CODA 10-K & 10-Q changes, risk factors and insider trading

This section of Form 10-K discusses fiscal 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 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 Management Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” in our Form 10-K, filed with the SEC on January 30,29, 2023, 2025, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at www.codaoctopusgroup.comwww.codaoctopusgroup.com.

Our Marine Technology Business has operations in the USA, UK and Denmark – see the 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 in this market 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.

Although the Marine Technology weBusiness generategenerates most of ourits revenuesrevenue from ourits range of real time 3D sonars and DAVD, weit havesupplies a number ofseveral other products which we supply to the marine offshore market such as ourits F280 Series®, DA4G, DA4G-USB, GeoSurvey andsoftware, Survey Engine®. Wesoftware and alsoVoice_HUB_4, have added (a newrecently product for use in the diving market, adeveloped digital communication audio communications system (Voice HUB 4) which advances the current analog-based communication technology to a digital based communication technology. Ourtechnology). Its customers include offshore service providers to major oil and gas companies, renewable energy companies, underwater construction companies, law enforcement agencies, ports, mining companies, underwater vehicle manufacturers, defense bodies, prime defense contractors, navies, research institutes and universities and diving companies. WeIt also provideprovides customization of technology customization services, particularly in the defense market and around our DAVD solutions where this is tailored for particular markets and applications.

Defense Engineering Services Business

The Defense Engineering 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.

Factors Affecting our Business.Business

We are subject to foreign exchange risks. The Company’s operations are split between the United States, United Kingdom, Denmark,Kingdom and the Netherlands.Denmark. A significant proportion of our consolidated net revenues are generated outside of the United States by our foreign subsidiaries in the United Kingdom Kingdom (“UK”) and DenmarkDenmark. andFor context, in the 20242025 FY our foreign subsidiaries generated $12,936,755,$17,596,977, representing 63.7% 66.2% of our consolidated revenue. In addition, a significant part of our assets and liabilities isare held in British Pounds, Danish Kroner and Euros by these foreign subsidiaries. Foreign Currency translations as they pertain toof our assets and liabilities are translated at the the prevailing exchange rate at the balance sheet datedate, 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 Danish Kroner, Euros, against the US Dollar) may (positively or negatively) affect our financial results including our profitincome and lossstatement accounttransactions and the value of our assets and therefore we are subject to foreign currency fluctuation risks. In the 20242025 FY, for the purpose of reporting revenue and expenses, the value of the British Pound and Danish Kroner when compared to the 20232024 FY increased increased against the USD by 3.4%2.3% and 1.1%,2.1%, respectively. For the purpose of reporting assets and liabilities, the British Pound and the Danish Kroner both increased by 6.0%2.4% and 2.8%,6.5%, respectivelyrespectively, against the USD when compared to the 20232024 FY. We also hold cash and cash equivalents in foreign currencies such as the British Pound, Euros,Euros and the 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 Foreign Currency”. See also Note 2 (Summary of Accounting Policies) – “Foreign Currency Translation” to the audited audited consolidated financial statements.

Furthermore, we sell our goods and services globally. The exchange rate of the foreign currency used by our customercustomers for the purchase of our goods and services against our functional currencycurrencies (British Pounds purchase, Danish Kroner or USD purchase) may make the purchasing of our products unattractive from a pricing point of view. InFor the Current FY, revenues from Japan,example, a keysignificant strategic market,market werefor significantlyour downEchoscope® duetechnology tois theJapan. depreciation of theThe Japanese Yen againsthas majorbeen under currenciessignificant suchpressure and as a result we have seen reduced demand for our technology in Japan in the USD2025 and British Pound.FY.

We sell our products globally and increasingly to Asia. Asia is the fastest growing economies for our technology and solutions. The recent change in the political stance of both the USU.S. and UK Governments’ political stanceGovernments 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 our revenues and growth strategy. China has one of the largest planned and funded investment programs for offshore renewables, the market market for which most of our technology is used for in China. After significant business development in China, we had started to see persistent 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.companies and competition in general.

While thereOur haveBusiness beenis improvementsaffected inby lead time for supply of raw materials and components in the Supply Chain during the reporting period, we have experienced a significant increase in theincreased costs of raw materials causedsuch byas inflation.chips and processors, due to the increasing demand from AI businesses. These increases may make the costs of our products uncompetitive and affect demand and margins.

A significant part of our growth strategy is predicatedbuilt 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 including in the area of AI and the capabilities this may bring, 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 technology entering the subsea market is lidar technology.and photogrammetry technologies. However, unlike our sonar technology, Lidar and Photogrammetry 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.

The Defense Engineering 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 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.

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,assets and the 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.liabilities. Actual results could differ from those estimates and may have material effects on our operating results and financial position.

RevenuesOur 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 soand thattherefore ourwhen making a determination of the contract price doeswe do not involve havinghave to consider potential variable additional consideration. Our product sales do not include a right of return from the customer.

Regarding our Marine Technology Business,Business and PAL, 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 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.

FiscalResults Year 2024 Consolidated Results of Operations

It should be noted that ourOur 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 3131, 2024). and therefore when we compare our 2025 FY to 2024 FY, there is no comparative income statement data for PAL hadin noour material2024 FY 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.Statement.

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.subsidiaries Our foreign subsidiaries’ resultswhich are translated from their respective functional currencies into United States Dollar (USD) for reporting purposes. Currency fluctuations can therefore impact (positively or negatively) impact on our consolidated results including revenue, our profitability and the value of our assets and liabilities included on the consolidated balance sheet.sheets. InFor a discussion of the Current FY our consolidated revenue was $20,316,161 compared to $19,352,088 in the Previous FY, representing an increaseeffect of 5.0%.foreign When applying the Constant Rate (that is the foreign exchange raterates appliedon insales Previousgrowth, FYsee 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“Effect of salesForeign inExchange Rates” 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.below.

In the 20242025 FY, the Marine Technology Business generated $13,221,339 or 49.8% of our consolidated net revenues compared to $12,806,603 or 63.0% of our consolidated revenues compared to $12,119,066 or 62.6% in the 20232024 FY, representing an increase of 5.7%.3.2%. Gross Profit Margin was higherlower at 74.5% in the 2025 FY compared to 77.9% in the 2024 FY compared to 76.7% inFY, the 2023 FY, representing ana increasedecrease of 1.23.4 % points, reflecting the mix of salessales. A notable factor in the Current FY is a significant decrease in rentals and associated services revenue which we attribute to the reduction in funding for offshore renewables by the US Administration. This has resulted in reduced commissiondemand costs.for our rental solutions for the offshore renewable sector. In 20242025 FY total operating expenses increased in the Marine Technology Business by 13.2%2.0% and were $5,833,972,$5,949,560, compared to $5,153,456$5,833,972 in the 20232024 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.$3,895,857.

The following discussion and analysis should be read in conjunction with ourthe unaudited consolidated financial statements and related notes included herewithelsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements with theirand accompanying notes included in our annualAnnual reportReport on Form 10-K for the fiscal year ended October 31, 2025, filed with the U.S. Securities and Exchange CommissionSEC on January 29, 2026, as amended on our by Form 10-K/A filed withon the U.S. Securities and Exchange Commission on February 26, 2026. This discussion reflects management’s best assessment as of the date of this report and should not be construed to imply that the results discussed herein will necessarily continue into the future,future or that any conclusion reached herein will necessarily beis indicative of actualfuture operating results in the future. Such discussion represents only the best present assessment of our management.results.

We haveoperate organized our operations intothrough three reportable segments: Marine Technology Business, Acoustics Sensors and Materials BusinessBusiness, and Defense Engineering Services Business. These segments reflect thehow way the Companymanagement evaluates its business performanceperformance, allocates resources, and manages its operations. See Item 1 of Part 1I, Item 1, “Financial Statements – Note 15 – Segment Analysis.”

We operate in global markets, and our results are affected by macroeconomic conditions and geopolitical developments that influence customer demand, supply chain reliability, and overall business activity. InDuring the Current Quarter, $5,231,403approximately or 75.8%55.3% of our consolidated net net revenues were generated outside the Americas.Americas compared to 63.5% in the Previous Quarter.

Volatility in Global Trade Policy Includingand Geopolitical UncertaintiesUncertainty

Currency Fluctuation/ and Foreign Exchange Risks

We are uncertain as to the extent of the impact the factors disclosed above and those in our Form 10-K as amended on our Form 10-K/A coveringfor fiscal year ended October 31, 2025, as amended, are likely to have on our future financial results.

These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As of AprilJuly 30,31, 2026, we had had cash and cash equivalents of $30,624,337$31,714,519 and cash provided by our operations of $2,047,284.$3,430,017. Based on our outstanding obligations and and our cash and cash equivalents, as well as our revolving line of credit with HSBC NA, we believe we have sufficient working capital to to meet our anticipated cash needs for the next twelve months. However, any projections of future cash flows are subject to substantial uncertainty.

Our Marine Technology Business revenues are derived from both sales and rental of underwater solutions for imaging, mapping, survey applications and diving. PAL’s revenues are derived from sales of acoustic sensors, materials and calibration services, and for our Defense Engineering Services Business forrevenues are derived from engineering services performed for third party customers who are primarily Defenseprime Contractors.defense contractors (“DoD contractors”). Certain of these contracts require management to estimate contract progress and costs to complete, and revisions to these estimates may result in adjustments to revenue and profitability recognized in future periods. 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 additional variable consideration. Our product sales do not include a right of return by the customer.

For further discussion of our revenue recognition accounting policies, refer to Note 2 – “Revenue Recognition” into these our unaudited consolidated financial statements and Note 2 “Summary of Accounting Policies” in our Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended October 31, 2025.2025, as amended.

We value our inventory based on our cost. We adjust the value of our inventory to the extent our management determines that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, our management uses estimates of future demand and sales prices for each product to determine appropriate inventory reserves and to make correspondingwhether reductions in inventory values are required to reflect the lower of cost or net realizable value. In the event of a higher incidence of inventory obsolescence, we could be required to increaserecord ouradditional reductions in inventory reserve,values, which would increase our cost of revenues and decrease our gross profit.

During the Current Quarter, the USD weakenedstrengthened against the British Pound and weakened against the Danish Kroner, resulting in translated foreign revenues being higherlower by $193,532$26,608 than when using the Previous Quarter exchange rate. In addition, the associated costs of our foreign subsidiaries including cost of revenues and operating expenses when translated from their respective functional currencies into USD for reporting purposes were higherlower due to the weakeningstrengthening of the USD, (for a discussion of the effect of foreign exchange rates see the Itemdiscussion 2under “Inflation and Foreign Currency”). below.

Consolidated net revenues in the Current Quarter decreased increased by 1.6%9.2% and was $6,904,012$7,717,469 compared to $7,017,459$7,064,795 in the Previous Quarter. During the Current Quarter total operating expenses decreased increased by 18.3%2.1% and income from operations increased by 64.8%.11.1%. Pre-tax income in the Current Quarter was $2,133,652$1,791,351 compared to $1,265,610$1,543,749 in the Previous Quarter, representing an increase of 68.6%.16.0%. A more detailed analysis of our results of operations is set out below.

In the Current Quarter 73.2%60.7% of our consolidated net revenuerevenues was attributable to the Company’s foreign subsidiaries. When translating this amount from the native functional currencies of British Pound and Danish Kroner to USD in the Current Quarter this was $5,051,341$4,688,134 compared to $4,857,809$4,714,742 when using the exchange rate applied in the Previous Quarter and therefore ana increasedecrease in net revenuerevenues of $193,532.$26,608.

In the Current Quarter 68.8%71.6% of our consolidated Operating Expenses and Cost of Revenues was attributable to the Company’s foreign subsidiaries and this was $3,516,419$4,410,741 (“Foreign Subsidiary Costs”) of our total costs of $5,111,036.$6,162,814. When translating the Foreign Subsidiary Costs from the native functional currencies of British Pound and Danish Kroner to USD in the Current Quarter this was $117,428$29,408 higherlower when using the exchange rate of the Previous Quarter.

Pre-taxAs a result of the decrease in revenue, pre-tax income wasfor $1,216,553the Products Business decreased to $999,527 in the Current Quarter compared to $1,055,255from $1,426,739 in the Previous Quarter, reflecting a decreasedecline inof operating expenses.29.9%.

Acoustic Acoustics Sensors and Materials Business (“PAL”)