Coda Octopus Group, Inc. CODA US Equity☆

ITEM 1A. RISK FACTORS 20

ITEM 1B. UNRESOLVED STAFF COMMENTS 20

ITEM 1C. CYBERSECURITY 21

ITEM 2. PROPERTIES 22

ITEM 3. LEGAL PROCEEDINGS 22

ITEM 4. MINE SAFETY DISCLOSURES 22

PART II

ITEM 6. SELECTED FINANCIAL DATA 23

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 42

ITEM 9A CONTROLS AND PROCEDURES 42

ITEM 9B OTHER INFORMATION 42

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. 42

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 43

ITEM 11. EXECUTIVE COMPENSATION 48

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 51

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 52

SIGNATURES 53

FORWARD-LOOKING

STATEMENTS

This

annual report on Form 10-K (this “Annual Report”) contains forward-looking statements, which are subject to the safe harbor

provisions created by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical

fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use

words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,”

“project” and similar expressions or variations of such words are intended to identify forward-looking statements but are

not the exclusive means of identifying forward-looking statements in this Annual Report. The identification of certain statements as

“forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. All

statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but

not limited to, statements that relate to our future revenue, product development, customer demand, market share, growth rate, competitiveness,

gross margins, levels of research, development and other related costs, expenditures, tax expenses, cash flows, our management’s

plans and objectives for our current and future operations, the levels of customer spending, general economic conditions, and the sufficiency of financial resources to support future operations and capital expenditures.

When

we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently

available to us. These forward-looking statements are subject to risks, uncertainties, and assumptions, including but not limited to,

risks, uncertainties and assumptions discussed in this Annual Report. Factors that can cause or contribute to these differences include

those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

If

one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results

may vary materially from what we projected. Any forward-looking statement you read in this Annual Report reflects our current views with

respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of

operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us, or individuals

acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified

in this Annual Report, which would cause actual results to differ before making an investment decision. We are under no duty to update

any of the forward-looking statements after the date of this Annual Report or to conform these statements to actual results.

PART

I

ITEM

1. BUSINESS

Overview

Coda

Octopus Group, Inc. (“Coda” “the Company” or “we”), through its wholly owned subsidiaries, operates

three distinct segments:

Marine Technology Business

Our

Marine Technology Business provides technology solutions to the underwater market and constitutes our core business. We are

allocating most of our resources to this segment. It owns key proprietary and unique technology comprising its real time volumetric

imaging sonar technology (Echoscope® technology) and diving technology (“DAVD” (Diver Augmented Vision

Display)), both of which are intended for the underwater market, and which are used in the commercial offshore and defense sectors.

It also sells other proprietary subsea products such as its geophysical hardware and software solutions, inertial navigation systems

and digital audio communications system for underwater applications. All innovations, design, development and manufacturing of our

products are performed within the Company. As part of our patent strategy, we endeavor to actively protect our innovations by

seeking, where appropriate, patent protection.

Our

imaging sonar series which is marketed under the name Echoscope®, Echoscope PIPE® and Echoscope PIPE NANO

Gen Series® are used primarily in the underwater construction, offshore renewables, and offshore oil and gas,

complex underwater mapping, salvage operations, dredging, bridge inspection, navigation of underwater hazard, port and harbor

security, ship hull scanning, mining, commercial and defense diving, robotics, autonomous underwater vehicle market, marine sciences

sectors and more broadly applications for real time 3D monitoring, inspection and visualization underwater. Uniquely, the

Echoscope® technology is a single sensor for multiple underwater applications that can be used to image in 3D, moving

objects in zero visibility water conditions. Competing technologies such as the multibeam is intended for mapping the seabed.

However, they are not designed for imaging moving objects.

Our

diving technology marketed under the name “CodaOctopus® DAVD” targets the global defense and commercial

diving markets. We have two variants of the DAVD, (the tethered and untethered variants). The tethered variant is used with a

connection to a surface vessel, and the untethered variant is not connected to a surface mothership for air supply. The target

market for the untethered variant is the military and special forces operations divers.

The

DAVD solution has the potential to radically change how diving operations are performed globally because it delivers real time information

simultaneously to the divers underwater and their surface-based dive supervisors. The DAVD Head- Up Display (“HUD”)

is used as a data portal for the diver while underwater. Various types of information are displayed to the diver in the HUD in real time,

thereby increasing the capability of the interaction between the diver and the

dive supervisor and therefore the overall effectiveness of the dive operations. When paired with our Echoscope® technology it forms a comprehensive solution

for diving in zero-visibility water conditions, which is one of the biggest challenges for diving operations.

The

DAVD untethered solution (“DUS”) is designed for the Defense and Military market where diving is performed without connection

to a surface vessel. These divers typically performs special forces operations, mine detection and clearance or

reconnaissance and surveillance. Similar to the tethered variant, the DAVD HUD is used for displaying a range of mission-related information

to the diver.

DAVD’s

concept of using a pair of glasses, which is capable of augmented reality display, inside the face mask, helmet or other diving suits

is protected by a patent. The Company has an exclusive license to exploit this utility patent.

The

Marine Technology Business operates through the Company’s wholly owned subsidiaries Coda Octopus Products, Inc., (Orlando), Coda

Octopus Products Ltd (UK), Coda Octopus Products A/S (Denmark).

Acoustics

Sensors and Materials Business

The

Company acquired Precision Acoustics Limited (PAL) on October 29, 2024. PAL is a supplier of acoustic sensors materials, and consultancy services in the field of acoustics. PAL serves

a broad base of markets such as the medical, subsea, defense, universities and research and development institutes. 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. Ultrasonic free-field sensitivity calibration is critical for markets that require precision

ultrasonic measurement, strict safety compliance, and full metrological traceability. These include regulated and high-risk applications,

such as diagnostic and therapeutic medical ultrasound and defense and underwater acoustics, where free-field calibration is essential

to ensure accurate beam sensitivity and minimal interference. PAL’s operations are based in the United Kingdom.

Defense

Engineering Services Business (Services Segment)

Our

Defense Engineering Services Businesses are suppliers of embedded solutions and sub-assemblies which they design, manufacture and

sell as a component of mission critical integrated defense systems. The Defense Engineering Services Business established its

business in 1977 and has been supporting a number of significant defense programs for over 40 years, including

Raytheon’s Close in Weapon Support (CIWS) and Northrop Grumman’s Mine Hunting Systems Program (AQS-24). The

Defense Engineering Services business model entails engineering components for integration into broader defense programs, such as

the CIWS program. Typically, they are contracted to develop and supply prototypes units which are validated for broader integration

into these Defense programs and thereafter, subject to meeting the acceptance criteria, these lead to contracts for manufacture,

repair and upgrade for the life of the program, which can span decades. We enjoy sole source status for the parts that we design and

supply into these programs. This business model ensures recurring and long tail revenues. Coda Octopus Engineering, Inc. and Coda

Octopus Martech Ltd, qualify as small businesses. This opens opportunities under state requirements to collaborate with Prime

Defense Contractors on these programs. A significant part of the revenue generated by the Defense Engineering Services Business is

highly concentrated and is usually derived from a small number of prime defense contractors such as Raytheon, Northrop, Atlas

Electronics or Thales Underwater. In any one financial year, between 20% to 30% of our consolidated revenues may be derived from

these customers either alone or collectively.

The

Defense Engineering Services Businesses operate through our wholly owned subsidiaries, Coda Octopus Engineering, Inc (“COEI”),

which is based in Salt Lake City, Utah and which we acquired in 2007, and Coda Octopus Martech Limited (“Martech”),

which is based in Portland, United Kingdom which we acquired in 2006.

Cross-Group

Synergies

Our Marine Technology business, PAL,

and the Defense Engineering Services Business operate as a fully integrated capability, combining shared customer relationships,

complementary technologies, and deep specialist engineering expertise. Together, they deliver end-to-end solutions in underwater

acoustics and measurement, supported by the design and manufacture of robust, ruggedized systems engineered for deployment in

demanding and hostile environments. These capabilities span the entire technology value chain, from acquisition and processing

through to computation, analysis, and visualization.

The Group increasingly operates on a

collaborative basis, with each business drawing on the strengths of the others to deliver complex customer programs and coordinated

responses to broader-scope tenders. Our Defense Engineering Services Business plays a central role in the Group’s growth

strategy, providing the engineering depth and systems expertise required to accelerate innovation and enhance the delivery of

technology solutions across the Marine Technology portfolio.

This integrated operating model enhances the Group’s control over intellectual property and reinforces its

competitive position. PAL’s recognized expertise in ultrasonic and acoustic measurement underpins the Group’s core technologies

and continues to shape the development and evolution of integrated, value-led solutions based on proprietary technology.

Key

Pillars for our Growth Plans

Our

volumetric real time 3D imaging sonar technology (the Echoscope® technology) and our DAVD are our most promising products

for the Company’s near-term growth.

The

Echoscope® is widely used in the commercial offshore marine market for a wide range of activities from real time 3D monitoring,

salvage and recovery, placements and landings, mining, etc. The biggest market opportunity for scalable growth around the Echoscope

is in the defense sector which is undergoing structural and transformational changes through the deployment of new classes of

underwater vehicles, including manned, unmanned surface, and fully autonomous platforms. These platforms vary in size, from large

vehicles exceeding 85 feet in length and weighing over 85 tons, to compact, one-person-deployable systems. A common requirement

across all platforms is the need for reliable underwater vision. This capability is essential for safe and accurate navigation,

situational awareness, environmental understanding, data collection, and mission execution. The Echoscope directly addresses these

needs by providing high-resolution, real-time 3D imaging in complex underwater environments. The defense sector deploys these

underwater vehicles for a range of mission-critical applications, most notably Mine Countermeasures, Anti-Submarine Warfare,

Surveillance and Reconnaissance, and Infrastructure Protection (such as undersea cables). The Echoscope is currently being evaluated for integration into

active future defense programs.

All

next-generation defense vehicle programs share a common objective of integrating advanced technologies and enhanced capabilities.

Central to this evolution is the development of smarter vehicles equipped with tools like the Echoscope® which deliver

real-time, three-dimensional data (live XYZ data) for informed real time decision-making. Its versatility across a wide range of

defense mission applications supports the consolidation of sensor suite requirements on these platforms. A key advantage lies in

addressing SWaP (Size, Weight, and Power) constraints. With the potential to reduce the number of active sensors on these platforms

the Echoscope offers the opportunity to lower power consumption and overall vehicle weight and directly contributing to extended

mission durations. This capability represents a unique and valuable benefit which the Echoscope brings to the defense underwater

vehicles programs.

The

launch by the Company of its Echoscope PIPE NANO Gen Series® in fiscal year 2025, our ultra-compact real time 3D imaging sonar

marks a critical step in enabling next-generation subsea AI enabled autonomy. As the subsea industry transitions from vessel-intensive,

human -in-the-loop workflows, NANO Gen Series provides the real time 3D perception required to unlock scalable, software driven

autonomy across a growing range of platforms. It functions as a core perception sensor for AI-enabled platforms, supporting navigation,

obstacle avoidance, target recognition and guidance and adaptive mission execution with reliance on bandwidth limited communications

or post-processing capability. The introduction of our NANO Gen Series which is a shade bigger

than a smartphone, is a significant leap forward as it positions the Company to address a broad swathe of the underwater vehicle

market, where these vehicles are increasingly becoming smaller. With the introduction of our NANO Gen sonar series in fiscal year

2025 we saw real progress in the Defense underwater vehicle market and have had several key and successful trials with the new NANO

sonar as it is aligned with the strongest growth drivers in the subsea market for autonomy, Edge AI, reduced operational costs and

scalable deployment. By enabling higher levels of autonomy and mission efficiency in a single, compact sensor, NANO Gen Series strengthens

the Echoscope’s role as a critical sensor to the next generation of intelligent subsea platforms.

We

also believe that the DAVD system, which is a relatively new technology and presents significant capabilities to the diving market, is

poised to radically change the way diving operations are performed globally by providing a fully integrated suite of sensor data shared

in real time by the diver and the dive supervisor on the surface. Current diving is done largely by voice command missions from the topside

using disparate suite of systems for video data, communications, and positioning.

The

DAVD tethered variant is now a commercial offering and is in the early stages of adoption with the US Navy in over 14 commands. We continue

to work to achieve adoption in the global market.

The

DAVD untethered solution (DUS) presents the biggest market opportunity for DAVD technology. In the USA alone there are over 14,000

divers that could utilize this solution including U.S. Special Operations Forces (SOF), EOD (Explosive Ordnance Disposal), US Army,

Marine Corps, US Coast Guard, first responders and law enforcement.

In the Fiscal Year 2024, the DAVD untethered solution was the subject of a joint

funded U.S and Foreign Navy program, the DUS Hardening Program, under which the DAVD technology was adapted and hardened for SOF

applications. During the fiscal year 2024 we made significant progress by delivering major project deliverables such as a new

generation head up display (DAVD HUD), which is in a much smaller form factor and higher resolution. Following the successful

completion of the DUS Hardening Program, we made further progress during the fiscal year 2025 when we received the first production

order for the untethered variant and delivered 16 DAVD Untethered Systems for the U.S Navy MK16 Rebreather system. These are the culmination of extensive field testing and direct feedback from operational divers. The production unit is now undergoing

final approval for Authorization for Navy Use (ANU). This is an essential approval process which permits the system to be used in live

operation. We also delivered all program

deliverables under the DUS Hardening Program to a foreign navy sponsor including training on the DUS, which now enables

this navy to move to the next stage of their evaluation by introducing this technology to their internal users. In the 2025 FY

we also received our first small batch order for DAVD system from a very influential European-based foreign navy, and we are contracted to

provide training in our second quarter of fiscal 2026 to this navy.

The

concept of utilizing a pair of transparent glasses in the HUD underwater for this purpose, is protected by patent. All component parts

of the DAVD system are proprietary to the Company and include software (4G USE® DAVD Edition), Diver Processing Pack –

telemetry system (DPP), topside Supervisor Console Controller and real time 3D Sonar. The Company benefits from the exclusive license

from the U.S. Department of the Navy at Naval Surface Warfare Center Panama City Division to utilize the utility patent covering the

concept of using the pair of transparent glasses as a data hub underwater. The DAVD tethered variant is classified as an “Authorization

for Navy Use” item and also benefits from CE marking certifying that the DAVD system meets the essential health, safety and environmental

requirements of the UK and European Union. The untethered variant is currently going through validation process.

Our

corporate structure is as follows:

Corporate

History

The

Company began as Coda Technologies Limited. This company now operates under the name Coda Octopus Products Limited, a United Kingdom

corporation formed in 1994 as a start-up company with its origins as a research group at Heriot-Watt University, Edinburgh, Scotland.

Initially, its operations consisted primarily of developing software for subsea mapping and visualization using sidescan sonar (a technology

widely used in commercial offshore geophysical survey and naval mine-hunting to detect objects on, and textures of, the surface of the

seabed).

In

June 2002, we acquired Octopus Marine Systems Ltd, a UK corporation, and changed our name to Coda Octopus Limited. At the time of its

acquisition, Octopus Marine Systems was producing geophysical products broadly similar to those of Coda, but targeted at the less sophisticated,

easy-to-use, “workhorse” market.

In

December 2002, Coda Octopus Ltd acquired OmniTech AS, a Norwegian corporation, which became a wholly owned subsidiary of the Company,

and which subsequently changed its name to Coda Octopus R&D A/S. At the time of acquisition, this company had been engaged for over

ten years in developing a revolutionary imaging sonar technology capable of producing real time three-dimensional (“3D”)

underwater images for use in subsea activities. Coda Octopus Products Limited (Edinburgh based) then developed our visualization software

(Underwater Survey Explorer) to control and display the images from the real time 3D sonar device. This technology is now marketed by

us under the brand name “Echoscope®”, Echoscope PIPE® and Echoscope PIPE NANO

Gen Series®. All activities of this now-defunct Norwegian subsidiary, Coda Octopus R&D A/S, have been transferred

to Coda Octopus Products Limited (Edinburgh).

On

July 13, 2004, the Company effected a reverse merger pursuant to the terms of a share exchange agreement between The Panda Project, Inc.

(“Panda”), a Florida corporation, and a now defunct entity affiliated with Coda Octopus Ltd. (“Coda Parent”).

Panda acquired the shares of Coda Octopus Limited, a UK corporation and a wholly owned subsidiary of Coda Parent, in consideration for

the issuance of a total of 1,432,143 shares of common stock to Coda Parent and other shareholders of Coda Octopus Limited. The shares

issued represented approximately 90.9% of the issued and outstanding shares of Panda. The share exchange was accounted for as a reverse

acquisition of Panda by Coda. Subsequently, Panda was reincorporated in Delaware and changed its name to Coda Octopus Group, Inc.

In

June 2006, the Company acquired Coda Octopus Martech Limited (“Martech”), which is part of our Defense Engineering Services Business. This is an English corporation.

In

April 2007, the Company acquired Coda Octopus Engineering, Inc. (“COEI”), formerly known as Colmek

Inc., which is part of our Defense Engineering Services Business. This is a Utah corporation.

In

December 2013 Coda Octopus Products Limited established Coda Octopus Products Pty Ltd (Australia) to grow our presence in Australia and

New Zealand. These activities were interrupted by the Coronavirus Pandemic in 2020 and since then we have not had personnel on the ground

and therefore these operations have been slow to regain momentum.

On

October 29, 2024, we acquired into the Group, Precision Acoustics Limited - “PAL” - a company established under the laws

of England. This company was acquired to gain access to its expertise and expand our capabilities and offering to the market. It was

also acquired to leverage its existing technologies and expertise, which are used in other market sectors, into one of our main markets,

the subsea market.

Coda

Octopus Group, Inc., is organized under the laws of the State of Delaware as a holding company that conducts its business through its

subsidiaries, several of which are organized under the laws of foreign jurisdictions, including England, Scotland, Denmark, Australia

and India. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. courts against these

entities, or to effect service of process on the officers and directors managing the foreign subsidiaries. These companies’ operations

must comply with the laws of the countries under which they are incorporated, and these laws are likely to be different from the equivalent

laws of the United States.

Corporate Information

Our principal executive offices are located at 3300

S. Hiawassee Rd, Orlando, FL 32835. Our telephone number is +1 (407) 735-2406. We maintain a corporate website at www.codaoctopusgroup.com.

The reference to the Company’s website address does not constitute incorporation by reference of the information on the Company’s

website into this Form 10-K.

Marine

Technology Business (“Products Segment”)

Our

Marine Technology Business develops proprietary solutions for both the commercial and defense subsea market. The range of solutions which

it offers to the market are complementary and include:

Product Family Composition

Diving Technology DAVD range Hardware and Software

Digital Audio Communications System Voice HUB_4 Hardware and Software

These

products and/or solutions are sold, rented or leased into various marine sectors such as:

● Marine geophysical survey

● Offshore Renewables (“Wind Energy”)

● Underwater construction, inspection and monitoring

● Diving Companies

● Commercial and Defense Diving

● Salvage and decommissioning

● Oil and Gas (O&G”)

● Robotics

● Autonomous underwater vehicles

● Commercial fisheries

● Environmental, mammal and habitat monitoring

● Underwater Defense Applications

● Underwater vehicles

● Port and Harbor Security, law enforcement and first responders

● Research and education

1.

Geophysical Range of Products

The

Geophysical range of products is marketed under the brands DA4G®, GeoSurvey® and Survey Engine®.

We started our business in 1994 designing and developing the GeoSurvey® software and hardware package for acquisition

and processing of sidescan sonar and sub-bottom profiler data. For over two decades, our GeoSurvey has been an industry leading software

package in the market for data acquisition and interpretation and provides feature rich solutions and productivity enhancing tools for

the most exacting survey requirements. Designed specifically for sidescan and sub-bottom data acquisition, GeoSurvey®

has been purchased by numerous leading survey companies throughout the world and has been the workhorse for processing data for Oil &

Gas companies for many years. DA4G is a hardware acquisition system and both GeoSurvey® and Survey Engine®

are complementary software packages which are used for processing the data post-acquisition.

2.

Inertial Positioning and Attitude Measurement Systems (“Motion Products”)

We

have been selling our GNSS Aided Inertial Measurement Systems for over 20 years. Our current generation of F280 Series® was

released to the market in 2021 and is used to provide data on accurate positioning, heading, pitch, roll and yaw at sea. The F280 Series®

is an advancement of our F180® series and is highly complementary to our real time Echoscope® sonar

series and they are packaged together to provide a more comprehensive solution. The products within the F280 Series ® range

can be sold with or without our Echoscope®.

3.

Real Time Volumetric Imaging Sonars (ranging from 3D/4D, 5D and 6D)

We

design, develop and supply what we believe is the world’s most advanced series of real time volumetric imaging sonar (Echoscope®,

Echoscope PIPE® and recently added Echoscope PIPE® NANO Gen Series). This is the culmination of over 25 years of research

and development. Our sonar innovations are multi-tiered and extend to hardware, firmware and software, all of which co-exist and are

co-dependent on each other. In other words, hardware, firmware and software operate as sub-systems to each other. We believe that the

highly complex nature of this new technology will make it extremely difficult to reverse engineer our sonar products.

Prior

to 2018, we were selling our third generation of Echoscope imaging sonar (3G Sonar Series which were of limited application due to size, weight, power and price (SWAPs)). In January 2018, we launched our 4G

Sonar Series which were largely form factor revisions, and removed the SWAPs issues.

Building on our 4G developments, we continued our innovation and in 2021 released our latest generation of sonar, Echoscope

PIPE® to the market which advanced the capabilities of the technology and antecedent sonar products significantly. We

continued investing in our Echoscope Technology and in 2025 based on our breakthrough technology chip set, we were able to introduce

our new Echoscope PIPE NANO Gen Series® which is significantly reduced in form factor (a shade bigger than

smartphones) and further opens the opportunities for our technology in the small underwater vehicles space, drones and

robotics and platforms designed for autonomy and AI driven requirements.

We

believe that the Echoscope PIPE® technology is superior to the other imaging sonars in the market as it generates real

time 3D, 4D, 5D and 6D images of the underwater environment irrespective of low or zero visibility conditions and, unlike conventional

sonars, can image a volume of data (as opposed to a slice of data). The capability of our volumetric imaging sonars covers a broad breadth

of activities underwater particularly for any form of real time monitoring in 3D, underwater construction, salvaging, placements, decommissioning,

obstacle avoidance, complex underwater mapping and real time 3D navigation in zero visibility conditions. Uniquely also, using a single

sensor (our Echoscope PIPE®) range we can provide different data outputs to the various parts of the survey team, thus

reducing the number of different sensors required on these underwater projects, and ultimately reducing the costs associated with these

operations.

About

the Company’s 5D and 6D PIPE Sonars Innovations

The

acronym PIPE stands for Parallel Intelligent Processing Engine.

5D

and 6D imaging sonars are new to the subsea market and constitute an innovation by the Company.

5D

Sonars (Echoscope PIPE®)

The

Company’s 5D Sonars is capable of processing and utilizing much more of the data that is acquired and processed by our latest

PIPE volumetric imaging sonars. Prior to this, due to limitation of processing technologies, there was an upper limit to the amount

of data our antecedent sonars could acquire and process. This meant that in the previous generation of sonars (3G and 4G series)

when a signal was emitted, they returned a single range and intensity value per beam. In our 5D Sonars we return multiple range and

intensity values per beam (Full Time Series data). This new capability provides more information about the underwater

environment.

6D

Sonars (Echoscope PIPE®)

The

Company’s 6D Sonars process and utilize much more of the data acquired by the sonar. 6D Sonars generate multiple real time 3D full

time series images. The latest

PIPE technology generates multiple 3D images simultaneously in real time using different sonar/acoustic parameters (such as different

beamforming methods, frequency, range, field of view, pulse length and other acoustic filters or shading). This allows for different

data sets to be provided to different parts of the survey team in real time (thus consolidating the sensors and the associated costs

and effectiveness of the solution). We are not aware of any sonar that offers either 5D or 6D Capability.

Echoscope

PIPE NANO Gen Series®

The

Company’s NANO Gen Series sonars were introduced during third fiscal quarter of 2025. The NANO Gen Series is

pivotal for the Company as it addresses the small underwater vehicles, drones, autonomous and robotics platforms which is a growing

part of the underwater vehicles market – where these are getting increasingly smaller. The biggest market opportunity for our

scalable growth around the Echoscope is in the defense sector which is undergoing a major transformation through the deployment of

new classes of underwater vehicles, including manned, unmanned surface, and fully autonomous platforms which are becoming

increasingly small. The introduction of NANO is important as it positions the Company to address a broader swathe of

the imaging sonar market. We believe our NANO Gen Series is aligned with the strongest growth drivers in the subsea market by

enabling higher levels of autonomy and mission efficiency with a single ultra compact sensor supporting multiple high-value use

cases including subsea navigation, inspection, 3D modeling, 3D perception, seabed imaging and change detection and therefore

allowing operators to consolidate hardware, reduce integration complexity and lower the total system cost. This multi-mission

flexibility positions NANO Gen Series as a platform-agnostic technology for AUVs, ROVs, hybrid vehicles, resident subsea systems and

future autonomous fleets.

Echoscope®

Software

The

Echoscope® technology is used in conjunction with our internally developed software (USE, Construction Monitoring System (CMS), 4G

USE®, 4G USE® DAVD Edition and 4G USE® DAVD Flex Edition). The software

is a critical component of the capabilities and features of our sonar series.

Our

software development capability is an important part of our strategy to maintain our lead in designing, manufacturing, and selling

state-of-the-art real-time volumetric imaging sonars and our DAVD System. It also allows us to be responsive to our

customers’ requirements for new features and capabilities around our solutions.

We

have now launched our fourth-generation multi-sensor software platform which is marketed under the name “4G USE®”,

which is a multi-sensor platform allowing users to bring in and utilize a variety of sensor data including sonar, positioning, camera,

lidar, video processing and other sources of point cloud data and seamlessly merging above and below the water data captured from the

sonar and camera. It is also the platform for our DAVD software, and this module is marketed under the brands 4G USE®

DAVD Edition and 4G USE® DAVD Flex Edition and our new 4G USE® Obstacle Detection/Avoidance software.

Diver

Augmented Vision Display (DAVD) System – Diving Technology

Funded

by the Office of Naval Research (“ONR”) through its Future Naval Capabilities (FNC) program, and in close collaboration

with NAVSEA 00C3 and Naval Surface Warfare Center, Panama City Division (“NSWC PCD”) we have developed a cutting-edge

Augmented Reality (AR) technology (DAVD), purpose-built product to enhance diver safety, performance and situational awareness in

low-visibility and technically demanding underwater environments.

DAVD

is a complete end-to-end diver management solution incorporating as a key element a high-resolution, fully transparent glass head-up

display (“DAVD HUD”), integrated directly inside the diving helmet (for hard hat surface air supply diving) or full-facemask

(for tethered and untethered defense, commercial and recreational diving applications) or diving suits.

Problem

In Context

The

concept of using a pair of transparent glasses in the HUD to render real time information for underwater applications is protected by

patent and Coda Octopus has an exclusive license from United States Department of the Navy at NSWC PCD to exploit this patent for all

underwater diving activities.

The

US Government, as represented by Secretary of the Navy (Arlington, VA), describes the challenge for divers in an abstract from their

patent application as follows:

“By

their very nature, underwater dive missions are difficult and inherently dangerous. Furthermore, the complexity of underwater missions

can make it difficult or impossible for a diver to retain all pre-mission briefing information. For these reasons, it is critical for

underwater divers to have access to environmental data and mission data while in the water. However, in low visibility water environments,

divers can rarely see handheld displays or gauges. Accordingly, divers are generally supplied with audio-communicated information from

a topside location. The topside-supplied information can include descriptions of sonar images, blueprints, maps, pictures, etc. Unfortunately,

it can be very difficult and confusing for a diver to interpret a topside personnel’s audio description of the topside personnel’s

visual interpretation. Combining this with unreliable audio communication can lead to mission failures or disasters.”

It

further describes the objective of the Invention as:

“Accordingly,

it is an object of the present invention to provide an underwater diver with real-time visual information available to topside personnel.

Another

object of the present invention is to provide real-time visual information to an underwater diver for viewing in water environments irrespective

of water visibility levels.

Other

objects and advantages of the present invention will become more obvious hereinafter in the specification and drawings.”

How

does DAVD Change this?

The

DAVD system addresses all the challenges described above including removing the interpretation of the underwater scene to the topside

by providing the diver with real time data and first-person interpretation. The DAVD technology benefits not only the diver and direct

supervisor on the surface, but also engineers, end-clients, rescue workers and support personnel who all have a vested interest in a

successful and safe diving mission. DAVD provides the location of the diver, the dive support vessel, work site assets and any hazards

that are known or discovered in real-time. Real-time compass and depth are also displayed to the diver to reduce disorientation. Visibility

for the diver and team is significantly enhanced with both real-time camera and 3D sonar data (providing underwater night-vision) and

also high-resolution maps and models of the entire work site and surroundings. Communication is transformed from low quality audio speech

to high quality digital audio and video, text messaging, visual alerts and automated navigation guidance. The safety of the diver and

team is paramount. DAVD ensures the Diver and Supervisor are visually synchronized and can safely coordinate movement, tasks and instructions

with full health monitoring and logging of the entire mission. Using the current method of diving, data and information sharing end when

the diver leaves the surface.

The

DAVD solution is currently in early-stage adoption with the US Navy and enjoys the benefit of the classification Authorization for

Navy Use (ANU) item for the Tethered variant. DAVD also is certified for CE markings which covers compliance with the European Union and the United Kingdom

health environmental and health and safety requirements.

We

continue to evolve the DAVD technology. We delivered the new generation of DAVD HUD at the end of fiscal year 2024 and following the

completion of the DUS Hardening Program, which funded the adaptation of the DAVD technology for the special forces sector, we delivered

16 DUS new generation systems which are now the subject of evaluation for broader adoption by this community of users.

During

fiscal 2025 we received contracts for several funded programs for the incorporation of the DAVD technology into diving

apparatus including diving masks and diving suits including DSEND (Deep Sea Expeditionary with No Compression System). DAVD is being leveraged as a critical life support and visualization component, enhancing diver safety and mission effectiveness by delivering

real time life support data via the DAVD HUD and 3D situational awareness through Echoscope technology. These initiatives exemplify the

growing recognition of DAVD and Echoscope technologies as mission-critical tools in the evolving landscape of advanced military diving

and underwater operations.

Marine

Technology Business Accreditations

Coda

Octopus Products Limited has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015

and Cyber Essentials Plus certification.

Acoustic

and Materials Business (Precision Acoustics Limited (“PAL”))

PAL 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. Ultrasonic free-field sensitivity

calibration is critical for markets that require precision ultrasonic measurement, strict safety compliance, and full metrological traceability.

These include regulated and high-risk applications, such as diagnostic and therapeutic medical ultrasound and defense and underwater

acoustics, where free-field calibration is essential to ensure accurate beam sensitivity and minimal interference.

PAL

has the requisite accreditations for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials Plus

certification and ISO/IEC 17025 covering ultrasonic hydrophone calibration capabilities—specifically in Ultrasonic Free-Field Sensitivity.

Defense Engineering Services Businesses (“Services Segment”)

Our

Defense Engineering Services Businesses comprise Coda Octopus Engineering, Inc. (“COEI”) which is based in Salt Lake City and Coda

Octopus Martech Limited which is based in Portland, UK.

They

largely operate as sub-contractors to prime defense contractors, and their engineering solutions typically constitute sub-components

designed for integration into larger defense programs of record where high levels of reliability and quality are essential pre-requisites

for securing and maintaining these agreements with their customers. Typically, they prototype subassemblies for their customers and after

going through various acceptance tests, including first article inspection approvals, they are then awarded the manufacturing contracts.

Many of these manufacturing contracts have a repeat orders profile which typically follows the life cycle of the defense program that

is using the subassembly component within the broader program.

These

arrangements often give the Defense Engineering Services Businesses long term preferred/sole supplier status for the sub-components they supply

into these programs and provide them with opportunity to participate in any requirements for technology refresh or obsolescence

management for the components supplied. They generally use these long-standing relationships to win more contracts with these

customers.

In

order to grow, the Defense Engineering Business relies on increasing the number of new programs it attracts annually. In

addition, we are increasingly combining our engineering capabilities with our product offerings. This enables us to offer systems

which are complete with installation and support to maximize the utilization of our collective expertise to advance our

technologies.

Coda

Octopus Martech Limited (“Martech”)

Martech,

which is UK-based, operates in the specialized niche of bespoke design and manufacturing services mainly to the United Kingdom defense

and subsea industries. Its services are provided on a custom subcontract basis where high quality and high integrity devices are required

in small quantities. Their skill set includes both hardware and software design.

Martech

enjoys pre-approvals to allow it to be short-listed for certain types of government contracts. Much of the more significant business

secured by Martech is through the formal government or government contractor tendering process. Martech has the requisite accreditations

for its business including being Lloyds Register accredited to ISO 9001:2015 and Cyber Essentials Plus certification.

Coda

Octopus Engineering, Inc. (“COEI”)

COEI, which is US-based, is a supplier of embedded solutions and sub-assemblies which they design and manufacture and sell into mission critical integrated

defense systems such as the Close-In-Weapons System (CIWS). This business was established 1977 and has been supporting several

significant US defense programs for over 45 years, including Raytheon’s CIWS and Northrop Grumman’s Mine Hunting Systems

Program (AQS-24). This business was at the heart of technology for search and recovery of the Titanic in 1985 with its long-range

telemetry system for underwater instrumentation. COEI’s business model entails designing sub-assemblies which are components

of broader defense programs. COEI is the sole source for the hardware and software components that they supply to these programs.

This business model ensures recurring and long tail revenues since we continue to supply parts, typically for the life of the

program, which can span decades. Their work scope typically extends to both hardware and software design.

COEI

has the requisite accreditations for its business, including being Lloyds Register accredited to ISO 9001:2015 and NIST (National Institute

of Science and Technology) 800-171 certification.

Sales

and Marketing

The

Marine Technology Business markets its products through its internal sales team, website, industry events such as trade shows, webinars,

live demonstrations of the technology, industry relationships and a network of non-exclusive agents in foreign countries such as Japan,

China, Korea and South Africa.

PAL

markets its products through its internal sales team, its website and a network of non-exclusive agents in Japan, China, India and Korea.

COEI

markets its products through its internal sales team, website, industry events and a network of non-exclusive agents in the US and

Canada.

Martech

markets its products through its internal sales team, website and industry events.

Competition

Marine

Technology Business

In

our Marine Technology Business, we are exposed to the following competitive challenges:

Real

Time 3D/4D/5D and 6D Volumetric Sonar (Echoscope® Technology)

A

significant portion of our revenue is generated from our Echoscope® technology.

Within

the domain of real-time 3D imaging, we are aware of only a single recent entrant to the market: WaterLinked AS. The specific capabilities

and intended applications of their sonar system remain uncertain; however, publicly available datasheets indicate that it is designed

solely as an acoustic camera with a notably limited imaging range and crucially limited resolution. Consequently, the product appears

to offer limited performance and remains at a nascent stage of technological development.

Entry into this market depends upon specialized marine electronics, acoustic, know-how, and software development skills. The learning curve, which

has resulted in the advancement of our real time 3D sonar device, is the culmination of two decades of research and development in this

field.

Companies

such as Kongsberg Gruppen, R2Sonic, LLC, Tritech International Ltd., United Kingdom, BlueView Technologies Inc., USA (now a part of Teledyne

Technologies Incorporated), and Norbit Group AS Norway and Kraken Robotics are examples of companies offering imaging sonar solutions

(such as multibeam sonars, SAS sonars and/or 2D scanning sonars), but none of these sonar offerings are directly comparable or competitors

to our real time volumetric 3D/4D/5D and 6D sonar solutions as their scanning sonar, single beam or multibeam sonars are not real time

3D imaging sonars and therefore cannot image moving targets underwater.

Specifically,

we believe that they do not have the same capabilities as our Echoscope® technology in terms of real time inspection

and monitoring by generating 3D, 4D, 5D and 6D images of moving objects underwater including in environments in low or zero

visibility conditions. Notwithstanding it should be noted that Teledyne has acquired a significant number of substantial subsea

companies (examples are Reson and BlueView). Teledyne has much greater resources, liquidity and market reach than our Company and

has many operating verticals. We therefore can give no assurance that companies such as these will not enter this market.

Furthermore, companies such as Kongsberg Gruppen and Teledyne can expend significantly more in any one fiscal year on R&D and

Business Development, key pillars for increasing market share of underwater imaging sonars, than the Company. Notwithstanding, we

believe that our recent development and introduction of 5D/6D - Echoscope PIPE® sonar capability in conjunction with

our software (4G USE® a multi-sensor platform) further distinguishes our volumetric sonars and significantly extends

our lead in real time 3D/4D/5D and 6D Imaging of moving objects underwater over competitors in the subsea imaging market.

Furthermore, we believe that the addition of Precision Acoustic’s expertise in this area will help the Company in maintaining

its lead in this area. We are not aware of any other imaging sonars in the market capable of generating real time 5D and 6D imagery

underwater, which are Coda Octopus inventions. The innovations around Echoscope PIPE® are the subject of numerous

patent applications. We have been awarded US 10,718,865 and US 10,816,652 patents which concerns a method of compressing beamformed

data and method of compressing sonar data, respectively. These two patents are important “method patents” since we are

handling significantly more data than in our previous generation of sonars.

We

seek to compete on the basis of producing high quality products employing cutting edge technology that is easy to use by the operators

without specialized skills in sonar technology. We intend to continue our research and development activities to continually improve

our products, seek new applications for our existing products, develop new innovative products and grow the market for our products and

expertise.

Diver

Augmented Vision Display System (“DAVD”)

A

material portion of our revenue is generated from our DAVD technology.

There

are various diving systems in the market that provide a combination of different aspects of our DAVD system but no systems that directly

compete in the form of embedded fully transparent glasses mounted internally within the diver helmet or mask for visual display of a

range of data and augmented reality information which can be directly consumed by the diver underwater. This concept is protected by

US Patent 10,877,282.

The

DAVD system provides a unique diver centric system with localized and external sensors to provide increased safety, scene awareness and

vital communication in the form of Digital Audio, Ultra-Low-Light Video, Text and technical instruction and access to a complete media

hub for effective communication between diver and supervisor. The DAVD system provides the following capabilities:

There

are several diver related products and sensors that can be worn by the diver such as telemetry systems, navigational aids, dive computers,

video and sonar systems and probes and sensors such as magnetic and thickness. Each of these systems typically have an independent display,