with a major offshore service provider in the Middle East, quoting six Echoscopes for sale [52] Q&A Session Summary Question: What caused the revenue shortfall in the fourth quarter? - Management indicated that the revenue decline was due to postponed projects and weak demand in key markets [80] Question: Is the situation getting worse regarding order intake? - Management confirmed that many projects were stalling and not moving forward due to macroeconomic factors [104] Question: What is the status of the R&D tax credit? - The R&D credits are related to the company's foreign entity and are not expected to change [124] Question: When will technologies be deployed within Navy contracts? - Management stated that evaluation under programs can take several years, but progress is being made [116] Question: What is the outlook for the offshore renewable market? - Management expressed confidence in the offshore renewable market's potential once contractual hurdles are removed [128]

ORLANDO, FL, Jan. 29, 2024 (GLOBE NEWSWIRE) -- Coda Octopus Group, Inc. (CODA) (NASDAQ:CODA) today reported its audited financial results for its fiscal year ended October 31, 2023 (FY2023). Annmarie Gayle, CODA's Chairman and CEO, commented: "I am pleased to report our annual results for FY2023. Although we have made progress in our strategic end markets in the FY2023, our financial performance was affected by external factors affecting our sectors of operation. "The offshore renewable energy sector and u ...

Marine Technology Business Operations - The Marine Technology Business operates through subsidiaries in Orlando, UK, Denmark, Netherlands, and India[17] - The company acquired Octopus Marine Systems Ltd in 2002, leading to the introduction of the Motion product (F180 series)[28] - The company acquired Coda Octopus Martech Limited in 2006, expanding its Marine Engineering Business[29] - The company established Coda Octopus Products Pty Ltd in Australia in 2013, though activities were slowed by the Coronavirus Pandemic[30] Echoscope Technology and Applications - The Echoscope® and Echoscope PIPE products are primarily used in underwater construction, offshore renewables, and offshore oil and gas markets[16] - The Echoscope technology is the only acoustic imaging sonar capable of providing real-time 3D/4D/5D/6D imaging of moving objects in zero visibility water conditions[20] DAVD System and Market Potential - The DAVD tethered system completed successful field trials with a major European Offshore Service Provider, part of the "Big Four" Dredging companies accounting for 80% of global dredging capacity[22] - The DAVD system is expected to generate $2 million in revenue, with firm commitment from a foreign NATO country[25] - The DAVD system is protected by patent, with exclusive license from the U.S. Department of the Navy[26] - The DAVD system combined with real-time 3D sonars allows diving in difficult water conditions, addressing visibility issues[21]

Coda Octopus Group, Inc. (NASDAQ:CODA) Q3 2023 Earnings Conference Call September 13, 2023 10:00 AM ET Company Participants Jackie Keshner - Investor Relations, Gateway Group, Inc. Annmarie Gayle - Chair and Chief Executive Officer Gayle Jardine - Acting Chief Financial Officer Conference Call Participants Brian Kinstlinger - Alliance Global Partners Walter Ramsley - Walrus Partners William Bremer - Vanquish Capital Partners Operator Good morning, and welcome to Coda Octopus Group Third Quarter Fiscal Year ...

PART I - Financial Information [Item 1: Financial Statements](index=3&type=section&id=Item%201%3A%20Financial%20Statements) Coda Octopus Group, Inc.'s unaudited consolidated financial statements, covering balance sheets, income, equity, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (July 31, 2023 vs. October 31, 2022) | Metric | July 31, 2023 | October 31, 2022 | Change (%) | | :-------------------------- | :-------------- | :--------------- | :--------- | | Total Assets | $51,969,795 | $46,927,458 | 10.7% | | Total Liabilities | $2,132,566 | $3,544,649 | -39.9% | | Total Stockholders' Equity | $49,837,229 | $43,382,809 | 14.9% | | Cash and Cash Equivalents | $24,890,568 | $22,927,371 | 8.6% | | Inventory | $11,647,639 | $10,027,111 | 16.1% | | Unbilled Receivables | $1,742,334 | $602,115 | 189.4% | | Accounts Payable | $1,126,762 | $793,247 | 42.1% | | Accrued Expenses & Other Current Liabilities | $225,787 | $1,731,706 | -87.0% | | Deferred Revenue (Current) | $640,775 | $943,569 | -32.1% | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Consolidated Income and Comprehensive Income (3 Months Ended July 31) | Metric | 2023 | 2022 | Change (%) | | :---------------------- | :------------ | :------------ | :--------- | | Net Revenues | $4,890,532 | $6,267,409 | -22.0% | | Gross Profit | $3,365,224 | $4,562,644 | -26.3% | | Income from Operations | $862,614 | $2,023,713 | -57.4% | | Net Income | $1,038,780 | $1,768,657 | -41.3% | | Basic EPS | $0.09 | $0.16 | -43.8% | | Diluted EPS | $0.09 | $0.16 | -43.8% | | Comprehensive Income | $1,431,263 | $963,500 | 48.5% | Consolidated Income and Comprehensive Income (9 Months Ended July 31) | Metric | 2023 | 2022 | Change (%) | | :---------------------- | :------------- | :------------- | :--------- | | Net Revenues | $15,788,325 | $17,090,455 | -7.6% | | Gross Profit | $10,741,470 | $11,754,284 | -8.6% | | Income from Operations | $3,063,818 | $3,869,978 | -20.8% | | Net Income | $3,445,114 | $3,597,208 | -4.2% | | Basic EPS | $0.31 | $0.33 | -6.1% | | Diluted EPS | $0.31 | $0.32 | -3.1% | | Comprehensive Income | $5,983,620 | $766,450 | 680.7% | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) - Total Stockholders' Equity increased from **$43,382,809** as of October 31, 2022, to **$49,837,229** as of July 31, 2023[12](index=12&type=chunk) - Accumulated Other Comprehensive Loss improved from **$(4,737,124)** to **$(2,198,618)** over the nine months, largely due to foreign currency translation adjustments[12](index=12&type=chunk)[14](index=14&type=chunk) - Accumulated Deficit decreased from **$(14,176,636)** to **$(10,731,522)** over the nine months, reflecting net income[12](index=12&type=chunk) - Employee stock-based compensation contributed **$488,764** to additional paid-in capital for the nine months ended July 31, 2023[16](index=16&type=chunk)[59](index=59&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flows (9 Months Ended July 31) | Cash Flow Activity | 2023 | 2022 | Change (%) | | :-------------------------- | :------------ | :------------ | :--------- | | Net Cash from Operating | $1,384,897 | $6,282,523 | -77.9% | | Net Cash from Investing | $(509,609) | $(1,195,885) | -57.4% | | Net Cash from Financing | $(17,963) | $(63,559) | -71.7% | | Effect of Currency Translation | $1,105,872 | $(1,399,815) | N/A | | Net Increase in Cash | $1,963,197 | $3,623,264 | -45.8% | | Cash at End of Period | $24,890,568 | $21,370,920 | 16.5% | [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS](index=10&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) - Coda Octopus Group, Inc. operates two distinct business units: Marine Technology Business (Products Segment) and Marine Engineering Business (Services Segment)[23](index=23&type=chunk) - The Marine Technology Business sells and rents Echoscope real-time 3D imaging sonar and the new Diver Augmented Vision Display (DAVD) system to subsea and underwater markets, with DAVD being a significant growth area[23](index=23&type=chunk) - The Marine Engineering Business is a sub-contractor to prime defense contractors, supplying proprietary sub-assemblies for mission-critical defense systems[23](index=23&type=chunk) [NOTE 2 – REVENUE RECOGNITION](index=10&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) - Revenue is recognized in accordance with Topic 606, when performance obligations are met, which includes product delivery, service performance, or over the subscription/rental period[26](index=26&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - Fixed-price contracts for services are recognized using the percentage of completion method, measured by the percentage of costs incurred to date[33](index=33&type=chunk) - Deferred revenue includes customer prepayments and amounts related to warranty or Through Life Support (TLS) obligations, amortized over the relevant service period[32](index=32&type=chunk)[48](index=48&type=chunk) [NOTE 3 – COST OF REVENUES](index=12&type=section&id=NOTE%203%20%E2%80%93%20COST%20OF%20REVENUES) - Cost of Revenues includes materials, direct costs, and commissions paid to sales agents, primarily for the Marine Technology Business[39](index=39&type=chunk) Commissions Included in Cost of Revenues | Period | 2023 | 2022 | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Three Months Ended July 31 | $120,724 | $33,001 | 265.8% | | Nine Months Ended July 31 | $728,552 | $434,005 | 67.9% | [NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS](index=12&type=section&id=NOTE%204%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) - The carrying amounts of financial instruments (cash, accounts receivable, accounts payable, accrued expenses) approximate fair values due to their short-term nature[40](index=40&type=chunk) [NOTE 5 – FOREIGN CURRENCY TRANSLATION](index=12&type=section&id=NOTE%205%20%E2%80%93%20FOREIGN%20CURRENCY%20TRANSLATION) - Assets and liabilities are translated at prevailing exchange rates at balance sheet dates, while revenues and expenses use weighted average rates[41](index=41&type=chunk) - Resulting translation adjustments are recorded as a separate component in stockholders' equity as part of accumulated other comprehensive income or loss[41](index=41&type=chunk) [NOTE 6 – INVENTORY](index=12&type=section&id=NOTE%206%20%E2%80%93%20INVENTORY) Inventory Composition (July 31, 2023 vs. October 31, 2022) | Component | July 31, 2023 | October 31, 2022 | | :---------------- | :------------ | :--------------- | | Raw materials and parts | $8,940,798 | $7,219,344 | | Work in progress | $396,359 | $383,427 | | Finished goods | $2,310,482 | $2,424,340 | | **Total Inventory** | **$11,647,639** | **$10,027,111** | - Total inventory increased by **16.1%** from October 31, 2022, to July 31, 2023, primarily driven by an increase in raw materials and parts[42](index=42&type=chunk) [NOTE 7 – FIXED ASSETS](index=12&type=section&id=NOTE%207%20%E2%80%93%20FIXED%20ASSETS) Property and Equipment, Net (July 31, 2023 vs. October 31, 2022) | Component | July 31, 2023 | October 31, 2022 | | :---------------------------- | :------------ | :--------------- | | Buildings | $5,852,425 | $5,419,946 | | Land | $200,000 | $200,000 | | Office machinery and equipment | $1,888,864 | $1,556,030 | | Rental assets | $2,636,744 | $2,252,292 | | Furniture, fixtures and improvements | $1,214,734 | $1,108,787 | | Totals (Gross) | $11,792,767 | $10,537,055 | | Less: accumulated depreciation | $(5,541,521) | $(4,704,523) | | **Total Property and Equipment, net** | **$6,251,246** | **$5,832,532** | - Total Property and Equipment, net, increased by **7.2%** from October 31, 2022, to July 31, 2023[44](index=44&type=chunk) [NOTE 8 – OTHER CURRENT ASSETS](index=14&type=section&id=NOTE%208%20%E2%80%93%20OTHER%20CURRENT%20ASSETS) Other Current Assets (July 31, 2023 vs. October 31, 2022) | Component | July 31, 2023 | October 31, 2022 | | :---------------------------- | :------------ | :--------------- | | Deposits | $24,664 | $18,631 | | Other Tax Receivables | $172,271 | $151,217 | | Employee Retention Credit Receivables | $173,213 | $173,213 | | Other Receivables | $2,035 | $- | | **Total Other Current Assets** | **$372,183** | **$343,061** | - Total Other Current Assets increased by **8.5%** from October 31, 2022, to July 31, 2023[45](index=45&type=chunk) [NOTE 9 – CONTRACTS IN PROGRESS](index=14&type=section&id=NOTE%209%20%E2%80%93%20CONTRACTS%20IN%20PROGRESS) - Unbilled Receivables, representing costs and estimated earnings in excess of billings, increased significantly from **$602,115** as of October 31, 2022, to **$1,742,334** as of July 31, 2023[46](index=46&type=chunk) - Deferred Revenue (billings in excess of costs and warranty obligations) decreased from **$790,458** as of October 31, 2022, to **$543,991** as of July 31, 2023[47](index=47&type=chunk) - Deferred revenue for warranty or Through Life Support (TLS) was **$236,026** as of July 31, 2023, compared to **$229,238** as of October 31, 2022[48](index=48&type=chunk) [NOTE 10 – CONCENTRATIONS](index=14&type=section&id=NOTE%2010%20%E2%80%93%20CONCENTRATIONS) - For the three months ended July 31, 2023, three customers accounted for **36.1% of net revenues** and **41.2% of net receivables**[49](index=49&type=chunk) - For the nine months ended July 31, 2023, one customer accounted for **11.7% of net revenues** and **21.4% of net receivables**[51](index=51&type=chunk) [NOTE 11 – RECENT ACCOUNTING PRONOUNCEMENTS](index=14&type=section&id=NOTE%2011%20%E2%80%93%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - There have been no new accounting pronouncements not yet effective that have significance or potential significance to the Consolidated Financial Statements[53](index=53&type=chunk) [NOTE 12 – EARNINGS PER SHARE](index=14&type=section&id=NOTE%2012%20%E2%80%93%20EARNINGS%20PER%20SHARE) Net Income Per Share (3 Months Ended July 31) | Metric | 2023 | 2022 | | :-------- | :---- | :---- | | Basic EPS | $0.09 | $0.16 | | Diluted EPS | $0.09 | $0.16 | Net Income Per Share (9 Months Ended July 31) | Metric | 2023 | 2022 | | :-------- | :---- | :---- | | Basic EPS | $0.31 | $0.33 | | Diluted EPS | $0.31 | $0.32 | [NOTE 13 – 2017 STOCK INCENTIVE PLAN](index=16&type=section&id=NOTE%2013%20%E2%80%93%202017%20STOCK%20INCENTIVE%20PLAN) - The total stock compensation expense for the nine months ended July 31, 2023, was **$488,764**[59](index=59&type=chunk) - During the nine months ended July 31, 2023, **199,496 options** were exercised on a cashless basis, resulting in the issuance of **92,275 shares**[58](index=58&type=chunk) - As of July 31, 2023, there were **370,682 shares** available for issuance under the 2017 Plan and a total of **1,370,682 shares** available under both the 2017 and 2021 Plans[58](index=58&type=chunk)[62](index=62&type=chunk) [NOTE 14 – SEGMENT ANALYSIS](index=16&type=section&id=NOTE%2014%20%E2%80%93%20SEGMENT%20ANALYSIS) - The Company operates two distinct reportable segments: Marine Technology Business (Products) and Marine Engineering Business (Services), managed separately[63](index=63&type=chunk) Segment Performance (3 Months Ended July 31) | Metric | Marine Technology (2023) | Marine Technology (2022) | Marine Engineering (2023) | Marine Engineering (2022) | | :---------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | Net Revenues | $2,863,251 | $4,004,557 | $2,027,281 | $2,262,852 | | Income from Operations | $911,237 | $2,135,252 | $455,325 | $417,419 | Segment Performance (9 Months Ended July 31) | Metric | Marine Technology (2023) | Marine Technology (2022) | Marine Engineering (2023) | Marine Engineering (2022) | | :---------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | Net Revenues | $10,270,839 | $11,319,314 | $5,517,486 | $5,771,141 | | Income from Operations | $3,872,766 | $5,587,116 | $1,057,876 | $299,192 | [NOTE 15 – DISAGGREGATION OF REVENUE](index=23&type=section&id=NOTE%2015%20%E2%80%93%20DISAGGREGATION%20OF%20REVENUE) Revenue Disaggregation by Geographical Market (3 Months Ended July 31) | Market | 2023 Total | 2022 Total | Change (%) | | :-------------- | :------------ | :------------ | :--------- | | Americas | $2,606,628 | $3,095,140 | -15.8% | | Europe | $1,245,334 | $1,073,342 | 16.0% | | Australia/Asia | $442,670 | $1,435,637 | -69.2% | | Middle East/Africa | $595,900 | $663,290 | -10.2% | | **Total Revenues** | **$4,890,532** | **$6,267,409** | **-22.0%** | Revenue Disaggregation by Major Goods/Service Lines (3 Months Ended July 31) | Line of Business | 2023 Total | 2022 Total | Change (%) | | :--------------- | :------------ | :------------ | :--------- | | Equipment Sales | $2,224,874 | $3,379,435 | -34.2% | | Equipment Rentals | $303,525 | $380,984 | -20.3% | | Software Sales | $147,453 | $252,204 | -41.5% | | Engineering Parts | $1,377,562 | $999,228 | 37.9% | | Services | $837,118 | $1,255,558 | -33.3% | | **Total Revenues** | **$4,890,532** | **$6,267,409** | **-22.0%** | Revenue Disaggregation by Geographical Market (9 Months Ended July 31) | Market | 2023 Total | 2022 Total | Change (%) | | :-------------- | :------------- | :------------- | :--------- | | Americas | $7,315,039 | $7,360,269 | -0.6% | | Europe | $3,776,269 | $3,511,455 | 7.5% | | Australia/Asia | $3,799,349 | $4,477,178 | -15.1% | | Middle East/Africa | $897,668 | $1,741,553 | -48.4% | | **Total Revenues** | **$15,788,325** | **$17,090,455** | **-7.6%** | Revenue Disaggregation by Major Goods/Service Lines (9 Months Ended July 31) | Line of Business | 2023 Total | 2022 Total | Change (%) | | :--------------- | :------------- | :------------- | :--------- | | Equipment Sales | $7,305,543 | $8,376,415 | -12.8% | | Equipment Rentals | $1,088,855 | $1,726,760 | -36.9% | | Software Sales | $784,046 | $691,422 | 13.4% | | Engineering Parts | $3,598,547 | $2,918,181 | 23.3% | | Services | $3,011,334 | $3,377,677 | -10.9% | | **Total Revenues** | **$15,788,325** | **$17,090,455** | **-7.6%** | [NOTE 16 – INCOME TAXES](index=27&type=section&id=NOTE%2016%20%E2%80%93%20INCOME%20TAXES) - The effective tax rate for the three months ended July 31, 2023, was **3.6%**, down from **13.4%** in 2022[79](index=79&type=chunk) - The effective tax rate for the nine months ended July 31, 2023, was **0.6%**, down from **9.6%** in 2022[80](index=80&type=chunk) - UK subsidiaries recorded a **0.0% tax rate** due to R&D tax credits, while the Danish company had a **22.0% provision**[79](index=79&type=chunk)[80](index=80&type=chunk) [NOTE 17 – CERTIFIED DEPOSIT INTEREST BEARING ACCOUNTS](index=27&type=section&id=NOTE%2017%20%E2%80%93%20CERTIFIED%20DEPOSIT%20INTEREST%20BEARING%20ACCOUNTS) - The Company established certified deposit interest-bearing accounts in February 2023, classified as 'cash equivalent' for short-term periods not exceeding **3 months**[81](index=81&type=chunk) Interest-Bearing Accounts as of July 31, 2023 | Currency Denomination | Amount | Bank | Interest Rate | | :-------------------- | :------------ | :--------- | :------------ | | USD | $13,256,709 | HSBC | 5.17% | | GBP | £750,000 | HSBC | 4.80% | | GBP (Unrestricted) | £1,248,151 | N/A | 5.00% | | Euro | €795,000 | Jyske Bank | 1.9% | | British Pound | £414,000 | Jyske Bank | 3.2% | | Danish Kroner | DKK 3,190,000 | Jyske Bank | 1.6% | | USD | $1,094,000 | Jyske Bank | 3.8% | [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations, including business overview, key factors, and financial performance [General Overview](index=28&type=section&id=General%20Overview) - The Marine Technology Business provides Echoscope real-time 3D imaging sonar and the CodaOctopusDAVD (Diver Augmented Vision Display) system for underwater defense and commercial markets globally[84](index=84&type=chunk)[86](index=86&type=chunk) - The DAVD system, protected by patent, integrates real-time data into a diver's Head-up Display (HUD), enhancing safety and efficiency in diving operations[86](index=86&type=chunk)[99](index=99&type=chunk) - The Marine Engineering Business is a long-term Department of Defense (DoD) supplier, designing and manufacturing proprietary sub-assemblies for mission-critical integrated systems (MCIS)[90](index=90&type=chunk) - Volumetric real-time imaging sonar technology and the DAVD are identified as the most promising products for the Company's near-term growth[91](index=91&type=chunk) [Factors Affecting our Business in the Current Quarter](index=31&type=section&id=Factors%20Affecting%20our%20Business%20in%20the%20Current%20Quarter) - Ongoing cumulative supply chain issues, including shortages of key electronic components (e.g., FPGAs), result in lead times up to **12 months** and significant price increases, impacting production and project progression[103](index=103&type=chunk)[108](index=108&type=chunk) - Inflation in operating countries (Denmark **3.1%**, UK **6.4%**, USA **3.2%**) increases operational and material costs, and creates pressure on salaries, making it difficult to attract and retain skilled personnel[104](index=104&type=chunk)[108](index=108&type=chunk) - Currency fluctuations, particularly the weakening USD against GBP, EUR, DKK, and INR, can impact consolidated financial results, though it had a positive impact on revenue in the current quarter[105](index=105&type=chunk) - Skill shortages in critical areas (sales, marketing, software developers, electronic technicians) coupled with wage pressure pose a risk to business continuity and growth[106](index=106&type=chunk) - Long and unpredictable sales cycles in the defense market, particularly for the Services Business and Marine Technology's defense opportunities, affect the timing of orders and quarterly revenues[107](index=107&type=chunk) [Impact on Revenues and Earnings](index=33&type=section&id=Impact%20on%20Revenues%20and%20Earnings) - The Company is uncertain about the full extent of the impact these factors will have on future financial results[109](index=109&type=chunk) [Impact on Liquidity, Balance Sheet and Assets](index=34&type=section&id=Impact%20on%20Liquidity%2C%20Balance%20Sheet%20and%20Assets) - As of July 31, 2023, the Company had cash and cash equivalents of **$24,890,568** and believes it has sufficient working capital for the foreseeable future, despite potential adverse impacts from market factors[110](index=110&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) - Revenue recognition follows Topic 606, with revenues derived from sales and rentals of underwater solutions and engineering services, recognized when performance obligations are met[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - Deferred costs on service projects, primarily direct and incremental costs, are recognized in accordance with revenue recognition policies and reviewed quarterly for recoverability[116](index=116&type=chunk)[117](index=117&type=chunk) - Income taxes are accounted for under ASC 740, with deferred tax assets and liabilities recorded for temporary differences between financial and tax reporting bases[119](index=119&type=chunk)[120](index=120&type=chunk) - Intangible assets, including goodwill, customer relationships, and licenses, are evaluated for impairment annually (goodwill) or amortized over **2 to 15 years** (finite-lived assets)[122](index=122&type=chunk)[123](index=123&type=chunk) [Consolidated Results of Operations](index=35&type=section&id=Consolidated%20Results%20of%20Operations) - Consolidated revenue for the Current Quarter decreased by **22.0%** to **$4,890,532** compared to the Previous Quarter, primarily due to falls in both Marine Technology and Services segments[124](index=124&type=chunk)[135](index=135&type=chunk) - Income from operations fell by **57.4%**, and net income before taxes decreased by **47.3%** to **$1,077,166** in the Current Quarter[124](index=124&type=chunk) - Currency fluctuations had a positive impact on reported revenue in the Current Quarter, increasing it by **0.4%** or **$18,633**[124](index=124&type=chunk)[188](index=188&type=chunk) [Segment Summary](index=36&type=section&id=Segment%20Summary) [Marine Technology Business](index=36&type=section&id=Marine%20Technology%20Business%20Segment%20Summary) - Revenue decreased by **28.5%** to **$2,863,251** in the Current Quarter, contributing **58.5%** of consolidated revenues[126](index=126&type=chunk) - Gross Profit Margin fell by **4.6%** to **82.1%** due to increased agent commissions and lower sales of high-margin rentals, software, and customization services[126](index=126&type=chunk) - Sales from the Asia region decreased by **69.2%** to **$442,670** in the Current Quarter, attributed to a slow pace of converting proposals into orders[129](index=129&type=chunk) - The defense market application increased to **46.5%** of revenues, while construction sector revenue decreased from **37.9%** to **10.0%**[130](index=130&type=chunk)[132](index=132&type=chunk) - A slowdown in European offshore wind power generation, driven by rising costs and higher interest rates, significantly impacted rental and associated services revenues[128](index=128&type=chunk)[131](index=131&type=chunk) [Services Business](index=37&type=section&id=Services%20Business%20Segment%20Summary) - Revenue decreased by **10.4%** to **$2,027,281** in the Current Quarter, contributing **41.5%** of consolidated revenues[133](index=133&type=chunk) - Gross Profit Margin increased by **1.8%** to **50.0%**, and total operating expenses fell by **17.0%**[133](index=133&type=chunk) - The fall in revenue is largely due to significant delays in securing orders from UK customers, whose priorities shifted to supporting Ukraine-related land-based solutions[133](index=133&type=chunk) [Results of Operations for the Current Quarter compared to the Previous Quarter](index=38&type=section&id=Results%20of%20Operations%20for%20the%20Current%20Quarter%20compared%20to%20the%20Previous%20Quarter) - Total consolidated revenues decreased by **22.0%** to **$4,890,532**, driven by reduced sales in the Marine Technology Business (Europe, Asia) and delays in orders for the Services Business (UK operations)[135](index=135&type=chunk) - Gross Profit Margin weakened to **68.8%** (from **72.8%**), attributed to a lower percentage of higher-margin Marine Technology sales, increased commission costs, and a less favorable sales mix[136](index=136&type=chunk) Marine Technology Business Sales Mix (3 Months Ended July 31) | Category | 2023 | 2022 | Change (%) | | :---------------- | :------------ | :------------ | :--------- | | Equipment Sales | $2,143,203 | $2,928,019 | -26.8% | | Equipment Rentals | $303,525 | $380,984 | -20.3% | | Software Sales | $147,453 | $252,204 | -41.5% | | Services | $269,070 | $443,350 | -39.3% | | **Total Net Sales** | **$2,863,251** | **$4,004,557** | **-28.5%** | - Research and Development (R&D) expenditure slightly decreased by **1.7%** to **$568,287**, aligning with a strategic shift towards business development and marketing[141](index=141&type=chunk) - Other Income increased significantly by **986.7%** to **$214,552**, primarily due to **$211,704** in interest earned on certified deposit accounts established in February 2023[153](index=153&type=chunk) - Net Income decreased by **41.3%** to **$1,038,780**, while Comprehensive Income increased by **48.5%** to **$1,431,263**, reflecting a positive foreign currency translation adjustment[155](index=155&type=chunk)[156](index=156&type=chunk) [Results of Operations for the Current Nine Month Period compared to the Previous Nine Month Period](index=41&type=section&id=Results%20of%20Operations%20for%20the%20Current%20Nine%20Month%20Period%20compared%20to%20the%20Previous%20Nine%20Month%20Period) - Total consolidated revenues decreased by **7.6%** to **$15,788,325**, primarily due to a fall in Marine Technology Business revenue (Asia sales, rentals) and significant delays in orders for the Services Business UK Operations[157](index=157&type=chunk) - Consolidated Gross Profit Margin was lower at **68.0%** (vs. **68.8%**), influenced by a lower percentage of higher-margin Marine Technology sales, increased commission costs, and a shift towards more hardware sales[158](index=158&type=chunk) - Services Business gross profit margins strengthened to **53.1%** (from **40.8%**) due to an exceptionally low-margin engineering project in the prior period[162](index=162&type=chunk) - R&D expenditures decreased by **13.0%** to **$1,538,684**, reflecting a strategic shift from R&D to marketing and business development, with major development projects now completed[164](index=164&type=chunk)[166](index=166&type=chunk) - Other Income increased by **253.4%** to **$403,693**, with **$395,161** attributable to interest earned on certified deposit accounts[176](index=176&type=chunk) - Net Income decreased by **4.2%** to **$3,445,114**, while Comprehensive Income significantly increased to **$5,983,620** (from **$766,450**), driven by a substantial gain from foreign currency translation adjustments[178](index=178&type=chunk)[179](index=179&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity and Capital Resources (July 31, 2023) | Metric | Amount | | :---------------------- | :------------ | | Accumulated Deficit | $10,731,522 | | Working Capital | $39,738,904 | | Cash and Cash Equivalents | $24,890,568 | | Cash from Operating Activities (9 months) | $1,384,898 | - The Company has a **$4,000,000** revolving line of credit with HSBC NA, with a **$0** outstanding balance as of July 31, 2023, set to expire on November 26, 2023[181](index=181&type=chunk) [Inflation and Foreign Currency](index=47&type=section&id=Inflation%20and%20Foreign%20Currency) - The Company's consolidated results are impacted by fluctuations in currency exchange rates as its foreign subsidiaries maintain accounts in native currencies (GBP, DKK, AUD, INR) translated into USD[183](index=183&type=chunk)[184](index=184&type=chunk) Impact of Currency Fluctuations (3 Months Ended July 31, 2023) | Metric | Actual Results | Constant Rates | Total Effect | | :---------- | :------------- | :------------- | :----------- | | Revenues | $2,313,763 | $2,295,130 | $18,633 | | Net profit (losses) | $177,600 | $170,793 | $6,807 | | Net assets | $24,529,308 | $21,979,780 | $2,549,528 | Impact of Currency Fluctuations (9 Months Ended July 31, 2023) | Metric | Actual Results | Constant Rates | Total Effect | | :---------- | :------------- | :------------- | :----------- | | Revenues | $8,521,593 | $8,812,857 | $(291,264) | | Net profit (losses) | $1,928,099 | $1,946,989 | $(18,890) | | Net assets | $24,529,308 | $21,981,835 | $2,547,473 | [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company does not have any off-balance sheet arrangements[191](index=191&type=chunk) [Item 3: Quantitative and Qualitative Disclosures about Market Risks](index=48&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This item is not required for smaller reporting companies - Not required for smaller reporting companies[192](index=192&type=chunk) [Item 4: Controls and Procedures](index=48&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Evaluation of disclosure controls and procedures, including identification and remediation of a material weakness in intercompany eliminations - A material weakness in internal controls over financial reporting, concerning the identification and review of intercompany eliminations, was disclosed in the Form 10-K for the fiscal year ended October 31, 2022[195](index=195&type=chunk) - A comprehensive remediation plan was implemented in the **first quarter of 2023**, including designated codes for intercompany transactions, a standalone 'Elimination Workbook,' and an Error Log for monitoring[196](index=196&type=chunk) - Management concluded that the material weakness has been remediated as of **July 31, 2023**, following monitoring and testing of the new controls[197](index=197&type=chunk)[199](index=199&type=chunk) PART II - Other Information [Item 1: Legal Proceedings](index=50&type=section&id=Item%201%3A%20Legal%20Proceedings) No legal proceedings are expected to materially adversely affect the company's business, financial condition, or operating results - The Company is not aware of any legal proceedings that are believed to have a material adverse effect on its business, financial condition, or operating results[201](index=201&type=chunk) [Item 1A: Risk Factors](index=50&type=section&id=Item%201A%3A%20Risk%20Factors) This item is not required for smaller reporting companies - Not required for smaller reporting companies[202](index=202&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report during the period - None to report[202](index=202&type=chunk) [Item 3: Default Upon Senior Securities](index=50&type=section&id=Item%203%3A%20Default%20Upon%20Senior%20Securities) No defaults upon senior securities to report during the period - None to report[203](index=203&type=chunk) [Item 4: Mine Safety Disclosures](index=50&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[204](index=204&type=chunk) [Item 5: Other Information](index=50&type=section&id=Item%205%3A%20Other%20Information) No other information is required to be reported under this item - No other information to report[205](index=205&type=chunk) [Item 6: Exhibits](index=50&type=section&id=Item%206%3A%20Exhibits) Lists exhibits filed as part of the Form 10-Q, including certifications and Inline XBRL documents - Exhibits include Certifications of the Chief Executive Officer and Acting Chief Financial Officer (**31, 32**) and various Inline XBRL documents (**101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104**)[205](index=205&type=chunk)[206](index=206&type=chunk) [Signatures](index=51&type=section&id=Signatures) The report is duly signed by the registrant's authorized officers - The report was signed by Annmarie Gayle, Chief Executive Officer, and Gayle Jardine, Acting Chief Financial Officer, on **September 13, 2023**[209](index=209&type=chunk)

Coda Octopus Group, Inc. (NASDAQ:CODA) Q2 2023 Earnings Conference Call June 14, 2023 10:00 AM ET Company Participants Jackie Keshner - Gateway Group, Inc. Annmarie Gayle - Chairman & CEO Gayle Jardine - Acting CFO Conference Call Participants Brian Kinstlinger - Alliance Global Partners Walter Ramsley - R-Squared David Wright - Henry Investment Trust Operator Good morning, and welcome to Coda Octopus Group's Second Quarter Fiscal Year 2023 Earnings Conference Call. My name is Christine, and I'll be your op ...