EDGAR 10-K Filing

Company CIK: 1334325
Filing Year: 2025
Filename: 1334325_10-K_2025_0001493152-25-004075.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Corporate Information
Our principal executive offices are located at 3300 S. Hiawassee Rd, Orlando, FL 32835. Our telephone number is +1 (407) 735-2406. We maintain a corporate website at www.codaoctopusgroup.com. The reference to the Company’s website address does not constitute incorporation by reference of the information on the Company’s website into this Form 10-K.
Overview
Coda Octopus Group, Inc. (“Coda” “the Company” or “we”), through its wholly owned subsidiaries, operates two distinct segments:
● 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”).
Marine Technology Business (Products Segment)
Our Marine Technology Business is a technology solution provider to the underwater market. It owns key proprietary and unique technology comprising its real time volumetric imaging sonar technology (Echoscope® technology) and diving technology (Diver Augmented Vision Display - “DAVD”), both of which are applicable to the underwater market, and which are used in the commercial offshore and defense sectors. It also sells other proprietary subsea products such as its geophysical hardware and software solutions and inertial navigation systems. All innovations, design, development and manufacturing of our products are performed within the Company. As part of our patent strategy, we endeavor to actively protect our innovations by seeking patent protection where appropriate.
Our imaging sonar series is marketed under the name Echoscope® and Echoscope PIPE® and are used primarily in the underwater construction, offshore renewables, and offshore oil and gas, complex underwater mapping, salvage operations, dredging, bridge inspection, navigation of underwater hazard, port and harbor security, mining, commercial and defense diving, marine sciences sectors and more broadly applications for real time 3D monitoring, inspection and visualization underwater. Uniquely, the Echoscope® technology is a single sensor for multiple underwater applications that can be used to image in 3D, moving objects in zero visibility water conditions. Competing technologies such as the multibeam primary function is for mapping the seabed and are not real time 3D sonars.
Our diving technology marketed under the name “CodaOctopus® DAVD” addresses the global defense and commercial diving markets. We have two variants of the DAVD: the tethered and untethered variant. The tethered variant is used with a connection to a surface vessel and the untethered variant is not connected to a surface mothership for air supply.
The DAVD solution has the potential to radically change how diving operations are performed globally because it delivers real time information simultaneously to the divers underwater and their surface-based dive supervisors. The DAVD Head- Up Display (“HUD”) is used as a data portal for the diver while underwater. Various types of information are displayed to the diver in the HUD in real time and there by obviating the need for voice instructions.
The DAVD untethered solution (“DUS”) is designed for the Defense and Military market where diving is performed without connection to a surface vessel. These divers are typically military divers performing special forces operations, mine detection and clearance or reconnaissance and surveillance. Similar to the tethered variant, the DAVD HUD is used for displaying a range of mission-related information to the diver.
DAVD’s concept of using a pair of glasses, which is capable of augmented reality display, inside the face mask, helmet or other diving suits is protected by patent. The Company has an exclusive license to exploit this utility patent.
The Marine Technology Business operates through 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).
Marine Engineering Business (Services Segment)
Our Marine Engineering Businesses are suppliers of embedded solutions and sub-assemblies which they design and manufacture and sell as a component of 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 Close in Weapon Support (CIWS) and Northrop Grumman’s Mine Hunting Systems Program (AQS-24) Program. The Services Segment’s business model entails engineering components for integration into broader defense programs, such as the CIWS program. Typically, they supply prototypes units which are validated for integration and thereafter, subject to meeting the acceptance criteria, these lead to contracts for manufacture, repair and upgrade for the life of the program, which can span decades. We enjoy sole source status for the parts that we design and supply into these programs. This business model ensures recurring and long tail revenues. Coda Octopus Colmek, Inc. and Coda Octopus Martech Ltd, qualify as small businesses. This opens opportunities under state requirements to collaborate with Prime Defense Contractors on these programs. A significant part of the revenues generated by the Marine Engineering Business is highly concentrated and are usually derived from a small number of prime defense contractors such as Raytheon or Northrop. In any one financial year, between 20% to 30% of our consolidated revenues may be derived from these customers either alone or collectively.
The Services Segment operates through our wholly owned subsidiaries, Coda Octopus Colmek, Inc (“Colmek”), which is based in Salt Lake City, Utah and which we acquired in 2007, and Coda Octopus Martech Limited (“Martech”), which is based in Portland, United Kingdom and which we acquired in 2006.
Newly Acquired Third Business Unit into the Group’s Products Segment
On October 29, 2024 we acquired Precision Acoustics Limited (hereinafter referred to as “PAL”), a company established under the laws of England. This Company is a recognized leader in the ultrasound and acoustic measurement field. Specializing in acoustic hydrophone design and innovative acoustic materials, they provide a comprehensive range of products and solutions, with a primary focus on medical imaging and Non-Destructive Testing (NDT). NDT is used to validate the viability of structures such as aircraft, ship hulls, wellheads and other subsea structures. Their expertise extends to working closely with national and global standard-setting bodies (such as the National Physical Laboratory of the UK), contributing to the establishment of the primary measurement standards in the industry. This business was acquired to gain access to their expertise and leverage this across the group including in the area of advancing the Echoscope® technology. We believe the addition of their expertise and capabilities positions the Group to qualify to compete for larger Defense contracts.
For segment reporting purposes this newly acquired Company will be reported within our Products Segment.
Therefore, our Products Segment will now comprise PAL and our Marine Technology Business.
Cross-Group Synergies
Our Marine Technology Business and Marine Engineering Services Business both have established synergies in terms of customers, technologies and specialized engineering skills for robust, rugged, and repeated engineering solutions relating to data acquisition, data computation and display of the data. Increasingly drawing on each part of the business strengths, the Marine Technology Business and Marine Engineering Business work jointly on projects including responding jointly for responding to invitations to tender for new projects with broader scope. We believe the Services Business is important to our overall growth strategy as it brings significant engineering depth for the development of the technology solutions offered by the Marine Technology Business. This also ensures tighter control over our intellectual property rights, which are important for our market position. The addition of the expertise of PAL in the field of acoustics and NDT positions the Group to consolidate its capabilities and therefore jointly compete for larger Defense contracts.
Key Pillars for our Growth Plans
Our Echoscope® and DAVD technologies are our most promising products and solutions for the Company’s near-term growth.
We believe that our real time 3D/4D/5D/6D imaging sonars are the only acoustic imaging sonars capable of providing real time 4D imaging of moving objects in zero visibility water conditions and making real time 3D physical measurements of objects underwater. Competing acoustic imaging sonars such as the multibeam sonars are primarily seabed mapping tools which are not designed to perform complex seabed mapping or imaging of moving objects in 3D underwater. The Echoscope® technology therefore is a key sensor for underwater construction activities, inspection and monitoring in real time 3D. We also believe that our new generation of Echoscope PIPE® is the only sonar that can generate concurrently multiple real time 3D/4D/5D/6D acoustic images using different acoustic parameters in real time such as field of view, pulse length, filters, beam density and various beamforming modes. This has the potential to reduce the number of underwater sensors that are required on a project at any one time and therefore improve the efficiency of these underwater operations.
In our industry we are widely considered the leading solution provider for underwater real time 3D visualization.
We also believe that the DAVD solution is poised to radically change the way diving operations are performed by providing a fully integrated suite of sensor data which can be shared in real time by the dive supervisor on the surface vessel and the diver by displaying the required data in the DAVD HUD. Current diving is done largely by poor analog voice command missions (with the diver supervisor on the surface providing verbal instructions to the diver underwater) using a disparate suite of systems for video data, communications, and positioning, which is not available to the diver firsthand. Furthermore, by combining the DAVD with our real time 3D sonars, (Echoscope®), it allows diving to be performed in difficult water conditions (turbidity or zero visibility issues) and thus addresses the common problem of underwater operations having to be aborted due to visibility issues.
The DAVD tethered version, which has now been moved from the customer’s research and development phase into its operational phase, is now in early-stage adoption and is currently operational across nine naval commands within the US Navy. This means that the DAVD tethered version is now a standard item available for purchase and for which budget lines can be established within the various user commands within the Navy.
In the Current FY we continued our global marketing campaigns for the adoption of the DAVD tethered system outside of the US Navy. We believe we have made significant progress with these campaigns. Due to funding shortage on US Defense Programs during the Fiscal Year 2024, funds were not allocated for the DAVD tethered system. We are aware that a number of commands have requested DAVD systems, but these are awaiting budget approval. We do not believe these opportunities have gone away but until the Federal Budget is in place by the new Administration, we expect that US Defense Programs will continue to be funded through continuing resolutions under which there is limited funding available. This may result in a shift of spending priorities which may impact on the level of allocation of funding to programs like the DAVD.
We continue to see great interest in the technology from the marketplace and as we introduce the new generation of the DAVD Augmented Reality HUD, this has galvanized solid interest in the technology.
We are actively working on the DAVD untethered system under a funded joint program with the US Navy and a Foreign Navy, (the “DUS Hardening Program”) where the DAVD technology is being hardened for adoption by the special forces. We have made solid progress under this program and have received positive feedback by these customers. In the Fiscal Year 2024, we did not receive the level of funding anticipated for the DUS Hardening Program due to the reduced funding available under continuing resolutions. Until the Federal Budget is adopted by the new Administration, we anticipate reduced funding for US Defense Programs which may impact the allocation of funding to the DUS Hardening Program and affect the time scales to which we are working for completing the deliverables under this program. Despite this reduced level of funding in the FY 2024, we have achieved a critical milestone (a major pre-requisite for the success of the DUS Hardening Program and we delivered the new generation of the DAVD HUD solution. This next-generation DAVD HUD technology platform boasts a more compact design, a 200% increase in resolution, and an expanded field of view. These enhancements significantly improve compatibility with specialized dive helmets and masks, unlocking new possibilities for previously underutilized applications and markets. This accomplishment represents a major milestone in the success of the DUS Hardening Program. We continue to believe that the DUS variant represents the biggest market opportunity for the DAVD technology in the USA with the addressable market including defense, law enforcement and first responders.
The concept of utilizing a pair of transparent glasses in the HUD underwater for this purpose, is protected by patent. All component parts of the DAVD system are proprietary to the Company and include software (4G USE® DAVD Edition), Diver Processing Pack - telemetry system (DPP), topside Supervisor Console Controller and real time 3D Sonar. The Company benefits from the exclusive license from the U.S. Department of the Navy at Naval Surface Warfare Center Panama City Division to utilize the utility patent covering the concept of using the pair of transparent glasses as a data hub underwater. The DAVD tethered variant is classified as an “Authorization for Navy Use” item and also benefits from CE marking certifying that the DAVD system meets the essential health, safety and environmental requirements of the UK and European Union. The untethered variant is currently going through validation process.
Our corporate structure is as follows:
* For operational purposes, although the newly acquired PAL will, for segment reporting purposes, be reported as part of the Products Segment, this will continue to be a separate business unit from the Marine Technology Business, as it operates in a different market sector from the Marine Technology Business.
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 Heriot-Watt University, Edinburgh, Scotland. Initially, its operations consisted primarily of developing software for subsea mapping and visualization using sidescan sonar (a technology widely used in commercial offshore geophysical survey and naval mine-hunting to detect objects on, and textures of, the surface of the seabed).
In June 2002, we acquired Octopus Marine Systems Ltd, a UK corporation, and changed our name to Coda Octopus Limited. At the time of its acquisition, Octopus Marine Systems was producing geophysical products broadly similar to those of Coda, but targeted at the less sophisticated, easy-to-use, “workhorse” market.
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 A/S. At the time of acquisition, this company had been engaged for over ten years in developing a revolutionary imaging sonar technology capable of producing real time three-dimensional (“3D”) underwater images for use in subsea activities. Coda Octopus Products Limited (Edinburgh based) then developed our visualization software (Underwater Survey Explorer) to control and display the images from the real time 3D sonar device. This patented technology is now marketed by us under the brand name “Echoscope®” and Echoscope PIPE®. All activities of this now-defunct Norwegian subsidiary, Coda Octopus R&D A/S, have been transferred to Coda Octopus Products Limited (Edinburgh).
On July 13, 2004, the Company effected a reverse merger pursuant to the terms of a share exchange agreement between The Panda Project, Inc. (“Panda”), a Florida corporation, and a now defunct entity affiliated with Coda Octopus Ltd. (“Coda Parent”). Panda acquired the shares of Coda Octopus Limited, a UK corporation and a wholly-owned subsidiary of Coda Parent, in consideration for the issuance of a total of 1,432,143 shares of common stock to Coda Parent and other shareholders of Coda Octopus Limited. The shares issued represented approximately 90.9% of the issued and outstanding shares of Panda. The share exchange was accounted for as a reverse acquisition of Panda by Coda. Subsequently, Panda was reincorporated in Delaware and changed its name to Coda Octopus Group, Inc.
In June 2006, we acquired Coda Octopus Martech Limited, which is part of our Services Segment or Marine Engineering Business. This is an English corporation.
In April 2007, we acquired Coda Octopus Colmek, Inc., which is part of our Services Segment or Marine Engineering Business. This is a Utah corporation.
Both Martech and Colmek largely have the same business model, provide similar engineering services and sell to a similar customer base (Martech is UK focused and Colmek is US focused).
In December 2013 Coda Octopus Products Limited established Coda Octopus Products Pty Ltd (Australia) to grow our presence in Australia and New Zealand. These activities were interrupted by the Coronavirus Pandemic in 2020 and since then has been slow to regain momentum.
In 2017 Coda Octopus Products Limited established a subsidiary Coda Octopus Products A/S in Denmark as part of the mitigation strategy relating to the UK withdrawal from the European Union.
In November 2021 Coda Octopus Products Limited established a subsidiary Coda Octopus Products (India) Private Limited intended to gain access to this market and to recruit critical resources for software development.
On October 29, 2024, we acquired into the Group, Precision Acoustics Limited, a company established under the laws of England. This company was acquired to gain access to its expertise and expand our capabilities and offering to the market. It was also acquired to leverage its existing technologies and expertise, which are used in other market sectors, into one of our main markets, the subsea market.
Coda Octopus Group, Inc., is organized under the laws of the State of Delaware as a holding company that conducts its business through its subsidiaries, several of which are organized under the laws of foreign jurisdictions, including England, Scotland, Denmark, The Netherlands, Australia and India. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. courts against these entities, or to effect service of process on the officers and directors managing the foreign subsidiaries. These companies’ operations must comply with the laws of the countries under which they are incorporated, and these laws are likely to be different from the equivalent laws of the United States.
Marine Technology Business (“Products Segment”)
Our Marine Technology Business develops proprietary solutions for both the commercial and defense subsea market. The range of solutions which it offers to the market are complementary and include:
Product
Family
Composition
Real time volumetric imaging sonar
Echoscope®/ Echoscope PIPE® range
Hardware and Software
Diving Technology
Diver Augmented Vision Display (DAVD) range
Hardware and Software
Digital Audio Communications System
Voice HUB_4
Hardware and Software
GNSS-Aided Navigation Systems (providing heading, pitch, yaw and roll data at sea)
Series®
Hardware and Software
Geophysical Solutions
(used in conjunction with sidescan and sub-bottom data acquisition)
DA4G®, GeoSurvey® and Survey Engine
Hardware and software
These products and/or solutions are sold, rented or leased into various marine sectors such as:
● Marine geophysical survey
● Offshore Renewables (“Wind Energy”)
● Underwater construction, inspection and monitoring
● Diving Companies
● Commercial and Defense Diving
● Salvage and decommissioning
● Oil and Gas (O&G”)
● Robotics
● Commercial fisheries
● Environmental, mammal and habitat monitoring
● Underwater Defense Applications
● Marine vehicles and robotics
● Port and Harbor Security, law enforcement and first responders
● Research and education
1. Geophysical Range of Products
The Geophysical range of products is marketed under the brands DA4G®, GeoSurvey® and Survey Engine®. We started our business in 1994 designing and developing the GeoSurvey® software and hardware package for acquisition and processing of sidescan sonar and sub-bottom profiler data. For over two decades, our GeoSurvey has been an industry leading software package in the market for data acquisition and interpretation and provides feature rich solutions and productivity enhancing tools for the most exacting survey requirements. Designed specifically for sidescan and sub-bottom data acquisition, GeoSurvey® has been purchased by numerous leading survey companies throughout the world and has been the workhorse for processing data for Oil & Gas companies for many years. The DA4G® is the hardware acquisition system and both GeoSurvey® and Survey Engine® are complementary software packages which are used for processing the data post-acquisition.
2. Inertial Positioning and Attitude Measurement Systems (“Motion Products”)
We have been selling our GNSS Aided Inertial Measurement Systems for over 15 years. Our current generation of Series® was released to the market in 2021 and is used to provide data on accurate positioning, heading, pitch, roll and yaw at sea. The Series® is an advancement of our® series and is highly complementary to our real time Echoscope® sonar series and they are packaged together to provide a more comprehensive solution. The products within the Series ® range can be sold with or without our Echoscope®.
3. Real Time Volumetric Imaging Sonars (ranging from 3D/4D, 5D and 6D)
We design, develop and supply what we believe is the world’s most advanced series of real time volumetric imaging sonar (Echoscope® and Echoscope PIPE®). This is the culmination of over 25 years of research and development. Our sonar innovations are multi-tiered and extend to hardware, firmware and software, all of which co-exist and are co-dependent on each other. In other words, hardware, firmware and software operate as sub-systems to each other. We believe that the highly complex nature of this new technology will make it extremely difficult to reverse engineer our sonar products.
Prior to 2018, we were selling our third generation of Echoscope imaging sonar (3G Sonar Series). In January 2018, we launched our 4G Sonar Series which were largely form factor revisions, and removed several barriers to adoption, (size, weight, power and price). Building on 4G developments, we continued our innovation and in 2021 released our latest generation of sonar, Echoscope PIPE® to the market which advanced the capabilities of the technology and antecedent sonar products significantly.
We believe that the Echoscope PIPE® technology is superior to the other imaging sonars in the market as it generates real time 3D, 4D, 5D and 6D images of the underwater environment irrespective of low or zero visibility conditions and, unlike conventional sonars, can image a volume of data (as opposed to a slice of data). The capability of our volumetric imaging sonars covers a broad breadth of activities underwater particularly for any form of real time monitoring in 3D, underwater construction, salvaging, placements, decommissioning, obstacle avoidance, complex underwater mapping and real time 3D navigation in zero visibility conditions. Uniquely also, using a single sensor (our Echoscope PIPE®) range we can provide different data outputs to the various parts of the survey team, thus reducing the number of different sensors required on these underwater projects, and ultimately reducing the costs associated with these operations.
About the Company’s 5D and 6D Sonars Innovations
5D and 6D imaging sonars are new to the subsea market and constitute an innovation by the Company. We have several patent applications pending for these innovations.
5D Sonars (Echoscope PIPE®)
The advancement that the Company has made with its 5D Sonars is the ability to process and utilize much more of the data that is acquired and processed by our volumetric imaging sonars. Prior to this, due to limitation of processing technologies, there was an upper limit to the amount of data our antecedent sonars could acquire and process. This meant that in the previous generation of sonars (3G and 4G series) when a signal was emitted, they returned a single range and intensity value per beam. In our 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.
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 sonars (3G and 4G series), we could image and display one 3D image in real time. Our PIPE technology generates multiple 3D images simultaneously in real time using different sonar/acoustic parameters (such as different beamforming methods, frequency, range, field of view, pulse length and other acoustic filters or shading). This allows for different data sets to be provided to different parts of the survey team in real time (thus consolidating the sensors and the associated costs and effectiveness of the solution). We are not aware of any sonars that offer either 5D or 6D Capability.
Echoscope® Sonar Hardware
We believe our 5D and 6D series of sonars herald a significant leap forward in real time subsea imaging as this inventive capability allows a single sonar to provide different parts of the survey operations with multiple real time 3D data sets (as opposed to one 3D dataset) for each part of the survey teams’ requirements.
Current competing imaging technologies such as the single beam, multibeam and scanning sonars are either real time 2D imaging sonars or 3D imaging sonars which are not capable of real time 3D imaging, that is to generate a 3D image underwater of moving objects. The competing 3D technology, the multibeam, which is the current standard bearer for imaging sonars in the market is for mapping of the seabed. The Echoscope® technology can also map the seabed (and is superior to the multibeam for complex mapping and inspection of complex underwater structures) and in addition can image moving objects underwater in 3D. The Echoscope® is therefore the primary tool of choice for inspecting and monitoring in real time 3D all types of underwater operations and is the only choice in poor visibility conditions. In addition, the Echoscope® in many instances enables the user to monitor underwater operations from a surface vessel replacing the Remotely Operated Vehicles (ROVs) thus bringing considerable cost savings to our customers.
Echoscope® Software
The Echoscope® technology is used in conjunction with our internally developed software (USE, Construction Monitoring System (CMS), 4G USE® and 4G USE® DAVD Edition). The software is a critical component of the capabilities and features of our sonar series.
Our software development capability is an important part of our strategy to maintain our lead in designing, manufacturing, and selling state-of-the-art real time volumetric imaging sonars and our DAVD System. It also allows us to be responsive to our customers’ requirements for new features and capabilities around our solutions.
We have now launched our fourth-generation multi-sensor software platform which is marketed under the name “4G USE®”. We have also filed several provisional patents around our 4G USE® which is a multi-sensor platform allowing users to bring in and utilize a variety of sensor data including sonar, positioning, camera, lidar, video processing and other sources of point cloud data and seamlessly merging above and below the water data captured from the sonar and camera. It is also the platform for our DAVD software, and this module is marketed under the brand 4G USE® DAVD Edition.
Diver Augmented Vision Display (DAVD) System - Diving Technology
Funded by the Office of Naval Research (“ONR”) through its Future Naval Capabilities (FNC) program, and in close collaboration with NAVSEA 00C3 and Naval Surface Warfare Center, Panama City Division (“NSWC PCD”) we have developed a diver see-through integrated information display system (DAVD).
DAVD is a complete end-to-end diver management solution incorporating as a key element a high-resolution, fully transparent glass head-up display, HUD, integrated directly inside the diving helmet (for hard hat surface air supply diving) or full-facemask (for tethered and untethered defense, commercial and recreational diving applications) or diving suits. In October 2024, we released to the US Navy for evaluation our new generation of Augmented Reality DAVD HUD. The new generation of the DAVD HUD is much smaller and has a higher resolution and therefore offers great flexibility for use in helmets and facemasks for diving. This new generation removes some of the form factor barriers which limited the types of helmets or masks that could be used with our previous generation of the DAVD HUD. The delivery of the new generation of DAVD HUD is a key milestone under the funded DUS Hardening Program.
Problem In Context
The concept of using a pair of transparent glasses in the HUD to render real time information for underwater applications is protected by patent and Coda Octopus has an exclusive license from United States Department of the Navy at NSWC PCD to exploit this patent for all underwater diving activities.
The US Government as represented by Secretary of the Navy (Arlington, VA), describes the challenge for divers in their patent application as follows:
“By their very nature, underwater dive missions are difficult and inherently dangerous. Furthermore, the complexity of underwater missions can make it difficult or impossible for a diver to retain all pre-mission briefing information. For these reasons, it is critical for underwater divers to have access to environmental data and mission data while in the water. However, in low visibility water environments, divers can rarely see handheld displays or gauges. Accordingly, divers are generally supplied with audio-communicated information from a topside location. The topside-supplied information can include descriptions of sonar images, blueprints, maps, pictures, etc. Unfortunately, it can be very difficult and confusing for a diver to interpret a topside personnel’s audio description of the topside personnel’s visual interpretation. Combining this with unreliable audio communication can lead to mission failures or disasters.”
It further describes the objective of the Invention as:
“Accordingly, it is an object of the present invention to provide an underwater diver with real-time visual information available to topside personnel.
Another object of the present invention is to provide real-time visual information to an underwater diver for viewing in water environments irrespective of water visibility levels.
Other objects and advantages of the present invention will become more obvious hereinafter in the specification and drawings.”
How does DAVD Change this?
The DAVD system addresses all the challenges described above including removing the interpretation of the underwater scene to the topside by providing the diver with real time data and first-person interpretation. The DAVD technology benefits not only the diver and direct supervisor on the surface, but also engineers, end-clients, rescue workers and support personnel who all have a vested interest in a successful and safe diving mission. DAVD provides the location of the diver, the dive support vessel, work site assets and any hazards that are known or discovered in real-time. Real-time compass and depth are also displayed to the diver to reduce disorientation. Visibility for the diver and team is significantly enhanced with both real-time camera and 3D sonar data (providing underwater night-vision) and also high-resolution maps and models of the entire work site and surroundings. Communication is transformed from low quality audio speech to high quality digital audio and video, text messaging, visual alerts and automated navigation guidance. The safety of the diver and team is paramount. DAVD ensures the Diver and Supervisor are visually synchronized and can safely coordinate movement, tasks and instructions with full health monitoring and logging of the entire mission. Using the current method of diving, data and information sharing end when the diver leaves the surface.
The DAVD is a significant technology for both defense and commercial underwater diving applications, and we believe that we have the opportunity to standardize this technology globally. The DAVD comprises both hardware comprising the HUD, Diver Processing Pack (DPP), cables and topside Control Unit (DAVD Control Panel) along with 4G USE® DAVD Edition real time visualization software. These developments and products have been performed by the Company.
The DAVD is currently in early-stage adoption with the US Navy and enjoys the benefit of the classification Authorization for Navy Use (ANU) item. DAVD also is certified for CE markings which covers compliance with the European Union and the United Kingdom health environmental and health and safety requirements.
We are marketing the DAVD (through live demonstrations) globally to navies and the commercial diving market. We have significant interest from a number of reputable global commercial offshore service providers and are working with them for the early adoption of the technology and also a number of European friendly Navies including the UK Ministry of Defense (MOD).
Marine Technology Business Accreditations
Coda Octopus Products Limited has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials Plus certification.
Newly Acquired Business Unit - Precision Acoustics Limited (“PAL”)
PAL, which is UK based, was acquired into the Group on October 29, 2024. This Company is a recognized leader in the ultrasound and acoustic measurement field. Specializing in acoustic hydrophone design and innovative acoustic materials, they provide a comprehensive range of products and solutions, with a primary focus on medical imaging and Non-Destructive Testing (NDT). NDT is used to validate the viability of structures such as aircraft, ship hulls, wellheads and other subsea structures. Their expertise extends to working closely with national and global standard-setting bodies (such as the National Physical Laboratory of the UK), contributing to the establishment of the primary measurement standards in the industry. For segment reporting purposes, this Company financial results will be reported as a third unit under the Products Segment.
PAL has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials certification.
Marine Engineering Businesses (“Services Segment”)
Our Marine Engineering Businesses comprise Coda Octopus Colmek, Inc. which is based in Salt Lake City and Coda Octopus Martech Limited which is based in the United Kingdom.
They largely operate as sub-contractors to prime defense contractors, and their engineering solutions typically constitute sub-components designed for integration into larger defense programs of record where high levels of reliability and quality are essential pre-requisites for securing and maintaining these agreements with their customers. Typically, they prototype subassemblies for their customers and after going through various acceptance tests, including first article inspection approvals, they are then awarded the manufacturing contracts. Many of these manufacturing contracts have a repeat orders profile which typically follows the life cycle of the defense program that is using the subassembly component within the broader program.
These arrangements often give the Marine Engineering Business long term preferred/sole supplier status for the sub-components they supply into these programs and provide them with opportunity to participate in any requirements for technology refresh or obsolescence management for the components supplied. They generally use these long-standing relationships to win more contracts with these customers.
In order to grow, the Marine Engineering Business relies on increasing the number of new programs it attracts annually.
In addition, we are increasingly combining our engineering capabilities with our product offerings. This enables us to offer systems which are complete with installation and support to maximize the utilization of our collective expertise to advance our technologies.
Coda Octopus Martech Limited (“Martech”)
Martech, which is UK-based, operates in the specialized niche of bespoke design and manufacturing services mainly to the United Kingdom 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 skill set includes both hardware and software design.
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 Plus certification.
Coda Octopus Colmek, Inc. (“Colmek”)
Colmek, which is USA-based, are suppliers of embedded solutions and sub-assemblies which they design and manufacture and sell into mission critical integrated defense systems such as the Close-In-Weapons System (CIWS). This business was established 1977 and has been supporting several significant US defense programs for over 40 years, including Raytheon’s CIWS and Northrop Grumman’s Mine Hunting Systems Program (AQS-24). Colmek’s business model entails designing sub-assemblies which are components of broader defense programs. Colmek is the sole source for the parts that they supply to these programs. This business model ensures recurring and long tail revenues since we continue to supply parts, typically for the life of the program, which can span decades. Their work scope typically extends to both hardware and software design.
Colmek has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and NIST (National Institute of Science and Technology) 800-171 certification.
Sales and Marketing
The Marine Technology Business markets its products through its internal sales team, website, industry events such as trade shows, webinars, live demonstrations of the technology, industry relationships and a network of non-exclusive agents in foreign countries such as Japan, China, Korea and South Africa.
PAL markets its products through its internal sales team, its website and a network of non-exclusive agents in Japan, China, India and Korea.
Colmek markets its products through its internal sales team, website, industry events and agents in the US and Canada.
Martech markets its products through its internal sales team, website and industry events.
Competition
In our Marine Technology Business (Products Business), we are exposed to the following competitive challenges:
Data Acquisition Products (Geophysical Products)
A small percentage of our revenue is generated from our geophysical range of products.
The industry for data acquisition and processing systems for sidescan and sub-bottom profiler data is fragmented with several companies occupying niche areas, and we face competition from different companies with respect to our different products.
In the field of geophysical products, Triton Imaging Inc., a US-based company, now part of the ECA Group (Toulon, France), Chesapeake, a US-based company, and Oceanic Imaging Consultants, Hawaii, USA, dominate the market.
GNSS Aided Inertial Positioning and Attitude Measurement Systems (“Motion Products”)
A small percentage of our revenue is generated from our Series®.
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. We believe that our market share in this market segment of motion sensing equipment is relatively small. We sell our MOTION range as part of our equipment suite to complement our Echoscope® real time 3D sonar range as well as supplying it individually. The development and introduction of our Series® of GNSS Aided Inertial Positioning and Attitude Measurement System® constitutes our new generation of Motion Products and gives us the opportunity to increase our market share.
Real Time 3D/4D/5D and 6D Volumetric Sonar
A significant portion of our revenue is generated from our Echoscope® technology.
In the field of Real Time 3D/4D/5D imaging, we are unaware of other companies offering a similar product. In this context it is important to understand some of the 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. 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.
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 and Kraken Robotics are examples of companies offering imaging sonar solutions (such as multibeam sonars, SAS 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.
Specifically, we believe that they do not have the same capabilities as our Echoscope® technology in terms of real time inspection and monitoring by generating 3D, 4D, 5D and 6D images of moving objects underwater including in environments in low or zero visibility conditions. Notwithstanding it should be noted that Teledyne has acquired a significant number of substantial subsea companies (examples are Reson and BlueView). Teledyne has much greater resources, liquidity and market reach than our Company and has many operating verticals. 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. 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. Furthermore, we believe that the addition of Precision Acoustic’s expertise in this area will help the Company in maintaining its lead in this area. We are not aware of any other imaging sonars in the market capable of generating real time 5D and 6D imagery underwater, which are Coda Octopus inventions. The innovations around Echoscope PIPE® are the subject of numerous patent applications. 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. These two patents are important method patents since we are handling significantly more data than in our previous generation of sonars.
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. We intend to continue our research and development activities to continually improve our products, seek new applications for our existing products, develop new innovative products and grow the market for our products and expertise.
Diver Augmented Vision Display System (“DAVD”)
A material portion of our revenue is generated from our DAVD technology.
There are various diving systems in the market that provide a combination of different aspects of our DAVD system but no systems that directly compete in the form of embedded fully transparent glasses mounted internally within the diver helmet or mask for visual display of a range of data and augmented reality information which can be directly consumed by the diver underwater. This concept is protected by US Patent 10,877,282.
The DAVD system provides a unique diver centric system with localized and external sensors to provide increased safety, scene awareness and vital communication in the form of Digital Audio, Ultra-Low-Light Video, Text and technical instruction and access to a complete media hub for effective communication between diver and supervisor. The DAVD system provides the following capabilities:
● Fully Transparent High-Definition Head-Up Display mounted internally within supported Dive Helmets and Dive Masks, including Kirby Morgan KM37, KM37SS, KM97 and SL17 Helmets, as well as the Interspiro Divator MK II, OTS Guardian and Dräger Panorama Nova Dive
● Fully integrated 1st person perspective digital low-light camera with advanced video processing and real-time edge enhancement for Diver and Dive Supervisor
● Fully integrated noise-cancelling Digital Audio at source, replacing legacy communications
● Integrated Diver Head Tracking for accurate 3D scene visualization with full support for subsea positioning systems for accurate Diver positioning
● Telemetry Information on demand including Dive Timers, Depth and Compass Heading, Live position Lat/Long (when connected to external diving positioning system), Waypoint Range and Bearing as well as external Dive Computer data
● Instant Digital Voice and Text Communication between Dive Supervisor and Diver, including auto and pre-defined messaging
● Transmit unlimited on-demand media to Diver including Images, Instructional Videos, Technical Drawings and other assets to assist in live operations
● Creation and transfer of unlimited step-by-step mission instructions with text, video and image support for common diver tasks and operations
● Full Mixed-Reality 3D Display for Diver using live Sonar, pre-surveyed Sonar data and 3D models
● Divers HUD Display fully adjustable between 2D Mode, and 3D Mode with 1st person and 3rd person perspective
There are several diver related products and sensors that can be worn by the diver such as telemetry systems, navigational aids, dive computers, video and sonar systems and probes and sensors such as magnetic and thickness. Each of these systems typically have an independent display, typically on the device or wrist worn.
Video systems generally provide no direct benefit to the diver and are intended for top-side visualization. The DAVD provides video data to the diver directly.
More recent advances in technology have introduced head mounted display (HMD) as either replacement or as additional display close to the divers’ eyes. These are typically presented in the form of a monocular display mounted externally to the divers’ mask in which the diver must look at this display through a single eye. These are not intended for long term use and more for occasional glance at data for reference. Dual HMDs are also provided in certain products to replace what the diver can see through the mask with a computer display.
The drawback of such HMD is that the diver loses all sense of the natural surrounding and the real environment is placed using the computer display. Examples of monocular and dual lens HMD include Shearwater Nerd 2, Tritech DMD (Diver Mounted Display) and Blueprint Subsea Artemis HMD.
Furthermore, a significant challenge for diving is the operating environment where zero visibility conditions typically prevail. Combining our DAVD with our Echoscope® removes this barrier for diving operations.
In our Services Segment, we are exposed to the following competitive challenges:
Newly acquired business unit, PAL
PAL sells several products some of which are customized for the customer’s specific application. It is exposed to the following competitive challenges:
Needle and Membrane Hydrophones and Fibre-Optic Hydrophones Market.
For its needle and membrane hydrophone ranges, which are a highly specialized range of products, competition is limited. The principal competitors offering both needle and membrane hydrophones are Onda Corporation, Sunnyvale, CA, USA and Gampt, Merseberg, Germany. For its fibre-optic hydrophones range of products, its main competitors are Onda Corporation, Sunnyvale, CA, USA, RP Acoustics, Stuttgart, Germany and Muller Instruments, Oberursel, Germany.
Single element Transducers Market
PAL supplies single element transducers. There are many suppliers of ultrasonic transducers including Olympus, USA, Imasonic, Besancon, France; Vermon, France; Sonatest, UK; Waygate Technologies, USA as well as numerous smaller organizations in China. However, these competitors offer commercial-off-the-shelf (COTs) products whereas PAL offers custom design single element transducers based on its customers’ specifications and therefore competition is limited for this specialist customization capability).
Automated Measurement Systems Market
PAL supplies Automated Measurement Systems. Its main competitors in this area are Onda Corporation, Sunnyvale, CA, USA; Acertara Acoustic Laboratories, Longmont, CO, USA and Gampt, Merseberg, Germany. These companies offer acoustic measurement systems which are comparable with the PA UMS system. However, PAL faces less competition for its Automated Measurement Systems since its focus is on customization to their customers’ specifications.
Passive Acoustic materials Market
PAL supplies passive acoustic materials. Competition is limited as it has a license from the UK National Physical Laboratory to distribute a wide range of ultrasonic absorbers and encapsulants incorporating NPL’s intellectual property.
Measurements and Calibration Market
As a provider of measurements and calibration services in the UK, PAL’s main competitor is National Physical Laboratory (NPL), UK who is the only provider of ISO17025 accredited hydrophone calibration services, in addition to the ultrasonic power calibration service. They also provide ultrasonic and underwater acoustic field characterization services. However, there is a long-established collaboration between PAL and NPL, and both organizations act as supplier and customer of each other. Elsewhere, numerous notified bodies or national measurement institutions (TuV, Germany; SGS, France; GUM Poland; PTB, Germany) offer some specific measurement services.
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. Martech and Colmek compete with larger contractors, such as the primes, in the defense industry. Typical among these are Ultra Electronics, BAE Systems, Thales, Raytheon and Northrop Grumman, all of whom are also partners on various projects. The strongest competitors are often the prime contractors themselves as they predominantly have the option to execute the work package internally as opposed to subcontracting these.
Intellectual Property
We operate in an industry in which innovation, investment in new ideas and protection of our intellectual property rights are critical for our continued success. When we can, we protect our innovations and inventions through a variety of means, including, but not limited to, applying for patent, copyright, and trademark protection domestically and internationally, and protecting our trade secrets. We incentivize our employees to innovate through our Patent Reward Scheme. In the last 3 years we have advanced our existing sonar technology and have filed several significant patents applications pertaining to these inventions including our 5D and 6D innovations. Furthermore, we have recently been awarded a patent which concerns a method of predicting and adjusting the laying of cable using sonar imaging. This is a significant patent for the Offshore Renewables Market, which as the world makes the energy transition is set to expand globally. Our Echoscope® technology is used for real time monitoring of cable installations for many of these offshore renewable projects. This recent patent covers a method which automatically predicts the cable touchdown point and removes the need for the Echoscope® operator to manually determine and log the cable touchdown point.
Patents
Our patented inventions along with our strategy to enhance these inventions are at the heart of the Company’s strategy for growth and development. We expend a material part of our 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.
Our patent portfolio consists of the following:
Patent No.
Description
Expiration Date
US 7,466,628
Concerns a method of constructing mathematical representations of objects from reflected sonar signals
January 1, 2027
US 7,489,592
Concerns a method of automatically performing a patch test for a sonar system, where data from a plurality of overlapping three-dimensional (3D) sonar scans of a surface, as the platform is moved, are used to compensate for biases in mounting the sonar system on the platform
March 5, 2027
US 7,898,902
Concerns a method of representation of sonar images allowing 3D sonar data to be represented by a two-dimensional image
June 13, 2028
US 8,059,486
Concerns a method of rendering volume representation of sonar images.
April 16, 2028
Japan
Concerns a method for drilling/levelling by an underwater drilling/levelling construction device
January 13, 2031
Japan
Concerns a method of construction management for a 3D sonar device
October 13, 2030
US 8,854,920
Concerns a method of volumetric rendering of 3D sonar data sets
June 22, 2033
US 9,019,795
Concerns a method of object tracking using sonar imaging through point matching between 3D data sets
November 30, 2033
US 10,088,566
Concerns a method of object tracking using sonar imaging using a bounding sphere for object tracking
November 25, 2036
US 10,718,865
Concerns a method of compressing beamformed sonar data
March 1, 2039
US 10,816,652
Concerns a method of compressing sonar data
October 28, 2038
US 11,061,136
Concerns a method of tracking unknown possible objects with sonar
March 28, 2039
**US 11,204,108
Concerns a method of predicting and adjusting the laying of cable using sonar imaging.
March 22, 2039
*US 11,448,755
Concerns a method of correcting beamformed data through split aperture beamforming
June 3, 2041
US11,579,288
Concerns a method of pseudo random frequency sonar ping generation for the purposes of data and hardware cost reduction
April 14, 2038
JP7224959
Concerns a method of compressing sonar data
February 28, 2038
US10, 877,282
Head Up Display System for Underwater Face Plate (within an underwater dive helmet or dive mask)
License for exclusive use granted to Coda Octopus.
US 11,846,733
Concerns a method of stabilizing sonar images
October 30, 2035
JP
Concerns a method of pseudo random frequency sonar ping generation to reduce data and hardware cost
April 14, 2038
US 11,874,407
Concerns technologies for dynamic, real time, four-dimensional volumetric multi-object underwater scene segmentation
February 19, 2040
US11,789,146
Concerns a combined method of location of sonar detection device
August 5, 2039
Trademarks
We own the registered trademarks listed below and they are used in conjunction with the products that we market and sell:
Coda®, Octopus®, CodaOctopus®, CodaOctopus & Design®, Octopus & Design®,®,®, Series®, Echoscope®, Echoscope 4G®, Echoscope 5D®, 5D Echoscope®, Echoscope 6D®, 6D Echoscope®, Echoscope PIPE® Ping-Pong Echoscope Sonar®, Ping-Pong Echoscope®, Ping-Pong Sonar®, Echoscope Sequencer® 4G Underwater Survey Explorer®, 4G USE®, Echoscope Sequencer®, Survey Engine®, Dimension®, DAseries®, GeoSurvey® CodaOctopus® Air, CodaOctopus® Vantage®; CodaOctopus® UIS; CodaOctopus® USE, Sentiris® , Thermite®; PA and PA Precision Acoustics.
In addition, we have registered several internet domain names including www.codaoctopus.com; www.codaoctopusgroup.com; www.colmek.com and www.martechsystems.co.uk; www.codaoctopusmartech.com; and www.acoustics.co.uk.
Research and Development (“R&D”)
Research and Development is foundational to our business strategy to ensure our growth strategy and maintain our competitiveness. The main costs that are incurred in this area are wages and salaries, researching, prototyping, and validation and testing. The acquisition of PAL into the Group on October 29, 2024, may result in an increase in R&D expenditures as we seek to take advantage of PAL’s expertise with a view to bringing more products and solutions to the market.
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. 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.
Government Regulation
We sell our products and services internationally and therefore we are subject to numerous laws concerning general business regulations in the various jurisdictions in which we operate. Governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs) may have a material impact on our business and directly affect our revenue. We are also subject to compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties. We are subject to laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes.
Furthermore, many of our products are subject to export control regimes including in the United States, United Kingdom, Denmark, and Australia. Where our products are subject to such export control requirements, they may only be exported to our customers if there is a valid export license granted by the relevant government body. 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. Our international activities are significant to our revenues and profits (see Note 16 Disaggregation of revenue). We are therefore dependent on obtaining, on a timely basis, export licenses to many foreign jurisdictions including China.
In addition, as a provider for the US Government, we may be subject to numerous laws and regulations relating to the award, administration, Defense Federal Acquisition Regulations (“DFARs”) and performance of US Government contracts, including the False Claims Act. Non-compliance found by any one agency could result in fines, penalties, debarment, or suspension from receiving additional contracts with all US Government agencies. Given our dependence on US Government business, suspension or debarment could have a material adverse effect on our business and results of operations. In addition, the costs of complying with some of the regulations including DFARS may be prohibitive.
We are dependent on Government funding for a significant part of our revenue generation. To secure certain types of Defense contracts, we need as a pre-requisite to meet Defense Federal Acquisition Regulations on security (including regulations on the type of IT system which must be in place, receiving, handling and storing certain classes of materials). In many instances we do not hold these credentials, and we may therefore not qualify to compete for such contracts.
We are also required to maintain certain accreditations including ISO 900 accreditation, Cyber Essentials, Cyber Essential Plus and NIST (National Institute Science and Technology).
Employees
As of the date hereof, we employ approximately 103 employees worldwide, of which 15 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. A number of our employees hold PhD’s in the area of their specialization. None of our employees are employed under a collective agreement and we have not experienced any organized labor difficulties in the past.
Available Information
Our internet address is www.codaoctopusgroup.com, where we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities Exchange Commission (“SEC”). Our SEC reports can be accessed through the investor relations section of our website. With the exception of our annual and periodic reports (Form 10-K and Form 10-Q), the information found on the Company’s website is not intended to be incorporated by reference into this or any other report we file with or furnish to the SEC and are expressly excluded from any such form or reporting.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Not required for smaller reporting companies.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2. PROPERTIES
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 include office space, training center and light manufacturing 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. These premises are owned by Coda Octopus Colmek.
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.
Copenhagen, Denmark
Coda Octopus Products A/S, a Danish Subsidiary was established as a mitigation strategy in relation to the UK leaving the European Union which has limited trade relations with EU member states. It leases business premises comprising 1,450 square feet for its operations. The lease is subject to 6 months’ notice of termination.
Annual rent is DKK 142,893 plus Value Added Tax (being an equivalent of $22,903) 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. The building comprises both office space and manufacturing and testing facilities. The rent paid to Coda Octopus Products Limited is $59,109 per annum.
Higher Bockhampton, Dorset, United Kingdom
Precision Acoustics Limited leases business premises comprising 6,501 square feet used for both office space, manufacturing and testing facilities. The lease is for a fixed period (with no provision for early termination) and expires on March 31, 2033. The annual rent for these premises is $58,350 per annum.
All non-US Dollar denominated rents are stated according to prevailing exchange rates as of the date of each respective lease agreement.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We 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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has been traded on the Nasdaq Capital Market under the symbol “CODA” since July 19, 2017. 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. 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, 2024 HIGH LOW
First Quarter $ 7.12 $ 5.21
Second Quarter $ 7.04 $ 5.26
Third Quarter $ 7.49 $ 5.86
Fourth Quarter $ 9.03 $ 6.80
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
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.
As of October 31, 2024, we had no authorized share repurchase programs.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. 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. 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.
This section of Form 10-K discusses fiscal 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 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 www.codaoctopusgroup.com
General Overview
We operate two distinct business segments: the Products Segment and Services Segment. The Products Segment comprises two distinct business units: the Marine Technology Business, (which serves the subsea market), and PAL. The Services Segment comprises two engineering businesses.
Marine Technology Business
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 underwater imaging, surveying and diving market. It has been operating as a supplier of solutions comprising both hardware and software products for over 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. 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 while in the USA, Europe and the Middle East we sell directly. We also rent our products and solutions, particularly to tier-one offshore service providers who prefer accounting for offshore equipment as an operating expense rather than capital expense.
Our imaging sonar technology products and solutions marketed under the name of Echoscope® and Echoscope PIPE® are used in a wide range of underwater construction activities (which include real time monitoring, placements or decommissioning), 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, robotics and 3D perception applications, fisheries, commercial and defense diving, and marine sciences sectors. Uniquely the Echoscope® technology is a single sensor for multiple underwater applications which allows the market operators to consolidate their underwater sensor requirements.
Our novel diving technology is distributed under the name “CodaOctopus® DAVD” to the global defense and commercial diving markets and is relatively new to the market. The DAVD system which embeds a pair of transparent glasses in the HUD is used as the data hub for displaying comprehensive real time data to the diver underwater including augmented reality data. DAVD technology allows both the diver and the dive supervisor to visualize in real time the same underwater scene and data. We believe that the DAVD system has the potential to radically transform how diving operations are performed globally because it provides a fully integrated singular system for topside control and a fully connected HUD system for the diver, allowing both the topside and diver to share a range of critical information including depth (pressure and temperature), compass and head tracking, real time dive timers and alerts, diver position and navigation, ultra-low light enhanced video system and enhanced digital voice communications. Limitations of current diving operations are that the diver only shares analog voice communications with the dive supervisor on the surface, instructions are relayed verbally, and there is no real time information including real time navigation, tracking and mapping of the dive area available to the diver. The topside must also manage several independent systems for video, communications, and positioning. The Company’s DAVD solution addresses these deficiencies. Another critical part of our solution is that by using the Company’s Echoscope® technology, diving can be performed in zero visibility conditions, a common problem which besets these operations and can result in significant costs to the offshore service provider.
Although we generate most of our revenues from our range of real time 3D sonars and DAVD, we have a number of other products which we supply to the marine offshore market such as our Series®, DA4G, GeoSurvey and Survey Engine®. We also have added a new product for use in the diving market, a digital communication system (Voice HUB 4) which advances the current analog-based communication technology to a digital based communication technology. 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. We also provide technology customization services, particularly in the defense market and around our DAVD solutions where this is tailored for particular markets and applications.
Newly acquired business unit within the Products Segment
We acquired PAL into the Group on October 29, 2024. PAL had no material income statement activity in the two days from the acquisition date October 29, 2024 through to October 31, 2024, the date of the Company’s fiscal year end. Therefore, the Company’s audited Consolidated Statements of Income and Comprehensive Income (“Income Statement”) reported in this Form 10-K for the year ended October 31, 2024, do not include any revenue or expenses relating to PAL. Therefore, to the extent that the Management Discussions relate to Income Statement activity, this does not include the recently acquired PAL.
Engineering Business
The Services Business has operations in the USA and UK. It is a trusted long-term Department of Defense (DoD) supplier. Its central business model consists of working with Prime Defense Contractors to design and manufacture sub-assemblies for utilization into larger Defense mission critical integrated systems (“MCIS”). An example of such MCIS is the US Close-In-Weapons Support (CIWS) Program for the Phalanx radar-guided cannon used on combat ships. These proprietary sub-assemblies, once approved within the MCIS program, afford the Services Business the status of preferred supplier. Such status permits it to supply these sub-assemblies and upgrades in the event of obsolescence or advancement of technology for the life of the MCIS program. Customers include prime Defense contractors such as Raytheon, Northrop Grumman, Thales Underwater and BAE Systems. The typical scope of services provided by this business extends to concept, design, prototype, manufacture, and post-sale support including maintenance and obsolescence management.
We have long-standing relationships with Prime Defense Contractors, and we use these credentials to secure more business. 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.
These business units have established synergies in terms of customers and specialized engineering skills 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. United Kingdom’s withdrawal from the European Union (EU) - “Brexit”
This has affected our Business in several important areas:
It has reduced demand for our products and services in EU member states. Recent Bank of England analysis (October 2024) has concluded that the UK leaving the European Union single market, has impacted demand for British products and services in all areas.
It has reduced the availability of the pool of highly skilled workers. This has made recruitment for skills challenging and constrains our ability to innovate rapidly.
Our technologies (both DAVD and Echoscope®) require training and support of customers deployments. We do not qualify for work permits in the EU member states and therefore cannot support our EU customers as we did prior to Brexit.
Our shipments to the EU member states are subject to custom process. This results in increased costs and delays in the processing of shipments. This is a further impediment for our customers and makes selling into these markets more challenging.
Because we have to set up various offices in the European Union member state countries to gain seamless access to these markets (Denmark and the Netherlands), it increases the cost of our operations and therefore our overheads without any corollary increase in sales to defray these costs.
More broadly, it has interrupted the free flow of our products and services in the EU member states which has resulted in reduced demand.
B. Currency Risks:
The Company’s operations are split between the United States, United Kingdom, Denmark, and the Netherlands. A significant proportion of our consolidated revenues are generated outside of the United States by our foreign subsidiaries in the United Kingdom (“UK”) and Denmark and in the 2024 FY our foreign subsidiaries generated $12,936,755, representing 63.7% of our consolidated revenue. In addition, a significant part of our assets and liabilities is held in British Pounds, Danish Kroner and Euros by these foreign subsidiaries. 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 using the average exchange rates in effect during the 12-month reporting period. Significant currency fluctuations (particularly the British Pound and/or the Danish Kroner, Euros, against the US Dollar) may (positively or negatively) 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. In the 2024 FY, for the purpose of reporting revenue and expenses, the value of the British Pound and Danish Kroner when compared to the 2023 FY increased against the USD by 3.4% and 1.1%, respectively. For the purpose of reporting assets and liabilities, the British Pound and the Danish Kroner both increased by 6.0% and 2.8%, respectively against the USD when compared to the 2023 FY. We also hold cash and cash equivalents in foreign currencies such as British Pound, Euros, Danish Kroner. When the U.S. Dollar strengthens compared to these currencies, cash and cash equivalents balances when translated, may be materially less than expected and vice versa. The impact of currency fluctuations is discussed more fully below under Item 2 - “Inflation and Foreign Currency”. See also Note 2 (Summary of Accounting Policies) - “Foreign Currency Translation” to the audited consolidated financial statements.
Furthermore, we sell our goods and services globally. The exchange rate of the foreign currency used by our customer for the purchase of our goods and services against our functional currency may make the purchasing of our products unattractive from a pricing point of view. In the Current FY, revenues from Japan, a key strategic market, were significantly down due to the depreciation of the Japanese Yen against major currencies such as the USD and British Pound.
C. Inflation
Inflation measured as the Consumer Price Index has affected the global economy since calendar year 2022, and which was caused by supply chain issues resulting from the coronavirus pandemic and which has since been further compounded by the war in Ukraine which has affected the price of commodities such as oil. Inflation has since remained volatile in the countries in which we operate and continues to be a threat to the global economy. Recently inflation has been falling in these countries but remain volatile and in the twelve months to October 31, 2024, these were:
Denmark 1.6% - source: Statistics Denmark,
UK 3.2% - source: Office of National Statistics (ONS); and
USA 2.6% - source: U.S. Bureau of Labor Statistics.
Although in the 2024 FY inflation has been falling, prices which have increased due to inflation over the last two years including our raw material costs and wages have remained at their inflationary-inspired level and have become the base price, a large part of which we have not been able to pass on to customers. Furthermore, the Bank of England has indicated that global shocks cannot be ruled out and these may cause inflation to increase. For example, developments in the Middle East could increase inflation by causing oil prices to rise.
Inflation affects our business in a number of areas including reducing demand for our goods and services, increasing our cost of operations and materials and therefore our overall financial results. See “Inflation and Foreign Currency” section of this Form 10-K.
D. Geopolitical Landscape
(i) Relationship with the Second Largest Economy in the World: China
We sell our products globally and increasingly to Asia. Asia is the fastest growing economies for our technology and solutions. The recent change in both the US and UK Governments’ political stance towards trade with China, directly affects the sale of our products to customers based 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. Many Chinese entities have been included on the US Bureau of Industry and Security blacklist where there is a presumption of denial of grant of export licenses.
The UK Government is generally in lock step with the US Government’s position and has refused to grant export licenses for several of the Company’s applications for end users in China. The curtailment of access to this market due to refusal to issue export licenses is likely to significantly impact our revenues from Asia.
The removal of China as a trading partner (the second largest economy in the world) 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. After significant business development in China, we had started to see persistent and credible growth for our products in this market. However, with the ongoing geopolitical climate, we do not expect to see increased sales in China. We also believe that where technologies are made unavailable to China, China will endeavor to find alternative source of supply or innovate in the areas where restrictions are placed by Western governments and will be more harmful to companies.
(ii) War in Ukraine:
The ongoing war in Ukraine impacts our Services Business as most defense spending is now directed toward land-based applications rather than naval based applications. This therefore reduces the opportunities for the Services Business, thus impacting revenue.
(iii) Global instability caused by ongoing conflicts
In general, conflicts create global instability in many ways including disrupting the supply chain and shipping routes. Such conflicts may reduce demand for our products and also increase inflation.
E. 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, we have experienced a significant increase in the costs of raw materials caused by inflation. These increases may make the costs of our products uncompetitive and affect demand and 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 for our business operations. The inflationary conditions coupled with the shortage of skilled workers in the countries in which we operate make it difficult for us to compete for these skills. Furthermore, the competitive marketplace for labor also results in high turnover in the workforce which impacts our business in several areas.
Furthermore, 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. 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. The technology space is inherently uncertain due to the fast pace of innovations and therefore we can give no assurance that we can maintain our leading position in these areas or that innovations in other areas may not surpass our solutions that we currently supply to the subsea market. 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.
H. Concentration of Business Opportunities Where the Sales Cycle is Long and Unpredictable
The Services Business revenues are highly concentrated and are largely generated from subcontracts with a small number of Prime Defense Contractors. The sales cycle is generally protracted, which may affect our revenues. It is also dependent on the US federal government appropriating budget for Defense projects and where the federal government is unable to find consensus in the US Congress, this affects the timely award of sub-contracts from Prime Defense Contractors to our Services Business, which is reliant on these awards. Furthermore, the Marine Technology Business’ key opportunities which are critical to its growth strategy are in the Defense market and therefore this business segment is also reliant on funding from Defense Programs. Due to the protracted nature of the government procurement process and cycle for Defense spending under federal and/or state budgets, the sales cycle can be long, unpredictable and subject to variation by the different Administrations, thus affecting timing of orders, revenues and our overall growth plans.
I. Interest Rates
The change in monetary policy vis-à-vis interest rates has in general affected some of our key sectors such as offshore renewables and underwater construction. The increase in interest rates has impacted on the viability of a number of underwater projects resulting in increased operational costs, which in turn has reduced the demand for our underwater solutions.
J. Reduced Funding Available for Defense Programs resulting from the use of Continuing Resolutions to authorize ongoing spending under Defense Programs
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 is derived from government funding in the Defense sector. In FY 2024 many U.S. Defense Programs were funded through continuing resolution (as opposed to a fully appropriated Federal Budget). Funding programs through the continuing resolutions mechanism means that spending priorities shift caused by lower availability of funds. Both Segments have been affected by this including the Products Business DAVD Hardening Program. Consequently, our revenue from the Americas in the 2024 FY decreased by 20.0% and was $7,287,561 compared to $9,110,498 in the 2023 FY. See Note 16 (Disaggregation of Revenue) for more information on this impact on our Business. Many Defense Programs will continue to operate under continuing resolution until the new Administration approves a Federal Budget and line-item appropriations are completed, which may be several months after the new Administration takes office and therefore, we believe we will continue to be impacted until this is resolved.
Critical Accounting Policies and Estimates
The Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. 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. We evaluate our estimates based on our historical experience and various other assumptions that are believed to be reasonable under the circumstances. These estimates relate to revenue recognition, the assessment of recoverability of goodwill and intangible assets, recognition and measurement of deferred income tax assets and liabilities, the assessment of unrecognized tax benefits, and others. In addition, in connection with our acquisition of PAL, we determined the fair value of PAL’s opening balance sheet, which determination relied on numerous estimates about the current and future operations of PAL. Actual results could differ from those estimates and may have material effects on our operating results and financial position.
We believe the following accounting estimates are most critical to understanding our consolidated financial statements. See “Note 2 - Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements for a full description of our accounting policies.
Revenue Recognition
Revenues are earned under formal contracts with our customers. In respect of our Marine Technology Business these are derived from both sales and rental of underwater technologies and in respect of our Engineering Business from the supply of engineering services. Our contracts do not include the possibility for additional contingent consideration so that our determination of the contract price does not involve having to consider potential variable additional consideration. Our product sales do not include a right of return from the customer.
Regarding our Marine Technology Business, all our products are sold on a stand-alone basis and those market prices are evidence of the value of the products. To the extent that we also provide services (e.g., installation, training, etc.), those services are either included as part of the product or are subject to written contracts based on the stand-alone value of those services. Revenue from the sales 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.
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 fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the periods in which the related services are rendered.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (ASC 740). Under ASC 740, deferred income tax assets and liabilities are recorded for the income tax effects of differences between the bases of assets and liabilities for financial reporting purposes and their bases for income tax reporting. The Company’s differences arise principally from the use of various accelerated and modified accelerated cost recovery system lives for income tax purposes versus straight line depreciation used for book purposes and from the utilization of net operating loss carry-forwards.
Deferred tax assets and liabilities are the amounts by which the Company’s future income taxes are expected to be impacted by these differences as they reverse. Deferred tax assets are based on differences that are expected to decrease future income taxes as they reverse. Correspondingly, deferred tax liabilities are based on differences that are expected to increase future income taxes as they reverse. “Note 11 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.
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. GAAP.
Goodwill and Intangible Assets
Goodwill and intangible assets consist principally of the excess of cost over the fair value of net assets acquired (i.e., goodwill), customer relationships, value of technology, non-compete agreements and licenses. Goodwill was allocated to our reporting units based on the original purchase price allocation. Goodwill is not amortized and is evaluated for impairment annually or more often if circumstances indicate impairment may exist. Customer relationships, value of technology, non-compete agreements, patents and licenses are amortized on a straight-line basis over periods of 2 to 15 years. The Company amortizes its intangible assets using the straight-line method over their estimated period of benefit. We evaluate annually 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. If the fair value, which is based on future discounted cash flows, exceeds the carrying amount, goodwill is not considered impaired. The Company has adopted Accounting Standards Codification 2017 - 04, Simplifying the Test for Goodwill Impairment, which permits the Company to impair the difference between the carrying amount in excess of the fair value of the reporting unit as the reduction in goodwill.
At the end of each financial year, we evaluate goodwill on a separate reporting unit basis to assess recoverability, and impairments, if any, are recognized in earnings. An impairment loss would be recognized in an amount equal to the excess of the carrying amount of the reporting unit compared to the fair value of the reporting unit. To date, the Company has not had any goodwill impairments.
Fiscal Year 2024 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
FY Means the Fiscal Year ended October 31, 2024
FY Means the Fiscal Year ended October 31, 2023
Current FY Means the Fiscal Year ended October 31, 2024
Previous FY Means the Fiscal Year ended October 31, 2023
It should be noted that our audited Consolidated Statements of Income and Comprehensive Income (“Income Statement”) for the 2024 FY do not include PAL which was acquired into the Group on October 29, 2024 (two days prior to the Company’s fiscal year end on October 31). PAL had no material Income Statement activity during that period. As such, to the extent that the Management Discussions and Analysis below relate to Income Statement activity, these do not include PAL.
In the Current FY our overall consolidated financial results were up when compared to the Previous FY. Our consolidated results of operations include the results of the Company’s foreign subsidiaries. Our foreign subsidiaries’ results are translated from their respective functional currencies into United States Dollar (USD) for reporting purposes. Currency fluctuations can therefore impact (positively or negatively) on our consolidated results including revenue, our profitability and the value of our assets and liabilities included on the consolidated balance sheet. In the Current FY our consolidated revenue was $20,316,161 compared to $19,352,088 in the Previous FY, representing an increase of 5.0%. When applying the Constant Rate (that is the foreign exchange rate applied in Previous FY when translating from the foreign subsidiaries’ functional currencies to USD for reporting purposes), our revenue would have been lower in the Current FY by 1.7% or $350,986 and therefore our consolidated revenue was positively impacted. Gross Profit Margin increased by 2.5%, reflecting changes in the mix of sales in the reporting period. Total operating expenses increased by 2.9% in the Current FY and were $10,588,974 compared to $10,291,503 in the Previous FY. Income from operations increased by 30.8% and was $3,584,131 in the Current FY compared to $2,739,552 in the Previous FY. Net income before taxes in the Current FY increased by 34.8% and was $4,611,288 compared to $3,421,228 in the Previous FY.
Although in the Current FY our revenue increased by 5.0% when compared to the Previous FY, revenue emanating from the strategic Defense sector, an important pillar for our growth strategy, was down. This was due to the reduced level of funding under US Defense Programs caused by the use of continuing resolutions to fund these programs. The use of continuing resolution means funding priorities shift to accommodate the reduced levels of funding available for these programs. The shift in priorities may therefore affect the allocation of funding for programs which we budget for internally. For this reason, in the Current FY revenue emanating from the Americas fell by 20.0% and was $7,287,561 compared to $9,110,498 in the Previous FY (See Note 16 “Disaggregation of revenue” for more information on the split of our revenue in the reporting period). We anticipate that our business will continue to be impacted until the new Administration adopts a Federal Budget and line-item appropriations are made. This could be several months from the new Administration taking office and we therefore anticipate that our Q1 2025 financial results will be impacted by this.
Segment Summary
Marine Technology Business
The Marine Technology Business forms part of the Products Segment.
In the 2024 FY, the Marine Technology Business generated $12,806,603 or 63.0% of our consolidated revenues compared to $12,119,066 or 62.6% in the 2023 FY, representing an increase of 5.7%. Gross Profit Margin was higher at 77.9% in the 2024 FY compared to 76.7% in the 2023 FY, representing an increase of 1.2 % points, reflecting the mix of sales and reduced commission costs. In 2024 FY total operating expenses increased in the Marine Technology Business by 13.2% and were $5,833,972, compared to $5,153,456 in the 2023 FY. This is due to an increase in various areas of our SG&A expenditure including wages and salaries, marketing, general office costs and exchange rate variance. Income from operations in the Marine Technology Business was $4,148,090.
Although in the 2024 FY revenue in the Marine Technology Business increased by 5.7%, this segment was impacted by reduced revenue from the Americas resulting from reduced orders under Defense Programs caused by the shift in spending priorities resulting from the use of continuing resolutions to fund these programs. As a result, the Marine Technology Business revenue from the Americas decreased by 33.4% and was $2,838,857 in the 2024 FY compared to $4,263,883 in the 2023 FY.
In the 2024 FY revenue generated from rentals increased by 84.1% and was $2,328,781 compared to $1,264,804 in the 2023 FY, which offset the reduction in outright sale of products in the 2024 FY which was $7,210,169 compared to $8,444,305 in the 2023 FY, representing a decrease of 14.6%. Commission costs decreased by 9.4% and were $719,491 in the 2024 FY as compared to $794,427 in the 2023 FY.
Services Business
In the 2024 FY, the Services Business generated $7,509,558 or 37.0% of our consolidated revenues compared to $7,233,022 or 37.4% in the 2023 FY, representing an increase of 3.8%. Gross Profit Margin was higher at 55.8% in the 2024 FY compared to 51.6% in the 2023 FY, representing an increase of 4.2% points. This increase reflects the mix of engineering services composed within our 2024 FY revenue make up (more units of manufacturing compared to design work). Total operating expenses fell in the Services Business by 1.7% and were $2,471,810 in the 2024 FY compared to $2,515,664 in the 2023 FY. This is largely related to the reduction in staff headcount caused by volatility in the workforce in general and a shortage in engineering skills in the markets in which we operate. Income from operations in the 2024 FY was $1,719,233 compared to $1,216,121 in the 2023 FY.
This segment is comprised of the UK Operations (Martech) and the US Operations (Colmek) and is reliant on funding being available under Defense Programs. During the 2024 FY, the US Operations experienced significant delays in securing orders under Defense Programs caused by the reduced funding available under continuing resolutions which result in a shift in spending priorities. This has caused reduced order intake by our US Services Operations. Until a Federal Budget is adopted by the new Administration and the line-item appropriations are in place we expect this business unit to continue to be impacted.
We continue to work on the diversification of the Services Business revenue, which is highly concentrated and reliant on Defense funding being available, by investing in our Thermite® Octal range of mission computers.
Comparison of fiscal year ended October 31, 2024, to fiscal year ended October 31, 2023
The information provided below pertains to the Company’s consolidated financial results of operations. For information on the performance of each Segment including the disaggregation of revenues and geographical split, see “Note 15 Segment Analysis” and “Note 16 Disaggregation of Revenue” of our audited Consolidated Financial Statements as of October 31, 2024, and 2023.
Revenue:
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 20,316,161 $ 19,352,088 Increase of 5.0%
Our consolidated revenues increased by 5.0% in the 2024 FY when compared to the 2023 FY. This increase is largely attributed to the increase in the revenue generated by the Marine Technology Business, which increased by 5.7%. Although revenue generated by this segment increased, its US Operations revenue decreased by 33.4% and was $2,838,857 in the 2024 FY compared to $4,263,883 in the 2023 FY. This was caused by reduced funding under Defense Programs. The Services segment was also impacted for the same reason and consequently, revenue from the Americas in the Current FY decreased by 20.0% and was $7,287,561 compared to $9,110,498 in the Previous FY. We expect weak order intake under these programs until the new Administration adopts a Federal Budget and line items are appropriated by the respective appropriation committees. In the Current FY, we were able to offset some of the impact of reduced funding under US Defense Programs, with an increase in rental income which in the Current FY was $2,328,781 compared to $1,264,804 in the Previous FY and also an increase in outright equipment sale in the strategic market of Asia which in the Current FY was $5,475,401 compared to $4,607,786 in the Previous FY.
Gross Margin:
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
69.8% (Gross profit of $14,173,105) 67.3% (Gross profit of $13,031,055) Increase of 2.5%
Our consolidated gross profit margins reported in our financial results may vary according to several factors, which 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 Marine Technology Business is generally higher than that of the Services Business.
● The percentage of our consolidated sales that is attributable to the Services Business. 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. The sales generated by the Marine Technology comprise of:
● Outright sales versus rentals.
● Hardware related sales versus Software related sales (Software is generally a higher margin).
● Custom engineering around its technology (“services”) versus field services (where our technical support engineers are deployed to the field to provide support to our customers in their use of our technology).
● Levels of commission on sales.
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. Although the Services Business works with sales agents this is on a lesser scale than the Marine Technology Business and typically commission costs incurred by the Services Business are immaterial.
See “Note 2 Summary of Accounting Policies” (Cost of Revenue), “Note 15 Segment Analysis” and “Note 16 Disaggregation of Revenue” of our audited Consolidated Financial Statements as of October 31, 2024, 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). The assets utilized for our rental offering are subject to depreciation, a portion of which is allocated to Cost of Revenue.
In the 2024 FY gross profit margins for the Marine Technology Business were 77.9% compared to 76.7% in the 2023 FY. For the Services Business, these were 55.8% in the 2024 FY compared to 51.6% in the 2023 FY.
The Marine Technology Business incurred commission costs in the 2024 FY of $719,491 compared to $794,427 in the 2023 FY, representing a decrease of 9.4%.
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 2024 FY compared to the 2023 FY is set out below:
FY
Products FY
Products Percentage Change
Equipment Sales $ 7,210,169 $ 8,444,305 (14.6 )%
Equipment Rentals 2,328,781 1,264,804 84.1 %
Software Sales 878,516 851,976 3.1 %
Services 2,389,137 1,557,981 53.3 %
Total Net Sales $ 12,806,603 $ 12,119,066 5.7 %
The main reason for the reduction in equipment sales in the 2024 FY is the contraction in demand from the key strategic market of Defense Programs in the U.S. During the reporting period, these programs were funded through the use of continuing resolutions resulting in reduced allocation caused by a shift of funding priorities. Services supplied by this Business unit increased due to the higher demand for engineering support on the rental projects executed in the reporting period.
For more detailed information on the composition and disaggregation of our revenues, please refer to “Note 16 Disaggregation of Revenue” of our audited Consolidated Financial Statements of October 31, 2024, and 2023.
Research and Development (R&D):
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 2,242,429 $ 2,096,467 Increase of 7.0%
Research and Development costs are, in general, an inherent ongoing cost for the Marine Technology Business operations and are expended on maintaining its products in the market, advancing these or expanding its technology portfolio.
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 addition, the Services Business incurs research and development expenses on advancing its Thermite® Octal range of mission computer products with the strategic goals of increasing and diversifying its revenues and improving gross profit margins.
In the 2024 FY this category of expenditure increased by 7.0%. This is largely due to an increase in R&D expenditure by the Services Business which was incurred in connection with its development efforts around its Thermite® Octal range of mission computer products.
Changes in this category by Segment are set out immediately below:
Description Amount % change
Products Business (Products Segment) 2024 FY $ 2,019,112 Decrease 1.2%
Products Business (Products Segment) 2023 FY $ 2,043,890
Engineering Business (Services Segment) 2024 FY $ 223,317 Increase 324.7%
Engineering Business (Services Segment) 2023 FY $ 52,577
Selling, General and Administrative Expenses (SG&A):
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 8,346,545 $ 8,195,036 Increase of 1.8%
In the 2024 FY SG&A expenditures increased by 1.8% when compared to the 2023 FY.
Notable factors in our SG&A expenses for the 2024 FY are:
SG&A expenses include transactions which are cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization, Stock-based compensation charges, Exchange Rate Variance and Credit Losses Allowance. In 2024 FY and 2023 FY, respectively, non-cash items as a percentage of SGA expenses were 12.4% and 15.6%, respectively.
SG&A expenses include stock based compensation expenses (Non-Cash Item). In the 2024 FY we recorded expense of $137,676 for stock-based compensation as compared to $645,196 in the corresponding 2023 FY, representing a decrease of 78.7% reflecting the reduced stock grants made under the plan in the Current FY.
SG&A expenses include exchange rate variance (Non-Cash Item). In relation to exchange rate variance we recorded expense of $287,939 in the 2024 FY compared to $190,073 in the 2023 FY.
SGA includes credit losses allowance (Non-Cash Item). In the 2024 FY we recorded a credit loss of $119,405.
Further discussions on SG&A are set out immediately below.
Key Areas of SG&A Expenses across the Group for the year ended October 31, 2024, compared to the year ended October 31,
Expenditure October 31, 2024 October 31, 2023 Percentage Change
Wages and Salaries $ 3,627,748 $ 3,499,542 Increase of 3.7%
Legal and Professional Fees (including accounting, audit, tax and investor relations) $ 1,658,648 $ 1,809,604 Decrease of 8.3%
Rent for our various locations $ 29,330 $ 50,767 Decrease of 42.2%
Marketing (excluding associated travel) $ 382,440 $ 216,403 Increase of 76.7%
Travel associated with Marketing activities $ 70,120 $ 41,149 Increase of 70.4%
In the 2024 FY compared to the 2023 FY:
Wages and Salaries increased by 3.7%. Although in the 2024 FY as a Group we had less staff on payroll, these costs have increased due to inflation combined with the fierce competition for skills leading to higher payroll costs. In the financial year 2025 we anticipate that this area of expenditure will continue to increase as we have several key vacancies which we are seeking to fill, including management positions, and we continue to increase salaries to stabilize our workforce.
Legal and Professional Fees decreased by 8.3%. The main reason for the change in this area of expenditure is the re-allocation of external accounting services to internal accounting services and also the reduction in fees associated with Investor Relations activities.
Rent expenditure decreased by 42.2% compared to FY 2023. 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. However, with the acquisition of PAL, we anticipate this area of expenditure will increase in the future.
Marketing increased by 76.7% and Travel associated with marketing increased by 70.4%. This is in keeping with our strategy to shift our focus to business development, marketing, and brand building. Expenditures in this area are spent on industry-related trade shows and events, demonstrations particularly on the DAVD market adoption and technology awareness campaigns, marketing events and customer visits and fees relating to the US Focus Group we retained to assist us in this area.
Overhead related costs as a percentage of revenue for the year ended October 31, 2024, compared to the year ended October 31, 2023
Our overhead SG&A expenditures comprise general corporate administrative costs.
Overhead SG&A as a percentage of revenue decreased by 2.4% and was 11.2%. The main reason for this is that stock compensation expense decreased by 78.7% and in the 2024 FY was $137,676 compared to $645,196 in the 2023 FY. At the same time, in keeping with our strategy to invest in brand building and marketing, our overheads include a new fee relating to the appointment of the US Focus Group to assist in this area, which was $129,500.
Operating Income:
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 3,584,131 $ 2,739,552 Increase of 30.8%
In 2024 FY, Operating Income increased by 30.8%. This is largely due to the increase in our consolidated revenue and gross profit.
Other Income:
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 1,027,157 $ 681,676 Increase of 50.7 %
In the 2024 FY, we had “Other Income” of $1,027,157 compared to $681,676, representing an increase of 50.7% from the 2023 FY. In the 2024 FY, $938,775 of this amount represents interest income earned on our certified deposit accounts. In the 2023 FY we had interest income of $642,530 (this was lower in the 2023 FY since the certified deposit accounts were established in February 2023). These accounts are for fixed 3-month rolling periods and constitute “cash equivalents” in our current audited Consolidated Financial Statements for the period ended October 31, 2024. We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain the same or continue to rise and the Company continues to maintain this level of cash in the certified deposit accounts. See “Note 6 - Composition of Certain Financial Statement Captions” (Other Income) to the audited Consolidated Financial Statements for period ended October 31, 2024, where this is discussed further.
Income before Income Tax Expense for the year ended October 31, 2024, compared to the year ended October 31, 2023
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 4,611,288 $ 3,421,228 Increase of 34.8%
In the 2024 FY, we had income before income taxes of $4,611,288 as compared to $3,421,228 in the 2023 FY, representing an increase of 34.8%. Net income before income taxes increased largely due to an increase in our consolidated revenues and a 46.1% increase in interest income in the 2024 FY (see Other Income above).
Net Income for the year ended October 31, 2024, compared to the year ended October 31, 2023
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 3,645,996 $ 3,124,149 Increase of 16.7%
In the 2024 FY we had Net Income of $3,645,996 compared to $3,124,149 in the 2023 FY, representing an increase of 16.7%. This is a reflection of the increase in our pre-tax income for the reasons discussed earlier. In the 2024 FY our tax expenses increased, and we recorded a Current Tax Expense of $713,670 compared to $248,655 in the 2023 FY and a Deferred Tax Expense of $251,622 compared to $48,424 in the 2023 FY. Our effective tax rate is subject to significant variation due to several factors including variability in our pre-tax income and taxable income and/or loss and the mix of jurisdictions to which such income or losses relate, the applicability of special tax regimes, changes in tax regulations, changes in our stock price, changes in our deferred tax assets and liabilities, their valuation, foreign currency gains (losses). The mix of jurisdictions and related income or losses also affects our tax liability for Global Intangible Low-Taxed Income. Furthermore, our tax liability is also affected by the availability of carryforwards losses and R&D tax credits in the UK subsidiaries. In the 2024 FY, the Company and its US subsidiaries had a lower percentage of taxable income (due to lower sales caused by reduced Defense funding allocation) than the Company’s foreign subsidiaries, while the Company’s UK and Danish subsidiaries had a higher percentage of taxable income in their respective tax jurisdictions. The Company’s UK subsidiaries benefit from carryforward losses (NOLs) and research and development (R&D) tax credits. These have been applied to offset a portion of the 2024 FY UK tax liability resulting in a current provision for tax liability of the UK subsidiaries of $267,759 for Current Tax Expense and a Deferred expense of $2,511. There was no provision made in 2023 FY for the UK subsidiaries as tax liabilities were fully offset through the application of offsets relating to R&D Tax Credits and NOLs. Our Danish subsidiary does not benefit from any carryforwards or other tax relief in its tax jurisdiction and therefore for the 2024 FY we have recorded a Current Tax Expense of $218,670 and a Deferred Tax Expense of $11,003.
Comprehensive Income for the year ended October 31, 2024, compared to the year ended October 31, 2023
Year Ended October 31, 2024 Year Ended October 31, 2023 Percentage Change
$ 4,577,714 $ 4,418,724 Increase of 3.6%
In the 2024 FY Comprehensive income was $4,577,714 compared to $4,418,724 for the 2023 FY. 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. In 2024 FY we recorded a lower gain of $931,718 on foreign currency translation adjustment transactions compared to a gain of $1,294,575 in the 2023 FY. 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. 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 2024 FY compared to 2023 FY.
Segment Analysis
We operate two reportable segments, “Products Business” and “Service Business” which are managed separately based upon fundamental differences in their operations. Segment operating income is total segment revenue reduced by cost of revenues and operating expenses, Research and Development (“R&D”), and Selling, General & Administrative (“SG&A”) identifiable with the reporting business segment. Overheads include general corporate administrative costs. As previously disclosed, PAL was acquired on October 29, 2024 and had no material income statement activity for the remaining two days of up to October 31, 2024. Therefore, our Income Statement does not include PAL. However, the fair value of assets acquired and liabilities assumed for PAL have been included in our audited Consolidated Balance Sheet and in respect of the Segment information provided immediately below, PAL is included in the Supplemental Disclosure information in the table below but not in the Income Statement.
The Company evaluates performance and resources based upon operating income.
Inter-company sales are not included in our consolidated financial statements. For segment reporting purposes only, we have shown in the table below our inter-company sales during the reporting period, which have been eliminated from our financial statements.
The Products Segment is comprised of the Marine Technology Business (Coda Octopus Products - with entities in UK USA and Denmark) and PAL (a recently acquired business unit within the Products Segment). The Marine Technology Business is a supplier to the underwater/subsea market and sells both hardware and software solutions which include imaging sonar technology solutions, diving and diving communications technology, geophysical products, rental equipment, customization, and field operations services. PAL is a supplier of products to the ultrasound, acoustic measurement and NDT markets.
The Services Segment is comprised of Coda Octopus Colmek, Inc. (a Utah corporation) and Coda Octopus Martech Ltd (a UK corporation). The Services Segment operates as subcontractors mainly to prime Defense contractors where they provide engineering services.
The Segment information below which covers our income statement activities does not include PAL (which had no material Income Statement activity from the date of acquisition to the Company’s current fiscal year end). The Supplemental Disclosures in the Segment information covering assets and liabilities include PAL.
The following tables summarize certain balance sheets and statement of operations information by reportable segment for the financial years ending October 31, 2024, and October 31, 2023, respectively.
Products Services Overhead Total
Year Ended October 31, 2024
Net Revenues $ 12,806,603 $ 7,509,558 $ - $ 20,316,161
Cost of Revenues 2,824,541 3,318,515 - 6,143,056
Gross Profit 9,982,062 4,191,043 - 14,173,105
Research & Development 2,019,112 223,317 - 2,242,429
Selling, General & Administrative 3,814,860 2,248,493 2,283,192 8,346,545
Total Operating Expenses 5,833,972 2,471,810 2,283,192 10,588,974
Income (Loss) from Operations 4,148,090 1,719,233 (2,283,192 ) 3,584,131
Other Income
Other Income 53,960 34,422 - 88,382
Interest Income 657,817 198,239 82,719 938,775
Total Other Income 711,777 232,661 82,719 1,027,157
Income (Loss) before Income Taxes 4,859,867 1,951,894 (2,200,473 ) 4,611,288
Income Tax Expense
Current Tax Expense 316,955 169,374 227,341 713,670
Deferred Tax Expense (Benefit) (5,655 ) 19,169 238,108 251,622
Total Income Tax Expense 311,300 188,543 465,449 965,292
Net Income (Loss) $ 4,548,567 $ 1,763,351 $ (2,665,922 ) $ 3,645,996
Supplemental Disclosures
*Total Assets
$ 40,922,453 $ 13,404,567 $ 3,217,524 $ 57,544,544
*Total Liabilities
$ 3,072,876 $ 842,450 $ 500,695 $ 4,416,021
Revenues from Intercompany Sales - eliminated from sales above $ 3,367,839 $ 238,143 $ 1,266,000 $ 4,871,982
Depreciation and Amortization $ 632,882 $ 88,166 $ 49,487 $ 770,535
Purchases of Long-lived Assets $ 345,191 $ 23,786 $ 89,103 $ 458,079
* The Total Assets and Total Liabilities included in the Supplemental Disclosures include PAL
Products 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
Other Income 39,146 - - 39,146
Interest Income 544,892 97,638 - 642,530
Total Other Income 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 Expense (Benefit) 115,954 (54,382 ) (13,148 ) 48,424
Total Income Tax Expense (Benefit) 388,080 24,494 (115,495 ) 297,079
Net Income (Loss) $ 4,341,772 $ 1,289,265 $ (2,506,888 ) $ 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
The Company’s reportable business segments sell their goods and services in four geographic locations:
● Americas
● Europe
● Australia/Asia
● Middle East/Africa
Liquidity and Capital Resources
As of October 31, 2024, the Company had an accumulated deficit of $7,406,491, working capital of $39,084,999 and stockholders’ equity of $53,128,523. For the year then ended, the Company generated cash flow from operations of $2,451,675.
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, 2024, we had cash and cash equivalents on hand of $22,479,072 and both billed and unbilled receivables of $5,151,290. Our current cash balance represents approximately 33 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. 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 extended for another year until November 2025. To date, the Company has not borrowed any funds under this credit line.
Operating Activities
Net cash generated from operating activities for the year ended October 31, 2024, was $2,451,675. We recorded net income for the period of $3,645,996. 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, gain on sale of asset, allowance for credit loss and stock-based compensation, which collectively totaled $1,245,331. Changes in operating assets decreased net cash from operating activities by $2,183,361 and changes in current liabilities decreased net cash from operating activities by $256,291.
Investing Activities
Net cash used in investing activities, (net of cash acquired), for the year ended October 31, 2024, was $4,421,092.
Financing Activities
Net cash used in financing activities for the year ended October 31, 2024, was $15,633.
Foreign Currency and Inflation
The Company’s consolidated results are a combination of its US operations and foreign subsidiaries. The foreign 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 foreign subsidiaries functional currencies into USD. See “Note 2 Summary of Accounting Policies” (Foreign Currency Translation) of our audited Consolidated Financial Statements as of October 31, 2024, for more information on the applicable rates used for our Balance Sheet transactions and Statements of Income and Comprehensive Income.
Fluctuations in currency exchange rates can directly (positively and negatively) impact on the Company’s sales, profitability and financial position when the transactions of the foreign subsidiaries are translated from their functional currencies into USD for financial reporting. In addition, the Company is also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables incurred in the ordinary course of its business operations (cross-border transactions such as inventory purchasing). In general, the Company’s subsidiaries perform financial transactions in their native currencies. Exceptionally, a subsidiary may perform financial transactions in foreign currencies (such as purchasing inventory from a foreign supplier, for example, in foreign currency). Furthermore, the Company holds significant cash balances in foreign currencies, such as British Pound, Euro and Danish Kroner. 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. The Company does not hedge its currency exposure risks.
Applying the Constant Rate (as the term is defined immediately below), the impact of currency fluctuations in the 2024 FY compared with the 2023 FY, is shown below.
For Revenue and Expenses (Income Statement Transactions) for the Current FY, the Constant Rate means: The “prevailing weighted average” exchange rate in the current 12-month period for the Current FY compared to the “prevailing weighted average” exchange rate in the 12-month period for the Previous Year.
For Balance Sheet Transactions Constant Rate means: The prevailing exchange rate as of October 31, 2024, when compared to prevailing exchange rate as of October 31, 2023.
These are the values we have used in the calculations below which show the impact of these currency fluctuations on our operations in the 2024 FY:
Based British Pounds
Based Australian Dollar
Based Danish Kroner
TOTAL USD
Actual
Constant
Actual
Constant
Actual
Constant
Actual
Constant
*Total
Results
Rates
Results
Rates
Results
Rates
Results
Rates
Effect
($)
($)
($)
($)
($)
($)
($)
($)
($)
Revenues
9,391,144
9,078,639
-
-
3,545,611
3,507,130
12,936,755
12,585,769
350,986
Costs
8,880,421
8,584,911
6,056
6,064
686,573
679,121
9,597,625
9,297,474
300,151
Net profit (losses)
510,723
493,728
(6,056 )
(6,064 )
2,859,038
2,828,009
3,339,130
3,288,295
50,835
Assets
29,762,265
28,088,109
19,986
19,319
841,717
818,887
30,635,932
28,938,396
1,697,536
Liabilities
(2,944,586 )
(2,778,950 )
(2,991 )
(2,891 )
(325,643 )
(316,811 )
(3,286,084 )
(3,111,641 )
(174,443 )
Net assets
26,817,679
25,309,159
16,995
16,428
516,074
502,076
27,349,848
25,826,755
1,523,093
The effect of exchange rate movements between the Previous FY and the Current FY increased net assets by $1,523,093.
The table above does not show separately the effect of exchange rate impact for Indian Rupees since this operation is dormant and the impact is not material.
*Total Effect summary column data is the difference between the Actual Results in the reporting period and the results when the Constant Rate is applied.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Inflation
Inflation affects our Business in several ways including:
Cost of Operations (including wages, salaries, utilities) and therefore our overheads.
Bill of Material (BOM) Costs of our Products and Input Materials for Engineering Services.
Our revenue. An inflationary environment is likely to reduce demand for our goods and services.
Impacts on our ability to compete for key skills required for our Business
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. In addition, our general costs of operations have increased along with raw material costs for our products and solutions.
Inflation is also an inherently destabilizing factor for both retaining staff and recruiting staff and therefore impacts on our business plans and the effectiveness of our assembled workforce.
Furthermore, our revenue continues to be affected in strategic markets and geographies due to inflationary pressures which have made the pricing for our solutions unattractive for those markets.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index of Financial statements following Part III of this Report for a listing of the Company’s Consolidated Financial Statements and Notes thereto.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)- 15(e) under the Exchange Act), as of the end of the period covered by this Report. Based on the evaluation of our disclosure controls and procedures as of October 31, 2024, our Chief Executive Officer and Interim Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of this date.
Attached as exhibits to this Form 10-K are certifications of the Company’s Chief Executive Officer and Interim Chief Financial Officer, which are required in accordance with Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the certifications, for a more complete understanding of the topics presented.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed by, or under the supervision of, a public company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles (“US GAAP”) including those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of October 31, 2024. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). Based on its assessment, our management believes that, as of October 31, 2024, our internal control over financial reporting was effective based on those criteria.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Under SEC rules, the management’s report was not subject to attestation by the Company’s independent registered public accounting firm.
Changes in Internal Control over Financial Reporting
During the year ended October 31, 2024, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. Other Information
Not Applicable

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following persons are the executive officers and directors as of the date hereof:
Name
Age
Position
Annmarie Gayle
Chief Executive Officer and Chairman
Gayle Jardine
Interim Chief Financial Officer
Blair Cunningham
President of Technology
Michael Hamilton
Director
Robert Harcourt
Director
Anthony Tata
Director
Tyler G. Runnels
Director
Gwenael Rouy-Poirier
Director
Dr. Angus McFadzean
Director
Annmarie Gayle has been our Chief Executive Officer and a member of the Board of Directors since 2011 and our Chairman since March 2017. She is also our Chief Executive Officer for our flagship products business, Coda Octopus Products, Limited (UK) since 2013. Prior thereto, she spent two years assisting with the restructuring of our Company. She previously served with the Company as Senior Vice President of Legal Affairs between 2006 and 2007. Earlier in her career she worked for a leading City-London law firm specializing in Intellectual Property Rights, the United Nations in various legal positions and the European Union. Ms. Gayle has a strong background in restructuring and has spent more than 12 years in a number of countries where she has been the lead adviser to a number of transitional administrations on privatizing banks and reforming state-owned assets in the Central Eastern European countries including banking, infrastructure, mining and telecommunications assets. Ms. Gayle has also managed a number of large European Union funded projects providing transitional support and capacity. Ms. Gayle holds a Law degree gained at the University of London and a Master of Law degree in International Commercial Law from Cambridge University and has completed her professional law exams to practice law in England & Wales. Because of her wealth of experience in corporate governance, large-scale project management, restructuring, strategy, structuring and managing corporate transactions, we believe that she is highly qualified to act as our Chief Executive Officer.
Gayle Jardine joined the Company as European Director of Finance in September 1, 2015. She was appointed as the Interim CFO on February 14, 2024. From 2009 to 2015, she was the Controlling Director of Pentland Accounting Ltd providing management accounting services to a variety of businesses related to software provision and commercial property offerings. Between 2004 and 2009 she held senior finance management roles in Wireless Fiber Systems, Scottish Water Solutions and Honeywell. The majority of her earlier career from 1992-2002 was spent at Hewlett Packard (HP) / Agilent Technologies where she started as a Graduate Financial Analyst and worked her way through various roles to be Financial Operations Manager of a worldwide product line managing teams in UK, Germany and USA. From 1995-1996 she had a foreign services assignment to Santa Rosa, California with HP as a Financial Business Consultant in their Test & Measurement Business. Ms. Jardine qualified as a Chartered Management Accountant (CIMA) in 1996 and has a BA (Hons) in Business Studies from Robert Gordon University in Aberdeen.
Blair Cunningham joined the Company in July 2004 and held several roles in the Company including Chief Technology Officer between July 2004 and July 2005. He is currently our President of Technology and Divisional CEO of Coda Octopus Products, Inc. Mr. Cunningham received an HND in Computer Science in 1989 from Moray College of Further Education, Elgin, Scotland. Because of Mr. Cunningham’s expertise in technology, systems software development and project management, the Company believes that he is highly qualified to serve in his current roles.
Michael Hamilton was our Chairman of the Board between June 2010 and March 2017. He is currently serving as an independent director of our Board. He has been a member of the board of directors and a member of the audit committee of Tian Ruixiang Holdings Ltd., a Nasdaq traded public company, since 2020. Since 2014, Mr. Hamilton has provided accounting and valuation services for a varied list of clients. He was Senior Vice President of Powerlink Transmission Company from 2011 through 2014. From 1988 to 2003, he was an audit partner at PricewaterhouseCoopers. He holds a Bachelor of Science in Accounting from St. Frances College and is a certified public accountant and is accredited in business valuation. Because of Mr. Hamilton’s background in auditing, strategic corporate finance solutions, financial management and financial reporting, we believe that he is highly qualified to be a member of our Board of Directors.
G. Tyler Runnels was elected as a director at the 2018 annual meeting. Mr. Runnels has nearly 30 years of investment banking experience including debt and equity financing, private placements, mergers and acquisitions, initial public offerings, bridge financings, and financial restructurings. Since 2003 Mr. Runnels has been the Chairman and Chief Executive Officer of T.R. Winston & Company, LLC, an investment bank and member of FINRA, where he began working in 1990. Mr. Runnels was an early-stage investor in our company and T.R. Winston & Company, LLC has served as our exclusive placement agent in one of our private placements raising early rounds of capital for our company. Mr. Runnels has successfully completed and advised on numerous transactions for clients in a variety of industries, including healthcare, oil and gas, business services, manufacturing, and technology. Mr. Runnels is also responsible for working with high-net-worth clients seeking to diversify their portfolios to include real estate products through established relationships with real estate brokers, accountants, attorneys, qualified intermediaries, and financial advisors. Prior to joining T.R. Winston & Co., LLC, Mr. Runnels held the position of Senior Vice President of Corporate Finance for H.J. Meyers & Company, a regional investment bank. Mr. Runnels received a B.S. and MBA from Pepperdine University. Mr. Runnels holds FINRA Series 7, 24, 55, 63 and 79 licenses.
Robert Harcourt has been a member of Coda’s Board of Directors since June 26,2023. Mr. Harcourt is a retired Audit and Advisory Partner of KPMG with a professional career spanning over 40 years where he executed a variety of roles at the partnership level during the time with KPMG. including Assurance Partner from 1978 - 1999 and Advisory Partner from 1999- 2007. He also worked as Associate Director, Division of Registration and Inspection of the Public Company Accounting Oversight Board (PCAOB) from 2011-2016. He most recently worked for the Analysis Group and Cornerstone Research from 2018-2021. He is a Certified Public Accountant and holds a BBA in Accountancy from Pace University and has completed course work at Harvard University and Stanford University.
Brigadier General Anthony Tata (Ret) has been a member of Coda’s Board of Directors since June 26, 2023. Brigadier General Tata most recently performed the duties of Undersecretary of Defense for Policy, the number 3 position in the United States Department of Defense, where he implemented the National Defense Strategy and worked closely with allies and partners to achieve strategic defense goals globally. His military career includes commands in the 82nd and 101st Airborne Divisions and the 10th Mountain Division, as well as many overseas operations. He is a West Point graduate with a Bachelor of Science and two master’s degrees in Operational Planning and International Relations. He is also a distinguished national security fellow at Harvard University’s JFK School of Government and a successful author. His military awards include the bronze star, combat action badge, ranger tab, master parachutist badge and Department of Defense award for distinguished public service.
Gwenaël Rouy-Poirier was elected as a director in April 2024. Since January 2024, he has been an independent consultant for companies in the aerospace and defense sectors. From May to December 2023, he was Chief Financial Officer for SHL (Scandinavian Health Ltd.) Medical, a private company backed up by private equity operating as a leading solutions provider in the design, development, and manufacturing of advanced medical delivery devices such as autoinjectors and pen injectors. From April 2021 to December 2022, he was Chief Financial Officer of GKN Aerospace, one of the world’s leading multi-technology Tier 1 aerospace suppliers, serving 90% of the world’s aircraft and engine manufacturers. From 2019 to 2021, he was Chief Financial Officer of Nobel Biocare Systems, a premium dental implant leader whose portfolio also included restorative solutions, dentist hardware equipment and digital treatment technologies. Prior thereto, he worked for Honeywell mostly in the Aerospace division, as well as in the Homes & Building Technologies and Specialty Materials), l’Oréal and Arthur Andersen, among others. He earned a Bachelor (Mathematics) from Lycée Victor Duruy and a Master of Management in Corporate Finance from EDHEC Business School in France. Because of his strong financial background and ties to the defense industry, the Company believes that he is highly qualified to serve on the Board.
Dr. Angus McFadzean became a director on July 1, 2024. He is one of the co-founders of the Company’s Marine Technology Business and has been affiliated with the Company in various capacities since its inception in 1994. From 2013 until his retirement in May 2024, Dr. McFadzean was the Research and Development Director of the Company’s Marine Technology subsidiary, where, among other things, he was responsible for overseeing and managing the Marine Technology Business’ R&D Program including developments relating to the Echoscope® and DAVD. He was also responsible for the Company’s Cyber Security Management Program. Dr. McFadzean holds a master’s degree in electrical and electronic engineering as well as a Ph.D. from Heriot-Watt University in Edinburgh, Scotland. Because of his deep knowledge of the Company’s technology, the Company believes that he is highly qualified to serve on the Board.
Family Relationships
None of our Directors are related by blood, marriage, or adoption to any other Director, executive officer, or other key employees.
Board Leadership Structure
The Board of Directors is currently chaired by the Chief Executive Officer of the Company, Annmarie Gayle. The Company believes that combining the positions of Chief Executive Officer and Chairman of the Board of Directors helps to ensure that the Board of Directors and management act with a common purpose. Integrating the positions of Chief Executive Officer and Chairman can provide a clear chain of command to execute the Company’s strategic initiatives. The Company also believes that it is advantageous to have a chairman with an extensive history with, and knowledge of, the Company. Notwithstanding the combined role of Chief Executive Officer and Chairman, key strategic initiatives and decisions involving the Company are discussed and approved by the entire Board of Directors. The Company believes that the current leadership structure and processes maintain an effective oversight of management and independence of the Board of Directors as a whole without separate designation of a lead independent director. However, the Board of Directors will continue to monitor its functioning and will consider appropriate changes to ensure the effective independent function of the Board of Directors in its oversight responsibilities.
Independence of the Board of Directors and its Committees
After review of all relevant transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its Independent Registered Public Accounting Firm, the Board of Directors has determined that all the Company’s directors are independent within the meaning of the applicable NASDAQ listing standards, except Ms. Gayle, the Company’s Chairman and Chief Executive Officer. The Board of Directors met 4 times and acted by unanimous written consent 4 times during the fiscal year ended October 31, 2024. Each member of the Board of Directors attended all meetings of the Board of Directors held in the last fiscal year during the period for which he or she was a director and of the meetings of the committees on which he or she served in the last fiscal year during the period for which he or she was a committee member.
The Board of Directors has three committees: the Audit Committee, the Compensation Committee and the Nominating Committee. Below is a description of each committee of the Board of Directors. The Board of Directors has determined that each member of each committee meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to the Company.
Audit Committee
The Audit Committee of the Board of Directors oversees the Company’s corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee, among other things: evaluates the performance, and assesses the qualifications, of the Independent Registered Public Accounting Firm; determines and pre-approves the engagement of the Independent Registered Public Accounting Firm to perform all proposed audit, review and attest services; reviews and pre-approves the retention of the Independent Registered Public Accounting Firm to perform any proposed, permissible non-audit services; determines whether to retain or terminate the existing Independent Registered Public Accounting Firm or to appoint and engage a new independent registered Public Accounting Firm for the ensuing year; confers with management and the Independent Registered Public Accounting Firm regarding the effectiveness of internal control over financial reporting; establishes procedures as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; reviews the financial statements to be included in the Company’s Annual Report on Form 10-K and the Company’s periodic quarterly filings on Form 10-Q, recommends whether or not such financial statements should be so included; and discusses with management and the Independent Registered Public Accounting Firm the results of the annual audit and review of the Company’s quarterly financial statements.
The Audit Committee is currently composed of four outside directors: Michael Hamilton (Chairman), Robert Harcourt, Anthony Tata and Gwenaël Rouy-Poirier. The Audit Committee met four times during the fiscal year ended October 31, 2024. The Audit Committee Charter is available on the Company’s website, www.codaoctopusgroup.com.
The Board of Directors periodically reviews the NASDAQ listing standards’ definition of independence for Audit Committee members and has determined that all members of the Company’s Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A) of the NASDAQ listing standards and Rule 10A-3(b)(1) of the Securities Exchange Act, as amended). The Board of Directors has determined that Michael Hamilton qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board of Directors made a qualitative assessment of Mr. Hamilton’s level of knowledge and experience based on a number of factors, including his formal education and his service in executive capacities, having financial oversight responsibilities.
Compensation Committee
The Compensation Committee of the Board of Directors reviews, modifies and approves the overall compensation strategy and policies for the Company. The Compensation Committee, among other things, reviews and approves corporate performance goals and objectives relevant to the compensation of the Company’s officers; determines and approves the compensation and other terms of employment of the Company’s Chief Executive Officer; determines and approves the compensation and other terms of employment of the other officers of the Company; and administers the Company’s stock option and purchase plans, pension and profit sharing plans and other similar programs.
The Compensation Committee is composed of four outside directors: G. Tyler Runnels (Chairman), Robert Harcourt, Michael Hamilton and Gwenaël Rouy-Poirier. All members of the Compensation Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Compensation Committee met three times during the fiscal year ended October 31, 2024. The Compensation Committee Charter is available on the Company’s website at: www.codaoctopusgroup.com.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee has at any time been an employee of ours. None of our executive officers serves as a member of the board of directors or the compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
Nominating Committee
The Nominating Committee of the Board of Directors is responsible for, among other things, identifying, reviewing and evaluating candidates to serve as directors of the Company; reviewing, evaluating and considering incumbent directors; recommending to the Board of Directors candidates for election to the Board of Directors; making recommendations to the Board of Directors regarding the membership of the committees of the Board of Directors, and assessing the performance of the Board of Directors.
The Nominating and Governance Committee is currently composed of four outside directors: G. Tyler Runnels (Chair), Michael Hamilton, Robert Harcourt and Gwenaël Rouy-Poirier. All members of the Nominating Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Nominating Committee met three times during the fiscal year ended October 31, 2024. The Nominating Committee Charter is available on the Company’s website at www.codaoctopusgroup.com.
The Nominating Committee has not established any specific minimum qualifications that must be met for recommendation for a position on the Board of Directors. Instead, in considering candidates for director the Nominating Committee will generally consider all relevant factors, including among others the candidate’s applicable education, expertise and demonstrated excellence in his or her field, the usefulness of the expertise to the Company, the availability of the candidate to devote sufficient time and attention to the affairs of the Company, the candidate’s reputation for personal integrity and ethics and the candidate’s ability to exercise sound business judgment. Other relevant factors, including diversity, experience, and skills, will also be considered. Candidates for director are reviewed in the context of the existing membership of the Board of Directors (including the qualities and skills of the existing directors), the operating requirements of the Company and the long-term interests of its stockholders.
The Nominating Committee considers each director’s executive experience and his or her familiarity and experience with the various operational, scientific and/or financial aspects of managing companies in our industry.
With respect to diversity, the Nominating Committee seeks a diverse group of individuals who have executive leadership experience and a complementary mix of backgrounds and skills necessary to provide meaningful oversight of the Company’s activities. The Company meets the NASDAQ standards for diversity on the board of directors. The Nominating Committee annually reviews the Board’s composition in light of the Company’s changing requirements. The Nominating Committee uses the Board of Director’s network of contacts when compiling a list of potential director candidates and may also engage outside consultants. Pursuant to its charter, the Nominating Committee will consider, but not necessarily recommend to the Board of Directors, potential director candidates recommended by stockholders. All potential director candidates are evaluated based on the factors set forth above, and the Nominating Committee has established no special procedure for the consideration of director candidates recommended by stockholders.
Employment Agreements
Annmarie Gayle
Pursuant to the terms of an employment agreement dated March 16, 2017, the Company employs Ms. Gayle as its Chief Executive Officer on a full-time basis and a member of its Board of Directors. Effective July 1, 2019, Ms. Gayle’s annual salary is $305,000. She is also entitled to an annual performance bonus of up to $100,000, upon achieving certain targets that are to be defined on an annual basis. The agreement provides for 30 days of paid vacation in addition to public holidays observed in Denmark where she is resident.
The agreement has no definitive term and may be terminated upon twelve months’ prior written notice by Ms. Gayle. In the event that the Company terminates her at any time without cause, she is entitled to a payment equal to her annual salary as well as a separation bonus of $150,000. The Company may terminate the agreement for cause, immediately and without notice. Among others, “for cause” includes gross misconduct, a serious or repeated breach of the agreement and negligence and incompetence as reasonably determined by the Company’s Board. The agreement includes a 12-month non-compete and non-solicitation provision.
Blair Cunningham
Under the terms of an employment contract dated January 1, 2013, our wholly owned subsidiary Coda Octopus Products, Inc. employs Blair Cunningham as its Chief Executive Officer and President of Technology. On January 24, 2025, Mr. Cunningham’s annual salary was increased to $270,000 from 225,000, effective February 1, 2025. Mr. Cunningham is entitled to 25 vacation days in addition to any public holiday. The Company also makes a contribution to certain benefits such as 401(k), dental and medical cover.
The agreement may be terminated only upon twelve-month prior written notice without cause. The Company may terminate the agreement for cause, immediately and without notice. Among others, “for cause” includes gross misconduct, a serious or repeated breach of the agreement and negligence and incompetence as reasonably determined by the Company’s Board. The agreement includes an 18-month non-compete and non-solicitation provision.
Gayle Jardine
Under the terms of an employment contract dated September 2015, our wholly owned subsidiary Coda Octopus Products, Limited. employs Gayle Jardine as its European Finance Director. She is being paid an annual base salary of £82,000 (equivalent of $104,875). Mrs. Jardine is entitled to 25 vacation days in addition to any public holiday.
In February 2024, Mrs. Jardine was appointed as Interim Chief Financial Officer of the Company. As an inducement for assuming the additional duties as Interim CFO, she is paid an additional short-term incentive payment of £6,000 (approximately $7,674) for each month that she acted in such a capacity.
The total compensation package paid by the Company to Mrs. Jardine is $196,963.
The company may terminate the agreement by giving nine weeks prior written notice without cause.
Code of Ethics
We have adopted a code of ethics for all our employees, including our chief executive officer, principal financial officer and principal accounting officer or controller, and/or persons performing similar functions, which is available on our website, under the link entitled “Code of Ethics”.
Claw Back Policy
We have adopted a Claw Back Policy with effect from September 7, 2023. The Claw Back policy applies to Covered Executive of the Company and provide for the recovery of (i) Erroneously Awarded Compensation from Covered Executives, and (ii) Recoverable Amounts from Covered Executives. This Policy is designed to comply with Nasdaq Rule 5608 and with Section 10D and Rule 10D-1 of the Exchange Act.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The Summary Compensation Table shows certain compensation information for services rendered for the fiscal years ended October 31, 2024, and 2023, by our executive officers. The following information includes the dollar value of base salaries, bonus awards, stock options grants and certain other compensation, if any, whether paid or deferred.
Name and Principal Position
Year
Salary
Bonus
Restricted Stock Awards
Option Awards
* All Other Compensation
Total
($)
($)
($)
($)
($)
($)
Annmarie Gayle
305,000
100,000
405,000
Chief Executive Officer
305,000
100,000
405,000
Gayle Jardine**
82,600
71,622
17,426
171,648
Interim Chief Financial Officer
95,204
23,801
20,275
32,922
172,202
Kevin Kane***
67,582
23,918
91,500
Divisional Chief Executive Officer
200,000
21,876
221,876
John Price
52,198
26,737
78,935
Chief Financial Officer****
Blair Cunningham
225,000
8,000
32,932
265,932
President of Technology
225,000
30,000
21,854
276,854
*The amounts described in the category of “All Other Compensation” comprise Health, Dental, Vision, Short Term Disability, Long Term Disability and Accidental Death and Dismemberment insurance premiums which the Company contributed to the officers’ identified plan.
** Mrs. Gayle Jardine was appointed as Interim Chief Financial Officer of the Company in February 2024.
*** Mr. Kevin Kane vacated his role in March 2024.
**** Mr. John Price was Chief Financial Officer from November 27, 2023 until February 12, 2024.
Grants of restricted stock awards as of October 31, 2024
Name Grant Date All other restricted
awards; number of
securities underlying
restricted stock awards Exercise
or base price of
restricted stock awards Grant date fair value
of restricted stock awards
Gayle Jardine 5/3/2023 2,500 8.11 20,275
Outstanding option awards as of October 31, 2024
Option Awards
Name Number of securities underlying unexercised
options exercisable Number of securities underlying unexercised
options unexercisable Exercise or base price of option swards Option
expiration date
Gayle Jardine 3,334 - 4.62 3/23/2025
Option exercises for October 31, 2024
None
DIRECTOR COMPENSATION
The following table sets forth the compensation paid to each of our directors (who are not also officers of the Company) for the fiscal year ended October 31, 2024, in connection with their services to the company. In accordance with the SEC’s rules, the table omits columns showing items that are not applicable. Except as set forth in the table, no other persons were paid any compensation for director services.
Name Fees Earned
or Paid in
Cash ($) Stock Awards
($) Total
($)
Michael Hamilton $ 50,000 $ 15,000 $ 65,000
Mr. Gwenael Rouy-Poirier $ 27,083 $ 50,000 $ 77,083
Dr. Angus McFadzean $ 16,700 $ 40,000 $ 56,700
G. Tyler Runnels $ 50,000 $ $ 50,000
Robert Harcourt $ 50,000 $ $ 50,000
Anthony Tata $ 50,000 $ $ 50,000
Stock Incentive Plans
The Company has two active Stock Incentive Plans - 2017 Stock Incentive Plan and 2021 Stock Incentive Plan.
Stock Incentive Plan
On December 6, 2017, the Board of Directors adopted the 2017 Stock Incentive Plan (the “2017 Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company, and to reward those individuals who contribute to the Company’s achievement of its economic objectives. The Plan, which was adopted subject to stockholders’ approval, was approved by Stockholders at its meeting held on July 24, 2018.
The maximum number of shares of Common Stock that will be available for issuance under the Plan is 913,612. The shares available for issuance under the Plan may, at the election of the Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury.
The Plan is administered by the Compensation Committee of the Board of Directors which has the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) eligible recipients; (ii) the nature and extent of the Incentive Awards to be made to each Participant; (iii) the time or times when Incentive Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions and other conditions to which the payment or vesting of Incentive Awards may be subject.
During the fiscal year ended October 31, 2024, pursuant to the terms of the 2017 Plan, the Company granted 21,208 restricted stock awards for an aggregate share of common stock of 21,208 to various eligible individuals. During this period 15,000 restricted stock awards were forfeited, and 2,394 units were converted into Treasury Stock and a further 72,542 vested and were issued to the holders of these by the Company. During the fiscal year ended October 31, 2024, no options were exercised, awarded or forfeited. As a result, as of October 31, 2024, there were 366,486 shares available for future issuance under the 2017 Plan.
The Company also issued 5,250 shares of common stock to an external consultant for services rendered in the reporting period.
Stock Incentive Plan
On July 12, 2021, the Board of Directors adopted the 2021 Stock Incentive Plan (the “2021 Plan”), which was approved by the Company’s stockholders at its meeting held on August 2, 2021. The 2021 Plan is identical to the 2017 Plan in all material respects, except that the number of shares available for issuance thereunder is 1,000,000.
During 2024 FY the Company issued a total of 77,792 shares of common stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the Exchange Act, our directors, our executive officers, and any persons holding more than 10% of our common stock are required to report their ownership of the common stock and any changes in that ownership to the SEC. To our knowledge, based solely on our review of the copies of such reports received or written representations from certain reporting persons that no other reports were required, except as set forth below, we believe that during our fiscal year ended October 31, 2024, no reports relating to our securities required to be filed by current reporting persons were filed late.
We will continue monitoring Section 16 compliance by each of our directors and executive officers and will assist them where possible in their filing obligations.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of January 25, 2025, regarding the beneficial ownership of our Common Stock, based on information provided by (i) each of our executive officers and directors; (ii) all executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of the outstanding shares of our Common Stock. The percentage ownership in this table is based on 11,218,804 shares issued and outstanding as of January 25, 2025.
Unless otherwise indicated, we believe that all persons named in the following table have sole voting and investment power with respect to all shares of Common Stock that they beneficially own.
Name and Address of Beneficial Owner (1) Amount and
Nature
of Beneficial
Ownership of
Common Stock
Percent of
Common Stock
Michael Hamilton 5,533 *
Annmarie Gayle (2) 2,367,952 21.1 %
Gayle Jardine (3) 6,333 *
Blair Cunningham 38,211 *
Robert Harcourt 6,273 *
Anthony Tata 6,273 *
G. Tyler Runnels (4) 875,685 7.8 %
Gwenael Rouy-Poirier (5) *
Angus McFadzean (6) 17,411 *
All Directors and Executive Officers as a Group
(Nine persons) (2)(3)(4)(5)(6):
3,323,671 29.6 %
Niels Sondergaard
Carit Etlars Vej 17A
8700 Horsens
Denmark
2,241,581 20 %
J. Steven Emerson (7)
1522 Ensley Avenue
Los Angeles, CA 90024
1,301,232 11.6 %
Bryan Ezralow (8)
23622 Calabasas Rd. Suite 200
Calabasas, CA 91302
1,073,120 9.6 %
*) Less than 1%.
1) Unless otherwise indicated, the address of all individuals and entities listed below is c/o Coda Octopus Group, Inc. 3300 S Hiawassee Rd, Suite 104-105, Orlando, Florida, 32835.
2) Consists of 95,038 shares held by Ms. Gayle and 2,241,581 shares beneficially owned by Ms. Gayle’s spouse, Niels Sondergaard. Ms. Gayle disclaims any beneficial ownership in those shares.
3) Includes 3,333 shares issuable upon exercise of currently exercisable options.
4) Includes 609,331 shares held by the G. Tyler Runnels and Jasmine Niklas Runnels TTEES of The Runnels Family Trust DTD 1-11-2000 of which Mr. Runnels is a trustee; 227,700 shares held by T.R. Winston; 24,368 shares held by TRW Capital Growth Fund, Ltd.; and 14,286 shares held by Pangaea Partners. The Company has been advised that Mr. Runnels has voting and dispositive power with respect to all of these shares.
5) Does not include 7,898 shares that will vest on April 15, 2025.
6) Includes 16,666 shares of common stock issuable upon exercise of currently exercisable options. Does not include 6,107 shares of common stock that vest on May 23, 2025.
7) Includes the following: 217,081 held by J. Steven Emerson IRA R/O II; 350,000 shares held by J. Steven Emerson Roth IRA; 49,328 shares held by Brian Emerson IRA; 310,928 shares held by Emerson Partners; 217,250 shares held by 1993 Emerson Family Trust; 8,286 shares held by the Alleghany Meadows IRA; 8,286 shares held by the Jill Meadows IRA; and 144,073 shares held by the Emerson family Foundation. The Company has been advised that Mr. Emerson has voting and dispositive power with respect to all of these shares.
8) Consists of 896,079 shares held by the Bryan Ezralow 1994 Trust u/t/d 12/22/1994; and 177,041 shares held by EZ MM&B Holdings, LLC. According to filings made with the SEC, Mr. Ezralow has voting and dispositive power with respect to these shares.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
None that are required to be reported herein.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees. The aggregate fees billed by Frazier & Deeter, LLC, our principal accountants, for professional services rendered for the audit and audit related services of the Company’s annual financial statements for the last two fiscal years and for the reviews of the financial statements included in the Company’s Quarterly reports on Form 10-Q during the last two fiscal years 2024 and 2023 were $361,125 and $381,987 respectively.
Tax Fees. The Company did not engage its principal accountants to render any tax services to the Company during the last two fiscal years.
All Other Fees. The Company did not engage its principal accountants to render services to the Company during the last two fiscal years, other than as reported above.
Prior to the Company’s engagement of its independent auditor, such engagement is approved by the Company’s Audit Committee. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant to the Company’s Audit Committee Charter, the independent auditors and management are required to report to the Company’s audit committee at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by the Company for the year ended October 31, 2024, were approved by the Company’s Audit Committee.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit Number
Description
2.1
Plan and Agreement of Merger dated July 12, 2004 by and between Panda and Coda Octopus (1)
3.1
Restated Certificate of Incorporation (2)
3.2
By-Laws (1)
10.30
Employment Contract dated January 1, 2013 between Coda Octopus Products, Inc. and Blair Cunningham (3)
10.31
Employment Contract dated March 16, 2017 between the Company and Annmarie Gayle (4)
10.32
2017 Stock Incentive Plan (5)
10.33
Employment Agreement dated May 7, 2021 between Coda Octopus Colmek, Inc and Kevin Kane (6)
10.34
Stock Incentive Plan (7)
10.35
Employment Agreement dated August 30, 2023, between the Company and John Price (8)
10.36
Share Purchase Agreement dated October 29, 2024, between LG Motion and Others and Coda Octopus R&D Limited.
Code of Ethics (9)
23.1
Consent of Frazier & Deeter, LLC (filed herewith)
31.1
Chief Executive Office and Interim Chief Financial Officer Certification
Certificate Pursuant to 18 U.S.C Section 1350
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
(1)
Incorporated by reference to the Company’s Registration Statement on Form SB-2 (SEC File No.143144)
(2)
Incorporated by reference to the Company’s Registration Statement on Form 10.
(3)
Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended October 31, 2010
(4)
Incorporated by reference to the Company’s Registration Statement on Form 10/A filed March 29,2017
(5)
Incorporated by reference to the Company’s Annual Report on Form 10 for the year ended October 31, 2017
(6)
Incorporated by reference to the Company’s Form 10-K for the year ended October 31, 2021, filed February 14, 2022
(7)
Incorporated by reference to the Company’s Definitive Statement filed August 2, 2021
(8)
Incorporated by reference to the Company’s Current Report on Form 8-K filed September 5, 2023
(9)
Incorporated by reference to the Company’s Form 10-K for the year ended October 31, 2017, filed January 30, 2018