Coda Octopus Issues $12 Million 8.5% Senior Secured Registered Note; Files 10K and Reports Audited Results for FY 2007

Business Wire,  Feb 27, 2008  

• E-mail
• Print
• Link

NEW YORK -- Coda Octopus Group, Inc. (OTCBB: CDOC), a world leader in underwater port security technology, headquartered here, said today it completed a significant new financing, and filed its 10K Report for the fiscal year ending October 31, 2007.

The Company closed a $12 million callable secured convertible note funded by The Royal Bank of Scotland plc. Net proceeds were $11,598,907, of which $1 million has been retained to secure performance of certain obligations and will be released once they are satisfied. Interest is payable semi-annually in arrears, and requires repayment after 84 months with a maximum of 8.5% interest. The note is convertible into common stock at $1.05 per share, and the Company has the option to force the conversion of the note into common stock at higher prices if the conditions set out in the transaction documents are met. The Company said the entire note was purchased by the Royal Bank of Scotland. Greenhouse Investments Limited was the transaction arranger and advisor to Coda Octopus.

This financing has been included as a subsequent event in the Company's 10K for the fiscal year ending October 31, 2007, which was filed yesterday.

FY O7 Year-End Results

For the fiscal year ended October 31, 2007, Coda Octopus Group, Inc. reported revenues of $13.9 million, as compared to $7.3 million or the fiscal year ended October 31, 2006*. Net loss applicable to common shares was ($16.1 million), or ($0.42) per share in FY 2007, compared to a loss of ($12.1 million), or ($0.50) per share in FY 2006. Weighted shares outstanding increased from 24,030,423 to 38,476,352 over the period.

During FY 2007, the Company acquired one new business subsidiary (Colmek Systems Engineering) started up another (Innalogic, Inc) and benefited significantly from the acquisition of Martech Systems, which was completed in June 2006. Subtracting the contributions from the acquisitions and the new business, there was a 17% increase in the Company's legacy businesses due to strong demand for Coda's traditional products in the geophysical and hydrographic survey markets.

Selling, General and Administrative (SG&A) expenses for FY 2007 increased to $12.4 million, from $7.5 million in FY 2006. However, SG&A for FY 2007 included $3.3 million in non-cash charges related to the issuance of stock and options, and $2.5 million for the acquisition of Martech, Colmek and the formation of Innalogic. Core comparable expenses increased by $1.1 million over the period, or 16.9%, despite an increase in revenues of approximately 90%.

Loss from operations totaled $8.4 million in FY 2007, as compared with $6.4 million in FY 2006. Removing non-cash expenses and non-recurring expenses, the comparison shows a loss from operations of $4.5 million for 2007 as compared with a loss of $3.9 million for FY 2006, an increase of $0.6 million or 15.5%. This increase is entirely attributable to the increase in SG&A expenses over the period.

Coda Octopus President and CEO Jason Reid characterized FY 2007 as "A year of significant transition in which Coda made a number of important strategic investments in its future, restructured its operations, and achieved sustainability in its revenues and expenses in the second half of the fiscal year."

Reid continued, "The Company expects the mainstay of its growth going forward to come from its patented 3D Sonar technology which has already been deployed to protect against the threat of underwater terrorism by the US Coast Guard, and by port and government authorities in the United States and around the world."

"In addition," Reid said, "Coda is experiencing exciting growth opportunities for 3D sonar in a number of commercial markets, with orders already coming through from companies conducting underwater construction and dredging. These are two areas where we see a strong positive contribution beginning this year."

"Longer term," Reid said, "Coda perceives large and promising applications in the inspection market, where there is growing US Government interest, given the poor state of a high number of bridges and dams throughout the US. While it may take some time to start selling into this market, we expect that the next three years should see this become an established area of our concentration."

"In summary," Reid concluded, "Coda Octopus has patented, developed and deployed 3D sonar technology that is increasingly understood to be of vital importance in protecting nations worldwide, and we expect increasing uptake of our technology for our underwater security products over this year and, indeed, well into the future."

*Period to period amounts are not directly comparable as the 2006 results only include four months of Martech numbers, as that company was acquired in June 2006, whilst the 2007 results include seven months of Colmek numbers, as that company was acquired in April 2007.

[TABLE OMITTED]
[TABLE OMITTED]