UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
☒ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2021
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
file number: 001-38154
CODA
OCTOPUS GROUP, INC.
(Exact
name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3300
S Hiawassee Rd, Suite
104-105, Orlando, Florida,
32835
(Address,
Including Zip Code of Principal Executive Offices)
407735
2406
(Issuer’s
telephone number)
Securities
registered under Section 12(b) of the Exchange Act:
COMMON
STOCK, $0.001 PAR VALUE PER SHARE
Securities
registered under Section 12(g) of the Exchange Act:
NONE
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
● State issuer’s revenues for its most recent fiscal year: $21,331,527
TABLE
OF CONTENTS
PART I
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 16
ITEM 1B. UNRESOLVED STAFF COMMENTS 16
ITEM 2. PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 17
ITEM 4. MINE SAFETY DISCLOSURES 17
PART II
ITEM 6. SELECTED FINANCIAL DATA 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 40
ITEM 9A CONTROLS AND PROCEDURES 40
ITEM 9B OTHER INFORMATION 40
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 41
ITEM 11. EXECUTIVE COMPENSATION 47
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 50
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 51
SIGNATURES 52
FORWARD-LOOKING
STATEMENTS
This
Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to
in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current
expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s
beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties
and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can
cause or contribute to these differences include those described under the heading “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
If
one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results
may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with
respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of
operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us, or individuals
acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified
in this annual report, which would cause actual results to differ before making an investment decision. We are under no duty to update
any of the forward-looking statements after the date of this annual report or to conform these statements to actual results.
PART
I
ITEM
1. BUSINESS
Overview
Coda
Octopus Group, Inc. (“Coda” “the Company” or “we”), through its wholly owned subsidiaries, operates
two distinct businesses:
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.
Our
Marine Engineering Businesses are suppliers of embedded solutions and sub-assemblies which they design and manufacture and sell into
mission critical integrated defense systems such as the Close-In-Weapons System (CIWS). The Services Segment established its business
in 1977 and has been supporting a number of significant defense programs for over 40 years, including Raytheon’s CIWS and Northrop
Grumman’s Mine Hunting Systems Program. The Services Segment’s business model entails designing sub-assembly prototypes which
are utilized in broader defense programs. These prototype contracts typically lead to contracts for the manufacture, repair
and upgrade of these sub-assemblies. We are the sole source for the parts that we design and supply into these programs. This
business model ensures recurring and long tail revenues since we continue to supply parts, typically for the life of the program, which
can span decades. Coda Octopus Colmek, Inc. and Coda Octopus Martech Ltd, each qualifies as a small business. This opens opportunity
under state requirements to collaborate with Prime Defense Contractors on these programs.
Due
to the above, a significant part of the revenues generated by the Marine Engineering Business is highly concentrated and is derived
from a small number of prime defense contractors such as Raytheon or Northrop. In any one year, between 20% to 30% of our consolidated
revenues may be derived from these customers individually or collectively.
The
Services Segment operates through our wholly owned subsidiaries, Coda Octopus Colmek, Inc (“Colmek”) based in Salt Lake City,
Utah, and Coda Octopus Martech Limited (“Martech”) based in Dorset, United Kingdom.
Cross-Group Synergies
Our
Marine Technology Business and Marine Engineering Services Business have established synergies in terms of customers and specialized
engineering skills for robust, rugged and repeated engineering solutions relating to data acquisition, data computation and display
of the data. Increasingly drawing on each part of the business strengths, the Marine Technology Business and Marine Engineering Business
work jointly on projects including responding jointly for tenders. We believe the Services Business is important to our overall growth
strategy as it brings significant engineering depth for the onward development of our technology solutions. This also ensures more tight
control over our intellectual property rights which are important for our market position in the space we operate.
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 which are 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 also 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, filters.
Our
customers include service providers to major oil and gas (“O&G”) companies, renewable companies, underwater
construction companies, law enforcement agencies, navies, ports, mining companies, defense bodies, diving companies, research
institutes and universities. 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.
Our
corporate structure is as follows:
Corporate
History
The
Company began as Coda Technologies Limited. This company now operates under the name Coda Octopus Products Limited, a United Kingdom
corporation formed in 1994 as a start-up company with its origins as a research group at Herriot-Watt University, Edinburgh, Scotland.
Initially, its operations consisted primarily of developing software for subsea mapping and visualization using sidescan sonar (a technology
widely used in commercial offshore geophysical survey and naval mine-hunting to detect objects on, and textures of, the surface of the
seabed).
In
June 2002, we acquired Octopus Marine Systems Ltd, a UK corporation, and changed our name to Coda Octopus Limited. At the time of its
acquisition, Octopus Marine Systems was producing geophysical products broadly similar to those of Coda, but targeted at the less sophisticated,
easy-to-use, “work-horse” market. The Octopus Marine Systems acquisition led to the introduction of the Motion product (F180®
series) into the Products Segment.
In
December 2002, Coda Octopus Ltd acquired OmniTech AS, a Norwegian company, which became a wholly owned subsidiary of the Company, and
which subsequently changed its name to Coda Octopus R&D AS. OmniTech owned the patents to a “method for producing a 3-D Image”
(which has now expired). At the time of acquisition, this company had been engaged for over ten years in developing a revolutionary imaging
sonar technology capable of producing real time three-dimensional (“3D”) underwater images for use in subsea activities.
Coda Octopus Products Limited (Edinburgh based) then developed the visualization software to control and display the images from the
real time 3D sonar device. This patented technology is now marketed by us under the brand name “Echoscope®”
and Echoscope PIPE®. All activities of this now-defunct Norwegian subsidiary, Coda Octopus R&D AS, have been transferred
to Coda Octopus Products Limited (Edinburgh).
On
July 13, 2004, the Company effected a reverse merger pursuant to the terms of a share exchange agreement between The Panda Project, Inc.
(“Panda”), a Florida corporation, and a now defunct entity affiliated with Coda Octopus Ltd. (“Coda Parent”).
Panda acquired the shares of Coda Octopus Limited, a UK corporation and a wholly-owned subsidiary of Coda Parent, in consideration for
the issuance of a total of 1,432,143 shares of common stock to Coda Parent and other shareholders of Coda Octopus Limited. The shares
issued represented approximately 90.9% of the issued and outstanding shares of Panda. The share exchange was accounted for as a reverse
acquisition of Panda by Coda. Subsequently, Panda was reincorporated in Delaware and changed its name to Coda Octopus Group, Inc.
In
June 2006, we acquired Coda Octopus Martech Limited which is part of our Services Segment or Marine Engineering Business. This is an
English corporation.
In
April 2007, we acquired Coda Octopus Colmek, Inc. which is part of our Services Segment or Marine Engineering Business. This is a Utah
corporation.
Both
Martech and Colmek largely have the same business model, provide similar engineering services and sell to a similar customer base (one
is UK focused and the other is US focused).
In December 2013 Coda Octopus Products Limited established
Coda Octopus Products Pty Ltd (Australia) to grow our presence in Australia and New Zealand. However, since 2020
we have not been able to do meaningful business development due to the Australian borders being closed because of the Coronavirus Pandemic.
In
2017 Coda Octopus Products Limited established a subsidiary Coda Octopus Products A/S in Denmark as part of the
mitigation strategy relating to the UK withdrawal from the European Union (See Item 7 Management’s Discussion and Analysis...”).
Coda
Octopus Group, Inc., is organized under the laws of the State of Delaware as a holding company that conducts its business through subsidiaries,
several of which are organized under the laws of foreign jurisdictions, including England, Scotland, Denmark, Australia and
recently India. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. courts against
these entities, or to effect service of process on the officers and directors managing the foreign subsidiaries. These companies’
operations must comply with the laws of the countries under which they are incorporated and are likely to be different from the equivalent
laws of the United States.
Marine
Technology Business (“Products Segment”)
Our
Marine Technology Business develops proprietary solutions for both the commercial and defense subsea market. The range of our solutions
are complementary and include:
Type of Systems Description
Geophysical Systems Comprising Hardware and Software;
Real Time Volumetric Imaging Sonar Comprising Hardware and Software
Diver Augmented Vision Display System Comprising Hardware and Software
These
products are sold, leased or rented into various marine sectors and include:
● Marine geophysical survey
● Offshore Renewables (“Wind Energy”)
● Underwater construction, inspection and monitoring
● Diving Companies
● Commercial and Defense Diving
● Salvage and decommissioning
● Oil and Gas (“O&G”)
● Commercial fisheries
● Environmental, mammal and habitat monitoring
● Underwater Defense Applications
● Marine vehicles and robotics
● Port and Harbor Security, law enforcement and first responders
● Research and education
1.
Geophysical Range of Products
Our
geophysical systems (“GEO”) range of products include geophysical data acquisition systems, processing and analysis software
that are used primarily by survey companies, offshore renewable companies, research institutions, salvage companies. The Company’s
GEO range of products are used in conjunction with sidescan sonars to survey large areas and create images of the seabed, identify seabed
boulders and objects, mark seabed type boundaries and identify existing subsurface structural features, geological layers, and/or buried
debris. The Company started its first innovation with this range of products and in fact was the first company to digitalize sidescan sonar data. The Company GEO range is a strong brand in the geophysical market space.
2.
GPS aided Inertial Positioning Systems
These
are referred to as our MOTION range of products and offer high accuracy GPS aided inertial positioning and attitude data, essential for
all marine survey applications. The products are commonly bundled with our GEO and real time sonar solutions offering our customers a
seamless integration and support experience.
3.
Real Time Volumetric Imaging Sonars (ranging from 3D/4D, 5D and 6D)
We
design, develop and supply what we believe is the world’s most advanced series of real time volumetric imaging sonar. This is the
culmination of over 25 years of research and development. This technology is protected by multiple patents. Furthermore, we continue
to file patents relating to our new and revolutionary sonars, our 5-Dimensional (5D) and 6-Dimensional (6D) real time volumetric imaging
sonars (marketed under the name Echoscope PIPE® (Parallel Intelligent Processing Engine). Our sonar innovations
are multi-tiered and extend to hardware, firmware and software, all of which co-exist and are co-dependent on each other. In other words,
hardware, firmware and software operate as sub-systems to each other. We believe that the highly complex nature of this new technology
will make it extremely difficult to reverse engineer our products. Pioneering this unique technology gives us a significant advantage
over our competitors in the subsea real time 3D imaging sonar market sectors. We also believe that our three-tier product development
capability of hardware, software and solution delivery adds to our competitive lead.
We
believe that this technology is superior to the other imaging sonars in the market as it generates real time 3D, 4D, 5D and 6D images
of the underwater environment irrespective of low or zero visibility conditions and, unlike conventional sonars, can image a volume (as
opposed to a slice of data) and provide real time 3D inspection and monitoring capability underwater. The capability of our volumetric
imaging sonars covers a broad breadth of activities underwater particularly for any form of underwater construction, salvaging,
placements, decommissioning, obstacle avoidance and complex underwater mapping.
About
the Company’s 5D and 6D Sonars Innovations
5D
and 6D sonars are new to the subsea market and constitute an innovation by the Marine Technology Business of the Company. We have several
patents pending for these innovations.
5D
Sonars (Echoscope PIPE®)
The
advancement that the Company has made with its 5D Sonars is the ability to process and utilize much more of the data that is acquired
by our volumetric imaging sonars. In the previous generation of our sonars, due to the state of the art of processing generally, there
was an upper limit to the quantity of the acquired data that could be processed and displayed by the sonar system. This meant that in
the previous generation of sonars when a signal was emitted, it returned a single range and intensity value per beam. In the 5D Sonars
we return multiple range and intensity values (Full Time Series (“FTS”)) per beam. This new capability provides more
information about the underwater environment. For example, it will give the user the ability to see multiple layers of soft target areas
underwater such as gas leaks and suspended sediment above the seabed all concurrently (not one or the other) or concurrent imagery of
marine life, sea growth on installations and the installations themselves. FTS will deliver all range values per beam as opposed to either
the First (First Above Threshold (“FAT”) or the strongest return (MAX) provided by the previous generation
of Echoscope technology. Our 5D capability is protected by a recently granted patent (US 10,718,865 – which concerns a method
of compressing beamforming sonar data).
6D
Sonars (Echoscope PIPE®)
The
Company’s 6D Sonars processes and utilizes much more of the data acquired by the sonar. 6D Sonars are sonars
which generate multiple real time 3D Full Time Series Images. In the previous generation of sonars, we could image and display one 3D
Image in real time. Our technology generates multiple 3D Images simultaneously in real time using different sonar/acoustic
parameters (such as frequency, range, field of view, pulse length and other acoustic filters or shading). Our new technology enables
one sensor to provide different 3D/4D/5D/6D data sets (through multiple parallel processing capability) to different
parts of the survey team operations in real time per their different operational requirements (thus consolidating the sensors
and the associated costs and effectiveness of the solution). 6D Sonars can also record raw data that can be subject to PIPE Offline
processing to generate unlimited data outputs. We are not aware of any sonars that can offer either 5D or 6D Capability.
In summary, our previous generation of real
time 3D sonar was capable of providing only single acoustic images of underwater objects in real time 3D whereas the PIPE family of sonars
is capable of providing multiple acoustic images of underwater objects in real time 3D/4D.
Sonar
Hardware
During
fiscal 2019, we completed critical innovation and advancement milestones around our core volumetric real time sonar technology. We
have now introduced the world’s first 5D and 6D series of volumetric imaging sonar technology. This new series of sonars are
marketed under the brand name Echoscope PIPE® (an acronym for Parallel Intelligent Processing Engine).
We believe our 5D and 6D series of sonars herald a significant leap forward in real time subsea imaging as this inventive capability
allows a single sonar to provide different parts of the survey operations with multiple real time data sets (as opposed to
one 3D dataset) for each part of the survey teams’ requirements.
The
Differences between our standard Echoscope® sonar series and our newly launched Echoscope PIPE® series
of sonars is set out below:
Description Current Echoscope® PIPE® Sonars
Real Time Capability Yes, 4D Images Yes, 4D, 5D and 6D
Adaptive Frequency Capability No Yes
Ping Rate Up to 20Hz Up to 40Hz
Number of Data Points per Single Ping Up to 16,386 Up to 40 million
Full Time Series Raw Data Capture No Capability Capture of Raw Data
We
believe that our Echoscope® technology will shepherd in the new generation of underwater real time 3D imaging sonar
which will evolve into a real time information platform and gain market share through the increased adoption of real time
3D volumetric imaging sonar technology. Current competing imaging technologies such as the single beam, multibeam and scanning
sonars are either 2D real time imaging sonars or 3D imaging sonars which are not capable of real time 3D imaging. The competing 3D technology,
the multibeam, which is the current standard bearer in the market is a sonar for mapping only. The Echoscope® technology
can not only map the seabed (and is superior to the multibeam for complex mapping and inspection of complex underwater structures) but
can image in real time 3D moving objects underwater and therefore is the primary tool of choice for inspecting and monitoring in real
time all types of underwater operations and the only choice in poor visibility conditions. In addition, the Echoscope®
can also in many instances enable the user to monitor underwater operations from a surface vessel and in this way replace Remotely
Operated Vehicles (ROVs) thus bringing considerable cost savings to our customers.
Prior
to January 2018, we were selling our third generation (3G) sonar series. In January 2018 we launched the first product within our fourth
generation series of sonars (“4G sonar series”). The 4G sonar series was an important development milestone for the
Company and since its introduction has seen increased number of units being sold or rented. Due to the form factor of our previous
generation of 3G sonar series this limited the types of subsea vessels/vehicles this generation of sonar could be integrated on (and
therefore be used for) due to (i) size; (ii) weight and (iii) power requirements (“form factor barriers”). With the launch
of the 4G sonar series we have removed these form factor barriers and can now integrate on the majority of underwater vehicles in the
market including the new and fast emerging smaller underwater vehicles such as autonomous surface vehicles (ASVs) and unmanned underwater
vehicles (UUVs) which are propelling growth in the underwater market.
The
4G sonar series developments were largely form factor driven as opposed to being based on performance and capability advancements. In
fiscal years 2019 and 2020 we continued our innovation of our sonar technology to focus on performance and capability advancements, particularly
on the beamforming and the data processing capability of our sonar series. In the previous generation of our sonars, due to limitations
in processing capability technology there were restrictions on how much of the captured Echoscope® sonar data could
be processed by us. Our previous generations of sonars processed 16,384 pieces of data per sonar ping (compared to around 256
pieces of data per sonar ping for competing technology such as the multibeam). Under our new Echoscope PIPE® sonar series
for each signal that is generated by the sonar we receive back up to 40 million pieces of information which we can now process. In
this context, we have two recent patents concerning a method of compressing beamforming sonar data and a method of compressing sonar
data. We believe that this allows us to deliver to the market the first 5-Dimensional (5D) sonar and 6-Dimensional (6D)
sonar capabilities and significantly builds on our 4G sonar series which radically changed the form factor and power requirements
which were previously barriers to increased adoption. The advantages offered by our 5D and 6D Sonar Series have been discussed above
under the heading (About the Company’s 5D and 6D Sonars Innovations). We started selling Echoscope PIPE®
in the market in March 2020. We are also seeing increased interest in Echoscope PIPE® technology in the market especially with OEM
underwater vehicle manufacturers.
The release of the Echoscope PIPE®
hardware, is a significant milestone. We are now focused on the value add to the technology via firmware and software capability.
The finalization of this development now gives the Company a real opportunity to pursue its strategy to standardize this technology in
the underwater imaging sonar market. We believe that in order to make the subsea and underwater market more efficient, it is mandatory
that the standard moves to a real time 3D information platform. Many underwater operations are stalled due to low visibility water conditions,
preventing the remotely operated vehicles (ROVs) from flying and also the lack of ability to utilize the sonar data immediately
because it requires post processing, which represents a significant challenge and higher costs. The subsea market is
experiencing structural and technology transitional changes including the introduction of the new generation of smaller and lighter vessels
(both surface and underwater). This creates a demand for new sensors and solutions for real time 3D imaging. We believe that
our lead in this area gives us a real opportunity to increase our market share.
Diver
Augmented Vision Display (DAVD) System
Funded
by the Office of Naval Research (“ONR”) through its Future Naval Capabilities (FNC) program, and in close collaboration with
NAVSEA 00C3 and Naval Surface Warfare Center, Panama City Division (“NSWC PCD”) we have developed a diver see-through integrated
information display system (DAVD).
DAVD
is a complete end-to-end diver management solution incorporating as a key element a high-resolution, fully transparent glass head-up
display (HUD) integrated directly inside the diving helmet (for hard hat surface air supply diving) or full-facemask (for tethered and
untethered defense, commercial and recreational diving applications). The DAVD HUD is currently deployed in the world leading and most
widely used Kirby Morgan® range of dive helmets and is currently being released in the industry standard Interspiro and
OTS full-face masks. The DAVD HUD and system technology is not however limited to these products and applications. We continue to work
with NASA who has used the DAVD system at its 6.2 million gallons Neutral Buoyancy Laboratory (NBL) located near the Johnson Space Center
in Texas, US. It is now exploring its ‘potential use in NASA’s planned return to the moon’.
Problem
In Context
Navy and Commercial diving share common issues and
challenges with location, visibility, communication, safety and data and information sharing. Divers work mainly in murky
or disorientating water conditions and rely heavily on their sense of touch to navigate and function. They work in the water column,
around complex structure and on the cluttered sea bottoms which is neither safe nor efficient. They, and the diver support team,
require dark spatial awareness memory as they work, arms outstretched in deep, dark, frigid waters to remember hazardous underwater debris,
targets and terrain. Complexity of the task and this challenging environment directly increases risk, stress, and inefficiency for the
entire team.
How
does DAVD Change this?
The
DAVD system addresses all the challenges described above. The DAVD technology benefits not only the diver and direct supervisor on the
surface, but also engineers, end-clients, rescue workers and support personnel whom all have vested interest in a successful and safe
mission. DAVD provides the location of the diver, the dive support vessel, work site assets and any hazards that are known or
discovered in real-time. Real-time compass and depth are also displayed to the diver to reduce disorientation. visibility for
Diver and team is dramatically enhanced with both real-time camera and 3D sonar (providing underwater night-vision) and also high-resolution
maps and models of the entire work site and surroundings. Communication is transformed from low quality audio speech to high quality
digital audio and video, text messaging, visual alerts and automated navigation guidance. The safety of the diver and team is
paramount. DAVD ensures the Diver and Supervisor are visually synchronized and can safely coordinate movement, tasks and instructions
with full health monitoring and logging of the entire mission. Data and information sharing traditionally ends when the
diver leaves the surface. DAVD provides a seamless and effective way to share any type of data, image, video, process or procedure instantly
in real-time through the DAVD fully transparent HUD display (equivalent of >100” HD TV in-front of the diver). Data and
information also flows up from the Diver to the Supervisor where the diver can look at an asset, make measurements or recordings
and the entire task is captured and documented on the DAVD system.
The
concept of using a pair of transparent glasses in the HUD for underwater applications is protected by patent and Coda Octopus has an
exclusive licence from United States Department of the Navy at NSWC PCD to exploit this patent for all underwater diving activities.
The DAVD is a significant technology for both defense and commercial underwater diving applications and we believe that Coda Octopus
has the opportunity to standardize this technology globally. The DAVD comprises both hardware comprising the HUD, Diver Processing Pack
(DPP) (which is a Thermite® variant), Cables and Topside Control Unit along with 4G USE® DAVD Edition
real time visualization software. All these development and products have been designed and developed by the Company.
The
DAVD is currently in early-stage adoption with the US Navy and enjoys the benefit of an Approved Navy Use (ANU) product. We have also
started marketing (through live demonstrations) this technology to friendly Navies globally and also to the commercial diving
market. We have significant interest from a number of reputable global commercial offshore service providers and are working with them
for early adoption of the technology and also a number of European friendly Navies including the UK Ministry of Defense (MOD).
GEN 3 of the DAVD which opens the market further
by extending support to Full Face Masks (FFM), has now also been released to the Navy for trials.
Sonar
Software
Our
software development capability is an important part of our strategy to maintain our lead in designing, manufacturing, and selling state-of-the-art
real time volumetric imaging sonars and our DAVD System.
Our existing third generation (3G) Underwater Survey
Explorer software used in conjunction with our real time volumetric sonars, is a product which we have been developing for over 15 years.
Because of technological advancements, including access to off the shelf components for more advanced processing of data (speed and size
being factors), in 2016, the Company started the process of re-conceiving and developing its top-end software for our now much more advanced
sonars. We have now launched our fourth-generation multi-sensor platform which is marketed under the name “4G USE®”.
We have also filed several provisional patents around our 4G USE®. 4G USE® is a multi-sensor platform allowing
users to bring in and utilize a variety of sensor data including sonar, positioning, camera, lidar, video processing and other
sources of point cloud data and seamlessly merging above and below the water data captured from the sonar and camera. It is also
the platform for our DAVD software, and this is marketed under the brand 4G USE® DAVD Edition.
Geophysical
Products and Solutions
The
Geophysical range of products are important for both Offshore Renewables and O&G. We therefore believe that with the expansion
of the markets into Offshore Renewables, we will see an increase in the take up of this product suite, particularly in the global rental
market. Our GeoSurvey® and DA4G ranges are strong brands in these markets.
We
started our business in 1994 designing and developing the GeoSurvey® software and hardware package for acquisition
and processing of sidescan sonar and sub-bottom profiler data. For over two decades, our GeoSurvey has been an industry leading software
package in the market for data acquisition and interpretation and provides feature rich solutions and productivity enhancing tools for
the most exacting survey requirements. Designed specifically for sidescan and sub-bottom data acquisition, GeoSurvey has been purchased
by numerous leading survey companies throughout the world.
The
Products Business generates around 2% of its revenues from this range of products. With the launch of the new products based on Artificial
Intelligence technology for which we believe there is increased demand we would anticipate our revenues from this product line
to increase over time.
Geophysical
Hardware
These
consist of a range of hardware solutions for field acquisition of sidescan sonar and sub-bottom profiler, which includes analog and digital
interfaces compatible with all geophysical survey systems.
In
2018, we introduced our DA4G-USB product. This allows customers to integrate the DA4G hardware into their own PC configuration. Based
on the CodaOctopus® DA4G system, it offers the same functionality, robustness and ease of use. CodaOctopus® DA4G
is the fourth generation of our successful DA series and is built on twenty years of knowledge, experience and innovation in supplying
unparalleled products and service to the worldwide geophysical survey sector. These purpose-built, turn-key, systems incorporate the
very latest hardware specifications and are designed and delivered to meet the demanding nature of offshore survey work.
The
CodaOctopus® DA4G range consists of a number of options and is backed (like all our products) with global service and
support.
This
consists of an integrated suite of software that automates the tasks of analyzing, annotating and mosaicking complex data sets,
thus ensuring faster and more precise results.
Geophysical
Software
Our
GeoSurvey® software is supplied to complement our DA4G hardware, offering field acquisition of sidescan sonar and sub-bottom
profiler data.
Our
Survey Engine software product offers a more advanced post-processing solution for sidescan sonar and sub-bottom profiler data. Designed
to streamline processing of very large data sets – many 100GBs – it offers comprehensive processing, interpretation, visualization,
reporting and exporting functionality.
We
continue to advance this range of products and in 2018 we launched our first product based on Artificial Intelligence techniques which
allows us to automatically identify boulders on the seabed – SEADP – “Survey Engine Automatic Object Detection”.
This new product presents a real opportunity to radically change workflow process for post-processing and analyzing side scan sonar data
to assess, among other things, the suitability of an area for exploration and construction activities (O&G installations, pipeline
and cable laying activities). This is in its early stage of roll out and has sparked significant interest. This is an area where we are
investing our research and development efforts. We are also seeing good results from SEADP and some good quality early adopters of this
new technology in the market.
Additionally,
in 2019 we introduced our Seabed Classification module (again based on Artificial Intelligence techniques). This automatically classifies
sidescan sonar imagery into different seabed types, computes and exports polygonal boundaries for these areas, and thereby simplifies
sidescan processing.
Inertial
Positioning and Attitude Measurement Systems (“Motion Products”)
Our
Motion Products are Global Navigational Satellite System (referred to in the industry as “GNSS” Aided Inertial Measurement
Units) provide measurement data on the position and attitude of a vessel. This device provides real-time data on these measurements which
are applied to compensate for vessel movement in order to align sonar data and remove motion blur.
We
have had our F180® series in the market for over 15 years and due to advancement of technology and the increasing demand for more precise GNSS Aided instruments, we have
now developed our new generation of Motion Products, our F280 Series®.
New
Generation of Motion Products
We
have now completed the ground up development of our new generation of Motion Products F280 Series® The new F280 Series®
is based on more advanced technology and is more accurate than our F180® series. The new technology is much
more scalable towards future development of new product variants. The F280Series® is highly complementary to our real
time volumetric sonar series and they are packaged together to provide a more comprehensive solution to our customers. The F280®
is sold with and without our sonar series. We have now started to market the F280 Series®
Sales
and Marketing
We
market our products primarily through our website, industry events such as trade shows, webinars and industry relationships. We also
have a small internal sales and marketing team which is engaged in marketing and selling our products. In addition, we have a
network of non-exclusive independent global sales agents. In 2022, a significant part of our business plan budget is allocated
to business development, sales and marketing which will include recruiting new staff for more direct sales and business development.
Coda
Octopus Products Limited has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015
and Cyber Essentials certification.
Marine
Engineering Businesses (“Services Segment”)
Our
Marine Engineering Businesses comprise Coda Octopus Colmek, Inc. based in Salt Lake City and Coda Octopus Martech Limited based in the
United Kingdom.
These
two operating entities supply engineered sub-assembly solutions which form part of mission critical integrated defense systems,
test equipment, instrumentation, and the like. They operate as sub-contractors to prime defense contractors, and their engineering
solutions are typically within broader defense programs where high levels of reliability and quality are essential pre-requisites for
securing and maintaining these agreements with their customers. Typically, we prototype products for these customers and after going
through various acceptance tests, including first article inspection approvals, we are given the production contracts. Many of these
production contracts have a repeat orders profile which typically follows the life cycle of the defense program that is using the production
part.
These
arrangements often give us long term preferred/sole supplier status for the parts we supply, technology refresh and obsolescence management
business opportunities with these customers and we generally use these long-standing relationships to win more contracts with these customers.
This
business relies on increasing the number of new programs it attracts annually.
In
addition, we are increasingly combining our engineering capabilities with our product offerings. This enables us to offer systems which
are complete with installation and support to maximize the utilization of our collective expertise to advance our real time volumetric
sonar technology.
Coda
Octopus Martech Limited (“Martech”)
Martech
operates in the specialized niche of bespoke design and manufacturing services mainly to the United Kingdom defense and subsea industries.
Its services are provided on a custom sub-contract basis where high quality and high integrity devices are required in small quantities.
The
Company enjoys pre-approvals to allow it to be short-listed for certain types of government contracts. Much of the more significant business
secured by Martech is through the formal government or government contractor tendering process.
Coda
Octopus Colmek, Inc. (“Colmek”)
Colmek
are suppliers of embedded solutions and sub-assemblies which they design and manufacture and sell into mission critical integrated defense
systems such as the Close-In-Weapons System (CIWS). This business was established 1977 and has been supporting several significant US
defense programs for over 40 years, including Raytheon’s CIWS and Northrop Grumman’s Mine Hunting Systems Program. Colmek’s
business model entails designing sub-assembly prototypes for defense programs which typically lead to contracts for the manufacture,
repair and upgrade of these sub-assemblies. We are the sole source for the parts that we supply into these programs. This business model
ensures recurring and long tail revenues since we continue to supply parts, typically for the life of the program, which can span decades.
In
order to diversify its business opportunity, in June 2014 Colmek completed the acquisition of the Thermite® which is a
rugged visual mission computer line and the Sentiris® AV1 XMC video card for $1,100,000 in cash. Colmek also acquired
hardware, Thermite inventory and other intellectual property rights (such as software code and trademarks pertaining to these products).
Thermite® was acquired with the goal of updating the technology and expanding the market for this rugged mission computer.
Thermite® Rugged Visual Computers
● Lightweight, power efficient and conduction-cooled;
● Three models optimized for man-wearable, vehicle, and airborne platforms; and
We
consider Thermite® to be an important part of our growth strategy. We have now designed and developed our next generation
of the Thermite® Octal.
Within
the Diver Augmented Vision Display (DAVD), Colmek supplies the “Diver Processing Pack” which is worn on the diver, and this
is a variant of Thermite®.
Other
products offered by Colmek include subsea telemetry and data acquisition systems, rugged workstations, analog-to-digital converters and
rugged LCD displays.
Competition
In
our Products Segment, we are exposed to the following competitive challenges:
Data
Acquisition Products (GEO Products)
The
industry for data acquisition and processing systems for sidescan and sub-bottom profiler data is fragmented with several companies occupying
niche areas, and we face competition from different companies with respect to our different products.
In
the field of geophysical products, Triton Imaging Inc., a US-based company, now part of the ECA Group (Toulon, France), Chesapeake, a
US-based company, and Oceanic Imaging Consultants, Hawaii, USA, dominate the market with an estimated 25% each of world sales, while
we believe that we control approximately 5% of world-wide sales.
GNSS
Aided Inertial Positioning and Attitude Measurement Systems (“Motion Products”)
In
the field of GNSS-aided inertial positioning and attitude sensing equipment, where our product addresses a small segment of the overall
market, we believe that we have four principal competitors: Teledyne Marine (part of US based Teledyne Technologies Inc.) which is focused
on the mid-performance segments with an estimated 25% of the market; iXblue, a French company which covers all segments, with an estimated
20% of the market; Kongsberg Seatex AS, a Norwegian company (part of Kongsberg Gruppen) which has products across all segments, with
an estimated 15% of the market; and Applanix, a Canadian company (part of Trimble) which has one major product focused on the high end
of the market, with an estimated 20% of the market. We believe that our market share in this market segment of motion sensing equipment
is about 5%. This market is fiercely competitive and with the advancement of technology coupled with the development of autonomous land
and marine platforms there are additional vendors in the market such as SBG Systems S.A.S (a French based manufacturer of motion sensors).
We sell our MOTION range as part of our equipment suite to complement our 3D sonar range as well as supplying it individually. The development
and introduction of our F280 Series® of GNSS Aided Inertial Positioning and Attitude Measurement System®
constitutes our new generation of Motion Products and gives us the opportunity to increase our market share.
Real
Time 3D/4D/5D and 6D Volumetric Sonar
In
the field of Real Time 3D/4D/5D imaging, we are unaware of other companies offering a similar product. In this context it is important
to understand some of the capabilities we bring to this field include:
- Acoustic Projector/Transmitter design, manufacturing, and testing
- Acoustic Receiver Array design, manufacturing, and testing
- Acoustic encapsulation and sensitivity measurement
- Acoustic Projector/Transmitter beam pattern and sensitivity measurement
- Pressure housing Design and Manufacture (sonar systems)
- 3D/5D/6D Real-Time digital beamforming (on-device)
- 1D and 2D Digital Beamforming
- Broadband Beamforming
- Signal Processing
- Active High Frequency Sonar Systems