Forward-Looking Statements
The information herein contains forward-looking statements. All statements other than statements of historical fact made herein are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations. The following discussion and analysis should be read in conjunction with our financial statements, included herewith and the audited financial statements included in our annual report on Form 10-K filed with theSecurities and Exchange Commission onJanuary 30, 2023 . This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. General Overview
Throughout these discussions "
The Company operates two distinct businesses. These are:
? the Marine Technology Business (also referred to in this Form 10-Q as "Products Business", or "Products Segment"); and ? the Marine Engineering Business (also referred to in this Form 10-Q as "Engineering Business", or "Services Business" or "Services Segment"). Our Marine Technology Business is an established technology solution provider to the subsea and underwater imaging, surveying and diving market. It has been operating as a supplier of solutions comprising both hardware and software products for over 25 years to this market and it owns key proprietary 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. All design, development and manufacturing of our technology and solutions are performed within the Company. 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, commercial and defense diving, and marine sciences sectors. Our novel diving technology is distributed under the name "CodaOctopus® DAVD" (Diver Augmented Vision Display) to the global defense and commercial diving markets and is new to the market. 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. Limitations of 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. Importantly also, using our sonar technology, diving can be performed in zero visibility conditions, a common problem which besets these operations. 20
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 which we supply to the marine offshore market 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. The Services Business has operations in theUSA andUK . 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.
Key Pillars for our Growth Plans
Our volumetric real time imaging sonar technology and our DAVD are our most promising products for the Company's near-term growth.
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, and filters.
In the industry in which we operate, we are widely considered the leading solution providers for underwater real time 3D visualization.
We also believe that the DAVD system is poised to radically change the way diving operations are performed globally by providing a fully integrated suite of sensor data shared in real time by the dive supervisor on the surface and the diver. Current diving is done largely by voice command missions from the topside using disparate suite of systems for video data, communications and positioning. The DAVD is now in early-stage adoption by different teams within theUS Navy such as the underwater construction and salvage teams and has been moved from R&D phase to operational phase. Operational phase means that this is now a standard item available for purchase and for which budget lines are established within the various user commands within theNavy . 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 theUnited 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. Both the Marine Technology Business and Engineering Business have established synergies in terms of customers and specialized engineering skill sets (hardware, firmware and software) encompassing capturing, computing, processing and displaying data in harsh environments. Both businesses jointly bid for projects for which their common joint skills provide competitive advantage and make them eligible for such projects.
Factors Affecting our Business in the
Following is a short description of some of the most critical and pressing 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 endedOctober 31, 2022 . 21
Cumulative Supply
We continue to experience shortage of key electronic components in the market and suppliers are still quoting lead times as long as 12 months out for routine components, including FPGAs (Field Programmable Gate Arrays). The unavailability of components affects our business in a number of ways, including:
Ø Our ability to progress ongoing projects including customer projects,
particularly on the Engineering Segment. Ø Significant increase in prices because demand exceeds supply for these components. Ø Our ability to manufacture systems in our Products Business.
Ø Our ability to fully utilize our Production staff, as critical parts are
unavailable. Ø Our ability to perform outstanding contractual obligations in the Engineering Business. Inflation
Inflation measured as the Consumer Price Index is significant in the countries
in which we operate. For the 12-month period preceding
ØDenmark 7.7% - source: Statistics Denmark, ØUK 10.1% - source:Office of National Statistics ; and ØUSA 6.4% - source:U.S. Bureau of Labor Statistics . Inflation affects our business in a number of areas including increasing our cost of operations and our bill of material costs for the products we sell and therefore our overall financial results. See the MD&A section which concerns "Inflation and Foreign Currency". Currency Fluctuations The Company has operations in theUK ,USA ,Denmark ,Australia andIndia . 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 theCurrent Quarter the USD has strengthened against major currencies including the British Pound, Euro,Danish Kroner and Indian Rupees (the functional currencies of the Company's foreign subsidiaries). A significant part of our consolidated results is transacted in British Pounds andDanish Kroner and translated into USD for reporting purposes. In theCurrent Quarter , for the purposes of reporting revenues and expenses, the value of the Pound and Euro (theDanish Kroner is pegged to the Euro) respectively fell 9.5% and 5.8%, against the USD, when compared to thePrevious Quarter . For the reporting of assets and liabilities, the Pound fell 8.3% when compared to thePrevious Quarter and the Danish Kroner fell 3.1% 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".
Skills/Resource Shortages and Pressure on Salaries and Wages
We are experiencing skill shortages in areas that are critical to our growth strategy including experienced sales and marketing personnel, software developers and skilled electronic technicians. The inflationary conditions in the countries in which we operate (US, theUK ,Denmark andIndia ) make it difficult for us to compete for these skills as there is extreme pressure on wages.
Concentration of Business Opportunities Where the Sales Cycle is Long and Unpredictable
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 theUS 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.
Impact on Revenues and Earnings
We are uncertain as to the extent of the impact the factors disclosed above and in our Form 10-K covering fiscal year endedOctober 31, 2022 will have on our future financial results. 22
Impact on Liquidity, Balance Sheet and Assets
These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As ofJanuary 31, 2023 , we had cash and cash equivalents of$24,522,383 and in theCurrent Quarter we generated$984,886 of cash from 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. Critical Accounting Policies This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared under accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported values of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported levels of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Below is a discussion of accounting policies that we consider critical to an understanding of our financial condition and operating results and that may require complex judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, "Summary of Accounting Policies" of our Annual Report on Form 10-K for the fiscal year endedOctober 31, 2022 . Revenue Recognition Our revenues are earned under formal contracts with our customers and are derived from both sales and rental of underwater solutions for imaging, mapping, defense and survey applications and from the engineering services that we provide. Our contracts do not include the possibility for additional contingent consideration so that our determination of the contract price does not involve having to consider potential variable additional consideration. Our product sales do not include a right of return by the customer. 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 exist. For further discussion of our revenue recognition accounting policies, refer to Note 2 - "Revenue Recognition" in these unaudited consolidated financial statements and Note 2 "Summary of Accounting Policies" in our Annual Report on Form 10-K for the fiscal year endedOctober 31, 2022 .
Recoverability of Deferred Costs
We defer costs on projects for service revenue. Deferred costs consist primarily of direct and incremental costs to customize and install systems, as defined in individual customer contracts, including costs to acquire hardware and software from third parties and payroll costs for our employees and other third parties. We recognize such costs on a contract by contract basis in accordance with our revenue recognition policy. For revenue recognized under the completed contract method, costs are deferred until the products are delivered, or upon completion of services or, where applicable, customer acceptance. For revenue recognized under the percentage of completion method, costs are recognized as products are delivered or services are provided in accordance with the percentage of completion calculation. For revenue recognized ratably over the term of the contract, costs are also recognized ratably over the term of the contract, commencing on the date of revenue recognition. At each balance sheet date, we review deferred costs, to ensure they are ultimately recoverable. Any anticipated losses on uncompleted contracts are recognized when evidence indicates the estimated total cost of a contract exceeds its estimated total revenue. 23 Income Taxes The Company accounts for income taxes in accordance with Accounting Standards Codification 740, Income Taxes (ASC 740). Under ASC 740, deferred income tax assets and liabilities are recorded for the income tax effects of differences between the bases of assets and liabilities for financial reporting purposes and their bases for income tax reporting. The Company's differences arise principally from the use of various accelerated and modified accelerated cost recovery system for income tax purposes versus straight line depreciation used for book purposes and from the utilization of net operating loss carry-forwards. Deferred tax assets and liabilities are the amounts by which the Company's future income taxes are expected to be impacted by these differences as they reverse. Deferred tax assets are based on differences that are expected to decrease future income taxes as they reverse. Correspondingly, deferred tax liabilities are based on differences that are expected to increase future income taxes as they reverse.
For income tax purposes, the Company uses the percentage of completion method of recognizing revenues on long-term contracts which is consistent with the Company's financial reporting under GAAP.
Intangible Assets 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. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value, which is based on future cash flows, exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, goodwill is reduced by the excess of the carrying amount of the reporting unit over that reporting unit's fair value.Goodwill can never be reduced below zero, if any. At the end of each year, we evaluate goodwill on a separate reporting unit basis to assess recoverability, and impairments, if any, are recognized in earnings.
Consolidated Results of Operations
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 our translated revenue. One factor in theCurrent Quarter is that the translated revenue of the Company's foreign subsidiaries was impacted by currency fluctuations as a result of the strengthening of the USD against the Pound and the Danish Kroner. During theCurrent Quarter our consolidated revenue was$5,596,284 compared to$5,838,208 in thePrevious Quarter , representing a decrease of 4.1%. However, applying the same exchange rate as thePrevious Quarter , revenue of our foreign subsidiaries would have increased by$342,146 resulting in an increase in consolidated revenue in theCurrent Quarter by 1.7% over thePrevious Quarter . During theCurrent Quarter total operating expenses fell by 13.5% and Income from operations fell by 2.2%. This was affected by the high percentage of agents' commissions incurred on sales of our technology inAsia in theCurrent Quarter - which were$486,341 compared to$138,372 in thePrevious Quarter , representing an increase on commission recorded of 251% over thePrevious Quarter (see Notes 14 and 15 to the Unaudited Consolidated Financial Statements for more information on Segment reporting and Disaggregation of Revenue by Segment and geography). Net income before taxes fell by 5.7% and was$1,361,861 compared to$1,444,648 and net income after taxes was$1,397,857 compared to$1,217,248 , representing an increase of 14.8%. Segment Summary Products Business
In theCurrent Quarter , the Products Business generated$3,824,159 or 68.3% of our consolidated revenues compared to$3,823,748 or 65.5% in thePrevious Quarter and was broadly in line with thePrevious Quarter . Although in its native currency the foreign subsidiaries revenue increased over thePrevious Quarter , the USD equivalent was reduced due to the sharp depreciation of the British Pound andDanish Kroner against the USD. Gross Profit Margin fell by 15% and was 72% in theCurrent Quarter compared to 85% inPrevious Quarter due to the significant agents' commissions we incurred on sales. A significant proportion of the Products Business' sales in theCurrent Quarter was conducted through sales agents due to geographic location of sales (Asia ) and we recorded commission of$486,341 in theCurrent Quarter compared to$138,372 in thePrevious Quarter , representing a 251% increase in this area. In the Current Quarter Total Operating Expenses fell in the Products Business by 14.3% and was$1,100,067 compared to$1,282,989 in thePrevious Quarter . Services Business
In theCurrent Quarter , the Services Business generated$1,772,125 or 31.7% of our consolidated revenues compared to$2,014,460 or 34.5% in thePrevious Quarter , representing a fall in sales of 12%. The main factor in the fall in sales in the Services Business is that it is experiencing delays in both closing contracts and progressing existing contracts with its prime defense contractor customers due to supply chain issues. A number of projects have stalled due to component shortage and also several of its key opportunities have stalled in theCurrent Quarter due to ongoing supply chain issues. This has resulted in a fall in the revenues of this segment in theCurrent Quarter . Gross Profit Margin was 56% compared to 45%, reflecting the types of engineering projects performed during the reporting period. Total Operating Expenses fell by 17.9% and was$652,460 compared to$794,664 . 24
Results of Operations for the
Revenue: Total consolidated revenues for theCurrent Quarter and thePrevious Quarter were$5,596,284 and$5,838,208 respectively, representing a decrease of 4.1%. This is caused by the Services Business revenue decreasing by 12.0% due to order take slowing because of supply chain issues on broader defense programs. This has resulted in delays in our customers placing orders. Additionally, the Company's foreign subsidiaries revenues were impacted by currency fluctuations caused by the sharp depreciation of the Pound, Euro andDanish Kroner against the USD. A significant part of our revenues is derived from our foreign subsidiaries in theUK andDenmark and therefore for the purpose of our financial reporting, the functional currencies of these subsidiaries are translated into USD. Applying the same exchange rate as thePrevious Quarter , revenue of our foreign subsidiaries would have increased by$342,146 and be largely in line with thePrevious Quarter Gross Profit Margins: Margin percentage was weaker in theCurrent Quarter at 67.1% (gross profit of$3,753,005 ) compared to 71.3% (gross profit of$4,159,934 ) in thePrevious Quarter . The main factor which affected Gross Profit Margins in theCurrent Quarter was the level of sales commission incurred. A significant percentage of recorded sales generated by the Products Business emanated fromAsia and these were conducted through sales agents, resulting in increased commission level. For the Products Business we recorded$486,341 in commission in theCurrent Quarter compared to$138,372 in thePrevious Quarter , representing an increase of 251%.
Gross profit margins reported in our financial results may vary according to several factors. These include:
? The percentage of consolidated sales attributed to the Marine Technology
Business versus the Services Business. The gross profit margin yielded by the
Marine Technology Business is generally higher than that of the Services
Business.
? The percentage of consolidated sales attributed to the Services Business. The
Services Business yields a lower gross profit margin on generated sales which
are largely based on time and materials for our
(
? The mix of sales within the Marine Technology Business during the reporting
period:
? Outright Sale versus Rentals.
? Hardware Sale versus Software, software is generally higher margin.
? Mix of Services rendered in the period - Offshore Engineering Services
versus paidCustomer Research and Development Projects.
? Level of commissions on products which may vary according to volume. Both the
Services and Marine Technology Businesses work with sales/distribution agents.
Most of the Marine Technology Business sales in
distributors. See Note 3 "Cost of Goods Sold" for more discussion on this.
? Level of Rental Assets in the
therefore the depreciation expenses may vary accordingly.
? The mix of engineering projects performed by our Services Business (Design
prototyping versus manufacturing), may also affect Gross Profit Margins.
In the
Since there are more variable factors affecting gross profit margins in the
Marine Technology Business (Products Business), a table showing a summary of
break-out of sales generated by the this business in the
Current Quarter Previous Quarter Percentage Products Products Change Equipment Sales$ 2,572,560 $ 1,958,845 31.3 % Equipment Rentals 265,903 630,468 (57.8 )% Software Sales 417,170 304,796 36.9 % Services 568,526 929,639 (38.8 )% Total Net Sales$ 3,824,159 $ 3,823,748 0.0 % In theCurrent Quarter the Marine Technology Business incurred commission costs of$486,341 compared to$138,372 in thePrevious Quarter , representing an increase of 251%, resulting in gross profit margins being lower. A significant percentage of our sales in foreign territories such asSouth Korea ,Japan andChina are conducted through our sales agents and distributors. Further information on the performance in theCurrent Quarter compared to thePrevious Quarter of each business segment including revenues by type and geography can be found in Notes 14 and Note 15 to the Unaudited Consolidated Financial Statements. Research and Development (R&D): R&D expenditures in theCurrent Quarter were$444,458 compared to$672,890 in thePrevious Quarter , representing a decrease of 33.9%. January 31, January 31, Percentage Segment 2023 2022 Change
Services Segment R&D Expenditures
25
The decrease in R&D expenditures is a reflection that we had less R&D projects
ongoing in the
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the
The fall in SG&A in theCurrent Quarter is largely due recording of a significantly lower non-cash charge relating to stock compensation, which was$182,153 as compared to$325,175 in thePrevious Quarter , representing a 44.0% reduction.
Within the category of SG&A we have transactions which are cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization and Stock-based compensation charges. In theCurrent Quarter non-cash items as a percentage of SG&A expenses was 14.5% compared to 22.0% in thePrevious Quarter .
Key Areas of SG&A Expenditure across the Company for the
January 31, January 31, Percentage Expenditure 2023 2022 Change Wages and Salaries$ 847,514 $ 903,162 Decrease of 6.2% Legal and Professional Fees
(including accounting and audit)$ 405,088 $ 359,018 Increase of 12.8% Rent for our various locations$ 12,712 $ 15,745
Decrease of 19.3% Marketing$ 20,442 $ 13,766 Increase of 48.5% Although in theCurrent Quarter "Wages and Salaries" have fallen, we believe on the full year basis this category will increase due to inflation and potential new hires to fill open positions. Our revision of salaries for the Fiscal Year 2023 will start to be recorded in our second quarter, due to the date when
these increases became effective.
The increase in "Legal and Professional" reflects an increase in audit fees.
The increase in marketing is anticipated within our plans. This is an area of expenditures 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. Operating Income: In the Current Quarter Operating Income marginally fell by 2.2% and was$1,346,096 as compared to$1,375,932 in thePrevious Quarter . The slight decrease in Operating Income is due to the fall in our consolidated revenues and gross profit margins realized in theCurrent Quarter . Other Income: In theCurrent Quarter , we had Other Income of$15,765 compared to$68,716 , representing a decrease of 77.1% from thePrevious Quarter . In theCurrent Quarter $12,861 of this amount represents interest earned on our deposits. We have established certified deposit accounts with our bankers and would expect that interest earned will be material in the future. See Note 17 ("Subsequent Events") where we discuss this further. Net Income before income taxes: In theCurrent Quarter , we had income before income taxes of$1,361,861 as compared to$1,444,648 in thePrevious Quarter , representing a decrease of 5.7%. Net income before income taxes fell due to the decrease in our consolidated revenues compounded by the decrease in Gross Profit Margins in theCurrent Quarter . 26
Net Income: In theCurrent Quarter we had Net Income of$1,397,857 compared to$1,217,248 in thePrevious Quarter , representing an increase of 14.8%. In thePrevious Quarter we recorded Current Tax Expense of$285,609 and in theCurrent Quarter we recorded Current Tax Benefit of$35,996 . The Company has utilized all its net operating losses carryforwards. 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 theCurrent Quarter , the Company and its US subsidiaries had no taxable income. TheUK companies have carryforward losses which will be applied to defray income tax liability and therefore no provision has been made for tax liability for the foreign subsidiaries in our consolidated results for theCurrent Quarter . Comprehensive Income. In the Current Quarter Comprehensive income was$3,005,507 compared to Comprehensive Income of$1,458,398 for thePrevious 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 thePrevious Quarter we had a gain of$241,150 on foreign currency translation adjustment transactions compared to a gain of$1,607,650 in theCurrent Quarter . A significant part of the Company's operations is based in theUK andDenmark , 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 Table 2 under the section which concerns "Inflation & Foreign Currency" which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in theCurrent Quarter compared to thePrevious Quarter .
Liquidity and Capital Resources
As ofJanuary 31, 2023 , the Company had an accumulated deficit of$12,778,779 , working capital of$36,474,417 , cash of$24,522,383 and stockholders' equity of$46,570,469 . For theCurrent Quarter , the Company's operating activities provided cash of$984,866 . The Company entered into a$4,000,000 revolving line of credit withHSBC NA onNovember 27, 2019 , at prime. The outstanding balance on the line of credit was$0 as ofJanuary 31, 2023 . This revolving credit line will expire onNovember 26, 2023 , unless renewed. 27
Inflation and Foreign Currency
The Company maintains its books in functional currency, as follows:
? US Dollars for US Operations. ? British Pound for United Kingdom Operations. ?Danish Kroner for our Danish Operations. ? Australian Dollars for our Australian Operations. ? Indian Rupees for our Indian Operations.
See Note 5 (Foreign Currency Translation) of our Unaudited Consolidated Financial Statements for more information on the applicable rates used for our Balance Sheet transactions and Statement of Income and Comprehensive Income.
Fluctuations in currency exchange rates can affect the Company's sales, profitability and financial position when the foreign currencies of its international operations are translated intoU.S. dollars for financial reporting. In addition, we are also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables. The Company cannot predict the extent to which currency fluctuations may affect the Company's business and financial position, and there is a risk that such fluctuations will have an adverse impact on the Company's sales, profits and financial position. Also, because differing portions of our revenues and costs are denominated in foreign currency, movements can impact our margins by, for example, decreasing our foreign revenues when the dollar strengthens without correspondingly decreasing our expenses. The Company does not currently hedge its currency exposure. Applying the Constant Rate, the impact of currency fluctuations on the three months endedJanuary 31, 2023 , is shown below. In this context "Constant Rates" is defined as:
For Revenue and Expenses (Income The Prevailing weighted average Statement Transactions)
exchange rate in the Previous
Quarter
For balance sheet transactions The Prevailing exchange rate as ofOctober 31, 2022 (the Balance Sheet Date")
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.
British Pounds based Danish Kroner based US Dollar Actual Constant Actual Constant Actual Constant Total Results $ Rates $ Results $ Rates $ Results $ Rates $ Effect $ Revenues 2,431,323 2,687,865 1,371,456 1,457,060 3,802,779 4,144,925 (342,146 ) Costs 1,907,019 2,108,239 296,109 314,592 2,210,184 2,430,592 (220,408 ) Net profit (losses) 524,304 579,626 1,075,347 1,142,468 1,592,595 1,714,333 (121,738 ) Assets 22,847,165 21,350,036 4,146,903 3,771,741 27,025,529 25,150,688 1,875,056 Liabilities (1,800,852 ) (1,682,846 ) (71,667 ) (65,183 ) (1,871,399 ) (1,746,803 ) (124,475 ) Net assets 21,046,313 19,667,190 4,075,236 3,706,558 25,154,130 23,403,885 1,750,580 This table shows that the effect of constant exchange rates, versus the actual exchange rate fluctuations, decreased our net income on activities in theCurrent Quarter by$121,738 and increased net assets by$1,750,580 . In addition, the Company recorded a transactional exchange rate loss of$72,649 during theCurrent Quarter .
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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