NOTE 9 – ACQUISITIONS

On October 29, 2024, the Company acquired all the issued and outstanding shares of Precision Acoustics Limited (PAL) for $6,538,569 in cash. At the acquisition date, the Company had immediate access to PAL’s cash balance of $1,933,284, which resulted in a net cash outlay by the Company at the acquisition date of $4,605,285. The Company agreed to pay the sellers for all cash in excess of the agreed working capital amount of $595,869 in PAL’s bank account on the date of its acquisition. This resulted in the Company paying $1,337,415 for the excess cash balance.

The Company acquired PAL to gain access to its expertise in acoustic and medical imaging technologies which we believe can be leveraged through development for use in the subsea market, the primary sector for our core business, the Marine Technology Business, and more broadly to expand the Group’s collective capabilities in order to qualify and compete for larger Defense-related contracts.

In the Current Quarter, PAL contributed revenues of $1,299,069 and earnings before tax of $173,871 to our consolidated results. In the six month period ended April 30, 2025, it contributed revenues of $2,611,330 and earnings before tax of $729,920 to our consolidated results. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred at the beginning of the Company’s comparable quarterly reporting period. The unaudited supplemental pro-forma information concerning revenue and expenses for PAL (which have been translated from British Pound to USD using the exchange rate used by the Company for those reporting periods) is shown below:

 SCHEDULE OF PROFORMA INFORMATION

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported proforma information.

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the Company’s results to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from November 1, 2024 through April 30, 2025.

In fiscal year 2024, the Company incurred $41,531 of acquisition related costs. These expenses are included in our general and administrative expense on the Consolidated Statements of Income and Comprehensive Income for the year ended October 31, 2024.

The acquisition of PAL includes contingent consideration arrangements (“Earn Outs”) that requires additional consideration to be paid by the Company to the sellers of PAL based on future revenue and pre-tax income of PAL over a three-year period. These amounts are payable up to three years after the acquisition date. The potential Earn Out provision amounts as at October 31, 2024 are shown in the table below applying an exchange rate (from British Pound to USD) of $1.278973:

 SCHEDULE OF POTENTIAL EARNOUT PROVISION AMOUNTS

The actual Earn Out obligations are specified in British Pound and therefore, if triggered, the amounts stated above may vary according to exchange rate fluctuations.

Based on the projections the Company used, there would be no earnouts payable, and subsequently, no contingent liability for earnout payments has been recorded in the Company’s accounts in the Current Quarter. To the extent that the Company does not record a contingent liability for these payments, any amount actually earned under the Earn Out provisions would be expensed in the year the qualifying conditions are met. The Company has up to one-year from October 29, 2024, to make any measurement period adjustments to the fair value of the opening balance sheet.

The goodwill is attributable to the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including an experienced workforce that will help accelerate product development and our go-to-market strategy, as well as expected future synergies generated by integrating PAL’s products with those in our existing platform. None of the goodwill is expected to be deductible for tax purposes.

Prior to the acquisition, PAL was a non-key supplier to our Marine Technology Business, which purchased on average approximately $80,000 of acoustic materials from PAL. It expects to continue to purchase these materials, at a similar level from PAL in the future.

The fair value of assets acquired includes non-competes and value of technology. The estimated future annual amortization expenses of finite-lived assets relating to the PAL acquisition for our fiscal year 2025 is $468,064 and in the three month and six month periods ended April 30, 2025, amortization expenses for PAL were $118,734 and $234,032, respectively.

CODA OCTOPUS GROUP, INC.

Notes to the Unaudited Consolidated Financial Statements

April 30, 2025 and October 31, 2024