a Octopus (CODA) - 2022 Q1 - Quarterly Report

PART I - Financial Information Financial Statements Unaudited consolidated financial statements for Coda Octopus Group, Inc. highlight 15.6% revenue growth and $1.2 million net income for Q1 2022 Consolidated Balance Sheets As of January 31, 2022, total assets were $45.4M, cash $20.7M, liabilities $2.6M, and equity $42.8M Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | Jan 31, 2022 ($) | Oct 31, 2021 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash | 20,711,228 | 17,747,656 | 16.7% | | Accounts Receivable, net | 1,535,682 | 4,207,996 | -63.5% | | Inventory | 11,159,798 | 10,691,177 | 4.4% | | Total Current Assets | 34,774,038 | 35,557,159 | -2.2% | | Total Assets | 45,399,231 | 45,465,419 | -0.1% | | Liabilities & Equity | | | | | Accounts Payable | 319,605 | 1,454,611 | -78.0% | | Total Current Liabilities | 2,413,409 | 4,258,460 | -43.3% | | Total Liabilities | 2,566,585 | 4,416,346 | -41.9% | | Total Stockholders' Equity | 42,832,646 | 41,049,073 | 4.3% | Consolidated Statements of Income and Comprehensive Income Q1 2022 net revenues increased 15.6% to $5.84M, gross profit grew 25.5%, and net income rose 7.8% Consolidated Income Statement Highlights (Unaudited) | Income Statement Items | Three Months Ended Jan 31, 2022 ($) | Three Months Ended Jan 31, 2021 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | 5,838,208 | 5,050,459 | 15.6% | | Gross Profit | 4,159,934 | 3,314,922 | 25.5% | | Income from Operations | 1,375,932 | 918,417 | 49.8% | | Net Income | 1,217,248 | 1,128,844 | 7.8% | | Diluted EPS | 0.11 | 0.10 | 10.0% | Consolidated Statements of Cash Flows Q1 2022 operating cash flow was $3.46M, investing used $1.0M, and cash increased to $20.71M Consolidated Cash Flow Highlights (Unaudited) | Cash Flow Items | Three Months Ended Jan 31, 2022 ($) | Three Months Ended Jan 31, 2021 ($) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 3,461,499 | 29,714 | | Net Cash Used in Investing Activities | (1,001,964) | (409,144) | | Net Cash (Used in) Provided by Financing Activities | (63,559) | 401,403 | | Net Increase in Cash | 2,963,572 | 947,586 | | Cash at End of Period | 20,711,228 | 16,081,875 | Notes to Unaudited Consolidated Financial Statements Notes detail business segments, accounting policies, revenue disaggregation, and COVID-19 pandemic impacts - The company operates two distinct business units: Marine Technology (Products), selling proprietary solutions like Echoscope® sonar and DAVD, and Marine Engineering (Services), acting as a sub-contractor to prime defense contractors[16] Revenue by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 Revenue ($) | Q1 2021 Revenue ($) | Change (%) | | :--- | :--- | :--- | :--- | | Marine Technology (Products) | 3,823,748 | 3,748,279 | 2.0% | | Marine Engineering (Services) | 2,014,460 | 1,302,180 | 54.7% | | Total | 5,838,208 | 5,050,459 | 15.6% | Revenue by Geography (Q1 2022) | Primary Geographical Markets | Revenue ($) | % of Total | | :--- | :--- | :--- | | Americas | 3,261,950 | 55.9% | | Europe | 1,301,194 | 22.3% | | Australia/Asia | 815,084 | 14.0% | | Middle East/Africa | 459,980 | 7.9% | | Total | 5,838,208 | 100.0% | - The COVID-19 pandemic continues to impact business through travel restrictions for customer demonstrations, supply chain disruptions, and workforce challenges, affecting demand and costs[62][65] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 performance, highlighting 15.6% revenue growth, key pillars, challenges, and strong liquidity General Overview and Key Growth Pillars Company growth is driven by Marine Technology and Engineering segments, with Echoscope® sonar and DAVD as key pillars - The company's growth is primarily driven by its volumetric real-time imaging sonar technology and the Diver Augmented Vision Display (DAVD)[76] - The Echoscope PIPE® is highlighted as the only technology capable of generating multiple real-time 3D/4D/5D/6D acoustic images, providing a competitive advantage[77] - The DAVD system, licensed from the U.S. Navy, is poised to radically change diving operations by improving safety and efficiency, especially in zero-visibility conditions[79] Factors Affecting our Business Business affected by COVID-19 travel restrictions, supply chain challenges, and skilled personnel shortages - The COVID-19 pandemic continues to disrupt operations, with severe travel restrictions in key Asian markets hindering in-person customer visits and product demonstrations[83] - The company is significantly impacted by increasing unavailability and price hikes of critical components, likely affecting realizable margins[84] - A shortage of skilled workers, especially in sales and marketing, and fierce competition for talent are increasing wage and salary costs[85] Consolidated Results of Operations Q1 2022 consolidated revenues increased 15.6%, gross margin improved, and operating income grew 49.8% Q1 2022 vs Q1 2021 Performance | Metric | Q1 2022 ($) | Q1 2021 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 5,838,208 | 5,050,459 | 15.6% | | Gross Profit | 4,159,934 | 3,314,922 | 25.5% | | R&D Expenses | 672,890 | 583,139 | 15.4% | | SG&A Expenses | 2,111,112 | 1,813,366 | 16.4% | | Operating Income | 1,375,932 | 918,417 | 49.8% | | Net Income | 1,217,248 | 1,128,844 | 7.8% | - The Products Business saw a 2% revenue increase, driven by an 88.6% growth in equipment rentals and 135.2% in services, despite a 29.9% fall in equipment sales, contributing to higher gross margins[108] - The Services Business revenue grew by 54.7%, achieving a net income before taxes of $179,733, a significant turnaround from a prior-year loss[102] Liquidity and Capital Resources As of January 31, 2022, the company maintains strong liquidity with $20.7M cash and no significant debt - The company has a strong liquidity position with $20,711,228 in cash and $32,360,629 in working capital as of January 31, 2022[122] - An $8,000,000 loan with HSBC Bank NA was paid in full in December 2021, satisfying all obligations[124] - A $4,000,000 revolving line of credit with HSBC NA remains available, with a $0 outstanding balance as of January 31, 2022[123] Quantitative and Qualitative Disclosures about Market Risks This disclosure is not required for smaller reporting companies - Not required for smaller reporting companies[132] Controls and Procedures Management concluded disclosure controls were effective as of January 31, 2022, with no material internal control changes - Based on an evaluation as of January 31, 2022, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective[136] - There were no material changes in internal controls over financial reporting during the quarter[137] PART II - Other Information Legal Proceedings The company is not aware of any legal proceedings expected to have a material adverse effect on its business - The company is not currently aware of any legal proceedings expected to have a material adverse effect on its business[138] Risk Factors This disclosure is not required for smaller reporting companies - Not required for smaller reporting companies[139] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported[139] Exhibits This section lists exhibits filed with the report, including CEO/CFO certifications and Inline XBRL - Exhibits filed include CEO and CFO certifications (Rule 13a-14(a) and Section 906 of Sarbanes-Oxley Act) and various Inline XBRL documents[142]