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, 2023
☐
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
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive offers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
● State issuer’s revenues for its most recent fiscal year: $19,352,088
TABLE
OF CONTENTS
PART I
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 16
ITEM 1B. UNRESOLVED STAFF COMMENTS 16
ITEM 1C. CYBERSECURITY 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 34
ITEM 9A CONTROLS AND PROCEDURES 34
ITEM 9B OTHER INFORMATION 34
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. 34
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 35
ITEM 11. EXECUTIVE COMPENSATION 41
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 44
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 45
SIGNATURES 46
FORWARD-LOOKING
STATEMENTS
This
annual report on Form 10-K (this “Annual Report”) contains forward-looking statements, which are subject to the safe
harbor provisions created by the Private Securities Litigation Reform Act of 1995. 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 or variations of such words are intended
to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this Annual
Report. The identification of certain statements as “forward-looking” is not intended to mean that other statements not
specifically identified are not forward-looking. All statements other than statements about historical facts are statements that
could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product
development, customer demand, market share, growth rate, competitiveness, gross margins, levels of research, development and other
related costs, expenditures, tax expenses, cash flows, our management’s plans and objectives for our current and future
operations, the levels of customer spending or research and development activities, and related events, general economic conditions,
and the sufficiency of financial resources to support future operations and capital expenditures.
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
Corporate Information
Our principal executive offices are located at 3300 S. Hiawassee Rd, Orlando, FL 32835. Our
telephone number is +1 (407) 735-2406. We maintain a corporate website at www.codaoctopusgroup.com. (the Company’s website).
The reference to the Company’s website address does not constitute incorporation by reference in this Form 10-K of the information
contained on the Company’s website.
Overview
Coda
Octopus Group, Inc. (“Coda” “the Company” or “we”), through its wholly owned subsidiaries, operates
two distinct businesses:
An
overview organization chart showing the subsidiaries within each operating segment is set out in this Item 1 (Business) of
the Form 10-K.
Throughout
this Form10-K we use certain terminologies in the context of our Echoscope® underwater imaging technology such as 2D, 3D, 4D, 5D
and 6D which have particular meaning. In this Form 10-K the meanings of these terminologies are set out below.
X This is range in front of the sonar computed from time
Z This is depth of the point in space relative to the sonar
Our
Marine Technology Business is a technology solution provider to the subsea and underwater market. It owns key proprietary technology
comprising its real time volumetric imaging sonar technology (Echoscope® technology) and diving technology (“DAVD” or Diver
Augmented Vision Display), both of which are applicable to the underwater defense and commercial markets. All innovations, design,
development and manufacturing of our technology and solutions are performed within the Company with the exception of sub-component
assemblies. We endeavor to actively protect our innovations by seeking patent protection. This is a part of our strategy to maintain our
competitive lead in the areas in which we specialize.
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 renewables, and offshore oil and gas, complex underwater mapping,
salvage operations, dredging, bridge inspection, navigation of underwater hazard, port and harbor security, mining, fisheries,
commercial and defense diving, marine sciences sectors and more broadly applications for real time 3D monitoring, inspection and
visualization underwater. Uniquely, the Echoscope® technology is a single sensor for multiple underwater applications (which
sets it apart from competing technologies). Our diving technology marketed under the name “CodaOctopus® DAVD” addresses the global defense and commercial diving markets. It has the potential to radically
change how diving operations are performed globally because it delivers real time information simultaneously to the divers
underwater and their surface-based dive supervisors. It also allows diving operations to be performed in zero visibility water
conditions which is a safety challenge for many diving operations. DAVD’s concept of using a pair of glasses inside the face mask, helmet or
other diving suits is protected by patent. The Company has an exclusive license to exploit this utility patent.
The
Marine Technology Business operates thorough our wholly owned subsidiaries Coda Octopus Products, Inc (Orlando), Coda Octopus
Products Ltd (UK), Coda Octopus Products A/S (Denmark and branch office Coda Octopus Products A/S in The Netherlands), and Coda
Octopus Products (India) Private Limited (India).
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. The Services Segment established its business in 1977 and has been supporting a number
of significant defense programs of record 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 prototypes contracts typically lead to contracts for the manufacture, repair and upgrade of these
sub-assemblies for the life of the program. We enjoy sole source status 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 these parts, typically for the life of the
program, which can span decades. Coda Octopus Colmek, Inc. and Coda Octopus Martech Ltd, qualify as small businesses. This opens
opportunities under state requirements to collaborate with Prime Defense Contractors on these programs. A significant part of the
revenues generated by the Marine Engineering Business is highly concentrated and are usually derived from a small number of
prime defense contractors such as Raytheon or Northrop. In any one financial year, between 20% to 30% of our consolidated revenues
may be derived from these customers either alone or collectively.
The Services Segment operates through our wholly
owned subsidiaries, Coda Octopus Colmek, Inc (“Colmek”) which we acquired by the Company in 2007, based in Salt Lake
City, Utah, and Coda Octopus Martech Limited (“Martech”) which was acquired by the Company in 2006, based in Portland,
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 responding to invitations to tender for new projects with broader
scope. We believe the Services Business is important to our overall growth strategy as it brings significant engineering depth for
the development of the technology solutions offered by the Marine Technology Business. This also ensures tighter control over our
intellectual property rights, which are important for our market position.
Key
Pillars for our Growth Plans
Our
Echoscope® and DAVD technologies are our most promising products and solutions for the Company’s near-term growth.
We
believe that our real time 3D/4D/5D/6D imaging sonars are the only acoustic imaging sonars which are capable of providing real time
3D/4D/5D/6D imaging of moving objects in zero visibility water conditions and also providing users with the capability to make real
time 3D physical measurements of objects underwater. Competing acoustic imaging sonars such as the multibeam sonars are primarily
seabed mapping tools which are not designed to perform complex seabed mapping or imaging of moving objects in 3D underwater. The
Echoscope® technology therefore is a key sensor for underwater inspection and monitoring in real time 3D. We also
believe that our new generation of Echoscope PIPE® is the only sonar that can generate multiple real time 3D/4D/5D/6D
acoustic images using different acoustic parameters in real time such as field of view, pulse length, filters, beam density and
various beamforming modes. This has the potential to reduce the number of underwater sensors that are required on a project at any one time.
In
our industry we are widely considered the leading solution providers for underwater real time 3D visualization.
We
also believe that the DAVD tethered 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 poor analog voice command missions from the topside using a disparate suite of systems for video data,
communications, and positioning. Furthermore, by combining the DAVD with our real time 3D sonars it allows diving to be performed in
difficult water conditions (turbidity or zero visibility issues) and thus addresses the common problem of underwater operations
having to be aborted due to visibility issues.
The
DAVD tethered version is now in early-stage adoption by different teams within the US Navy, such as the underwater construction and salvage
teams and has been moved from the customer’s R&D phase to their operational phase. This means that the DAVD tethered
version is now a standard item available for purchase and for which budget lines are established within the various user commands within
the Navy. To support the continued transfer of the DAVD system to field operations, we are involved in training the users.
In
the Current FY we continued our global marketing campaigns for the adoption of the DAVD tethered system outside of the US Navy. We
believe we have made significant progress with these campaigns. For example, we completed successful field trials of the DAVD and
our Echoscope® with a major European Offshore Service Provider, who is a part of the “Big Four” Dredging companies
(these four account for approximately 80% of the global dredging capacity).
The
major European Offshore Provider conclusion from their final trial assessment report provided to the Company is that:
“The
advantage of the DAVD alone (compass, depth, taking snapshots and presenting graphical information for diver and supervisor) or combined
with a 3D live sonar video stream is clear and increases safety and efficiency. The 3D sonar fits well within our scope of work and our
survey division is aware of this. We think that the combination of DAVD and 3D sonar has potential within our organization....”.
We
also completed successful trials with the Spanish Navy and a number of Japanese Offshore Service Providers.
We
believe there is momentum around the DAVD solution, and we continue to work with our customer base on adoption plans, including
models for adoption. Adoption is a process because it requires customers intending to take on the DAVD technology, to change their
current method and workflow. These and other considerations will impact the pace at which the transition to the DAVD technology
occurs.
The DAVD untethered prototype variant
(“DUS)” was delivered to our Navy customer for evaluation during fiscal 2023. In the third quarter we received joint
funding of $750,000 for the delivery of 8 DUS evaluation systems and further customization work for their application and workflow.
We have delivered the 8 systems which will facilitate early customer trials. The total funding for this scope is expected to be
$2m. This is the first time we have had firm commitment concerning an adoption path by a foreign NATO country. We believe the DUS
variant represents the biggest market opportunity for the DAVD technology in the USA addressing the defense, law-enforcement, and
first-responders market.
The
concept of utilizing a pair of transparent glasses in the Head Up Display (HUD) underwater for this purpose, is protected by patent.
All component parts of the DAVD system are proprietary to the Company and include software (4G USE® DAVD Edition), Diver
Processing Pack – telemetry system (DPP), topside Supervisor Console Controller and real time 3D Sonar. The Company benefits from
the exclusive license from the U.S. Department of the Navy at Naval Surface Warfare Center Panama City Division to utilize the utility
patent covering the concept of using the pair of transparent glasses as a data hub underwater. The DAVD tethered variant is an “Approved
Navy Use” item. The untethered variant is currently going through validation process.
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 corporation, which became a wholly owned subsidiary of the
Company, and which subsequently changed its name to Coda Octopus R&D AS. 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
our visualization software (Underwater Survey Explorer) 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 (Martech
is UK focused and Colmek 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. These activities were interrupted by the Coronavirus Pandemic in 2020 and since then has been slow to regain momentum.
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.
In
November 2021 Coda Octopus Products Limited established a subsidiary Coda Octopus Products (India) Private Limited intended to gain access
to this market and to recruit critical resources for software development.
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, The Netherlands, 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
Geophysical Hardware and Software
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 and has been for many years the workhorse for processing data for Oil & Gas companies.
The Geophysical range of products marketed under the
brands DA4G and GeoSurvey® 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 and consists of a range of hardware and software
products for acquisition and post-processing of sidescan sonar and sub-bottom profiler data, which includes analog and digital interfaces
compatible with all geophysical survey systems.
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 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).
2.
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) that provide measurement data on the position and attitude of a vessel (heading, pitch, roll and yaw of the
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 on the market for over 15 years and due to
the 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®.
We
have now completed the ground up development of our new generation of Motion Products F280 Series® for accurate
position, heading, pitch, roll and yaw at sea. The new F280 Series® is based on more advanced technology and is more
accurate than our previous generation of F180® products. The new technology is much more scalable towards future
development of new product variants. The F280 Series® is highly complementary to our real time
Echoscope® sonar series and they are packaged together to provide a more comprehensive solution. The F280® can
be sold with or without our Echoscope®.
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 5D and 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, complex underwater mapping and real time 3D navigation in zero
visibility conditions. Uniquely also, using a single sensor (our Echoscope PIPE®) range we can provide different outputs to the various
parts of the survey team, thus reducing the number of different sensors required on these underwater projects and thus the costs associated with these underwater operations.
About
the Company’s 5D and 6D Sonars Innovations
5D
and 6D imaging sonars are new to the subsea market and constitute an innovation by the Company. We have several patent applications
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. 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 our antecedent sonars. 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 per beam (Full Time Series data). 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. Our 5D capability is protected by recently granted patents.
6D
Sonars (Echoscope PIPE®)
The
Company’s 6D Sonars process and utilize much more of the data acquired by the sonar. 6D Sonars generate multiple real time 3D
Full Time Series Images. In the previous generation of sonar, we could image and display one 3D Image in real time. Our PIPE
technology generates multiple 3D images simultaneously in real time using different sonar/acoustic parameters (such as different
beamforming methods, frequency, range, field of view, pulse length and other acoustic filters or shading). This allows for different
data sets to be provided to different parts of the survey team in real time (thus consolidating the sensors and the associated costs
and effectiveness of the solution). We are not aware of any sonars that 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 thus providing significantly more benefits to our customers.
Echoscope®
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.
A
summary of some of the differences between our standard Echoscope® sonar series and our newly launched Echoscope PIPE® series
of sonars are set out below:
Description Echoscope4G® Echoscope PIPE® Sonars
Real Time Capability Yes, 4D Images Yes, 4D, 5D and 6D
Adaptive Frequency Band Capability No Yes
Ping Rate Up to 20Hz Up to 40Hz
Full Time Series Raw Data Capture No Capability Capture of Raw Data Capture
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, that is to generate a 3D image underwater of moving
objects. The competing 3D technology, the multibeam, which is the current standard bearer for imaging sonars in the market is for mapping
of the seabed. The Echoscope® technology can also map the seabed (and is superior to the multibeam for complex mapping
and inspection of complex underwater structures) but can also image in real time 3D moving objects underwater. The Echoscope®
is therefore the primary tool of choice for inspecting and monitoring in real time 3D all types of underwater operations and is
the only choice in poor visibility conditions. In addition, the Echoscope® in many instances enables the user to monitor
underwater operations from a surface vessel replacing the 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 since it removed several barriers to market adoption. Since its introduction we have seen an 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 underwater
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 our 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, thus opening potentially new market opportunities for the Company’s technology. For example, we are now
able to integrate on the Videoray Defender which is the US Navy selected platform for small manned portable vehicles. Our antecedent
sonars due to their form factors would not be able to operate on this class of vehicles. The 4G sonar series development is therefore this is a very significant
milestone in the Company’s progress and opens the potential to grow its market share of imaging sonars.
The
4G sonar series developments were largely form factor driven as opposed to being based on performance and capability advancements. In
the fiscal years 2019 and 2020 we continued to build on our initial 4G innovations with a renewed focus on performance and capability
advancements, particularly on the beamforming and the data processing capability of our sonar series. In the antecedent generation of
our sonars, due to limitations in processing technology there were restrictions on how much of the captured Echoscope®
sonar data could be processed by us. Our previous generations of sonar 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 which cover “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. 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 from the defense
space.
The
release of the Echoscope PIPE® hardware is a further significant milestone for the Company. We are now focused on delivering
additional competitive value to our imaging sonar 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 poor 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 costs. The subsea market is experiencing high structural and technological 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 and we continue to see significant interest in the Defense/Naval market for our Echoscope PIPE® technology.
Echoscope®
Software
The
Echoscope® technology works in conjunction with our internally developed software (USE, Construction Monitoring System (CMS), 4G
US® and 4G USE® DAVD Edition). The software is a critical component of the capabilities and features
of our sonar series.
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. It also allows us to be responsive to our customers’ requirements for
new features and capabilities around our solutions.
We
have now launched our fourth-generation multi-sensor software platform which is marketed under the name “4G USE®”.
We have also filed several provisional patents around our 4G USE® which 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 module is marketed under the brand 4G USE® DAVD Edition.
Diver
Augmented Vision Display (DAVD) System – Diving Technology
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) or diving suits. 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 “AGA”, OTS Guardian and the Divator and Dräger Panorama Nova Dive full-face masks. However, the DAVD HUD
technology is not limited to these products and/or applications.
Problem
In Context
The
concept of using a pair of transparent glasses in the HUD to render real time information for underwater applications is protected by
patent and Coda Octopus has an exclusive license from United States Department of the Navy at NSWC PCD to exploit this patent for all
underwater diving activities.
The
US Government as represented by Secretary of the Navy (Arlington, VA), describes the challenge for divers in their patent application
as follows:
“By
their very nature, underwater dive missions are difficult and inherently dangerous. Furthermore, the complexity of underwater missions
can make it difficult or impossible for a diver to retain all pre-mission briefing information. For these reasons, it is critical for
underwater divers to have access to environmental data and mission data while in the water. However, in low visibility water environments,
divers can rarely see handheld displays or gauges. Accordingly, divers are generally supplied with audio-communicated information from
a topside location. The topside-supplied information can include descriptions of sonar images, blueprints, maps, pictures, etc. Unfortunately,
it can be very difficult and confusing for a diver to interpret a topside personnel’s audio description of the topside personnel’s
visual interpretation. Combining this with unreliable audio communication can lead to mission failures or disasters.”
It
further describes the objective of the Invention as:
“Accordingly,
it is an object of the present invention to provide an underwater diver with real-time visual information available to topside personnel.
Another
object of the present invention is to provide real-time visual information to an underwater diver for viewing in water environments irrespective
of water visibility levels.
Other
objects and advantages of the present invention will become more obvious hereinafter in the specification and drawings.”
How
does DAVD Change this?
The
DAVD system addresses all the challenges described above including removing the interpretation of the underwater scene to the topside by providing the diver with real time
data and first-person interpretation. The DAVD technology benefits not only the diver and direct supervisor on
the surface, but also engineers, end-clients, rescue workers and support personnel who 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 significantly enhanced with both real-time camera and 3D sonar data (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.
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), Cables and Topside Control Unit along with 4G USE® DAVD Edition real time visualization software. All
these developments and products have been performed 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. DAVD also
is certified for CE markings for compliance with the European Union and the United Kingdom health and environmental
requirements.
We
are marketing the DAVD (through live demonstrations) to 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).
Sales
and Marketing
We
market our products primarily through our internal sales team, website, industry events such as trade shows, webinars, industry relationships
and agents in foreign countries such as Japan, China and Korea. In addition, we have a network of non-exclusive independent global sales
agents.
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.
They
supply engineered sub-assembly solutions which typically form part of broader mission critical integrated defense systems, test
equipment, instrumentation, and the like. They largely operate as sub-contractors to prime defense contractors, and their
engineering solutions are typically designed for integration into broader defense programs of record where high levels of
reliability and quality are essential pre-requisites for securing and maintaining these agreements with their customers. Typically,
they prototype subassemblies for their customers and after going through various acceptance tests, including first article
inspection approvals, they are then awarded the manufacturing contracts. Many of these manufacturing contracts have a repeat orders
profile which typically follows the life cycle of the defense program that is using the subassembly.
These
arrangements often give the Marine Engineering Business long term preferred/sole supplier status for the parts they supply into these programs,
technology refresh and obsolescence management opportunities with these customers and they generally use these long-standing
relationships to win more contracts with these customers.
In
order to grow, the Marine Engineering 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 technologies.
Coda
Octopus Martech Limited (“Martech”)
Martech
which is UK-based, operates in the specialized niche of bespoke design and manufacturing services mainly to the United Kingdom