Coda Octopus Group, Inc.

Notes to the Unaudited Consolidated Financial Statements

NOTE 1 –ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES

We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all material adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for fiscal year 2025 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the U.S. Securities Exchange Commission (“SEC”). These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes presented on the Company’s Annual Report on Form 10-K for the year ended October 31, 2024 as filed with the Securities and Exchange Commission on January 29, 2025.

Principles of Consolidation

The consolidated financial statements include the accounts of Coda Octopus Group, Inc. and its wholly owned domestic and foreign subsidiaries. All material intercompany transactions and balances have been eliminated in the consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting estimates and assumptions that require management’s most significant, challenging, and subjective judgment include estimates related to the percentage of completion method used to account for contracts including costs and earnings in excess of billings, billings in excess of costs and estimated earnings. Actual results realized by the Company may differ from management’s estimates.

NOTE 2 – REVENUE RECOGNITION

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s Topic 606,Revenue from Contracts with Customers(“Topic 606”).

Topic 606 has established a five-step process to determine the amount of revenue to record from contracts with customers. The five steps are:

NOTE 2 – REVENUE RECOGNITION (Continued)

We have three business segments:

Marine Technology Business (“Products Business”)

The Products Business revenues are earned under written contracts with its customers. Its Business Model includes:

Outright sale of underwater solutions (including hardware and software)

Rental of underwater equipment (including hardware and software)

Support services (including field installation and training)

Technical Support Services

Warranty Coverage and Through Life Support (TLS) sales

Customization of technology services

All its products and services are sold on a stand-alone basis and those market prices are evidence of the value of these products and services. Revenue derived from outright sale is recognized when its performance obligations are met – typically upon delivery and passing of risks in accordance with the contract terms. For rentals the rental period typically commences when the equipment is under the control of the customer and revenue derived from these contracts is recognized on a daily basis during the rental period. Revenue derived from services is recognized when our performance obligations are met under the terms of the contract. For contracts with multiple performance obligations, we recognize product revenue by allocating the transaction price to each performance obligation based on a relative standalone selling price basis and recognize revenue when performance obligations are met. Software license sales for which any services rendered are not considered distinct to the functionality of the software, we recognize revenue upon delivery of the software by the provision of the software installers and activation codes to the software.

Our contracts sometimes require customer payments in advance of revenue recognition. These are recognized as revenue when we have fulfilled our obligations under the respective contracts. Until such time, we recognize these prepayments as deferred revenue.

Our contracts do not give the customer the right of return. Where there are contractual failures giving rise to post-sale obligations these are addressed under our warranty or through life support provisions. The Company calculates its warranty expense provision based on its historical warranty experience and adjustments are made periodically to reflect actual warranty expenses.

Acoustic Sensors and Materials Business (“PAL”)

PAL revenues are earned under written contracts with its customers. Its Business Model includes:

Outright sale of sensors (including hardware and software) and materials

Warranty Coverage

Post Sale Calibration Services

Customization of technology services

All its products and services are sold on a stand-alone basis and those market prices are evidence of the value of these products and services. Revenue derived from outright sale is recognized when its performance obligations are met – typically upon delivery and passing of risks in accordance with the contract terms. For contracts with multiple performance obligations, we recognize product revenue by allocating the transaction price to each performance obligation based on a relative standalone selling price basis and recognize revenue when performance obligations are met. Software license sales for which any services rendered are not considered distinct to the functionality of the software, we recognize revenue upon delivery of the software by the provision of the software installers and activation codes to the software.

Our contracts sometimes require customer payments in advance of revenue recognition. These are recognized as revenue when we have fulfilled our obligations under the respective contracts. Until such time, we recognize these prepayments as deferred revenue.

Our contracts do not give the customer the right of return. Where there are contractual failures giving rise to post-sale obligations these are addressed under our warranty or through life support provisions. The Company calculates its warranty expense provision based on its historical warranty experience and adjustments are made periodically to reflect actual warranty expenses.

Marine Engineering Business (“Services Business”)

The Services Business revenues are earned under written contracts with its customers. Its Business Model includes:

Provision of engineering services

Supply of various types of proprietary products (such as Thermite® and FireSafe®)

Warranty Coverage

Post-Sale Service and Repair

NOTE 2 – REVENUE RECOGNITION (Continued)

With respect to revenues related to our Services Business, there are contracts in place that specify the fixed hourly rate and other reimbursable costs to be billed based on material and direct labor hours incurred and revenue is recognized on these contracts based on material and the 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 cost (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.

On a quarterly basis, we examine all our fixed-price contracts to determine if there are any losses to be recognized during the period. Any such loss is recorded in the quarter in which the loss first becomes apparent based upon costs incurred to date and the estimated costs to complete as determined by experience from similar contracts. Variations from estimated contract performance could result in adjustments to operating results.

For contracts with multiple performance obligations, we recognize product revenue by allocating the transaction price to each performance obligation based on a relative standalone selling price basis and recognize revenue when performance obligations are met.

Recoverability of Deferred Costs

In accordance with Topic 606, we defer costs on projects for service revenue. Deferred costs consist primarily of incremental direct costs to customize and install systems, as defined in individual customer contracts, including costs to acquire hardware and software from third parties and payroll costs for our employees and other third parties. The pricing of these service contracts is intended to provide for the recovery of these types of deferred costs over the life of the contract.

We recognize such costs in accordance with our revenue recognition policy by contract. For revenue recognized under the percentage of completion method, costs are recognized as products are delivered or services are provided in accordance with the percentage of completion calculation. For revenue recognized over time, costs are recognized ratably over the term of the contract, commencing on the date of revenue recognition. At each quarterly balance sheet date, we review deferred costs, to ensure they are ultimately recoverable.

Any anticipated losses on uncompleted contracts are recognized when evidence indicates the estimated total cost of a contract exceeds its estimated total revenue.

Other Revenue Disclosures

See Notes 15 and 16 – Segment Analysis and Disaggregation of Revenue. These Notes respectively provide disclosure of our revenue by segment (Marine Technology Business, Acoustics Sensors and Materials Business and Services Business); revenues from external customers and cost of those revenues; and the split of revenue by geography including within and outside the USA.

NOTE 3 –COST OF GOODS SOLD

Our Cost of goods sold includes the cost of materials and related direct costs. With respect to sales made through the Company’s sales agents distribution network, we include in our costs of goods sold commission paid to agents for the specific sales they make. Without using agents, we would not be eligible to participate in the Request for Proposals (“RFP”) for these sales on which we incur commission costs. All other sales-related expenses, including those related to unsuccessful bids, are included in selling, general and administrative costs. As a component of cost of goods sold, commission costs incurred in the three month period ended January 31, 2025 were $245,509 compared to $293,184 for the three month period ended January 31, 2024.

NOTE 4 –FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair values because of the short-term nature of these instruments.

NOTE 5 –FOREIGN CURRENCY TRANSLATION

Assets and liabilities are translated at the prevailing exchange rates at the balance sheet dates. Related revenues and expenses are translated at weighted average exchange rates in effect during the reporting period. Stockholders’ equity is recorded at the historical exchange rates. Resulting translation adjustments are recorded as a separate component in stockholders’ equity as part of accumulated other comprehensive income or (loss) as may be appropriate. Foreign currency transaction gains and losses are included in the consolidated statements of income and comprehensive income.

NOTE 6 –OPERATING LEASES

We are contractually bound by a non-cancellable operating lease relating to PAL which we acquired recently. Lease costs recognized in our consolidated statements of operations are summarized as follows:

Maturities of lease liabilities as of January 31, 2025 were as follows:

Future Minimum Operating Lease Maturity Analysis

NOTE 7 –COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

Certified Deposit Interest Bearing Accounts for the three months ended January 31, 2025 and 2024.

The Company has certified deposit interest-bearing accounts with its current bankers HSBC NA. These interest-bearing accounts are for rolling fixed short-term periods not exceeding 3 months and are classified in our financial statements as “cash equivalent”. In addition, we have an interest-bearing deposit account with HSBC UK which has no access restrictions and tracks the Bank of England base rate, which has a current rate of 4.75%. The table below indicates the applicable interest rates and amounts which are held in certified deposit and unrestricted interest-bearing accounts as of January 31, 2025 and 2024, and interest earned in the respective periods:

Inventory consisted of the following as of:

Other current assets consisted of the following as of:

Fixed Assets consisted of the following as of:

Depreciation expense for the three months ended January 31, 2025, and 2024 was $205,646 and $173,292 respectively.

NOTE 7 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS (Continued)

Property and equipment, net, by geographic areas were as follows:

Accrued Expenses and Other Current Liabilities consisted of the following as of:

Total Other Income, net consisted of the following:

NOTE 8 –CONTRACTS IN PROGESS

Costs and estimated earnings in excess of billings on uncompleted contracts represent accumulated project expenses and fees which have not been invoiced to customers as of the balance sheet date. These amounts are stated on the consolidated balance sheets as Unbilled Receivables and as of January 31, 2025 and October 31, 2024, these were $2,259,419 and $1,657,827, respectively.

Deferred Revenue as of January 31, 2025 and October 31, 2024, were respectively $1,004,800 and $1,225,634 and, consist of billings in excess of costs and payments received for future obligations such as our warranty or Through Life Support (“TLS”) obligations undertaken as part of our contracts.

Sales of equipment include a provision for warranty obligations or through life support (TLS) services. The contractual components relating to warranty and TLS are treated as deferred revenue over the corresponding period of the Company’s obligations under these deferred arrangements and are amortized over the relevant warranty or TLS period (12 months is our standard warranty contract obligation or for TLS 24, 36 or 60 months, depending on the contract) from the date of sale.

Deferred Revenue (current) includes paid customer invoices prior to delivery of the agreed service, customer prepaid technical support to be delivered within twelve months, provision for warranty services to be provided within twelve months or the current portion of TLS services. Deferred Revenue was $1,004,800 and $1,225,634 as of January 31, 2025 and October 31, 2024, respectively.

Deferred Revenue (“Current”) consisted of the following as of January 31, 2025 and October 31, 2024:

Deferred Revenue (“Non-Current”) includes customer prepaid support and TLS, to be delivered past the initial twelve months which to be provided past the initial twelve months.

Deferred Revenue (“Non-Current) was $36,882 and $56,121 as of January 31, 2025 and October 31, 2024 respectively.

NOTE 9 –ACQUISITIONS

On October 29, 2024, the Company acquired all the issued and outstanding shares of 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 at the acquisition date of $4,605,285. The Company agreed to pay the sellers for all cash in PAL’s bank account on the date of its acquisition, which was in excess of the agreed working capital amount of $595,869 and, as part of the transaction, the Company paid the sellers $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 the Marine Technology Business and more broadly to expand the Group’s collective capabilities in order to qualify to compete for larger Defense-related contracts.

In the Current Quarter, PAL contributed revenues of $1,312,261 and earnings of $556,049 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:

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 1 November 2024 through 31 January 2025.

In fiscal year 2024, the Company incurred $41,531 of acquisition related costs. These expenses are included general and administrative expense on the Company’s 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:

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 condition is 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 dollar 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 $460,872 and in the Current Quarter our amortization expenses for PAL were $115,218.

NOTE 10 –CONCENTRATIONS

Significant Customers

During the three months ended January 31, 2025, the Company had one customer from whom it generated sales greater than 10% of net revenues. Revenue from this customer was $621,523, or 12.0% of net revenues during the three months ended January 31, 2025. Receivables from this customer were $555,146, or 16.1% of net receivables as of January 31, 2025.

During the three months ended January 31, 2024, the Company had three customers from whom it generated sales greater than 10% of net revenues. Revenue from these customers was $1,809,398, or 40.6% of net revenues during the three months ended January 31, 2024. Receivables from these customers were $1,047,960, or 34.6% of net receivables as of January 31, 2024.

NOTE 11 –RECENT ACCOUNTING PRONOUNCEMENTS

On October 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 will affect how we report segment information, starting with our Form 10-K for the year ended October 31, 2025, and our quarterly reports on Form 10-Q starting with our quarterly report for the quarter ended January 31, 2026. The ASU requires that we provide disclosures of significant segment expenses and other segment items that are regularly provided to our Chief Operating Decision Maker (“the CODM”) and included in each reported measure of segment profit or loss. We will also have to disclose other segment items by reportable segment (i.e., the difference between reported segment revenue less the significant segment expenses (which are disclosed) less reported segment profit or loss). The information needed for these disclosures is available, and we are determining the best way to provide that information for these required segment disclosures.

On November 4, 2024, the FASB issued ASU2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures(“ASU 2024-03*”*) which is an update to Topic 220, Income Statement - Reporting Comprehensive Income. ASU 2024-03 enhances transparency and decision-usefulness of expense disclosures in response to investors’ requests for more detailed, disaggregated expense information, enabling a clearer understanding of a public business entity’s performance and cost structure. The amendments improve disclosure requirements in financial statement notes for specific expense categories including: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, (e) certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as other disaggregation requirements, (f) qualitative description of amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, as well as (g) the total amount of selling expenses, and in annual reporting periods, the entity’s definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and therefore will be included in our Form 10-K for our fiscal year 2028 and Form 10-Qs beginning after December 15, 2027 (i.e., our first quarter of fiscal 2029 interim report). Early adoption is permitted. We are currently evaluating ASU 2024-03 to determine the impact it will have on its consolidated financial statements and related disclosures.

On December 14, 2023, the FASB issued ASU 2023-09Improvements to Income Tax Disclosures(“ASU 2023-09”)*,*which is an update to Topic 740, Income Taxes. The amendments in this update relate to improvements regarding the transparency of income tax disclosures by requiring consistent categories and greater disaggregation by jurisdiction of information included in the effective income tax rate reconciliation and for income taxes paid. Also, the amendments allow investors to better assess an entity’s (i) capital allocation decisions, (ii) worldwide operations, and (iii) related tax risks, tax planning, and operational opportunities that affect the effective income tax rate and prospects for future cash flows. The other amendments in this update improve the effectiveness and comparability of disclosures relating to pretax income (or loss) and income tax expense (or benefit) and remove disclosures that are no longer considered cost beneficial or relevant. ASU 2023-09 is effective for public entities starting in annual periods beginning after December 15, 2024, and therefore will be included in our Form 10-K for our fiscal year 2026. Early adoption is permitted. We expect that the adoption of ASU 2023-09 will not have an impact on our results of operations and financial condition but will have a material impact on the disclosures required in the relevant notes to the consolidated financial statements.

NOTE 12 –GOODWILL AND IDENTIFIED INTANGIBLE ASSETS

Intangibles consisted of the following as of:

Amortization of intangible assets for the three months ended January 31, 2025 and 2024 was $127,759 and $17,246 respectively.

Goodwill consisted of the following as of:

NOTE 13 –EARNINGS PER SHARE

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share (reflecting the effect of all potentially dilutive securities – which are principally stock options and restricted stock grants) are calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

NOTE 14 –2017 AND 2021 STOCK INCENTIVE PLANS

2017 and 2021 Stock Incentive Plan (together “SIPs”)

On December 6, 2017, the Board of Directors adopted the 2017 Stock Incentive Plan (the “2017 Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company, and to reward those individuals who contribute to the Company’s achievement of its economic objectives. The Plan was adopted subject to stockholders’ approval and was approved by Stockholders at the Company’s Annual General Meeting held on July 24, 2018 and provides for a maximum of 913,612 to be issued under this Plan. On July 12, 2021 a second plan was adopted by the Board of Directors (2021 Plan). The 2021 Plan is identical to the 2017 Plan in all material respects except that the maximum number of shares allocated for issuance is 1,000,000.

The shares allocated for issuance under the SIPs may, at the election of the Compensation Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the SIPs to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury.

Pursuant to the terms of the 2017 Plan, during the three months ended January 31, 2025, the Company granted 11,880 restricted stock awards. There were no forfeitures or treasury stock created. During the three months ended January 31, 2025 there were 49,503 options exercised on a cashless basis, pursuant to which 23,317 shares of common stock were issued and 26,186 were returned to the plan

As of January 31, 2025, there were 1,380,792 shares available for future issuance under the 2017 and 2021 Plans.

The total stock compensation expense during the three months ended January 31, 2025 and 2024 was $100,145 (of which $81,400 constituted unregistered stock which was issued outside of the SIPs) and $77,076 respectively (Item 2 discusses this more fully).

NOTE 15 –SEGMENT ANALYSIS

We operate three reportable segments, “Marine Technology Products Business”, “Acoustic Sensors and Materials Business” and “Service Business” which are managed separately based upon fundamental differences in their operations, allocation of resources and markets.

Segment operating income is total segment revenue reduced by cost of revenues and operating expenses (research and development and selling, general & administrative) identifiable with the reporting business segment. Overhead includes general corporate administrative costs.

The Company evaluates performance and allocates resources based upon operating income. The accounting policies of the reportable segments are the same as those described in the critical accounting policies in Item 2 of this Form 10-Q. Our CODM regularly reviews consolidated net sales, consolidated operating expenses, and consolidated operating income (loss) by segment. Amounts included in consolidated operating expenses include “cost of sales,” “R&D expenses”, “selling, general and administrative expenses,” and “other operating expense (income), net”. Our CODM manages our business by reviewing business plans and strategy, annual forecasts and consolidated results by segment on a quarterly basis.

There are inter-segment sales in the supplemental disclosures section of the table below which have been eliminated from our financial statements. There are no internal revenue transactions between our reportable segments. However, for the purpose of segment reporting, these inter-segment sales are only included in the table below.

●Marine Technology Business

The Marine Technology Business (“Products Business”) is a supplier to the underwater/subsea market and selling both hardware and software solutions which includes imaging sonar technology solutions, diving technology, geophysical products, rental equipment, customization, and field operations services.

●Acoustic Sensors and Materials Business

The Company acquired Precision Acoustics Limited (PAL) on October 29, 2024. PAL is a supplier of acoustic sensors and materials. PAL serves a broad base of markets such as the medical, subsea, defense, universities and research and development institutes.

●Services Business

The Services Business operate primarily as subcontractors to prime defense contractors where they provide engineering services which typically form part of larger mission critical defense systems.

The following tables summarize segment asset and operating balances by reportable segment for the three months ended January 31, 2025 and 2024, respectively.

The Company’s reportable business segments sell their goods and services in four geographic locations:

NOTE 15 - SEGMENT ANALYSIS (Continued)

NOTE 15 – SEGMENT ANALYSIS (Continued)

In the Segment Analysis information presented for the Previous Quarter, there is no information for the Acoustics Sensors and Material Business (“PAL”) as this business unit was acquired on October 29, 2024.

NOTE 16 –DISAGGREGATION OF REVENUE

Information about the Company’s operations in different geographic areas for the three months ended January 31, 2025 is shown below. Net sales were attributed to geographic areas based on the location of the customer. In the Disaggregation of revenue information presented for the Previous Quarter, there is no information for the Acoustics Sensors and Material Business (“PAL”) as this business unit was acquired on October 29, 2024.

NOTE 16 – DISAGGREGATION OF REVENUE (Continued)

NOTE 17 –INCOME TAXES

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we may update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation, due to several factors including variability in accurately predicting our pre-tax income and/or loss and the mix of jurisdictions to which they relate. Our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss.

We estimate that the Company’s effective tax rate for the three months ended January 31, 2025, and 2024, was 2.3% and 19.5% respectively. In the Current Quarter the U.S. companies had a tax benefit as they did not generate any taxable income, and which resulted in a decrease of the Company’s effective income tax rate from 25.0% for the U.S companies. In the Current Quarter the Company made award of restricted stock and recorded a deferred tax benefit of $26,989 compared to a deferred tax expense in the Previous Quarter of $187,071, as a result of the vesting of restricted stock awards. In respect of the Company’s UK subsidiaries, no tax provision for the three months to January 31, 2025 has been made as we believe our R&D tax credits will offset any tax liability incurred in this period. In the Current Quarter, we made a tax provision of 22.0% for our Danish Subsidiary.