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What changed in Coda Octopus Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Coda Octopus Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+349 added−296 removedSource: 10-K (2024-01-29) vs 10-K (2023-01-30)

Top changes in Coda Octopus Group, Inc.'s 2023 10-K

349 paragraphs added · 296 removed · 174 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

98 edited+61 added−33 removed37 unchanged
Biggest changeA 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 Current Echoscope ® PIPE ® Sonars Real Time Capability Yes, 4D Images Yes, 4D, 5D and 6D Angular Cover Dual Frequency 50 o x50 o and 24 o x24 o 54 o x54 o - 47 o x47 o and 32 o x32 o - 28 o x28 o Adaptive Frequency Capability No Yes Ping Rate Up to 20Hz Up to 40Hz Multiple Real Time 4D Images No, one single Real Time Image Capable of Multiple Real Time Images Number of Data Points per Single Ping Up to 16,386 Up to 40 million Number of Beams and Values per Beam 128x128x1 Value Up to 180 x 180 with up to 2,500 values (depending on viewing range) Multiple Sequential Configuration Files to capture data using different parameters No Capability Up to 10 Configuration sets for real time capture and display Full Time Series Raw Data Capture No Capability Capture of Raw Data Full Time Series Raw Data Offline Processing No Capability Capable of Raw Data Offline Processing Multiple Parallel Beamformed Data Output No Capability Capable of Multiple Parallel Beamformed Data Outputs Smart Ping Manager using Frequency, Field of View, Filtering in Real-Time No Capability Capable Adaptative Real Time Beamforming No Capability Offers various methods of Beamforming the sonar data 8 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.
Biggest changeA 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 Echoscope 4G® Echoscope PIPE ® Sonars Real Time Capability Yes, 4D Images Yes, 4D, 5D and 6D Angular Cover Dual Frequency 90°x44° (triple frequency only), 50ox50o 24ox24o 100°x44° - 76°x33° (triple frequency only) 54ox54o - 46ox46o 33ox33o - 25ox25o Adaptive Frequency Band Capability No Yes Ping Rate Up to 20Hz Up to 40Hz Multiple Real Time 4D Images No, one single Real Time Image Capable of Multiple Real Time Images Number of Beams and Values per Beam 128x128x1 Value 180x180x up to 2,500 Values (depending on viewing range) Multiple Sequential Configuration Files to capture and display data using different parameters No Capability Up to 10 Configuration sets for real time capture and display Full Time Series Raw Data Capture No Capability Capture of Raw Data Capture Full Time Series Raw Data Offline Processing No Capability Capable of Raw Data Offline Processing Multiple Parallel Beamformed Data Output No Capability Capable of Multiple Parallel Beamformed Data Outputs Smart Ping Manager using Frequency, Field of View, Filtering in Real-Time No Capability Capable Advanced Beamforming Mode No Capability Capable (allowing dynamic change of FoV and number of beams on target (Beam Density), in- creasing resolution and definition of underwater target.
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).
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).
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, thus opening potentially new market opportunities for the Company’s technology.
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.
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).
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.
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.
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.
New Generation of Motion Products 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 F180 ® 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.
Companies such as Kongsberg Gruppen, R2Sonic, LLC, Tritech International Ltd., United Kingdom, BlueView Technologies Inc., USA (now a part of Teledyne Technologies Incorporated), and Norbit Group AS Norway are examples, but none of these sonar offerings are directly comparable or competitors to our real time volumetric 3D/4D/5D and 6D sonar solutions as their scanning sonar, single beam or multibeam sonars are not real time 3D imaging sonars and therefore cannot image moving targets underwater.
Companies such as Kongsberg Gruppen, R2Sonic, LLC, Tritech International Ltd., United Kingdom, BlueView Technologies Inc., USA (now a part of Teledyne Technologies Incorporated), and Norbit Group AS Norway are examples of companies offering imaging sonar solutions (such as multibeam sonars and/or 2D scanning sonars), but none of these sonar offerings are directly comparable or competitors to our real time volumetric 3D/4D/5D and 6D sonar solutions as their scanning sonar, single beam or multibeam sonars are not real time 3D imaging sonars and therefore cannot image moving targets underwater.
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). 5 In June 2002, we acquired Octopus Marine Systems Ltd, a UK corporation, and changed our name to Coda Octopus Limited.
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). 6 In June 2002, we acquired Octopus Marine Systems Ltd, a UK corporation, and changed our name to Coda Octopus Limited.
The learning curve, which has resulted in the advancement of our real time 3D sonar device, is the culmination of two decades of research and development into this field.
The learning curve, which has resulted in the advancement of our real time 3D sonar device, is the culmination of two decades of research and development in this field.
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.
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.
Furthermore, even following launch of any product we may not succeed. Moreover, we may incur significant research and development expenditures without realizing viable products. 16 Government Regulation Because of the nature of some of our products, they may be subject to export control regimes including in the United States, United Kingdom, Denmark and Australia where we conduct business operations.
Furthermore, even following the launch of any product we may not succeed. Moreover, we may incur significant research and development expenditures without realizing viable products. 15 Government Regulation Because of the nature of some of our products, they may be subject to export control regimes including in the United States, United Kingdom, Denmark, and Australia where we conduct business operations.
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).
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).
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 a number of barriers to market adoption. Since its introduction we have seen increased number of units being sold or rented.
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.
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).
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).
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 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).
Coda Octopus Products Limited has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials certification. 12 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.
Coda Octopus Products Limited has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials certification. 11 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 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. 6 Marine Technology Business (“Products Segment”) Our Marine Technology Business develops proprietary solutions for both the commercial and defense subsea market.
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. 7 Marine Technology Business (“Products Segment”) Our Marine Technology Business develops proprietary solutions for both the commercial and defense subsea market.
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 data (providing underwater night-vision) and also high-resolution maps and models of the entire work site and surroundings.
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.
They operate as sub-contractors to prime defense contractors, and their engineering solutions are typically designed for integration into broader defense programs where high levels of reliability and quality are essential pre-requisites for securing and maintaining these agreements with their customers.
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.
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 ® .
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 ® .
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.
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 the previous 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.
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.
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 for our Company.
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.
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.
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 therefore can give no assurance that companies such as these will not enter this market. Furthermore, companies such as Kongsberg Gruppen and Teledyne can expend significantly more in any one fiscal year on R&D and Business Development, key pillars for increasing market share of underwater imaging sonars, than Coda Octopus.
We therefore can give no assurance that companies such as these will not enter this market. Furthermore, companies such as Kongsberg Gruppen and Teledyne can expend significantly more in any one fiscal year on R&D and Business Development, key pillars for increasing market share of underwater imaging sonars, than the Company.
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.
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. Colmek are the sole source for the parts that they supply into these programs.
In addition, the costs of complying with some of the regulations including DFARS may be prohibitive. Employees As of the date hereof, we employ approximately 83 employees worldwide, of which 12 hold management positions. A large majority of our employees have a background in science, technology and engineering, with a substantial part being educated to degree and PhD level.
In addition, the costs of complying with some of the regulations including DFARS may be prohibitive. Employees As of the date hereof, we employ approximately 83 employees worldwide, of which 10 hold management positions. A large majority of our employees have a background in science, technology, software and hardware engineering, with a substantial part being educated to a degree level.
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 - Passive Mid Frequency Sonar Systems - Data acquisition and recording hardware and software - Real-time 2D and 3D sonar visualization rendering and processing software The entry into this market is dependent upon specialized marine electronics, acoustic and software development skills.
In this context it is important to understand some of the intellectual property including know how and 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 - Passive Mid Frequency Sonar Systems - Data acquisition and recording hardware and software - Real-time 2D and 3D sonar visualization rendering and processing software Any entry into this market depends upon specialized marine electronics, acoustic and software development skills.
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.
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.
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.
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”.
Notwithstanding, we believe that our recent development and introduction of 5D/6D - Echoscope PIPE ® ) sonar capability in conjunction with our software (4G USE ® a multi-sensor platform) further distinguishes our volumetric sonars and significantly extends our lead over competitors in the subsea imaging market.
Notwithstanding, we believe that our recent development and introduction of 5D/6D - Echoscope PIPE ® ) sonar capability in conjunction with our software (4G USE ® a multi-sensor platform) further distinguishes our volumetric sonars and significantly extends our lead in real time 3D/4D/5D and 6D Imaging of moving objects underwater over competitors in the subsea imaging market.
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 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.
With the crystallization of several significant hardware development projects by the Company, research and development has fallen. Our products are complex and therefore we can give no assurance that even with spending a significant part of our resources on R&D, we will be successful in our development goals or realized significant monetization of these developments.
The recent crystallization of several significant hardware development projects by the Company, has seen R&D expenditures decreasing. Our products are complex and therefore we can give no assurance that even with spending a significant part of our resources on R&D, we will be successful in our development goals or realize significant monetization of these developments.
The new technology is much more scalable towards future development of new product variants. The F280 Series ® 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.
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.
Increasingly, opportunities which we identify are for combined use. 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.
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.
Typically, we prototype subassemblies for these customers and after going through various acceptance tests, including first article inspection approvals, we are given 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 production part.
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.
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 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.
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 defense and subsea industries. Its services are provided on a custom subcontract basis where high quality and high integrity devices are required in small quantities. Their skills set includes both hardware and software design.
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 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.
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.
However, the DAVD HUD technology is not limited to these products and/or applications. 10 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.
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).
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).
In our Services Segment, we are exposed to the following competitive challenges: Marine Engineering Businesses Through our marine engineering operations, Coda Octopus Colmek, Inc. and Coda Octopus Martech Limited, we are involved in custom engineering for the defense industry in the United States and in the United Kingdom. Martech and Colmek compete with larger contractors in the defense industry.
In our Services Segment, we are exposed to the following competitive challenges: Marine Engineering Businesses Through our marine engineering operations, Coda Octopus Colmek, Inc. and Coda Octopus Martech Limited, we are involved in custom engineering for the defense industry in the United States and in the United Kingdom and are dependent on subcontract from the major prime contractors.
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, navigation of underwater hazard, port security, mining, fisheries, commercial and defense diving, and marine sciences sectors.
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.
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 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.
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 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.
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…”).
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.
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 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.
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 supply engineered sub-assembly solutions which typically form part of broader mission critical integrated defense systems, test equipment, instrumentation, and the like.
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.
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.
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.
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.
In the previous generation of sonars, 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 frequency, range, field of view, pulse length and other acoustic filters or shading).
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).
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).
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.
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”).
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”).
None of our employees are employed under a collective agreement and we have not experienced any organized labor difficulties in the past. ITEM 1A. RISK FACTORS Not required for smaller reporting companies.
None of our employees are employed under a collective agreement and we have not experienced any organized labor difficulties in the past.
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 to build on our 4G innovations with a focus on performance and capability advancements, particularly on the beamforming and the data processing capability of our sonar series.
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.
The subsea market is experiencing high 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.
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.
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 and real time 3D navigation in zero visibility conditions. 7 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 Company.
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.
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. In order to grow, the Marine Engineering Business relies on increasing the number of new programs it attracts annually.
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.
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.
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.
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. 13 Coda Octopus Colmek, Inc.
Martech 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. Martech has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials certification. Coda Octopus Colmek, Inc.
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.
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.
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 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.
A significant part of the revenues generated by the Marine Engineering Business is usually highly concentrated and are 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 either alone or collectively.
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.
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.
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.
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.
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 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.
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.
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.
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.
We are also seeing good results from SEADP and some good quality early adopters of this new technology in the market. 11 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.
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).
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 3D all types of underwater operations and is the only choice in poor visibility conditions.
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.
Moreover, these regulations may change from time to time in these jurisdictions, including the United States, depending on the existing relationship with the country to which the goods are exported. See Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operation) for further discussion on this topic.
Moreover, these regulations may change from time to time in these jurisdictions, including the United States, depending on the existing relationship with the country to which the goods are exported.
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.
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.
We seek to compete on the basis of producing high quality products employing cutting edge technology that is easy to use by operators without specialized skills in sonar technology.
We have been awarded US 10,718,865 and US 10,816,652 which concerns a method of compressing beamformed data and method of compressing sonar data, respectively. 13 We seek to compete on the basis of producing high quality products employing cutting edge technology that is easy to use by the operators without specialized skills in sonar technology.
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. 14 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.
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. 12 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 several principal competitors: Teledyne Technologies Inc.; Kongsberg Gruppen, iXblue, Applanix and SBG Systems.
These prototypes 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 these parts, typically for the life of the program, which can span decades.
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.
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.
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.
Our 5D capability is protected by a recently granted patent (US 10,718,865 – which concerns a method of compressing beamforming sonar data and US 10,816,652 which concerns a method of compressing sonar data) and 10,718,865 which concerns a method of compressing beamformed sonar data. 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.
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.
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/6D acoustic images using different acoustic parameters such as frequency, field of view, pulse length, and filters.
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.
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 innovation, design, development and manufacturing of our technology and solutions are performed within the Company.
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.
It also allows diving operations to be performed in zero visibility water conditions which is a safety challenge for diving operations. The Marine Technology Business operates thorough our wholly owned subsidiaries Coda Octopus Products Ltd (UK), Coda Octopus Products A/S (Denmark, Coda Octopus Products, Inc (Orlando) and Coda Octopus Products (India) Private Limited (India).
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).
It is also the platform for our DAVD software, and this is marketed under the brand 4G USE ® DAVD Edition. 10 Geophysical Products and Solutions The Geophysical range of products are important for both Offshore Renewables and O&G.
It is also the platform for our DAVD software, and this module is marketed under the brand 4G USE ® DAVD Edition.
We also incentivize our staff by having in place a Patent Reward Scheme. 15 Our patent portfolio consists of the following: Patent No.
We expend a material part of our cash resources in building our Patent Portfolio. We also incentivize our staff to contribute to our Patent Portfolio by having in place a competitive Patent Reward Scheme. In the 2023 FY we added four new patents to our portfolio. 14 Our patent portfolio consists of the following: Patent No.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePortland, Dorset, UK Martech uses premises owned by Coda Octopus Products Limited. These premises are located in the Marine Center in Portland, Dorset, United Kingdom, and comprise 9,890 square feet. The building comprises both office space and manufacturing and testing facilities. Martech is paying Coda Octopus Products Limited rent amounting to the equivalent of $53,803 per annum.
Biggest changeAnnual rent is DKK 142,893 plus Value Added Tax (being an equivalent of $20,472) per annum) with an annual increase of 3%. Portland, Dorset, UK Martech uses premises owned by Coda Octopus Products Limited. These premises are located in the Marine Center in Portland, Dorset, United Kingdom, and comprise 9,890 square feet.
These premises are owned by Coda Octopus Colmek. Edinburgh, Scotland, UK Coda Octopus Products Limited (Edinburgh based) operates from its premises comprising 12,070 square feet of internal space and includes manufacturing, R&D Facilities and office space. These premises are owned by Coda Octopus Products Limited.
Edinburgh, Scotland, UK Coda Octopus Products Limited (Edinburgh based) operates from its premises comprising 21,313 square feet of internal space and includes office space, R&D Facilities, and manufacturing. These premises are owned by Coda Octopus Products Limited.
ITEM 2. PROPERTIES Orlando, Florida Our corporate offices are co-located with our subsidiary Coda Octopus Products, Inc. in Orlando. We own these business premises comprising 3,000 square feet that includes office space and R&D facilities. Salt Lake City, Utah, USA Coda Octopus Colmek operates from its premises which comprises 16,000 square feet and includes manufacturing, R&D Facilities and office space.
ITEM 2. PROPERTIES Orlando, Florida Our corporate offices are co-located with our subsidiary Coda Octopus Products, Inc. in Orlando. We own these business premises comprising 3,000 square feet, that includes office space, training center and light manufacturing facilities.
Copenhagen, Denmark As a mitigation strategy in relation to the UK leaving the European Union membership, thus limiting trade relations with EU member states, we have established a Danish subsidiary, Coda Octopus Products A/S and leased business premises in Copenhagen, Denmark.
Copenhagen, Denmark Coda Octopus Products A/S, a Danish Subsidiary was established as as a mitigation strategy in relation to the UK leaving the European Union which has limited trade relations with EU member states. These premises are used as our European Offices. The lease is subject to six (6) months’ notice to terminate.
All non-US Dollar denominated rents are stated according to prevailing exchange rates as of the date of each respective lease agreement.
The building comprises both office space and manufacturing and testing facilities. The rent paid to Coda Octopus Products Limited is $53,803 per annum. All non-US Dollar denominated rents are stated according to prevailing exchange rates as of the date of each respective lease agreement.
Removed
The lease is a fixed term lease for the period September 1, 2019 to September 1, 2023 and continues unless 6 months’ notice is given in advance. Annual rent is DKK 142,893 plus Value Added Tax (being an equivalent of $20,472) per annum) with an annual increase of 3%.
Added
Salt Lake City, Utah, USA Coda Octopus Colmek operates from its premises which comprises 16,000 square feet and includes manufacturing, R&D Facilities, and office space. These premises are owned by Coda Octopus Colmek.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. 18 PART II
Biggest changeWe are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. 17 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 18 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 19 ITEM 6. SELECTED FINANCIAL DATA 19 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 37
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 17 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 18 ITEM 6. SELECTED FINANCIAL DATA 18 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.
Biggest changeThe following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the Nasdaq, for the periods indicated. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.
Year Ended October 31, 2022 HIGH LOW First Quarter $ 8.95 $ 6.49 Second Quarter $ 7.37 $ 5.60 Third Quarter $ 5.75 $ 4.77 Fourth Quarter $ 6.44 $ 4.85 Year Ended October 31, 2021 HIGH LOW First Quarter $ 6.67 $ 5.21 Second Quarter $ 9.50 $ 6.95 Third Quarter $ 9.90 $ 7.70 Fourth Quarter $ 9.50 $ 8.31 We have not declared or paid any cash dividends on our common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future.
Year Ended October 31, 2023 HIGH LOW First Quarter $ 8.22 $ 5.88 Second Quarter $ 8.19 $ 6.13 Third Quarter $ 11.09 $ 7.75 Fourth Quarter $ 8.76 $ 5.70 Year Ended October 31, 2022 HIGH LOW First Quarter $ 8.95 $ 6.49 Second Quarter $ 7.37 $ 5.60 Third Quarter $ 5.75 $ 4.77 Fourth Quarter $ 6.44 $ 4.85 We have not declared or paid any cash dividends on our common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future.
The decision whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, operating results, capital requirements and other factors that the board of directors considers significant.
The decision whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, operating results, capital requirements and other factors that the board of directors considers significant. As of October 31, 2023, we had no authorized share repurchase programs.
Removed
Prior thereto, it had been quoted on the OTCQX since February 8, 2017, under the symbol COGI, and prior thereto, on the OTC Pink Sheets under the symbol CDOC. The following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the Nasdaq, for the periods indicated.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMarine Technology Business (Products) Marine Engineering Business (Services) Overhead Total Year Ended October 31, 2022 Net Revenues $ 14,724,688 $ 7,501,115 $ - $ 22,225,803 Cost of Revenues 2,941,569 4,093,546 - 7,035,115 Gross Profit 11,783,119 3,407,569 - 15,190,688 Research & Development 2,207,500 30,420 - 2,237,920 Selling, General & Administrative 2,563,554 2,654,565 2,730,585 7,948,704 Total Operating Expenses 4,771,054 2,684,985 2,730,585 10,186,624 Income (Loss) from Operations 7,012,065 722,584 (2,730,585 ) 5,004,064 Other Income (Expense) Other Income 55,715 79,204 3,056 137,975 Interest Expense (9,233 ) (71 ) (400 ) (9,704 ) Total Other Income (Expense) 46,482 79,133 2,656 128,271 Income (Loss) before Income Taxes 7,058,547 801,717 (2,727,929 ) 5,132,335 Income Tax (Expense) Benefit Current Tax (Expense) Benefit (868,162 ) 39,422 (176,400 ) (1,005,140 ) Deferred Tax Benefit (Expense) 31,907 (41,657 ) 183,776 174,026 Total Income Tax (Expense) Benefit (836,255 ) (2,235 ) 7,376 (831,114 ) Net Income (Loss) $ 6,222,292 $ 799,482 $ (2,720,553 ) $ 4,301,221 Supplemental Disclosures Total Assets $ 33,348,805 $ 12,662,109 $ 916,544 $ 46,927,458 Total Liabilities $ 2,432,750 $ 526,195 $ 585,704 $ 3,544,649 Revenues from Intercompany Sales- eliminated from sales above $ 2,406,717 $ 396,015 $ 2,720,000 $ 5,522,732 Depreciation and Amortization $ 602,583 $ 96,776 $ 39,370 $ 738,729 Purchases of Long-lived Assets $ 1,123,475 $ 36,862 $ 90,887 $ 1,251,224 32 Marine Technology Business (Products) Marine Engineering Business (Services) Overhead Total Year Ended October 31, 2021 Net Revenues $ 15,804,222 $ 5,527,305 $ - $ 21,331,527 Cost of Revenues 3,169,835 3,391,974 - 6,561,809 Gross Profit 12,634,387 2,135,331 - 14,769,718 Research & Development 2,509,107 473,569 - 2,982,676 Selling, General & Administrative 3,231,733 2,304,300 2,413,492 7,949,525 Total Operating Expenses 5,740,840 2,777,869 2,413,492 10,932,201 Income (Loss) from Operations 6,893,547 (642,538 ) (2,413,492 ) 3,837,517 Other Income (Expense) Other Income 354,373 1,079,374 1,635 1,435,382 Interest Expense (1,738 ) (365 ) (17,552 ) (19,655 ) Total Other Income (Expense) 352,635 1,079,009 (15,917 ) 1,415,727 Income (Loss) before Income Taxes 7,246,182 436,471 (2,429,409 ) 5,253,244 Income Tax (Expense) Benefit Current Tax Benefit (Expense) 35,032 (51,624 ) - (16,592 ) Deferred Tax (Expense) Benefit (418,338 ) 409,205 (279,754 ) (288,887 ) Total Income Tax (Expense) Benefit (383,306 ) 357,581 (279,754 ) (305,479 ) Net Income (Loss) $ 6,862,876 $ 794,052 $ (2,709,163 ) $ 4,947,765 Supplemental Disclosures Total Assets $ 30,631,442 $ 14,117,747 $ 716,230 $ 45,465,419 Total Liabilities $ 3,166,999 $ 849,306 $ 400,041 $ 4,416,346 Revenues from Intercompany Sales- eliminated from sales above $ 2,075,387 $ 355,608 $ 3,470,000 $ 5,900,995 Depreciation and Amortization $ 780,434 $ 114,022 $ 29,617 $ 924,073 Purchases of Long-lived Assets $ 793,995 $ 51,907 $ 118,302 $ 964,204 Coda Octopus Martech and Coda Octopus Colmek (“Services Segment” or “Marine Engineering Business”) are providing engineering services as sub-contractors mainly to prime defense contractors and Coda Octopus Products operations are comprised primarily of product sales, technology solutions sales, rental of equipment and/or software and associated services (“Products Segment” or “Marine Technology Business”).
Biggest changeMarine Technology Business (“Products”) Marine Engineering Business (“Services”) Overhead Total Year Ended October 31, 2023 Net Revenues $ 12,119,066 $ 7,233,022 $ - $ 19,352,088 Cost of Revenues 2,819,796 3,501,237 - 6,321,033 Gross Profit 9,299,270 3,731,785 - 13,031,055 Research & Development 2,043,890 52,577 - 2,096,467 Selling, General & Administrative 3,109,566 2,463,087 2,622,383 8,195,036 Total Operating Expenses 5,153,456 2,515,664 2,622,383 10,291,503 Income (Loss) from Operations 4,145,814 1,216,121 (2,622,383 ) 2,739,552 Other Income (Expense) Other Income 39,146 - 39,146 Interest Income 544,892 97,638 - 642,530 Total Other Income (Expense) 584,038 97,638 - 681,676 Income (Loss) before Income Taxes 4,729,852 1,313,759 (2,622,383 ) 3,421,228 Income Tax (Expense) Benefit Current Tax (Expense) Benefit (272,126 ) (78,876 ) 102,347 (248,655 ) Deferred Tax Benefit (Expense) (115,954 ) 54,382 13,148 (48,424 ) Total Income Tax (Expense) Benefit (388,080 ) (24,494 ) 15,494 (297,079 ) Net Income (Loss) $ 4,341,772 $ 1,289,265 $ (2,506,889 ) $ 3,124,149 Supplemental Disclosures Total Assets $ 36,969,673 $ 13,604,262 $ 1,267,581 $ 51,841,516 Total Liabilities $ 2,263,761 $ 732,582 $ 416,407 $ 3,412,750 Revenues from Intercompany Sales - eliminated from sales above $ 4,602,741 $ 584,622 $ 1,200,000 $ 6,387,363 Depreciation and Amortization $ 523,339 $ 100,689 $ 43,502 $ 667,530 Purchases of Long-lived Assets $ 1,996,544 $ 25,404 $ 108,392 $ 2,130,340 30 Marine Technology Business (“Products”) Marine Engineering Business (“Services”) Overhead Total Year Ended October 31, 2022 Net Revenues $ 14,724,688 $ 7,501,115 $ - $ 22,225,803 Cost of Revenues 2,941,569 4,093,546 - 7,035,115 Gross Profit 11,783,119 3,407,569 - 15,190,688 Research & Development 2,207,500 30,420 - 2,237,920 Selling, General & Administrative 2,563,554 2,654,565 2,730,585 7,948,704 Total Operating Expenses 4,771,054 2,684,985 2,730,585 10,186,624 Income (Loss) from Operations 7,012,065 722,584 (2,730,585 ) 5,004,064 Other Income (Expense) Other Income 55,715 79,204 3,056 137,975 Interest Expense (9,233 ) (71 ) (400 ) (9,704 ) Total Other Income (Expense) 46,482 79,133 2,656 128,271 Income (Loss) before Income Taxes 7,058,547 801,717 (2,727,929 ) 5,132,335 Income Tax (Expense) Benefit Current Tax Benefit (Expense) (868,162 ) 39,422 (176,400 ) (1,005,140 ) Deferred Tax (Expense) Benefit 31,907 (41,657 ) 183,776 174,026 Total Income Tax (Expense) Benefit (836,255 ) (2,235 ) 7,376 (831,114 ) Net Income (Loss) $ 6,222,292 $ 799,482 $ (2,720,553 ) $ 4,301,221 Supplemental Disclosures Total Assets $ 33,348,805 $ 12,662,109 $ 916,544 $ 46,927,458 Total Liabilities $ 2,432,750 $ 526,195 $ 585,704 $ 3,544,649 Revenues from Intercompany Sales - eliminated from sales above $ 2,406,717 $ 396,015 $ 2,720,000 $ 5,522,732 Depreciation and Amortization $ 602,583 $ 96,776 $ 39,370 $ 738,729 Purchases of Long-lived Assets $ 1,123,475 $ 36,862 $ 90,887 $ 1,251,224 The Company’s reportable business segments sell their goods and services in four geographic locations: ● Americas ● Europe ● Australia/Asia ● Middle East/Africa 31 Liquidity and Capital Resources As of October 31, 2023, the Company had an accumulated deficit of $11,052,487, working capital of $37,608,719 and stockholders’ equity of $48,428,766.
Regarding our Products Segment, all of our products are sold on a stand-alone basis and those market prices are evidence of the value of the products.
Regarding our Products Segment, all our products are sold on a stand-alone basis and those market prices are evidence of the value of the products.
An example of new technology entering the subsea market is LIDAR technology. However, unlike our sonar technology, LIDAR technology cannot be employed in zero visibility conditions and cannot generate a volume pulse or image moving objects required for real time inspection and monitoring underwater.
An example of new technology entering the subsea market is LIDAR technology. However, unlike our sonar technology, LIDAR technology cannot be employed in zero visibility conditions and cannot generate a volume pulse or image moving objects required for real time inspection and monitoring underwater. I.
Revenue Recognition All of our revenues are earned under formal contracts with our customers and are derived from both sales and rental of underwater technologies and equipment for imaging, mapping, defense and survey applications, diving technology and from the engineering services that we provide.
Revenue Recognition Revenues are earned under formal contracts with our customers and are derived from both sales and rental of underwater technologies and equipment for imaging, mapping, defense and survey applications, diving technology and from the engineering services that we provide.
In addition, a significant part of our assets and liabilities (both current and fixed) is held in British Pounds and Danish Kroner by these foreign subsidiaries.
In addition, a significant part of our assets and liabilities (both current and fixed) is held in British Pounds, Danish Kroner and Euros by these foreign subsidiaries.
We annually evaluate the recoverability of goodwill and intangible assets and carefully consider events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Step 1 of the goodwill impairment test used to identify potential impairment compares the fair value of the reporting unit with its carrying amount, including goodwill.
We annually evaluate the recoverability of goodwill and intangible assets and carefully consider events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Step 1 of the goodwill impairment test used to identify potential impairment compares the fair value of the reporting unit with its’ carrying amount, including goodwill.
As a small business, we are hindered in our ability to compete for certain specialized electronic engineering skills as our remuneration package is not as competitive as those offered by bigger companies which are competing for the same skills.
As a small business, we are hindered in our ability to compete for certain specialized electronic engineering skills or technology skills, as our remuneration package is not as competitive as those offered by bigger companies which are competing for the same skills. G.
This line of credit is available to the Company for short-term working capital purpose. All amounts under the Revolving Line of Credit are payable at the end of each financial year. The facility was renewed for another year until November 2023. To date, the Company has not had reason to borrow any funds for its operations under this credit line.
This line of credit is available to the Company for short-term working capital purposes. All amounts under the Revolving Line of Credit are payable at the end of each financial year. The facility was renewed for another year until November 2024. To date, the Company has not had reason to borrow any funds for its operations under this credit line.
The recent change in both the US and UK Governments’ attitude (and to a lesser extent the European Union member states) towards trade with China, directly affects the sale of our products to customers based in China.
The recent change in both the US and UK Governments’ political stance (and to a lesser extent the European Union Member States) towards trade with China, directly affects the sale of our products to customers based in China.
Note 8 to the Consolidated Financial Statements discusses the amounts of deferred tax assets and liabilities, and also presents the impact of significant differences between financial reporting income and taxable income. 25 For income tax purposes, the Company uses the percentage of completion method of recognizing revenues on long-term contracts which is consistent with the Company’s financial reporting under U.S.
“Note 10 Income Taxes” to the Consolidated Financial Statements discusses the amounts of deferred tax assets and liabilities, and also presents the impact of significant differences between financial reporting income and taxable income. 23 For income tax purposes, the Company uses the percentage of completion method of recognizing revenues on long-term contracts which is consistent with the Company’s financial reporting under U.S.
Significant currency fluctuations (particularly the British Pound and/or the Danish Kroner, Euros, versus the US Dollar) may affect our financial results and the value of our assets. We are therefore subject to currency fluctuation risks.
Significant currency fluctuations (particularly the British Pound and/or the Danish Kroner, Euros, versus the US Dollar) may affect our financial results including our profit and loss account and the value of our assets and therefore we are subject to foreign currency fluctuation risks.
Our real time 3D sonars which are depth rated above 300 meters along with our inertial navigation and attitude measurement sensors (F280 ® series) are subject to export control for certain countries, including China and therefore requires an export license. We also are not allowed to promote our DAVD technology in China.
Our real time 3D sonars which are depth rated above 300 meters along with our inertial navigation and attitude measurement sensors (F280 ® series) are subject to export control for certain countries, including China and therefore requires an export license.
Notable factors in our SG&A 2022 FY are: Within the category of SG&A we have transactions which are cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization and Stock-based compensation charges. In 2022 FY and 2021 FY, respectively non-cash items as a percentage of SGA expenses were 20.5% and 20.6%, respectively. Stock Based Compensation Expenses ( Non-Cash Item).
Notable factors in our SG&A 2023 FY are: Within the category of SG&A we have transactions which are cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization, Stock-based compensation charges and Exchange Rate Variance. In 2023 FY and 2022 FY, respectively non-cash items as a percentage of SGA expenses were 15.6% and 15.1%, respectively.
Accordingly, we continue to invest in research and development to further our business goals including maintaining our lead in the real time volumetric imaging sonar sector (Marine Technology Business) and our new-to-market diving technology (DAVD). In the 2022 FY this category of expenditure decreased by 25.0%.
Accordingly, we continue to invest in research and development to further our business goals including maintaining our lead in the real time volumetric imaging sonar sector (Marine Technology Business) and our new-to-market diving technology (DAVD).
Our current cash balance represents approximately 35 months of Selling, General and Administrative Expenses. The Company continues to critically evaluate the level of expenses that we incur and reduce those expenses as appropriate. We also have access to a revolving line of credit of $4 million from HSBC NA.
Our current cash balance represents approximately 36 months of Selling, General and Administrative Expenses. The Company continues to critically evaluate the level of expenses that it incurs and reduces its expenses as may be appropriate within its business priorities. We also have access to a revolving line of credit of $4 million from HSBC NA.
On December 22, 2020 the US Government Department of Commerce (Bureau of Industry and Security, Commerce) amended the Export Administration Regulations (EAR) to add seventy-seven (77) Chinese entities “determined ….to be acting contrary to the national security or foreign policy interests of the United States”.
On March 2023, the US Government Department of Commerce (Bureau of Industry and Security, Commerce) amended the Export Administration Regulations (EAR) to add a significant number of entities “determined ….to be acting contrary to the national security or foreign policy interests of the United States”.
The Gross Profit Margin yielded by the Products Business is generally higher than that of the Engineering Business. ● The percentage of consolidated sales attributed to the Engineering Business.
These include: ● The percentage of our consolidated sales that is attributable to the Marine Technology Business versus the Services Business. The Gross Profit Margin yielded by the Products Business is generally higher than that of the Engineering Business. ● The percentage of our consolidated sales that is attributable to the Services Business.
We support some significant defense programs by supplying and maintaining proprietary parts (or parts for which we are preferred suppliers) through obsolescence management programs.
We support some significant defense programs of record by supplying and maintaining proprietary parts (or parts for which we are preferred suppliers) through obsolescence management programs. These services provide recurring stream of revenues for our Services segment.
For the year then ended, the Company generated cash flow from operations of $6,726,967. We believe that our current level of cash and cash generation will be sufficient to meet our short and medium-term liquidity needs. As of October 31, 2022, we had cash on hand of $22,927,371 and both billed and unbilled receivables of approximately $3,472,715.
For the year then ended, the Company generated cash flow from operations of $2,389,876. We believe that our current level of cash and cash generation will be sufficient to meet our short and medium-term liquidity needs. As of October 31, 2023, we had cash and cash equivalents on hand of $24,448,841 and both billed and unbilled receivables of $3,537,712.
Operating Activities Net cash generated from operating activities for the year ended October 31, 2022, was $6,726,967. We recorded net income for the period of $4,301,221. Other items in uses and sources of funds from operations included non-cash charges related to depreciation and amortization, deferred tax asset and stock-based compensation, which collectively totaled $1,676,563.
Operating Activities Net cash generated from operating activities for the year ended October 31, 2023, was $2,389,876. We recorded net income for the period of $3,124,149. Other items in uses and sources of funds from operations included non-cash charges related to depreciation of fixed assets, amortization of intangible assets, deferred tax asset and stock-based compensation, which collectively totaled $1,361,452.
Our customers include service providers to major offshore renewable companies, oil and gas (“O&G”) companies, law enforcement agencies, ports, mining companies, underwater vehicle manufacturers, Prime Defense Contractors as OEM integrators, defense bodies, fisheries and research institutes.
Our customers include offshore service providers to major oil and gas companies, renewable energy companies, underwater construction companies, law enforcement agencies, ports, mining companies, defense bodies, prime defense contractors, navies, research institutes and universities and diving companies.
In the twelve months to October 31, 2022, these were: - Denmark 10.1% - source: Statistics Denmark, - UK 11.1% - source: Office of National Statistics (ONS); and - USA 7.7% - source: U.S. Bureau of Labor Statistics.
Recently inflation has been falling in these countries and in the twelve months to October 31, 2023, these were: Ø Denmark 0.1% - source: Statistics Denmark, Ø UK 4.7% - source: Office of National Statistics (ONS); and Ø USA 3.2% - source: U.S. Bureau of Labor Statistics.
Technological Advancement: A significant part of our growth strategy is predicated on our flagship real time volumetric imaging sonar technology and our Diver Augmented Vision Display (DAVD) solution.
This is likely to further postpone approval of budgets and apportionments of funds, which is likely to affect our business. H. Technological Advancement A significant part of our growth strategy is predicated on our flagship real time volumetric imaging sonar technology, the Echoscope® and our Diver Augmented Vision Display (DAVD) solution.
Changes in operating assets increased net cash from operating activities by $1,205,916 and changes in current liabilities decreased net cash from operating activities by $456,733. 34 Investing Activities Net cash used in investing activities for the year ended October 31, 2022, was $556,560 Financing Activities Net cash used in financing activities for the year ended October 31, 2022, was $91,896.
Changes in operating assets decreased net cash from operating activities by $1,538,896 and changes in current liabilities decreased net cash from operating activities by $556,829. Investing Activities Net cash used in investing activities for the year ended October 31, 2023, was $1,520,775. Financing Activities Net cash used in financing activities for the year ended October 31, 2023, was $17,963.
For information on the performance of each Segment including the disaggregation of revenues and geographical split, see Note 13 (“Segment Analysis”) of our audited Consolidated Financial Statements as of October 31, 2022, and 2021. 26 Revenue: Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 22,225,803 $ 21,331,527 Increase of 4.2% We realized an increase in revenues of 4.2% in the 2022 FY compared to the 2021 FY.
For information on the performance of each Segment including the disaggregation of revenues and geographical split, see “Note 14 Segment Analysis” and “Note 15 Disaggregation of Revenue” of our audited Consolidated Financial Statements as of October 31, 2023, and 2022. 25 Revenue: Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 19,352,088 $ 22,225,803 Decrease of 12.9% We realized a decrease in our consolidated revenues of 12.9% in the 2023 FY compared to the 2022 FY.
Foreign Currency Translations as they pertain to our assets and liabilities are translated at the prevailing exchange rate at the balance sheet date and related revenue and expenses are translated at weighted average exchange rates in effect during the period (see paragraph n (Foreign Currency Translation) of Note 2 – Summary of Accounting Policies of our audited Consolidated Financial Statements as of October 31, 2022).
Foreign Currency Translations as they pertain to our assets and liabilities are translated at the prevailing exchange rate at the balance sheet date and related revenue and expenses are translated at weighted average exchange rates in effect during the 12-month reporting period.
Gross Margin: Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change 68.3% (Gross profit of $15,190,688) 69.2% (Gross profit of $14,769,718) Decrease of 0.9% Gross Profit Margins reported in our financial results may vary according to several factors. These include: ● The percentage of consolidated sales attributed to the Products Business.
Gross Margin: Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change 67.3% (Gross profit of $13,031,055) 68.3% (Gross profit of $15,190,688) Decrease of 1.0% Our consolidated gross profit margins reported in our financial results may vary according to several factors.
These are: ● the Marine Technology Business (also referred to in this Form 10-K as “Products Business”, “Products Operations” or “Products Segment”); and ● the Marine Engineering Business (also referred to in this Form 10-K as “Engineering Business”, “Engineering Operations”, or “Services Segment”). Our Marine Technology Business is a technology solution provider to the subsea and underwater market.
General Overview The Company operates two distinct businesses. These are: ● the Marine Technology Business (also referred to in this Form 10-K as “Products Business”, or “Products Segment”); and ● the Marine Engineering Business (also referred to in this Form 10-K as “Engineering Business”, or “Services Business” or “Services Segment”).
These services provide recurring stream of revenues for our Services segment. 20 Both the Marine Technology Business and Marine Engineering Business have established synergies in terms of customers and specialized engineering skill sets (hardware, firmware and software) encompassing capturing, computing, processing and displaying data in harsh environments.
Both the Marine Technology Business and Marine Engineering Business have established synergies in terms of customers and specialized engineering skill sets (hardware, firmware, and software) encompassing capturing, computing, processing and displaying data in harsh environments. Factors Affecting our Business. Our business is affected by a number of factors including those set out below: A.
See Notes 13 (Segment Analysis) and 14 (Disaggregation of Revenue) to our audited Consolidated Financial Statements as of October 31, 2022, for more information covering Segment reporting and the disaggregation of our revenues by type and geography. ● Level of assets in the rental pool and cost of sales associated with these rental assets (and which are subject to depreciation – see Note 2 paragraph d to our audited Consolidated Financial Statements as of October 31, 2022).
See “Note 2 Summary of Accounting Policies” (Cost of Revenue), “Notes 14 Segment Analysis” and “Note 15 Disaggregation of Revenue” of our audited Consolidated Financial Statements as of October 31, 2023, for more information covering commissions as a component of Cost of Revenues, segment reporting and the disaggregation of our revenues by type and geography, respectively. ● Level of assets in the rental pool and Cost of Revenue associated with these rental assets – see “Note 2 Summary of Accounting Policies” (Cost of Revenue).
Although the Company cannot predict the extent to which currency fluctuations may affect the Company’s business and financial position, there is a risk that such fluctuations will have an adverse impact on the Company’s sales, profits, balance sheet valuations and financial position.
The Company cannot predict the extent to which currency fluctuations may affect its business and financial position, and there is a risk that such fluctuations may have an adverse impact on the Company’s sales, profits and financial position. 32 Applying the Constant Rate (as the term is defined immediately below), the impact of currency fluctuations in the 2023 FY compared with the 2022 FY, is shown below.
Segment operating income is total segment revenue reduced by operating expenses identifiable with the business segment. Overhead includes general corporate administrative costs. The Company evaluates performance and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described in the summary of accounting policies.
Segment operating income is total Segment revenue reduced by cost of revenues and operating expenses (research and development and Selling, General & Administrative) identifiable with the reporting business segment. Overheads include general corporate administrative costs. The Company evaluates performance and allocates resources based upon operating income.
Most sales by the Products Business from Asia attract commission as those are typically sales via our agents/distributors network.
Both the Marine Technology Business and our Services Business work with a global network of sales agents. Most of the sales made by the Marine Technology Business from Asia or South Africa attract commission as those are typically sales via our agents/distributors network.
In the Current FY, 46.1% of our revenue was transacted in USD compared to 26.4% in the Previous FY. Comparison of fiscal year ended October 31, 2022, to fiscal year ended October 31, 2021 The information provided below pertains to the Company’s consolidated financial results.
Comparison of fiscal year ended October 31, 2023, to fiscal year ended October 31, 2022 The information provided below pertains to the Company’s consolidated financial results.
In the 2022 FY expenditures relating to the category of “Rent” increased by 25.6% compared to FY 2021. Rent is not a material expenditure in the Group as most of our premises are owned by the Company, except for premises used in Denmark. In 2022 FY expenditures relating to the category of “Marketing” increased by 309.1%.
We recorded $130,767 for tax specialists’ services in the Current FY compared to zero in the Previous FY. Rent expenditures decreased by 21.5% compared to FY 2022. Rent is not a material expenditure in the Group as most of our premises are owned by the Company, except for premises used in Denmark. Marketing increased by 9.7%.
Revenue from the sale of services is recognized when those services have been provided to the customer and evidence of the provision of those services exist.
Revenue from the sale of services is recognized when those services have been provided to the customer and evidence of the provision of those services exists. For further discussion of our revenue recognition accounting policies, refer to “Note 4 Revenue Recognition” in our Consolidated Financial Statements.
For more detailed information on the composition and disaggregation of our revenues, please refer to Note 14 (“Disaggregation of Revenue”) of our audited Consolidated Financial Statements of October 31, 2022, and 2021. 27 Research and Development (R&D): Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 2,237,920 $ 2,982,676 Decrease of 25.0% Research and Development costs are, in general, an inherent ongoing cost for the Marine Technology Business operations since it will need to either maintain the products it has in the market or continue to advance these products and its core technology to keep them competitive (both in price and performance) and to expand the product offerings which we have in the market.
Since there are more variable factors affecting Gross Profit Margins in the Marine Technology Business, a table showing a summary break-out of sales generated by the Marine Technology Business in the 2023 FY compared to the 2022 FY is set out below: 2023 FY Products 2022 FY Products Percentage Change Equipment Sales $ 8,444,305 $ 8,771,050 (3.7 )% Equipment Rentals 1,264,804 1,844,775 (31.4 )% Software Sales 851,976 1,014,867 (16.1 )% Services 1,557,981 3,093,996 (49.6 )% Total Net Sales $ 12,119,066 $ 14,724,688 (17.7 )% For more detailed information on the composition and disaggregation of our revenues, please refer to “Note 15 Disaggregation of Revenue” of our audited Consolidated Financial Statements of October 31, 2023, and 2022. 26 Research and Development (R&D): Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 2,096,467 $ 2,237,920 Decrease of 6.3% Research and Development costs are, in general, an inherent ongoing cost for the Marine Technology Business operations since it will need to either maintain the products it has in the market or continue to advance these products and its core technology to keep them competitive (both in price and performance) and to expand the product offerings which we have in the market.
For further discussion of our revenue recognition accounting policies, refer to paragraph h of Note 2 “Revenue Recognition” in our Consolidated Financial Statements. 24 Stock based Compensation We recognize the expense related to the fair value of stock based compensation awards within the consolidated statements of income and comprehensive income.
Stock-based Compensation We recognize the expense related to the fair value of stock-based compensation awards within the consolidated statements of income and comprehensive income.
The Company therefore realized significant adjustments relating to foreign currency transactions in the Current Year. In the 2021 FY we realized a gain on foreign currency translation adjustments relating to these transactions of $654,219 compared to a loss on these transactions in the 2022 FY of $3,070,065.
In the 2022 FY we recorded a loss of $3,070,065 on foreign currency translation adjustment transactions compared to a gain of $1,294,575 in the 2023 FY.
Comprehensive Income for the year ended October 31, 2022, compared to the year ended October 31, 2021 Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 1,231,156 $ 5,601,984 Decrease of 78.0% In the 2022 FY, Comprehensive Income was $1,231,156 compared to $5,601,984 for the 2021 FY reflecting the adverse effects of currency fluctuations.
Comprehensive Income for the year ended October 31, 2023, compared to the year ended October 31, 2022 Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 4,418,724 $ 1,231,156 Increase of 258.9% In the 2023 FY Comprehensive income was $4,418,724 compared to $1,231,156 for the 2022 FY.
Fiscal Year 2022 Consolidated Results of Operations In this Form 10-K, the following meanings are ascribed to the terminologies set out immediately below: FY Means Fiscal Year 2022 FY Means the Fiscal Year ended October 31, 2022 2021 FY Means the Fiscal Year ended October 31, 2021 Current FY Means the Fiscal Year ended October 31, 2022 Previous FY Means the Fiscal Year ended October 31, 2021 In the Current FY revenues increased by 4.2% over the Previous FY, Gross Profit Margins fell by 0.9%, total operating expenses fell by 6.8% and operating income increased by 30.4%.
Fiscal Year 2023 Consolidated Results of Operations In this Form 10-K, the following meanings are ascribed to the terminologies set out immediately below: FY Means Fiscal Year 2023 FY Means the Fiscal Year ended October 31, 2023 2022 FY Means the Fiscal Year ended October 31, 2022 Current FY Means the Fiscal Year ended October 31, 2023 Previous FY Means the Fiscal Year ended October 31, 2022 In the Current FY our overall consolidated financial results were down when compared to the Previous FY.
This is a key factor in the loss relating to foreign currency translations transactions in the 2022 FY. See Table 1 under the section which concerns “Inflation & Foreign Currency” which shows the impact of the currency adjustments. 31 Segment Analysis We are operating in two reportable segments, which are managed separately based upon fundamental differences in their operations.
See Table under the section of the MD&A which concerns “Foreign Currency & Inflation”, and which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in 2023 FY compared to 2022 FY. 29 Segment Analysis We operate in two reportable segments, (“Products Business” and “Service Business”) which are managed separately based upon fundamental differences in their operations.
The amended EAR in general states that there is a “presumption of denial” of grant of export licenses to these entities and their affiliates.
The amended EAR in general states that there is a “presumption of denial” of grant of export licenses to these entities and their affiliates. This is another indication that the US Government policy and disposition towards China continues to harden and companies in the technology space will increasingly find it difficult to sell to China due to government restrictions.
China has one of the largest planned investment programs for offshore renewables, the market for which most of our technology is used for in China. After significant business development in China, we had started to see persistent and credible growth for our products in this market.
The removal of China as a trading partner is likely to have a significant negative impact on our revenues and growth strategy. China has one of the largest planned and funded investment programs for offshore renewables, the market for which most of our technology is used for in China.
A large part of our revenues in the Services Segment derives from government funding in the defense sector. In general, where there is a change of government, spending priorities may change from those priorities of the previous Administration. This may adversely impact on our revenues.
In general, where there is a change of government, spending priorities may change from those priorities of the previous Administration. This may adversely impact on our revenues. Furthermore, during calendar year 2024, the US Federal Defense Budget is dependent on the New Administration being able to secure approval in Congress for the defense budget.
There are inter-segment sales in the table below which have been eliminated from our financial statements. However, for the purpose of segment reporting, these inter-segment sales are included in the table below only. The following tables summarize certain balance sheet and statement of operations information by reportable segment for the financial years ending October 31, 2022, and 2021, respectively.
The accounting policies of the reportable segments are the same as those described in the summary of accounting policies. There are inter-segment sales in the table below which have been eliminated from our financial statements. However, for the purpose of segment reporting, these inter-segment sales are only included in the table below.
Net Income after Income taxes for the year ended October 31, 2022, compared to the year ended October 31, 2021 Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 4,301,221 $ 4,947,765 Decrease of 13.1% In the 2022 FY, Net Income after Income taxes fell by 13.1%. This is due to a number of factors.
Net Income for the year ended October 31, 2023, compared to the year ended October 31, 2022 Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 3,124,149 $ 4,301,221 Decrease of 27.4% In the 2023 FY we had Net Income of $3,124,149 compared to $4,301,221 in the 2022 FY, representing a decrease of 27.4%.
Changes in this category by Segment are set out immediately below: Description Amount % increase / (decrease) Marine Technology Business (Products Segment) 2022FY $ 2,207,500 Decrease 12.0% Marine Technology Business (Products Segment) 2021FY $ 2,509,107 Engineering Business (Services Segment) 2022 FY $ 30,420 Decrease 93.6% Engineering Business (Services Segment) 2021 FY $ 473,569 Selling, General and Administrative Expenses (SG&A) : Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 7,948,704 $ 7,949,525 Decrease of 0.0% SG&A in the 2022 FY was largely in line with 2021 FY expenditures.
Changes in this category by Segment are set out immediately below: Description Amount % increase / (decrease) Marine Technology Business (Products Segment) 2023 FY $ 2,043,890 Decrease 7.4% Marine Technology Business (Products Segment) 2022 FY $ 2,207,500 Engineering Business (Services Segment) 2023 FY $ 52,577 Increase 72.8% Engineering Business (Services Segment) 2022 FY $ 30,420 Selling, General and Administrative Expenses (SG&A) : Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 8,195,036 $ 7,948,704 Increase of 3.1% The increase in SG&A is largely due to the increase in the category of Legal and Professional fees resulting from an increase in costs incurred for tax specialists’ fees, increase in board of directors’ fees, increase in our marketing expenses and exchange rate variances.
Further discussions on SG&A are set out immediately below. 28 Key Areas of SG&A Expenditure across the Group for the year ended October 31, 2022, compared to the year ended October 31, 2021 Expenditure October 31, 2022 October 31, 2021 Percentage Change Wages and Salaries $ 3,752,524 $ 3,361,494 Increase of 11.6% Legal and Professional Fees (including accounting, audit and investment banking services) $ 1,419,013 $ 1,284,591 Increase of 10.5% Rent for our various locations $ 64,637 $ 51,443 Increase of 25.6% Marketing $ 197,258 $ 48,214 Increase of 309.1% Although in FY2022 expenditures relating to Wages and Salaries increased by 11.6%, it should be noted that in the 2021 FY we had had contributions under the UK Coronavirus Job Retention Scheme (CJRS) of $135,000 which reduced this category of expenditures.
Further discussions on SG&A are set out immediately below. 27 Key Areas of SG&A Expenditure across the Group for the year ended October 31, 2023, compared to the year ended October 31, 2022 Expenditure October 31, 2023 October 31, 2022 Percentage Change Wages and Salaries $ 3,499,542 $ 3,752,524 Decrease of 6.7% Legal and Professional Fees (including accounting, audit, tax and investor relations) $ 1,809,604 $ 1,419,013 Increase of 27.5% Rent for our various locations $ 50,767 $ 64,637 Decrease of 21.5% Marketing $ 216,403 $ 197,258 Increase of 9.7% In the 2023 FY compared to the 2022 FY: Wages and Salaries decreased by 6.7%.
This subsidiary is crucial for our continued relationship with EU customers. 21 B. Currency Risks: The Company’s operations are split between the United States, United Kingdom, Denmark, India and Australia. A large proportion of our consolidated revenues (53.9% in the 2022 FY) are generated outside of the United States by our foreign subsidiaries in the United Kingdom (“UK”) and Denmark.
A significant proportion of our consolidated revenues (51.4% in 2023 FY compared to 53.9% in the 2022 FY) are generated outside of the United States by our foreign subsidiaries in the United Kingdom (“UK”) and Denmark.
We can, however, give no assurance that this will serve as adequate mitigation for this issue. H. Government Spending for Defense : We are dependent on the timely allocation of funds to defense procurement by governments in the United States and the United Kingdom.
Government Spending for Defense We are dependent on the timely allocation of funds to defense procurement by governments in the United States and the United Kingdom. A large part of our revenues in the Services Segment derives from government funding in the defense sector.
In the 2022 FY Gross Profit Margins for the Marine Technology Business were 80.0% compared to 79.9% in the 2021 FY. For the Engineering Business, these were 45.4% in the 2022 FY compared to 38.6% in the 2021 FY.
The assets utilized for our rental offering are subject to depreciation, a portion of which is allocated to Cost of Revenue. In the 2023 FY gross profit margins for the Marine Technology Business were 76.7% compared to 80.0% in the 2022 FY. For the Engineering Business, these were 51.6% in the 2023 FY compared to 45.4% in the 2022 FY.
Significant Increase in the Price of Raw Materials In addition to the disruption in the Supply Chain, we are also experiencing very significant increase in price of raw materials which we are unlikely to be able to pass on to our customers.
Significant Increase in the Price of Raw Materials While there have been improvements in lead time for supply of raw materials and components in the Supply Chain during the reporting period, there is significant inflation which impacts the costs of raw materials which we are unlikely to be able to pass on to our customers due to the extent of these increases.
The preparation of financial statements in conformity with US GAAP requires our management to make estimates and assumptions that affect the reported values of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported levels of revenue and expenses during the reporting period.
These financial statements have been prepared in conformity with GAAP in the United States which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty.
Comprehensive Income is affected by fluctuations in translating foreign currency transactions of our foreign subsidiaries into USD relating to both our profit and loss expenses and valuation of our assets and liabilities comprised within our balance sheet.
This category is affected by fluctuations in foreign currency exchange transactions both relating to our profit and loss expenses and our assets and liabilities on our balance sheet and are largely paper losses or gains, as may be applicable, in the reporting period.
Furthermore, even though our sonars which are depth rated at 250m or less do not require export licenses for China, and our other products such as our geophysical products and Pan & Tilt devices, the UK Customs are now indiscriminately seizing all our shipments which are consigned for China.
Furthermore, even though our sonars which are depth rated at 250m or less do not require export licenses for China, and our other products such as our geophysical products and Pan & Tilt devices, the recent change in the UK Export Control Regulations vis-à-vis China now encompasses an “all catch” provision under which any item intended for export to China may be seized by UK Border Control “if there is a risk that an item may be intended or diverted for purposes connected with weapons of mass destruction or their means of delivery”.
Furthermore, the US Federal Defense Budget is dependent on the New Administration being able to secure approval in Congress for the defense budget. The slim majority on which the current Administration operates is likely to hinder future spending on new defense projects. 23 I.
The slim majority on which the current Administration operates is likely to hinder future spending on new defense projects. Currently with the US Election season almost open, the Federal Government is using continuing resolutions to fund existing programs as there is no agreement on budget.
The Engineering Business yields a lower gross profit margin on generated sales which are largely based on time and materials contracts. ● The mix of sales generated by the Products Business: ● Outright sales versus rentals. ● Hardware related sales versus Software related sales. ● Extent of Offshore Engineering Support Services provided in the period. ● Extent of paid customer engineering work relating to customizing our technology for these customers’ requirements. ● Level of commissions on sales (both the Engineering and Products businesses work with a global network of sales agents).
The Services Business yields a lower gross profit margin on generated sales which are largely based on time and materials for our Department of Defense subcontracts. ● The mix of engineering projects performed by our Services Business (Design prototyping versus manufacturing). ● The mix of sales generated by the Marine Technology Business during the reporting period.
Inflation Inflation affects our Business in several ways including: Ø Cost of Operations (including wages and salaries) Ø Bill of Material Costs of our Products The effect of inflation on the Company’s 2022 FY results has been benign due to a number of factors.
High inflation affects our business in a number of areas including costs of operations, including wages and salaries which have increased in relation to the number of staff in the Current FY (which has reduced) compared to the number of staff in the Previous FY.
Shortage of Key Skills/Resourcing Levels and significant increase in cost of operations due to inflation We are experiencing extreme shortage of personnel with key skills which are critical to our business, such as electronic engineers, software development skills, technical support engineers, field support engineers and sales and business development skills.
These increases may make the cost of making our products uncompetitive and may also affect our margins. F. Shortage of Key Skills/Resourcing Levels and significant increase in cost of operations due to inflation We are experiencing skill shortages in areas that are critical to our growth strategy including experienced sales and marketing personnel, software developers and skilled electronic technicians.
Foreign Currency The Company maintains its books in local currency: US Dollars for its US operations, British Pounds for its United Kingdom operations, Danish Kroner for its Danish operations, Australian Dollars for its Australian operations and Indian Rupees for its Indian Operations.
Foreign Currency and Inflation The Company and its subsidiaries maintain their accounts in the native currencies of their operations, and which are: US Dollars For US Operations British Pound For United Kingdom Operations Danish Kroner For Danish Operations Australian Dollars For Australian Operations (operations are currently dormant) Indian Rupees For Indian Operations (operations are currently dormant) The Company’s consolidated financial results therefore include the translation of its subsidiaries functional currencies into U.S Dollar.
We therefore do not anticipate Interest Expense to be a material item of expenses in our financial statements. 30 Net Income before Income taxes for the year ended October 31, 2022, compared to the year ended October 31, 2021 Year Ended October 31, 2022 Year Ended October 31, 2021 Percentage Change $ 5,132,335 $ 5,253,244 Decrease of 2.3% In the 2022 FY, Net Income before taxes fell by 2.3% despite an increase in revenues (by 4.2% over the previous 2021 FY), a reduction in Total Operating Expenses by 6.8% and a reduction in the category of Interest Expenses.
Income before Income Tax Expense for the year ended October 31, 2023, compared to the year ended October 31, 2022 Year Ended October 31, 2023 Year Ended October 31, 2022 Percentage Change $ 3,421,228 $ 5,132,335 Decrease of 33.3% In the 2023 FY, we had income before income taxes of $3,421,228 as compared to $5,132,335 in the 2022 FY, representing a decrease of 33.3%.
Our actual results may differ significantly from management’s expectations. The following discussion and analysis should be read in conjunction with our financial statements, included herewith.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS Forward-Looking Statements The following discussion is intended to promote understanding of the results of operations and financial condition and should be read in conjunction with our consolidated financial statements and notes thereto. This discussion may contain forward-looking statements that reflect the plans, estimates and beliefs of Coda.
A significant part of our revenues is derived from our foreign subsidiaries in the UK and Denmark and therefore for the purpose of reporting, the functional currencies of these subsidiaries are translated into USD. Applying the same exchange rate as the Previous FY, revenue of the Products Business was negatively impacted by $913,899.
A significant part of the Company’s operations is based in the UK and Denmark, and therefore a major part of the Company’s assets and liabilities recorded in its consolidated balance sheet and profit and loss expenses are translated from the functional currencies of these subsidiaries into USD for reporting purposes, thus accounting for the changes.
These solutions and products are used primarily in the underwater construction market, offshore oil and gas, offshore wind energy industry, and in the complex dredging, port security, mining and marine sciences sectors.
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, offshore oil and gas, forward looking obstacle avoidance, complex underwater mapping, salvage operations, dredging, bridge inspection, underwater hazard detection, port and harbor security, mining, mine counter measures, ship hull scanning, real time threat detection, fisheries, commercial and defense diving, and marine sciences sectors.
The change in the UK EU membership status adversely impacts our business in several important areas: ● Our shipments into the European Union are subject to customs process. This results in increased costs and time for the processing of shipments. This operates as a deterrent for EU customers to work with us.
This is virtually impossible to demonstrate and therefore this impacts our ability to service our European Union customer requirements and directly impacts on revenue. Ø Our shipments from the UK to the EU member states are subject to custom process. This results in increased costs and delays in the processing of shipments.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS Forward-Looking Statements The information herein contains forward-looking statements. All statements other than statements of historical fact made herein are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements.
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The words “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made.
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These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain.
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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors and we disclaim and do not undertake any obligation to update or revise any forward-looking statement, except as required by applicable law.
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This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. General Overview We operate two distinct business operations.
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This section of this Form 10-K generally discusses fiscal 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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It has a long-established pedigree in this market, and it innovates, designs, develops and manufactures proprietary solutions for this market (both for commercial and defense applications) including our range of flagship volumetric real time sonar solutions and our diving technology.
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Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K, filed with the SEC on January 30, 2023, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at codaoctopusgroup.com.
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Our Marine Engineering Business is a supplier of engineering services and embedded solutions (such as mission computers) to prime defense contractors such as Raytheon, Northrop Grumman, Thales Underwater, Atlas Electronik UK and Babcock International Group.
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Our Marine Technology Business has operations in the USA, UK and Denmark – see organization chart set out in the Section Item 1 (Business). This business is an established technology solution provider to the subsea and underwater imaging, surveying and diving market.
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Generally, the items supplied into the defense market are sub-systems in broader mission critical integrated systems and thus requires a high level of reliability, consistency in standards and robustness. We have long-standing relationships with prime defense contractors, and we use these credentials to secure more business.
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It has been operating as a supplier of solutions comprising both hardware and software products for close to 30 years to this market and it owns key proprietary technology including its Echoscope® and DAVD technology, that are used in both the underwater defense and commercial markets.
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Factors Affecting our Business Our business is affected by a number of factors including those set out below: A. United Kingdom’s withdrawal from the European Union (“Brexit”) The UK was a member of the European Union member states for close to 50 years. This membership enabled the freedom of movement of goods, persons, capital and services between member states.
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All design, development and manufacturing of our technology and solutions are performed within the Company. We sell our products and solutions globally and have a combination of direct sales and indirect sales (via our agents’ network). In Asia and Africa, we largely sell via agents, in the USA, Europe and the Middle East we sell directly.

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