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 the Securities and
Exchange Commission on February 14, 2022. 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 following terminologies listed immediately below are used and have the meanings ascribed to them in the said table.

"Current Quarter": Three-month period ended January 31, 2022

"Previous Quarter": Three-month period ended January 31, 2021

We operate two distinct business operations. These are:





  ? the Marine Technology Business (also referred to in this Form 10-Q as
    "Products Business", "Products Operations" or "Products Segment"); and

  ? the Marine Engineering Business (also referred to in this Form 10-Q as

"Engineering Business", "Engineering Operations", or "Services Segment").






Our Marine Technology Business is a technology solution provider to the subsea
and underwater market. It owns key proprietary technology including real time
volumetric imaging sonar technology and diving technology, both of which are
applicable to 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), and offshore oil
and gas, complex underwater mapping, salvage operations, dredging, bridge
inspection, underwater hazard detection, port security, mining, fisheries,
commercial and defense diving, and marine sciences sectors. Our diving
technology marketed under the name "CodaOctopus® DAVD" (Diver Augmented Vision
Display) addresses the global defense and commercial diving markets and has the
potential to radically change how diving operations are performed globally
because it delivers a real time information platform for diving and allows
diving operations to be performed in zero visibility water conditions and
provides real time map of the dive area.



20







We generate most of our revenues from our real time 3D sonar which includes both
hardware and proprietary software. Our customers include service providers to
major oil and gas companies, renewable energy companies, law enforcement
agencies, ports, mining companies, defense bodies, research institutes and
universities.



Our Services Business acts primarily as a sub-contractor to prime defense
contractors and engineer sub-assemblies which are utilized in broader defense
programs. The Services Business has operations in the USA and UK. Its central
business model is the design and manufacture of 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 for these items. 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.

Key Pillars for our Growth Plans

Our volumetric real time imaging sonar technology and our Diver Augmented Vision Display ("DAVD") are our most promising products for the Group's near-term growth.





Our real time 3D/4D/5D/6D Imaging sonars are the only underwater imaging sonars
capable of providing not only complex seabed mapping but inspecting and
monitoring in real time 3D/4D/5D /6D moving underwater objects irrespective of
water conditions including in zero visibility water conditions (a perennial
problem in underwater operations). Competing technology can perform mapping (but
not complex mapping) without the ability to perform real time inspection and
monitoring of moving objects underwater. We believe our Echoscope PIPE®is the
only technology that can generate multiple real time 3D/4D/5D and 6D acoustic
images using different acoustic parameters such as frequency, field of view,
pulse length and acoustic filters.

We are widely considered the leading solution providers for real time 3D visualization underwater.


We also believe that the DAVD system is poised to radically change the way
commercial and diving operations are performed globally by advancing the methods
of communication, ability to consume and use digital information and real time
imaging sonar data, thereby improving safety and reducing the costs of these
operations. The DAVD HUD (Head Up Display) concept is protected by patent and is
manufactured and distributed under License from United States Department of the
Navy at Naval Surface Warfare Center Panama City Division to the Company.



Both the Marine Technology Business and Marine 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


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 ended October 31,
2021, that is hereby incorporated by reference.



21






General Impact



Our operations continue to be impacted by the Coronavirus outbreak ("Pandemic").
We rely on the ability to sell our solutions offered by the Marine Technology
Business, globally. Asia is a very significant market for our technology
solutions including Japan, China, South Korea. All these countries without
exception have severe restrictions which continue to affect our ability to have
in-person visits with customers to demonstrate our new offerings which underpin
our growth strategy including Echoscope PIPE® and CodaOctopus® DAVD (Diver
Augmented Vision Display System) and our new enterprise software solution 4G
USE®. Our products and solutions, including the top end software which controls
the sonar and DAVD are complex and do require in-person demonstration and
training for customers to benefit optimally from their adoption.



In addition, we are significantly impacted by the increasing unavailability of
critical components for our products and also parts for bespoke engineering by
our Engineering Segment. This is further compounded by significant price
increases which, on the Marine Technology Business side, we are unlikely to be
able to pass on to our customers. This is therefore likely to impact our
realizable margins.



We are also experiencing skills shortage in areas that are critical to our
growth strategy including in experienced sales and marketing personnel. In
addition, the competition is very fierce for skills and we are seeing
significant increase in costs associated with wages and salaries and demands
from potential candidates to work from home as a precondition to joining our
team. This is further exacerbated by the United Kingdom leaving the European
Union, which complicates hiring qualified candidates from EU member states.

The Services Business continues to experience difficulties in closing orders due to a combination of factors including delays in Defense Prime Contractors securing their orders. This means that sub-contracting is slow.

Impact on Revenues and Earnings





Until the business environment normalizes, we are uncertain as to the extent of
the impact the Pandemic will have on our future financial results. In the
Current Quarter both the Marine Technology Business and our Engineering Business
have been impacted by the constraints caused by the Pandemic which in turn is
impeding our ability to do meaningful business development and opportunities
pipeline building all of which affect our financial performance as a business.

Impact on Liquidity, Balance Sheet and Assets





Failure to curb the coronavirus Pandemic in the near future, coupled with the
projected downturn in the global economic outlook, may adversely impact on our
availability of free cash flow, working capital and business prospects. As of
January 31, 2022, we had cash and cash equivalents of approximately $20,711,288
and in the Current Quarter we generated approximately $3,461,499 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 in the 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
Consolidated Financial Statements for the year ended October 31, 2021.



22






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.



With regard to our Products Segment, 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 consolidated financial statements and in
our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

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 U.S. generally accepted accounting principles.





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 take into account events or circumstances that warrant
revised estimates of useful lives or that indicate that impairment exists.



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. An impairment loss would be
recognized in an amount equal to the excess of the carrying amount of the
goodwill over the implied fair value of the goodwill. There were no impairment
charges during the periods presented.

Consolidated Results of Operations





Summary

In the Current Quarter our financial results have been adversely impacted by a number of factors. These are:

? The ongoing Pandemic continues to affect our business development activities

as in-person meeting and demonstrations with our customers are required due to


    the nature of our offerings.
  ? Weaker than expected backlog of orders in the Services Segment.
  ? Sustained increases in component prices.
  ? Significant lead times for routine components for our products.




Segment Summary



In the Current Quarter the Products Business generated 65.5% of our consolidated
revenues compared to 74% in the Previous Quarter. In the Current Quarter the
Products Business realized an increase in net income before taxes of 17.5%. This
was $1,972,634 in the Current Quarter compared to $1,678,218 in the Previous
Quarter. Revenues generated in the Current Quarter increased by 2% and was
$3,823,748 compared to $3,748,279. Gross Profit Margin increased and was 85% in
the Current Quarter compared to 76.1% in the Previous Quarter. Total Operating
Expenses increased by 9.1%. In the Current Quarter the Products Business
completed significant milestone deliverables for our DAVD GEN 3.0 funded Program
including expanding the capability to the Full Face Mask (FFM). Previously the
DAVD was compatible with the Kirby Morgan Helmets. We also completed the
introduction of the capability to support multiple divers and automating a
number of key functions for the DAVD system.



In the Current Quarter the Services Business generated 34.5% of our consolidated
revenues compared to 26% in the Previous Quarter. In the Current Quarter the
Services Business's recorded net income before taxes of $179,733 compared to
loss before income taxes of $253,169 in the Previous Quarter. Revenues generated
in the Current Quarter increased by 54.7% and was $2,014,460 compared to
$1,302,180 in the Previous Quarter. Gross Profit Margin was 45.1% in the Current
Quarter compared to 35.4% in Previous Quarter. Total Operating Expenses
increased by 12.1% in the Current Quarter.



24

Results of Operations for the Current Quarter compared to the Previous Quarter





Revenue: Total consolidated revenues for the Current Quarter and the Previous
Quarter were $5,838,208 and $5,050,459 respectively, representing an increase of
15.6%. Revenue in both the Products and Services Businesses increased over the
Previous Quarter. Revenue in the Products Business increased by 2% and Services
Business by 54.7%.

Gross Profit Margins: Margin percentage was stronger in the Current Quarter at 71.3% (gross profit of $4,159,934) compared to 65.6% (gross profit of $3,314,922) in the Previous Quarter.

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. 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 contracts

? The mix of sales within the Marine Technology Business during the reporting

period:


        ?   Outright Sale versus Rentals;
        ?   Hardware Sale versus Software;
        ?   Mix of Services rendered in the period - Offshore Engineering Services
            versus Paid Customer Research and Development Projects;

? The mix of engineering projects performed (Design prototyping versus

manufacturing), may also affect Gross Profit Margins;

? Level of commissions on products which may vary according to volume. Both the

Services and Marine Technology Businesses work with sales/distribution agents.

? Level of Rental Assets in the Marine Technology Business' Rental Pool and


    therefore subject to depreciation.

In the Current Quarter Gross Profit Margins for the Products operations were 85.0% compared to 76.1% in the Previous Quarter. For the Services operation these were 45.1% in the Current Quarter compared to 35.4% % in the Previous Quarter.


Since there are more variable factors affecting Gross Profit Margins in the
Products Business, a table showing a summary of break-out of sales generated by
the Products Business in the Current Quarter compared to the Previous Quarter is
set out below:



                     Current Quarter       Previous Quarter       Percentage
                        Products               Products             Change
Equipment Sales     $       1,958,845     $        2,793,487           (29.88 )%
Equipment Rentals             630,468                334,363            88.56 %
Software Sales                304,796                225,222            35.33 %
Services                      929,639                395,207           135.23 %

Total Net Sales     $       3,823,748     $        3,748,279             2.01 %

In the Current Quarter the Products Business incurred Commission costs of $138,372 compared to $281,105, representing a 50.8% fall, resulting in Gross Profit Margins being higher.





Further information on the performance in the Current Quarter compared to the
Previous Quarter of each Segment including revenues by product and geography can
be found in Note 14 and Note 15 to the Unaudited Consolidated Financial
Statements.



We believe that the decrease in the Equipment Sales category in the Current
Quarter is due to the impending industry trade show, Oceanology 2022, which is
scheduled to take place on March 15 -17, 2022. We typically see postponement of
capital investment decisions until after the event.



Research and Development (R&D): R&D expenditures in the Current Quarter were
$672,890 compared to $583,139 in the Previous Quarter, representing an increase
of 15.4%.



                                     January 31,        January 31,           Percentage
             Segment                     2022               2021                Change

Services Segment R&D Expenditures $ 143,515 $ 141,395 Increase of 1.50% Products Segment R&D Expenditures $ 529,375 $ 441,744 Increase of 19.84%






25







Selling, General and Administrative Expenses (SG&A): SG&A expenses for the
Current Quarter increased by 16.4% to $2,111,112 from $1,813,366 in the Previous
Quarter. In the Previous Quarter SG&A was reduced by $83,500 representing
payroll assistance received under the UK Coronavirus Job Retention Scheme (CJRS)
for UK staff who were furloughed during the Current Quarter. SG&A also includes
non-cash item relating to charges for stock-based compensation which in the
Current Quarter was $325,175 compared to $174,447, representing an 86.4%
increase. The main variances in SG&A therefore relates to these two items
discussed here.

Key Areas of SG&A Expenditure across the Group for the Current Quarter compared to the Previous Quarter are:





                                    January 31,        January 31,           Percentage
          Expenditure                   2022               2021                Change
Wages and Salaries                 $      903,162     $      838,306     Increase of 7.74%
Legal and Professional Fees
(including accounting and audit)   $      359,018     $      336,109     Increase of 6.82%
Rent for our various locations     $       15,745     $        9,765     Increase of 61.24%
Marketing                          $       13,766     $       11,330     Increase of 21.5%




The increase in the "Wages and Salaries" category of expenditure reflects
$83,500 in contributions under the CJRS which resulted in the reduction in SGA
during the Previous Quarter . Nevertheless, we expect this area of expenditure
to increase as we are investing in business development and sales resources and
we also expect an increase in labor costs due to general skills shortage and
also inflationary pressures in both the US and UK.

The increase in "Legal and Professional" reflects additional costs associated with increasing our accounting functions.





The increase in Marketing is anticipated within our plans and reflects an
increase in marketing activities. 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 increased by 49.8% and
was $1,375,932 as compared to $918,417 in the Previous Quarter. The increase in
Operating Income is due to the increase in consolidated revenues realized in the
Current Quarter.



Interest Expense: Interest expense in the Current Quarter was $11,278 compared
to $14,514 in the Previous Quarter, representing a fall of 22.3%. In the Current
Quarter we paid the last interest payable on the HSBC NA debentures. All
indebtedness under the debentures have been satisfied in full and therefore
there will be no further interest payments in the foreseeable future. Please
refer to Note 11 - Note Payable to the Unaudited Consolidated Financial
Statements for further details pertaining to this HSBC Loan for more information
on this.



Other Income: In the Current Quarter, we had Other Income of $79,994 compared to
$92,025, representing a fall of 13.1% from the Previous Quarter. In the Previous
Quarter we had contributions under the Paycheck Protection Program of $89,971
compared to $0 in the Current Quarter. Similarly in the Previous Quarter we had
$0 for Employee Retention Credit, compared to $68,917 in the Current Quarter.



Income before income taxes: In the Current Quarter, we had income before income
taxes of $1,444,648 as compared to $995,928 in the Previous Quarter,
representing an increase of 45.1%. Income before income tax increased largely
due to the increase in the Current Quarter of our consolidated revenues.



26







Net Income: In the Current Quarter we had Net Income of $1,217,248 compared
to $1,128,844 in the Previous Quarter, representing an increase of 7.8%. In the
Previous Quarter we recorded Current Tax Benefit of $24,725 and in the Current
Quarter we recorded Current Tax Expense of $285,609 and similarly we recorded
Deferred Tax Benefit in the Current Quarter of $58,209 compared to $108,191 in
the Previous Quarter. The Company has now utilized its net operating loss carry
forwards and therefore it is expected that the US companies will become tax
paying entities.



Comprehensive Income. In the Current Quarter Comprehensive Income was $1,458,398
compared to $2,054,456 for the Previous Quarter. This category is affected by
fluctuations in foreign currency exchange transactions. In the Current Quarter
we had a foreign currency translation adjustment of $241,150 compared to
$925,613 in the Previous Quarter. With the removal of the uncertainty of the
future relationship between the United Kingdom and the European Union ("EU")
following its withdrawal from the EU and the entering into a trade agreement, we
anticipate that the British Pound will be less volatile against the US$ and
other major currencies.

Liquidity and Capital Resources

At January 31, 2022, the Company had an accumulated deficit of $17,260,609, working capital of $32,360,629, cash of $20,711,228 and stockholders' equity of $42,832,646. For the Current Quarter, the Company's operating activities provided cash of $3,461,499.


The Company entered into a $4,000,000 revolving line of credit with HSBC NA on
November 27, 2019, at prime. The outstanding balance on the line of credit was
$0 as of January 31, 2022. This revolving credit line will expire on November
26, 2022, unless renewed by the bank.



Financing Activities



Secured Promissory Note




On April 28, 2017, the Company and its US based subsidiaries entered into a loan
agreement with HSBC Bank NA (the "Lender") for a loan in the principal amount of
$8,000,000 (the "Loan"). The annual interest rate was fixed at 4.56%. The
obligations in connection with the repayment of the Loan were secured by all
assets of Coda Octopus Group, Inc., and its US subsidiaries. Our foreign
subsidiaries were joint and several guarantors of the obligations. This loan was
paid in full in December 2021 and all obligations under the HSBC Loan have

now
been satisfied.



27

Inflation and Foreign Currency

The Company maintains its books in functional currency. In this connection, these are:





  ? US Dollars for US Operations;
  ? British Pound for United Kingdom Operations;
  ? Danish Kroner for our Danish Operations; and
  ? Australian Dollars for our Australian Operations.




Note 4 (Foreign Currency Translation) of our Unaudited Consolidated Financial
Statements discusses fully the applicable rates used for our Balance Sheet

and
Income Statement.



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 into U.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.




Since the United Kingdom's decision to withdraw from the European Union in 2016,
the British Pound has been extremely volatile and because a significant part of
our operations is based in the United Kingdom we suffered, since then,
significant adverse exchange rate movements. However, since the final withdrawal
from the EU by the United Kingdom in December 2020, the British Pound has been
regaining its strength and we anticipate that the volatility that we experienced
during the lead up to UK leaving the European Union will abate.

The impact of currency fluctuations on the three months ended January 31, 2022, is shown below. In this context "Constant Rates" is defined as the weighted average exchange rate prevailing in the Previous Quarter.





                                             British Pounds                 Australian Dollar                 Danish Kroner                                US Dollar
                                        Actual           Constant         Actual        Constant         Actual          Constant           Actual

Constant Total


                                       Results            Rates           Results         Rates          Results           Rates           Results            Rates            Effect
Revenues                                2,535,282         2,601,843              -              -          388,743          410,428         2,924,025         3,012,271         (88,246 )
Costs                                   2,262,261         2,321,654         24,254         25,575           70,145           74,058         2,356,660         2,421,286         (64,626 )
Net profit (losses)                       273,021           280,189        (24,254 )      (25,575 )        318,598          336,370           567,365           590,984         (23,619 )
Assets                                 22,672,721        23,102,691         32,500         34,633        2,142,098        2,209,870        24,847,319        25,347,194        (499,875 )
Liabilities                            (1,119,560 )      (1,140,792 )       (2,610 )       (2,781 )        (19,688 )        (20,311 )      (1,141,858 )      (1,163,884 )        22,026
Net assets                             21,553,161        21,961,900         29,890         31,852        2,122,410        2,189,559        23,705,461  

     24,183,311        (477,850 )




This table shows that the effect of constant exchange rates, versus the actual
exchange rate fluctuations, decreased our net income on activities in the
Current Quarter by $23,619 and decreased net assets by $477,850. In addition,
the Company booked transactional exchange rate gain of $241,150 during the
Current Quarter.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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