Annual Report for Fiscal Year Ending October 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS

Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995. All statements other than statements of historical fact made herein are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurance can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations. Actual results and outcomes could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions, tariff and trade policies, reduction in government spending in the Defense sector and customer demand and spending, inflation, interest rates, and world events, risks of inventory management, variability in demand, economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks.

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 that are not included in this Form 10-K can be found in "Management Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")" in our Form 10-K, filed with the SEC on January 29, 2025, which is available free of charge on the SEC's website at www.sec.govand our Investor Relations website at www.codaoctopusgroup.com.

General Overview

We operate three distinct business segments: the Marine Technology business, Acoustic Sensors and Material Business and the Defense Engineering Services Business. PAL was acquired on October 29, 2024 and 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 for fiscal year 2024 and reported in its Form 10-K for the year ended October 31, 2024 does not include PAL. Accordingly, no income statement data is available for PAL in the 2024 FY and is therefore excluded from our MD&A discussion below.

Marine Technology Business

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 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 Business generates most of its revenue from its range of real time 3D sonars and DAVD, it supplies several other products to the marine offshore market such as its F280 Series^®, DA4G-USB, GeoSurvey software, Survey Engine^® software and Voice_HUB_4, (a recently developed digital audio communications system which advances the current analog-based communication technology to a digital based communication technology). 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. It also provides customization of technology services, particularly in the defense market and around our DAVD solutions where this is tailored for particular markets and applications.

Newly acquired Acoustics Sensors and Materials Business

PAL, which is UK based, was acquired by 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. PAL also performs calibration services for medical devices and is accredited to ISO/IEC 17025 standard. PAL is one of only two organizations in the United Kingdom with this certification, alongside the National Physical Laboratory (NPL). Globally, only a handful of facilities hold ISO/IEC 17025 accreditation for these measurements.

Defense Engineering Services Business

The Defense Engineering Services Business has operations in the USA and UK. It is a trusted long-term 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.	Change in Global Trade Policy including Tariffs We sell our goods and services globally and a large percentage of our revenue emanates from international sales. The recent change in trade policy has created significant uncertainties and certain monetary trade barriers for goods being imported into the US. Furthermore, some of our products sold in the U.S. market are manufactured in the UK. Therefore, we are subject to a 10% tariff on items which are imported into the U.S. from the UK. In the 2025 FY approximately 32% of our Marine Technology Business revenue was generated from sales made in the U.S. on which we have been subject to tariffs. Furthermore, approximately 18.9% of PAL's sales are made to the US and are also subject to tariffs.
	B.	Change in Funding Policy for Offshore Renewables Our Core Business revenue mix is a combination of outright sales and rentals. Rentals are an important part of our revenue generating activities and are driven by offshore development projects such as installation of infrastructure cables or remediation of subsea assets. Typically, we are contracted by the major offshore service providers to provide our Echoscope technology and support services (such as offshore engineers) to provide training and support. However, since the change in the U.S. Administration's policy on the funding for offshore renewables programs, we have seen reduced demand (and underutilization of our rental assets) from our European customers who had been down-selected for development of many of the offshore renewable Programs in the USA.
	C.	Foreign Exchange Risks

We are subject to foreign exchange risks. The Company's operations are split between the United States, United Kingdom and Denmark. A significant proportion of our consolidated net revenues are generated outside of the United States by our foreign subsidiaries in the United Kingdom ("UK") and Denmark. For context, in the 2025 FY our foreign subsidiaries generated $17,596,977, representing 66.2% of our consolidated revenue. In addition, a significant part of our assets and liabilities are held in British Pounds, Danish Kroner and Euros by these foreign subsidiaries. Foreign Currency translations of our assets and liabilities are translated at the prevailing exchange rate at the balance sheet date, and 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 income statement transactions and the value of our assets and therefore we are subject to foreign currency fluctuation risks. In the 2025 FY, for the purpose of reporting revenue and expenses, the value of the British Pound and Danish Kroner when compared to the 2024 FY increased against the USD by 2.3% and 2.1%, respectively. For the purpose of reporting assets and liabilities, the British Pound and the Danish Kroner both increased by 2.4% and 6.5%, respectively, against the USD when compared to the 2024 FY. We also hold cash and cash equivalents in foreign currencies such as the British Pound, 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 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 customers for the purchase of our goods and services against our functional currencies (British Pounds purchase, Danish Kroner or USD purchase) may make the purchasing of our products unattractive from a pricing point of view. For example, a significant strategic market for our Echoscope® technology is Japan. The Japanese Yen has been under significant pressure and as a result we have seen reduced demand for our technology in Japan in the 2025 FY.

D.

Macroeconomic Factors

Macroeconomic factors, including changes in inflation and interest rates, global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. These could affect customer demand for our products and services, our ability to predict growth needs, expenses, and the benefits we gain from new technologies. We expect some or all of them to continue to impact our operations in the 2026 FY.

E.

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 change in the political stance of both the U.S. and UK Governments 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 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 and competition in general.

(ii)

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.

F.

Significant Increase in the Price of Raw Materials caused by increased global demand for Artificial Intelligence (AI) processing

Our Business is affected by increased costs of raw materials such as 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.

G.

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.

H.

Technological Advancement

A significant part of our growth strategy is built on our flagship real time volumetric imaging sonar technology, the Echoscope® and our 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 entering the subsea market is lidar 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.

I.

Concentration of Business Opportunities Where the Sales Cycle is Long and Unpredictable

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 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.

J.

U. S. Government Shutdown and funding of Programs through the use of Continuing Resolutions (CR).

The U.S Government shutdown has impacted on our business and most Defense programs that we work on remain unfunded or have limited funding available to them. This has impacted order intake in our fourth quarter, and we expect this uncertainty to continue until a budget is adopted and appropriation of funding to these programs made. Furthermore, many US defense programs are being funded through the use of CR. This continues to affect many opportunities which the Company is pursuing as while the existing sustenance programs continue to be funded, new programs awards have slowed significantly.

K.

The Loss of Key Senior Management or the Failure to Hire and Retain Highly Skilled Personnel

We depend on our senior management and other key personnel, including our CEO and President of Technology. We do not have "key person" life insurance policies. We also rely on other highly skilled personnel within our innovation team, some of whom are of retirement age and who have vast and concentrated experience of our innovations and technologies. Competition for qualified personnel in the industries in which we operate is intense. For example, we experience significant competition in the technology industry for software engineers, analogue hardware engineers, computer scientists and other technical staff. In addition, the nature of our work prevents the adoption of remote working policies, which is very attractive for employees in general.

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 and the recognition and measurement of deferred income tax assets and liabilities. 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.

We have three operational segments that generate revenue.

Our Marine Technology Business revenues are derived from both sales and rental of underwater technologies.

PAL revenues are derived from sale of acoustic sensors and materials, in addition to the provision of calibration services.

Our Engineering Business revenues are derived from the supply of engineering services.

Our contracts do not include the possibility for additional contingent consideration and therefore when making a determination of the contract price we do not have to consider potential variable additional consideration. Our product sales do not include a right of return from the customer.

Regarding our Marine Technology 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 part of the product or are subject to written contracts based on the stand-alone value of those services.

Revenue from sales of engineering services there are contracts in place that specify the fixed hourly rate and other reimbursable costs to be billed and recognized based on material and direct labor hours incurred. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred (materials and direct labor hours) to date to estimated total costs to be incurred (materials and direct labor hours) for each contract. This method is used as we consider expenditures for direct materials and labor hours to be the best available measure of progress on these contracts.

For further discussion of our revenue recognition accounting policies, refer to "Note 4 Revenue Recognition" in our Consolidated Financial Statements.

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 4 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.

Results of Operations

In this Form 10-K, the following meanings are ascribed to the terminologies set out immediately below:

FY	Means Fiscal Year
2025 FY	Means the Fiscal Year ended October 31, 2025
2024 FY	Means the Fiscal Year ended October 31, 2024
Current FY	Means the Fiscal Year ended October 31, 2025
Previous FY	Means the Fiscal Year ended October 31, 2024

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, 2024) and therefore when we compare our 2025 FY to 2024 FY, there is no comparative income statement data for PAL in our 2024 FY Income 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 which are translated from their respective functional currencies into United States Dollar (USD) for reporting purposes. Currency fluctuations can therefore (positively or negatively) impact on our consolidated results including revenue, profitability and the value of our assets and liabilities included on the consolidated balance sheets. For a discussion of the effect of foreign exchange rates on sales growth, see "Effect of Foreign Exchange Rates" below.

In the Current FY our consolidated net revenue was $26,563,126 compared to $20,316,161 in the Previous FY, representing an increase of 30.7%. A significant part of the increase in our consolidated net revenue in the 2025 FY is due to the addition of PAL to the Group which contributed 20.4% or $5,409,954 to our consolidated net revenue. Without PAL, our consolidated net revenue would have increased by 4.1% to $21,153,172. Gross Profit Margin decreased by 3.3% points, reflecting changes in the mix of sales in the reporting period in conjunction with an increase in commission costs incurred in the period which was $896,046 in the Current FY compared to $740,507 in the Previous FY, representing an increase of 21.0%. Total operating expenses increased by 24.0% in the Current FY and were $13,126,340 compared to $10,588,974 in the Previous FY, largely due to the inclusion of PAL which added 17.8% or $2,335,355 to our total operating expenses. Income from operations increased by 26.6% and was $4,536,028 in the Current FY compared to $3,584,131 in the Previous FY. Net income before taxes in the Current FY increased by 19.5% and was $5,512,217 compared to $4,611,288 in the Previous FY.

Effect of Foreign Exchange Rates

As mentioned above, exchange rate fluctuations may affect our overall financial results.

Revenue Impact - Percentage of Revenue and Costs from our Foreign Subsidiaries:

In the Current FY 66.6% of our consolidated net revenue was attributable to the Company's foreign subsidiaries. When translating this amount from the native functional currencies of British Pound and Danish Kroner in the Current FY this $17,684,353 compared to $17,290,179 when using the exchange rate applied in the Previous FY and therefore an increase in net revenue of $394,174.

Cost of Revenue and Operating Costs Impact from our Foreign Subsidiaries

In the Current FY 66.6% of our consolidated Operating Expenses and Cost of Revenue was attributable to the Company's foreign subsidiaries and this was $14,674,223 ("Foreign Subsidiary Costs") of our total costs of $22,027,098. When translating the Foreign Subsidiary Costs from the native functional currencies of British Pound and Danish Kroner to USD in the Current FY this was $331,622 higher than when using the exchange rate of the Previous FY.

Segment Summary

Marine Technology Business

In the 2025 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% in the 2024 FY, representing an increase of 3.2%. Gross Profit Margin was lower at 74.5% in the 2025 FY compared to 77.9% in the 2024 FY, representing a decrease of 3.4 % points, reflecting the mix of sales. 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 demand for our rental solutions for the offshore renewable sector. In 2025 FY total operating expenses increased in the Marine Technology Business by 2.0% and were $5,949,560, compared to $5,833,972 in the 2024 FY. Income from operations in the Marine Technology Business was $3,895,857.

Although revenue in the Marine Technology Business increased by 3.2% in the 2025 FY, this segment was impacted by reduced rental revenue from the offshore renewables market due to the change in offshore renewable funding policy by the U.S. Administration. In addition, the shutdown of the U.S. Government also impacted order intake in the fourth quarter of our 2025 FY. Gross Profit Margins were slightly weaker due to the mix of sales in the Current FY where we had an increase in equipment sales by 30.5% and a reduction in rental revenue by 36.6%, which yield a higher gross profit margin than outright sales. Commission costs were broadly in line with the Previous Financial year and were $720,289 in the 2025 FY as compared to $719,491 in the 2024 FY, representing a 0.1% change.

Acoustics Sensors and Materials Business (PAL)

PAL was acquired into the Group on October 29, 2024, and therefore we have no comparative 2024 FY Income Statement data. In the 2025 FY, PAL contributed 20.4% or $5,409,954 to our consolidated net revenue. Gross Profit Margin was 58.6%. Total operating expenses for PAL were $2,335,355 and Income from operations was $837,169.

Defense Engineering Services Business

In the 2025 FY, the Defense Engineering Services Business generated $7,931,833 or 29.9% of our consolidated net revenue compared to $7,509,558 or 37.0% in the 2024 FY, representing an increase of 5.6%. Gross Profit Margin was higher at 58.6% in the 2025 FY compared to 55.8% in the 2024 FY, representing an increase of 2.8% points. This increase reflects the mix of engineering services provided during the reporting period (more units of manufacturing compared to design work). Total operating expenses increased in the Defense Engineering Services Business by 6.9% and were $2,641,594 in the 2025 FY compared to $2,471,810 in 2024 FY. This is largely related to an increase in wages and salaries. Although we have a lower staff headcount, wages have remained inflationary due to shortage of skills. This, in general, has resulted in higher volatility in the workforce, resulting in higher payroll costs. Income from operations in the 2025 FY was $2,002,833 compared to $1,719,233 in the 2024 FY, representing a 16.5% increase

This segment is comprised of the UK Operations (Martech) and the US Operations (COEI) and is reliant on funding being available under Defense Programs. During the 2025 FY, the US Operations were affected by the US Government Shutdown which resulted in lower order take in the last quarter of 2025 FY.

We continue to work on the diversification of the Defense Engineering 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, 2025, to fiscal year ended October 31, 2024

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, 2025, and 2024.

Revenue:

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	26,563,126			$	20,316,161			Increase of 30.7%

Our consolidated net revenue increased by 30.7% in the 2025 FY when compared to the 2024 FY. Revenue increased in the Marine Technology Business by 3.2% and was $13,221,339 and the Defense Engineering Services Business revenue increased by 5.6% and was $7,931,833. PAL contributed 20.4% or $5,409,954 to our consolidated net revenue. Without the inclusion of PAL, our consolidated net revenue in 2025 FY would have increased by 4.1% to $21,153,172.

Gross Margin:

Year Ended October 31, 2025		Year Ended October 31, 2024		Percentage Change
66.5% (Gross profit of $17,662,368)		69.8% (Gross profit of $14,173,105)		Decrease of 3.3% points

Gross profit margins reported in our financial results may vary according to several factors. These include:

	●	The percentage of consolidated net sales attributed to the Marine Technology Business versus the Defense Engineering Services Business and PAL. The Marine Technology Business gross profit margin may vary with the mix of products, the percentage of rental revenue and associated services; and geography from which our sales in the reporting period are derived (most sales from Asia incur commission costs which impact margins). The gross profit margin yielded by the Marine Technology Business is generally higher than that of the Defense Engineering Services Business and PAL.
	●	The percentage of consolidated net sales attributed to the Defense Engineering Services Business. The Defense Engineering Services Business yields a lower gross profit margin on generated sales which are largely based on DOD sub-contracts which are time and materials based.
	●	The percentage of consolidated net sales attributed to PAL. PAL supplies acoustic sensors and materials and its gross margin for these are typically between 55 - 62%. This may vary with the mix of products and also the percentage of reported sales that are performed through sales agents on which commission costs are incurred.
	●	The geography from which the sales are derived. Sales from Asia typically incur commission costs.
	●	Level of commission on products which may vary according to volume. All our business units work with sales/distribution agents. Most of the Marine Technology Business and PAL's sales in Asia are completed via agents or distributors. See Note 3 "Cost of Goods Sold" of our audited Consolidated Financial Statements of October 31, 2025, and 2024, for more discussion on this.
	●	The composition of our sales. Hardware sales margins are lower than software sales margins. Rentals yield a higher margin and therefore the more units of rentals in our mix of sales, the higher our margins.
	●	The percentage of sales that are attributed to custom engineering around our technology versus field support services provided by our technical support engineers.
	●	Level of Rental Assets in the Marine Technology Business' Rental Pool depreciation expenses may vary accordingly.
	●	The mix of engineering projects performed by our Defense Engineering Services. Gross profit margins may vary depending on whether we perform prototyping designs versus manufacturing.

In the 2025 FY gross profit margins for the Marine Technology Business were 74.5% compared to 77.9% in FY 2024. For PAL these were 58.6% and for the Defense Engineering Services Business, these were 58.6% in the 2025 FY compared to 55.8% in the 2024 FY.

The Marine Technology Business incurred commission costs in the 2025 FY of $720,289 compared to $719,491 in the 2024 FY, representing a marginal increase of 0.1%. For PAL these were $124,764 and the Defense Engineering Services Business $50,993 compared to $21,016 in 2024 FY.

Since there are more variable factors affecting Gross Profit Margins in the Marine Technology Business, our core business, a table showing a summary disaggregation of sales generated by the Marine Technology Business in the 2025 FY compared to the 2024 FY is set out below:

		2025 FY Products				2024 FY Products				Percentage Change
Equipment Sales		$	9,407,469			$	7,210,169				30.5	%
Equipment Rentals			1,476,713				2,328,781				(36.6)	%
Software Sales			752,312				878,516				(14.4)	%
Services			1,584,845				2,389,137				(33.7)	%
Total Net Sales		$	13,221,339			$	12,806,603				3.2	%

The increase in Equipment sales is largely attributable to an increase in DAVD and DAVD-related sales and increase in sales emanating from the strategic region of Asia where sales increased by 7.7% to $5,897,362 compared to $5,475,401. Rental revenue decreased and reflects the impact of the change in funding policy related to offshore renewables programs. Since the change in the U.S. Administration's policy on the funding for offshore renewables programs, we have seen reduced demand for our rental and associated solutions from our European customers who were down-selected for developing many offshore renewables projects in the USA. 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, 2025, and 2024.

Research and Development (R&D):

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	2,447,762			$	2,242,429			Increase of 9.2%

R&D in the 2025 FY increased by 9.2% and was $2,447,762 compared to $2,242,429 in the 2024 FY. The main reason for the increase in R&D expenditure is the inclusion of PAL which had R&D expenditures of $414,370. Without PAL R&D expenditures would have decreased by 9.3% or would have been $2,033,392, reflecting a reduction in payroll costs in this area - driven by the skills shortage discussed earlier.

●

Marine Technology Business

During the 2025 FY our Marine Technology Business R&D expenditure decreased by 8.0% and was $1,858,139 as compared to $2,019,112 in the 2024 FY. R&D expenditure is incurred by this business in connection with investments it makes in developing its products and solutions and a significant component of these expenditures comprises wages and salaries. This expenditure is an essential part of our business, as we need to continue to innovate our solutions on an ongoing basis. The decrease in R&D expenditure in the 2025 FY reflects reduced headcount and less R&D projects ongoing in the reporting period. In 2024 FY R&D expenditure of this business included technology custom chip development costs for our NANO Gen Series which we finalized and launched in our fourth quarter of 2025 FY.

●

Acoustics and Materials Business (PAL)

This is a newly acquired business unit and therefore there is no comparative financial data for the 2024 FY. During the 2025 FY, PAL incurred R&D expenditure of $414,370. R&D expenditure is incurred by this business in connection with investments it makes in developing its acoustic sensors, solutions and materials. A significant component of these expenditures comprises wages and salaries.

●

Defense Engineering Services Business

During the 2025 FY, the Defense Engineering Services Business R&D expenditure decreased by 21.5% and was $175,253 compared to $223,317 in the 2024 FY. The Defense Engineering Services Business incurs research and development expenses mainly 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.

Changes in this category by Segment are set out immediately below:

Description		Amount				% change
Marine Technology Business (Products Segment) 2025 FY		$	1,858,139				Decrease 8.0 %
Marine Technology Business (Products Segment) 2024 FY		$	2,019,112
Acoustics Sensors and Materials Business 2025 FY		$	414,370				infinite
Acoustics Sensors and Materials Business 2024 FY			-
Defense Engineering Services Business (Services Segment) 2025 FY		$	175,253				Decrease 21.5 %
Defense Engineering Services Business (Services Segment) 2024 FY		$	223,317

Selling, General and Administrative Expenses (SG&A):

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	10,678,578			$	8,346,545			Increase of 27.9%

In 2025 FY, SG&A expenditure increased by 27.9% when compared to the 2024 FY.

Notable factors in the change in our SG&A expenses for the 2025 FY are:

	●	The inclusion of PAL into the Group has resulted in an increase in SG&A in the 2025 FY by 18.0% or $1,920,985. Without the inclusion of PAL our SG&A expenses would be 4.9% higher or $8,757,593.
	●	The realization of the conditions precedent for year one "earn out" payments under the Acquisition Agreement relating to PAL and for which we have incurred a liability of $213,343.
	●	The increase in non-cash charges as a component of SG&A which in the 2025 FY were 15.9% or $1,697,959 of our total SG&A expenses compared to 12.4% or $1,032,463 of our total SG&A expenses in the 2024 FY, representing an increase of non-cash charges of 64.5%. SG&A includes both cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization, Stock-based compensation, Exchange Rate Variance charges and Credit Losses Allowance. In the Current Fiscal Year, the most significant factors which account for the increase in non-cash charges component were (i) stock based compensation expenses increased by 63.3% and were $224,786 compared to $137,676 in the 2024 FY (ii) Overhead Depreciation expenses increased by 51.2% to $645,484 in the 2025 FY compared to $426,966 in the 2024 FY, largely due to the inclusion of PAL; (iii) Credit Losses Allowance decreased to $89,456 compared to $119,405 in the 2024 FY; and (iv) Amortization expenses increased by 776.7% and were $530,218 compared to $60,476 in the 2024 FY, as a result of the acquisition of PAL.

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, 2025, compared to the year ended October 31, 2024

Expenditure		October 31, 2025				October 31, 2024				Percentage Change
Wages and Salaries		$	4,300,487			$	3,627,748			Increase of 18.5%
Legal and Professional Fees (including accounting, audit, tax and investor relations)		$	1,876,124			$	1,658,648			Increase of 13.1%
Rent for our various locations		$	71,476			$	29,330			Increase of 143.7%
Contingent Liability		$	213,343			$	-			N/A
Marketing (excluding associated travel)		$	370,043			$	382,440			Decrease of 3.2%
Travel associated with Marketing activities		$	152,003			$	70,120			Increase of 116.8%

In the 2025 FY compared to the 2024 FY:

Wages and Salaries increased by 18.5%. This category of expenses increased primarily due to the inclusion of PAL into the Group, which added $522,380 or 12.1% of our total Wages & Salaries in the 2025 FY. Without PAL, this category would have increased by 4.1% or to $3,778,107, reflecting wages inflation as we are operating on a lower head count than in the Previous FY.

Legal and Professional Fees increased by 13.1%. The main reason for the increase is the inclusion of PAL.

Rent expenditure increased by 143.7% due to the lease we acquired as part of the acquisition of PAL. We own most of our business premises. This category of expenditure is not material for our business and relates to our Copenhagen office space and the existing PAL lease.

Commitment and Contingent Liability - The Company has made provision of $213,343 (or £163,000 British Pound - the currency of the earn out obligation) since PAL has met the pre-conditions for the payment of the year one earn out, relating to revenue and pre-tax income targets as stipulated in the Acquisition Agreement.

Marketing and associated travel costs: Marketing and associated travel expenses increased by 15.4%. We incur marketing expenses in connection with the promotion of our goods and services. These expenses include the wages and salaries of our Digitalization Team, which is responsible for content digital creation and video production relating to our products and solutions. They also include costs associated with participation in industry trade shows, marketing events and travel for marketing activities. Marketing costs attributable to PAL in the Current Fiscal Year were negligible.

Corporate expenses as a percentage of revenue for the year ended October 31, 2025, compared to the year ended October 31, 2024

General corporate administrative expenses in the 2025 FY were $2,199,831 or approximately 8.3% of net revenue and $2,283,192 or 11.2% of net revenue in the 2024 FY, respectively, reflecting an increase in net revenue by 30.7% in the 2024 FY. For more information on general corporate administrative expenses, please see Note 15 (Segment Analysis) of our audited Consolidated Financial Statements of October 31, 2025, and 2024.

Operating Income:

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	4,536,028			$	3,584,131			Increase of 26.6%

In 2025 FY, Operating Income increased by 26.6%. This is largely due to the increase in our consolidated net revenue and gross profit.

Other Income:

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	976,189			$	1,027,157			Decrease of 5.0%

In the 2025 FY, we had "Other Income" of $976,189 compared to $1,027,157, representing a decrease of 5.0% from the 2024 FY. In the 2025 FY, $708,097 of this amount represents interest income earned on our certified deposit accounts. In the 2024 FY we had interest income of $938,775. The decrease in interest income reflects the change in interest rates that are applied to these amounts. These accounts are fixed for up to 3-month rolling periods and constitute "cash equivalents" in our current audited Consolidated Financial Statements for the year ended October 31, 2025. See "Note 6 - Composition of Certain Financial Statement Captions" (Other Income) to the audited Consolidated Financial Statements for the year ended October 31, 2025, where this is discussed further.

Income before Income Tax Expense for the year ended October 31, 2025, compared to the year ended October 31, 2024

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	5,512,217			$	4,611,288			Increase of 19.5%

In the 2025 FY, we had income before income taxes of $5,512,217 as compared to $4,611,288 in the 2024 FY, representing an increase of 19.5%. Net income before income taxes increased largely due to an increase in our consolidated net revenues and gross profit.

Net Income for the year ended October 31, 2025, compared to the year ended October 31, 2024

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	4,129,930			$	3,645,996			Increase of 13.3%

In the 2025 FY we had Net Income of $4,129,930 compared to $3,645,996 in the 2024 FY, representing an increase of 13.3%. This is a reflection of the increase in our pre-tax income for the reasons discussed earlier. In the 2025 FY our tax expenses increased, and we recorded a Current Tax Expense of $1,149,815 compared to $713,670 in the 2024 FY and a Deferred Tax Expense of $232,472 compared to $251,622 in the 2024 FY. Our effective tax rate is subject to significant variation due to several factors including variability in our pre-tax income 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 (GILTI) and increase in foreign subsidiaries pre-tax income is likely to increase our GILTI tax liability. Furthermore, our tax liability is also affected by the availability of net operating loss carryforward losses and R&D tax credits in the UK subsidiaries. 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 2025 FY tax liability for the Company's UK subsidiaries resulting in a current provision of $265,434 for Current Tax Expense and $293,052 for Deferred tax expense compared to $267,759 for Current Tax Expense and $2,511 for Deferred tax expense in the 2024 FY. Our Danish subsidiary does not benefit from any carryforwards or other tax relief in its tax jurisdiction and therefore for 2025 FY we have recorded a Current Tax Expense of $162,189, a decrease from FY 2024 FY where we recorded a Current Tax Expense of $218,670 and a Deferred Tax Expense of $11,003.

Comprehensive Income for the year ended October 31, 2025, compared to the year ended October 31, 2024

Year Ended October 31, 2025				Year Ended October 31, 2024				Percentage Change
$	4,762,104			$	4,577,714			Increase of 4.0%

In 2025 FY Comprehensive income was $4,762,104 compared to $4,577,714 for the 2024 FY, representing an increase of 4.0%. This category is affected by fluctuations in foreign currency exchange transactions both relating to our income and 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 2025 FY we recorded a lower gain of $632,174 on foreign currency translation adjustment transactions compared to a higher gain on these transactions of $931,718 in the 2024 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 income and expenses account 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 2025 FY compared to 2024 FY.

Segment Analysis

We operate three reportable segments, "Marine Technology Business", "Acoustic Sensors and Materials Business" and the "Defense Engineering Services Business". These segments are managed separately based upon fundamental differences in their operations, market segments and allocation of resources. Segment operating income is total segment revenue reduced by cost of revenues and operating expenses, R&D and SG&A identifiable with the reporting business segment. Corporate expenses include general corporate administrative costs.

The Acoustic Sensors and Materials Business ("PAL") was acquired on October 29, 2024 and had no material income statement activity for the remaining two days up to October 31, 2024. Therefore, there is no comparative financial data for PAL for 2024 FY. However, the fair value of assets acquired, and liabilities assumed for PAL have been included in our audited Consolidated Balance Sheet for the 2024 FY and in respect of the Segment Disclosure for 2024 FY PAL was included in the Supplemental Disclosures relating to the Marine Technology Business. The Segment Disclosure information for the 2025 FY includes full Income Statement information for PAL.

Our Chief Operating Decision Maker (CODM) evaluates the operating results and performance of all three of our segments using GAAP reporting for revenue, expenses and net income by segment. This financial metric is used to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions, take decisions on business investments and to monitor budget to actual performance on a monthly, quarterly and annual basis.

Inter-company sales are eliminated from our income statement. However, for information purposes only we have disclosed below inter-company sales for the reporting period.

The following tables summarize certain balance sheets and statement of operations information by reportable segment for the financial years ending October 31, 2025, and October 31, 2024, respectively, except that for 2024 FY there is no comparative Income Statement data for PAL for the reasons stated previously:

		Marine Technology Business ("Products")				Acoustic Sensors and Materials Business ("PAL")				Defense Engineering Services Business ("Services")				Corporate				Total
Year Ended October 31, 2025
Net Revenues		$	13,221,339			$	5,409,954			$	7,931,833			$	-			$	26,563,126
Cost of Revenues			3,375,922				2,237,430				3,287,406				-				8,900,758
Gross Profit			9,845,417				3,172,524				4,644,427				-				17,662,368
Research & Development			1,858,139				414,370				175,253				-				2,447,762
Selling, General & Administrative			4,091,421				1,920,985				2,466,341				2,199,831				10,678,578
Total Operating Expenses			5,949,560				2,335,355				2,641,594				2,199,831				13,126,340
Income (Loss) from Operations			3,895,857				837,169				2,002,833				(2,199,831	)			4,536,028
Other Income
Other Income			73,331				194,761				-				-				268,092
Interest Income			505,465				5,661				107,106				89,865				708,097
Total Other Income			578,796				200,422				107,106				89,865				976,189
Income (Loss) before Income Taxes			4,474,653				1,037,591				2,109,939				(2,109,966	)			5,512,217
Income Tax Expense
Current Tax Expense			201,167				43,118				183,338				722,192				1,149,815
Deferred Tax Expense (Benefit)			188,755				91,045				13,252				(60,580	)			232,472
Total Income Tax Expense			389,922				134,163				196,590				661,612				1,382,287
Net Income (Loss)		$	4,084,731			$	903,428			$	1,913,349			$	(2,771,578	)		$	4,129,930
Supplemental Disclosures
Total Assets		$	38,279,403			$	7,100,814			$	14,766,853			$	4,346,492			$	64,493,562
Total Liabilities		$	2,969,095			$	1,376,533			$	1,198,902			$	833,618			$	6,378,148
Revenues from Intercompany Sales - eliminated from sales above		$	6,144,638			$	51,896			$	374,311			$	2,600,000			$	9,170,845
Depreciation and Amortization		$	563,530			$	710,565			$	65,480			$	51,935			$	1,391,510
Purchases of Long-lived Assets		$	531,792			$	248,560			$	53,980			$	336,386			$	1,170,718

		Marine Technology Business ("Products")				Defense Engineering Services Business ("Services")				Corporate				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 (Benefit) Expense
Current Tax Expense			316,955				169,374				227,341				713,670
Deferred Tax (Benefit) Expense			(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			$	458,080

*

In the 2024 FY Supplemental Disclosures Information, the Marine Technology Business Disclosure under "Total Assets" includes $4,529,648 of assets pertaining to PAL and under "Total Liabilities" includes $1,455,145 of liabilities pertaining to PAL. There was no Revenue from Intercompany Sales, Depreciation and Amortization or Purchases of Long-lived Assets pertaining to PAL.

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, 2025, the Company had an accumulated deficit of $3,276,561 working capital of $44,365,153 and stockholders' equity of $58,115,414. For the year then ended, the Company generated cash flow from operations of $7,211,168.

Assuming that the current global macroeconomic environment remains stable, 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, 2025, we had cash and cash equivalents on hand of $28,682,615 and both billed and unbilled receivables of $6,721,585. Our current cash balance represents approximately 32 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. All amounts under the Revolving Line of Credit are payable at the end of each financial year. The facility is subject to annual renewal by HSBC in its sole discretion on April 30^th of each year. As of January 29, 2026, there are no amounts outstanding under this facility.

Operating Activities

Net cash generated from operating activities for the year ended October 31, 2025, was $7,211,168. We recorded net income for the period of $4,129,930. 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 amounted to $2,151,567. Changes in operating assets decreased net cash from operating activities by $491,815 and changes in current liabilities decreased net cash from operating activities by $1,421,486.

Investing Activities

Net cash used in investing activities, for the year ended October 31, 2025, was $1,196,069. These investing activities include costs associated with the implementation costs to date of our new ERP system, new plant and equipment, and the acquisition of a new survey vessel (COCO II) for our research and development testing, production testing and customer training.

Financing Activities

Net cash used in financing activities for the year ended October 31, 2025, was $0.

Foreign Currency and Inflation

The Company's consolidated results are a combination of its U.S. operations and foreign subsidiaries. The foreign subsidiaries maintain their accounts in the native currencies of their operations, and which are:

US Dollars	For U.S. Operations
British Pound	For United Kingdom Operations
Danish Kroner	For Danish Operations
Australian Dollars	For Australian Operations (operations are currently effectively dormant)
Indian Rupees	For Indian Operations (operations are currently effectively 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, 2025, 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. As necessary and on an exceptional basis, 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 the British Pound, the Euro and the 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 exposure to currency fluctuation risks.

The impact of currency fluctuations (using the Constant Rate) in the 2025 FY compared to 2024 FY is set out in the table below. Constant Rate is defined as:

For Revenue and Expenses Transactions for the 2025 FY 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
For Balance Sheet Transactions for the 2025 FY means		The prevailing exchange rate as of October 31, 2025, when compared to the prevailing exchange rate as of October 31, 2024.

These are the values we have used in the calculations below which show the impact of these currency fluctuations on our operations in the 2025 FY when applying the Constant Rate:

		Based British Pounds								Based Danish Kroner												TOTAL USD
		Actual				Constant				Actual				Constant				Actual				Constant				*Total
		Results				Rates				Results				Rates				Results				Rates				Effect
		($)				($)				($)				($)				($)				($)				($)
Revenues			13,158,114				12,857,720				4,526,239				4,432,460				17,684,353				17,290,179				394,174
Costs			13,890,469				13,573,355				753,429				737,819				14,674,223				14,342,601				331,622
Net profit (losses)			(732,355	)			(715,635	)			3,772,810				3,694,641				3,010,130				2,947,578				62,552
Assets			32,144,733				31,405,896				1,729,545				1,624,639				33,904,953				33,061,791				843,162
Liabilities			(4,137,193	)			(4,042,101	)			(597,937	)			(561,669	)			(4,763,634	)			(4,633,585	)			(130,049	)
Net assets			28,007,540				27,363,795				1,131,608				1,062,970				29,141,319				28,428,206				713,113

The effect of exchange rate movements between the 2024 FY and the 2025 FY increased net assets by $713,113.

The table above does not show separately the effect of exchange rate impact for Australian Dollars or Indian Rupees since these operations are non-trading dormant entities, and therefore the impact of foreign exchange movements 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 such as Japan which is a strategically important market for our technology.