SecProbe.io

CORRESP
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filename1.htm

    Unassociated Document

    Louis
A. Brilleman, P.C.

    110 Wall
Street, 11th
Floor

    New York,
NY 10005-3817

    Phone:
212-709-8210

    Fax:
212-943-2300

    December
14, 2009

    VIA
EDGAR

    Mr. David
R. Humphrey

    Branch
Chief

    United
States Securities and Exchange Commission

    Washington,
D.C. 20549

    Re:          Coda
Octopus Group, Inc. (the “Company”)

    Form 10-K
for the year ended October 31, 2008

    (the
“Form 10-K”)

    File No.
000-52815

    Dear Mr.
Humphrey:

    This letter is in response to the
letter dated October 29, 2009 by the accounting staff of the Securities and
Exchange Commission (the “Staff”).  That letter contained comments on
the responses of the Company dated October 19, 2009 to earlier Staff
comments.

    1.     In
February 2009, the Company embarked on a cost reduction program that is expected
to yield annualized savings as of October 31, 2009, as follows:

                                    Reduction
      in Research and Development:

                                  $

                                    0.322 mln.

                                    Reductions
      in other SG&A costs

                                  $

                                    3,062 mln.

                                    Total
      SG&A

                                  $

                                    3,383 mln.

                                    (slightly
      above the figure set forth the Form 10K)

                                      Additional
      Reductions:

                                    Reductions
      in Capital Expenditure

                                  $

                                    0.179 mln.

    Based
upon the internal management reports for the year ended October 31,
2009, the Company believes that the following cost reductions against budget
were achieved during each of the quarters:

    Mr. David
R. Humphrey

    Securities and Exchange
Commission

    December
14, 2009

                        Quarter
      Ended January 31, 2009

                      $
                      237,000,

                        Quarter
      Ended April 30, 2009

                      $
                      419,000

                        Quarter
      Ended July 31, 2009

                      $
                      750,000

                        Quarter
      Ended October 31, 2009

                      $
                      707,000

                        Total
      of cost saving against budget

                        during
      the year ended October 31, 2009

                      $
                      2,113,000

              The Company undertakes to expand its discussion on the
cost reduction program and its results in future
filings.

    2.      The
Company has taken note of the Staff’s comments and undertakes to rectify this
disclosure in future filings.  The Company advises the Staff that it
evaluates the impairment of Goodwill separately for each reporting
segment.

    3.      The
Company advises the Staff that its policy is to test its goodwill balances for
impairment on an annual basis, in the fourth quarter of each year, or more
frequently if events or changes in circumstances indicate that the asset might
be impaired.

    As
disclosed in the Company’s prior filings, the goodwill assets arose solely from
the acquisition of two wholly owned subsidiaries that comprise the Company’s
professional services reporting units- Martech and Colmek. In
evaluating whether the events or circumstances had changed during the quarter
ended July 31, 2009 to the extent that it may indicate impairment of the
goodwill asset requiring a test for impairment, the Company considered the
following :

                ·

                  The
      Company performed its annual impairment test according to the
      pronouncements in ASC 350 “ Intangibles – goodwill and other” for FYE
      October 31,
      2008 by an
      experienced consultant. During the quarter ended July 31, 2009, it
      reviewed the assumptions used in the annual impairment test. The Company
      compared the results of the annual impairment test to its current
      operations and noted no material changes in the assumptions used that
      require
      the Company
      to perform further testing for
  impairment.

              ·

              Management
      noted that the shares of similar entities operating in the sectors
      serviced by Martech and Colmek traded at approximating 1 to 1.2 times
      annual recurring sales. Management believes that based on these
      informal metrics the fair value of the individual reporting units exceeds
      the current carrying value of
goodwill.

              ·

              There
      has been no change in the day to day operations of Martech and
      Colmek

              ·

              There
      has been no change in the regulatory or legal environment the could have
      an negative impact on the Martech or Colmek’
  operations.

              ·

              As
      of the date the quarterly report of SEC Form 10Q as filed, Colmek and
      Martech had secured contracts for future services (i.e, “backlog”) of
      approximately   $ 1,596,000 and
      $   715,000  respectively.

              ·

              Both
      Colmek and Martech project operating income and cash flows for the next 12
      months.

        2

    Mr. David
R. Humphrey

    Securities and Exchange
Commission

    December
14, 2009

              ·

              The
      Company has no current plans to dispose of the Martech or Colmek
      at  prices below their respective carrying
    values.

    Accordingly,
based upon the above observations and facts, the Company does not believe that
events or changes in circumstances indicate that the asset might be impaired as
of July 31, 2009

    Note 8 Capital
Stock

    Series
A  Preferred Stock, page F-17

    4.      The
original transaction was concluded in GBP at a price of £32,000.  The
fixed exchange rate at which the Preferred Stock was issued is $1.77 to GPB
1.00.  This is equivalent to 320 Series A Preferred Stock (GBP 100.00
each).  320 units of Series A Preferred Stock were issued in exchange
for consultancy services provided by a consultant to the Company.

    Note 15 Segment Information,
page F-25

    5.      The
Company has taken note of the Staff’s comment and it undertakes in future
filings to include in the Segment Information disclosure the “Total” column that
ties directly to the face of the consolidated financial statements.

    6.      The
“gross profit” figure remained in the Corporate column in error after the
Company had reclassified the revenue in accordance with previous comment number
14 in the Staff’s letter dated September 9, 2009. The Company undertakes to
correct the error in future filings.

    The table
below details the breakdown of Corporate SG&A for the year and the latest
interim date.

                    FY2009
      to July

                    FY
      2008 to October

                  $

                  $

                    Rent
      & Utlilities

                  160,744

                  156,560

                    Office
      Expenses

                  150,954

                  332,611

                    Payroll

                  1,377,743

                  2,055,700

                    Insurance

                  194,580

                  106,226

                    Professional
      Fees

                  667,961

                  1,578,088

                    Forex

                  38,765

                  642,935

                    Marketing

                  279,909

                  824,593

                    Amortization

                  -

                  198,186

                    Stock
      Compensation

                  300,369

                  939,286

                    Travel
      Expenses

                  134,506

                  364,870

                    Sale
      of Asset

                  1,080

                  3,810

                  $
                  3,306,610

                  $
                  7,202,865

        3

    Mr. David
R. Humphrey

    Securities and Exchange
Commission

    December
14, 2009

    All of
the above costs, excluding amortization and sale of assets, were incurred either by (up to 10)
corporate staff at our New York headquarters, European Headquarters, or our
Washington Government Relations office. None were incurred at any operational
unit or in direct support of any single operational unit. Principal functions
were, CEO, CFO & Corporate Finance, Government Relations, Investor
Relations, Human Resource, & Market Development.

    Please
note that the Jody Frank is no longer with the Company.  Therefore,
kindly address future correspondence to Geoffrey Turner.

    Please
contact the undersigned at 212-709-8210 if you need any addition al
information.

                Very
      truly yours,

                /s/
      Louis A. Brilleman

    cc:
Geoffrey Turner

          (Coda
Octopus Group, Inc.)

        4