Coda Octopus Group, Inc.
For the period ended Jul 31, 2026. Filed Sep 14, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2026 · Filed Sep 14, 2026
CODA$8.34+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-04-30; filed 2026-06-15.
0001493152-26-028609
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-07-31; filed 2026-09-14.
0001493152-26-042475
Item 2. : Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 127 previous paragraphs and 160 current paragraphs.
38 unchanged; 36 reworded; 84 added; 52 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (84)
Current report
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein, other than statements of historical fact, are forward-looking statements. In particular, statements regarding industry prospects, customer demand, future operating results, financial position, business strategy, and future economic performance are forward-looking statements.
Current report
These forward-looking statements may be identified by the use of words such as “believes,” “estimates,” “could,” “anticipates,” “projects,” “expects,” “may,” “will,” “should,” or similar expressions. Forward-looking statements are based on management’s current expectations, assumptions, and forecasts and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
Current report
Factors that could cause actual results to differ materially include, among others, fluctuations in foreign exchange rates; changes in global economic, geopolitical, and market conditions; changes in tariff and trade policies; reductions in government spending or delays in defense procurement programs; changes in customer demand and spending patterns; inflationary pressures; interest rate fluctuations; supply chain disruptions; inventory management risks; and other unforeseen events or circumstances that may adversely affect our business, financial condition, results of operations, or cash flows. Additional risks and uncertainties are discussed in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, as amended by Form 10-K/A. We undertake no obligation to update any forward-looking statements, except as required by applicable law.
Current report
We market and sell our products and services internationally. During the Current Quarter, revenues generated from customers located outside the United States were $4,265,324, representing 55.3% of consolidated net revenues. As a result, our operating results are affected by foreign currency fluctuations, international trade policies, geopolitical developments, and economic conditions in the regions in which we conduct business.
Current report
Our business is also influenced by broader macroeconomic conditions, including inflation, interest rates, government spending priorities, global trade policies, and geopolitical developments. These conditions may disrupt supply chains, increase operating costs, affect the availability and pricing of components and materials, delay customer procurement decisions, and reduce the predictability of customer spending patterns.
Current report
The following discussion highlights significant factors that affected our business, financial condition, and results of operations during the Current Quarter.
Current report
Additional information regarding risks and uncertainties that may affect our business is included in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, as amended by Form 10-K/A, and should be considered together with the information presented in this Quarterly Report on Form 10-Q.
Current report
During the Current Quarter, geopolitical instability in the Middle East, including the ongoing conflict involving Iran and associated disruption to regional commercial activity, adversely affected portions of our Marine Technology Business. A significant portion of the customer base for this segment is located in the Middle East and Asia, and the uncertainty resulting from these developments contributed to delays in customer purchasing decisions, contract awards, and project activity. Revenue generated from customers in Asia and the Middle East totaled $1.2 million during the Current Quarter, compared to $2.1 million in the Previous Quarter, representing a decrease of approximately 42.2%. While multiple factors may influence customer demand, management believes that the geopolitical uncertainty and disruption affecting the region contributed to this decline.
Current report
In addition, these conditions have affected customer project schedules, resulting in longer procurement and program execution timelines in certain cases. Continued geopolitical instability in the region could further affect customer demand, the timing of project awards, supply chain efficiency, and our operating results.
Current report
We expect that geopolitical developments in the Middle East and related economic uncertainties may continue to affect our business, financial condition, and results of operations during the remainder of fiscal 2026.
Current report
A significant portion of our revenue is derived from international markets. As a result, our business may be affected by changes in U.S. trade policy, including tariffs, trade restrictions, customs requirements, and other measures affecting international commerce, as well as broader geopolitical developments that influence global economic activity and customer demand.
Current report
A portion of the products sold into the U.S. market are manufactured in the United Kingdom. Accordingly, tariffs and other trade measures applicable to imports into the United States may increase costs, affect customer demand, reduce pricing flexibility, and adversely impact the competitiveness of our products in the U.S. market. Such developments may also contribute to supply chain inefficiencies and reduce visibility into customer purchasing decisions and future demand patterns.
Current report
During the Current Quarter, products imported into the United States from the United Kingdom were subject to a 10% tariff. Approximately 47.3% of Marine Technology Business product revenue was generated from sales to customers in the United States.
Current report
The ultimate impact of changes in trade policy, tariffs, and broader geopolitical developments remains uncertain and will depend on, among other factors, the duration, scope, and implementation of such measures, the response of customers and suppliers, and our ability to mitigate associated costs through pricing actions, sourcing alternatives, operational adjustments, or other initiatives. Continued volatility in global trade conditions could adversely affect our revenues, operating results, cash flows, and financial condition.
Current report
Currency Fluctuation and Foreign Exchange Risks
Current report
The functional currencies of our subsidiaries include the British Pound Sterling, U.S. Dollar, Euro, and Danish Krone. As a result, our consolidated financial statements are subject to the effects of changes in foreign currency exchange rates.
Current report
Fluctuations in exchange rates may affect our revenues, operating expenses, assets, liabilities, and operating results. A significant portion of our revenues and expenses is denominated in currencies other than the U.S. dollar. Accordingly, changes in exchange rates may cause period-to-period fluctuations in our reported results of operations and financial condition when the financial statements of our foreign subsidiaries are translated into U.S. dollars for reporting purposes.
Current report
In addition, we maintain intercompany balances among our international operations. Changes in foreign currency exchange rates may result in foreign exchange gains or losses arising from the remeasurement of certain intercompany balances and other monetary assets and liabilities denominated in currencies other than the applicable functional currency. Such gains or losses can be significant and may adversely affect our results of operations in a given reporting period.
Current report
We also hold cash and cash equivalents denominated in foreign currencies, including British Pound Sterling, Euros, and Danish Krone. Consequently, fluctuations in exchange rates affect the U.S. dollar value of these balances. A strengthening of the U.S. dollar relative to these currencies generally decreases their reported U.S. dollar value, while a weakening of the U.S. dollar generally increases their reported U.S. dollar value.
Current report
Although exchange rate movements may at times have a favorable effect on certain aspects of our financial results, there can be no assurance that future changes in currency exchange rates will not have a material adverse effect on our revenues, profitability, cash flows, financial condition, or results of operations.
Current report
The effects of foreign currency fluctuations are discussed further under the “Inflation and Foreign Currency section below and in Note 5, Foreign Currency Translation, to the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
The Company’s Defense Engineering Services Business derives a significant portion of its revenues from subcontracts awarded by a limited number of prime defense contractors. The timing and volume of these awards are influenced by government procurement processes, budget appropriations, program funding decisions, and the priorities of U.S. federal agencies. Delays in the approval of government budgets, continuing resolutions, changes in spending priorities, or the failure of legislative bodies to reach agreement on appropriations may delay or reduce contract awards, which could adversely affect revenues and operating results.
Current report
In addition, significant growth opportunities within the Company’s Marine Technology Business, including its real-time 3D volumetric imaging sonar and Diver Augmented Vision Display (“DAVD”) technologies, are concentrated in the defense market. The procurement process for defense-related programs is often lengthy and subject to funding availability, budgetary constraints, testing and evaluation requirements, competitive award processes, and other factors outside the Company’s control. As a result, the timing of contract awards and customer orders can be difficult to predict and may fluctuate significantly from period to period. Delays, reductions, or cancellations of anticipated defense spending or procurement programs could adversely affect the Company’s revenues, operating results, cash flows, and growth prospects.
Current report
We sell our products internationally, with 52.7% of revenue generated by the Products Business in the Current Quarter derived from customers located outside the United States.
Current report
In the Current Quarter, the Products Business generated revenue of $3,377,472, representing 43.8% of consolidated net revenues, compared to $3,984,475, or 56.4% of consolidated net revenues, in the Previous Quarter, a decrease of $607,003, or 15.2%.
Current report
The decrease in revenue was primarily attributable to reduced demand for our goods and services arising from geopolitical uncertainty associated with the ongoing conflict involving Iran and the resulting disruption to offshore project activity in certain international markets. The impact was most evident in the Middle East and Asia, where customers delayed project execution and purchasing decisions. Revenue generated from the Middle East and Asia decreased to $1,231,751 in the Current Quarter from $2,130,914 in the Previous Quarter, representing a decrease of 42.2%. Revenue from the Americas also decreased to $1,597,751 compared to $1,696,344 in the Previous Quarter, a decline of 5.8%, primarily reflecting a slowdown in procurement activity on certain defense-related programs.
Current report
Gross profit margin increased to 78.5% in the Current Quarter from 77.0% in the Previous Quarter. The improvement was primarily driven by a favorable change in sales mix and lower commission expense. During the Current Quarter, utilization of our rental asset fleet increased, resulting in rental revenue increasing to $703,927 compared to $304,617 in the Previous Quarter, an increase of 131.1%. Rental revenue generally carries higher margins than equipment sales and was accompanied by a reduction in associated field service activity. In addition, lower hardware sales in Asia resulted in a reduction in commission expense of 60.5% to $37,909 compared to $96,088 in the Previous Quarter, further contributing to the improvement in gross margin.
Current report
Operating expenses for the Marine Technology Business increased modestly to $1,802,287 in the Current Quarter compared to $1,770,863 in the Previous Quarter, an increase of 1.8%. The increase was primarily attributable to the recognition of contingent consideration expense associated with the acquisition of Precision Acoustics Limited (“PAL”). Contingent consideration expense totaled $438,588 in the Current Quarter compared to $158,872 in the Previous Quarter, an increase of 176.1%. Excluding this item, operating expenses decreased compared to the Previous Quarter, primarily due to lower wages and salaries expense and a favorable foreign exchange movement. The business recorded a foreign exchange gain of $18,793 in the Current Quarter, compared to a foreign exchange loss of $238,551 in the Previous Quarter.
Current report
As a result of the decrease in revenue, pre-tax income for the Products Business decreased to $999,527 in the Current Quarter from $1,426,739 in the Previous Quarter, a decline of 29.9%.
Current report
In the Current Quarter, PAL generated revenue of $1,610,920, representing 20.9% of consolidated net revenues, compared to $1,458,536, or 20.6% of consolidated net revenues, in the Previous Quarter, an increase of $152,384, or 10.4%. PAL sells its products and service internationally. In the Current Quarter, revenue from the Americas was $695,814 compared to $299,861, representing an increase of 132.0%. Revenue in all other geographic regions declined.
Current report
Gross profit margin was 52.4% in the Current Quarter compared to 54.8% in the Previous Quarter. The decrease in gross margin primarily reflected changes in sales mix during the quarter. Commission expense decreased to $15,634 in the Current Quarter compared to $50,833 in the Previous Quarter, a decrease of 69.2%, reflecting a lower proportion of commission-bearing sales.
Current report
Total operating expenses increased to $644,656 in the Current Quarter compared to $550,090 in the Previous Quarter, an increase of 17.2%. The increase was primarily attributable to higher research and development expenses, which increased to $155,494 compared to $98,502 in the Previous Quarter, an increase of 57.9%. The increase in research and development expense was primarily attributable to engineering and product development activities associated with the Company’s acoustic tank product line. Customer demand for this product has increased over the past year, resulting in additional investment in product development and enhancement initiatives to support future growth opportunities.
Current report
As a result of the increase in operating expenses and the reduction in gross margin, pre-tax income decreased to $222,419 in the Current Quarter from $252,108 in the Previous Quarter, a decline of 11.8%.
Current report
In the Current Quarter, the Defense Engineering Services Business generated revenue of $2,729,077, representing 35.4% of consolidated net revenues, compared to $1,621,784, or 23.0% of consolidated net revenues, in the Previous Quarter, an increase of $1,107,293, or 68.3%. Both the UK and U.S. Services businesses experienced increased demand during the period, resulting in higher revenues from existing defense programs and newly awarded contracts.
Current report
Gross profit margin decreased to 56.9% in the Current Quarter from 58.9% in the Previous Quarter, reflecting the mix of engineering projects performed during the quarter. Commission expense was $16,256 in the Current Quarter compared to $0 in the Previous Quarter, reflecting the nature and source of project awards recognized during the period.
Current report
Total operating expenses decreased to $646,603 in the Current Quarter compared to $708,563 in the Previous Quarter, a decrease of $61,960, or 8.7%. The decrease was primarily attributable to lower payroll costs resulting from reduced headcount. Operating expenses also benefited from a foreign exchange gain of $32,724 in the Current Quarter compared to a foreign exchange loss of $6,558 in the Previous Quarter.
Current report
As a result of the significant increase in revenue and lower operating expenses, partially offset by the lower gross profit margin and increased commission expense, pre-tax income increased to $976,898 in the Current Quarter from $277,335 in the Previous Quarter, an increase of 252.2%.
Current report
Net Revenues: Total consolidated net revenues for the Current Quarter increased by 9.2% to $7,717,469, compared to $7,064,795 in the Previous Quarter. The increase was primarily attributable to higher revenues generated by the Company’s Defense Engineering Services Business and Acoustics Sensors and Materials Business (“PAL”), which offset the reduction in revenues generated by the Marine Technology Business. As discussed above, the Marine Technology Business, which primarily serves the marine offshore sector, was adversely affected by geopolitical uncertainty associated with the ongoing conflict involving Iran and the resulting disruption to offshore project activity in certain international markets. These conditions contributed to reduced customer demand and delays in project execution and purchasing decisions, resulting in a 15.2% decrease in revenue for the Marine Technology Business during the Current Quarter.
Current report
Gross Profit Margins*:* Gross profit margin was 65.4% in the Current Quarter (gross profit of $5,050,294) compared with 68.3% in the Previous Quarter (gross profit of $4,823,756). Although gross profit increased by 4.7%, consolidated gross profit margin decreased by 290 basis points, primarily due to changes in the mix of revenues generated by our operating segments. In particular, the Marine Technology Business, which generally generates higher gross margins than our other operating segments, represented 43.8% of consolidated net revenues in the Current Quarter compared with 56.4% in the Previous Quarter.
Current report
Within the Marine Technology Business, gross profit margin increased to 78.5% in the Current Quarter from 77.0% in the Previous Quarter. This improvement was primarily attributable to changes in product and geographic revenue mix. Equipment sales, which typically generate lower gross margins than rental and software revenues, decreased 17.8% to $2,257,201 from $2,746,255 in the Previous Quarter. Conversely, equipment rental revenues increased 131.1% to $703,927 from $304,617 in the Previous Quarter and represented a larger proportion of segment revenues during the Current Quarter. Gross margins also benefited from changes in geographic sales mix, including a lower proportion of revenues generated through commission-based distribution channels. As a result, despite a 15.2% decrease in total Marine Technology Business revenues to $3,377,472 in the Current Quarter from $3,984,475 in the Previous Quarter, the segment generated stronger gross profit margins during the Current Quarter.
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Removed paragraphs (52)
Previous report
This Quarterly Report on Form 10-Q 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 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.
Previous report
We sell our products and services internationally, with $5,231,403 or 75.8% of our consolidated net revenues for the Current Quarter, generated outside the United States. Our results of operations are affected by macroeconomic conditions, including changes in inflation and interest rates, as well as global economic and geopolitical developments. These developments include disruptions in trade caused by embargoes or blockades of major shipping routes, shifts in global tariff structures, significant changes in trade and funding policies, and other world events. Such factors can have both direct and indirect impacts on our business that are difficult to isolate or quantify.
Previous report
These conditions may adversely affect customer demand for our products and services and reduce the predictability of customer spending patterns, which in turn may impact on our ability to forecast overall demand. We expect some or all of these factors to continue to influence our operations during fiscal year 2026.
Previous report
The following are some of the most critical factors that affected our business during the Current Quarter. Our annual report on Form 10-K as amended on Form 10-K/A for the fiscal year ended October 31, 2025, contains additional factors that are hereby deemed incorporated by reference.
Previous report
In the Current Quarter, geopolitical instability has had a direct impact on our business. The ongoing conflict involving Iran and the resulting instability in the Middle East have adversely affected customer activity in regions that are significant to our Marine Technology Business. A substantial portion of our customer base for this segment is located in the Middle East and Asia. The conflict, combined with the effective closure of the Strait of Hormuz—through which a significant portion of global maritime shipping transits—has disrupted commercial activity and reduced demand for our products and services.
Previous report
Revenues from Asia and the Middle East for the Group in the Previous Quarter was $2,770,898 compared to $2,046,989 in the Current Quarter, representing a decrease of 26.1%. The uncertainty caused by the conflict and the regional standoff has contributed to lower order intake, delays in contract awards, and the postponement of customer projects. These conditions have also resulted in higher raw material costs, increased operational overhead, and extended lead times for core components, which have slowed progress on customer programs. These disruptions may impair our ability to meet customer demand, maintain production schedules, or operate efficiently.
Previous report
We sell our products and services globally, and a significant portion of our revenue is generated from international markets. Changes in U.S. trade policy that restrict the free flow of goods and services may reduce global demand for our offerings and contribute to uncertainty in the markets in which we operate. Recent shifts in U.S. trade policy have increased volatility in global trade conditions. Our revenue mix includes both product sales and rentals, with rental activity closely linked to offshore project development. Following changes in U.S. Administration policy regarding funding for offshore renewable energy programs, we have experienced reduced demand for rental equipment and related services from certain European customers who had been down-selected to develop offshore renewable projects in the United States. In addition, some of the products we sell into the U.S. market are manufactured in the United Kingdom. As a result, changes in trade policy, tariffs, customs requirements, or cross-border regulatory frameworks may affect our cost structure, supply chain efficiency, and the competitiveness of our products in the U.S. market. These factors collectively contribute to uncertainty in customer purchasing behavior and may adversely affect our ability to forecast demand and operate efficiently. Under the newly introduced tariff structure, we are subject to a 10% tariff on items imported into the United States from the United Kingdom, where most of our products are manufactured. In the Current Quarter approximately 20.2% of our Marine Technology Business revenues was generated from sales made in the USA and therefore exposed to tariffs.
Previous report
Currency Fluctuation/Foreign Exchange Risks
Previous report
The Company has operations in the UK, USA and Denmark and the financial transactions of these companies are conducted primarily in local currencies. The results of operations, our intercompany balances associated with our international operations, products and service offerings are exposed to foreign exchange rate fluctuations. Due to these fluctuations, operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances (such as assets and liabilities). We also hold cash and cash equivalents in foreign currencies such as British Pounds, Euros and Danish Kroner. When the U.S. Dollar strengthens compared to these currencies, cash equivalents when translated, may be materially less than expected and vice versa. In the Current Quarter, the USD weakened against the British Pound and Danish Kroner, which resulted in direct cost of sale and also total operating expenses of our foreign subsidiaries when translated into USD for reporting purposes being higher. The impact of currency fluctuations is discussed more fully below under “Inflation and Foreign Currency”. See also Note 5 (Foreign Currency Translation) to the unaudited Consolidated Financial Statements and the section of this report which concerns “Inflation and Foreign Currency”.
Previous report
The Defense Engineering Services Business revenues are highly concentrated and are mostly generated from sub-contracts with a small number of Prime Defense Contractors. The sales cycle is generally protracted, and this may affect quarterly revenues. It is also dependent on the federal government appropriating budget for Defense projects and where the federal government is unable to find consensus in the U.S. Congress or there is a change in spending priorities, this may affect the timely award of sub-contracts from Prime Defense Contractors to our Defense Engineering Services Business, which is reliant on these awards. Furthermore, our core business, the Marine Technology Business, key opportunities are in the Defense Market for both its imaging sonars and the DAVD technology, both of which are key pillars of the Company’s growth strategy. 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 and unpredictable, thus affecting timing of orders and thus quarterly revenues.
Previous report
We sell our products internationally (79.8% of sales by our Products Business in the Current Quarter are derived from sales outside of the USA). In the Current Quarter, the Products Business generated $2,839,592 or 41.1% of our consolidated net revenues compared to $3,878,090 or 55.3% in the Previous Quarter, representing a decrease of $1,038,498 or 26.8%. The decrease in revenues is primarily due to the reduced demand for our goods and services caused by the ongoing conflict with Iran and the effective closure of the Strait of Hormuz. Many offshore projects, especially in the Middle East and Asia, have been affected resulting in delays in ongoing projects and in customers’ placing orders. In the Current Quarter this has resulted in a decrease in hardware sales, from the strategic region of Asia where sales decreased by 35.3% to $1,423,313 compared to $2,200,282 in the Previous Quarter. Sales derived from the U.S. decreased by 59.7% to $573,083 compared to $1,423,701 in the Previous Quarter, reflecting delays in receiving contract awards under some Defense programs which we are anticipating.
Previous report
Gross profit margin increased from 67.7% in the Previous Quarter to 77.0% in the Current Quarter primarily due to the mix of sales and the decrease in sales in the Middle East and Asia (resulting in a decrease in commission costs in the Current Quarter). In the Current Quarter we saw increased utilization of our rental assets resulting in an increase in rental revenue by 351.1% to $761,338 compared to $168,791 in the Previous Quarter. In addition, hardware sales from the strategic region of Asia fell by 35.3%, resulting in commission costs decreasing by 68.7% to $114,060 compared to $364,381 in the Previous Quarter.
Previous report
In the Current Quarter, total operating expenses in the Marine Technology Business decreased by 25.3% to $1,241,359 compared to $1,662,743 in the Previous Quarter. The decrease was primarily driven by favorable foreign currency exchange rate movements resulting from the fluctuation of the U.S. dollar against the British Pound and Danish Kroner, the functional currencies of our foreign subsidiaries. These movements resulted in a foreign currency–related benefit of $88,949 in the Current Quarter, compared to an exchange rate variance expense of $221,198 in the Previous Quarter.
Previous report
Pre-tax income was $1,216,553 in the Current Quarter compared to $1,055,255 in the Previous Quarter, reflecting a decrease in operating expenses.
Previous report
In the Current Quarter, PAL generated $1,525,824 or 22.1% of our consolidated net revenues compared to $1,299,069 or 18.5% of our consolidated net revenues in the Previous Quarter, representing an increase of 17.5%. Gross profit margin was 53.7% in the Current Quarter compared to 65.4% in the Previous Quarter reflecting the mix of sales. Commission costs decreased by 62.0% and were $9,886 in the Current Quarter compared to $26,003 in the Previous Quarter. Total operating expenses were $539,711 compared to $704,189 in the Previous Quarter. Pre-tax income was $310,405 in the Current Quarter compared to $173,871 in the Previous Quarter, reflecting an increase in revenue in conjunction with a decrease in total operating expenses.
Previous report
In the Current Quarter, the Defense Engineering Services Business generated $2,538,596 or 36.8% of our consolidated net revenues compared to $1,840,300 or 26.2% in the Previous Quarter, representing an increase of 37.9%. This increase is attributable to the UK arm of our Defense Engineering Services Business. Gross profit margin increased from 55.5% in the Previous Quarter to 62.0% in the Current Quarter, reflecting the mix of engineering projects. Commission costs increased to $55,128 in the Current Quarter compared to $0 in the Previous Quarter. Total operating expenses increased by 10.3% and were $628,148 compared to $569,435 in the Previous Quarter, as a result of an increase in R&D expenditure in the Current Quarter. Pre-tax income increased in the Current Quarter to $977,387 compared to $477,722 in the Previous Quarter, largely reflecting the increase in revenue, gross profit margins and interest income.
Previous report
Net Revenues: Total consolidated net revenues for the Current Quarter decreased by 1.6% when compared to the Previous Quarter and were $6,904,012 and $7,017,459, respectively. The decrease in consolidated net revenue reflects a 26.8% reduction in revenue from the Marine Technology Business, our core business segment. This business segment primarily works in the marine offshore sector. Due to the ongoing conflict with Iran and the effective closure of the Strait of Hormuz, a large part of its customer base located in the Middle East and Asia have been affected and revenues from those regions decreased by 18.6%. Revenues in both the Defense Engineering Business and PAL increased in the Current Quarter.
Previous report
Gross Profit Margins*:* Margin percentage was stronger in the Current Quarter at 66.3% (gross profit of $4,578,049) compared to 64.1% (gross profit of $4,497,281) in the Previous Quarter. In the Current Quarter, gross profit margins in our Marine Technology Business were stronger primarily due to a reduction in hardware sales (decreased by 46.9% to $1,763,606 compared to $3,319,322 in the Previous Quarter); a reduction in sales derived from Asia, resulting in a decrease in commission costs by 68.7% to $114,060 compared to $364,381 coupled with an increase in rental revenue by 351.1%. In the Current Quarter, 61.0% of the total revenues of the Marine Technology Business attracted commission compared to 85.9% of total revenue in the Previous Quarter attracting commission. Gross Profit Margins in the Defense Engineering Business also increased from 55.5% to 62.0%, reflecting the mix of projects in the period presented. Total consolidated commission costs in the Current Quarter were $179,074 compared to $390,384 in the Previous Quarter, representing a decrease of 54.1%, which is primarily attributable to the Marine Technology Business.
Previous report
Since there are more variable factors affecting gross profit margins in the Marine Technology Business, a table categorizing net revenues generated by this segment in the Current Quarter compared to the Previous Quarter is set out below:
Previous report
Research and Development (R&D): R&D expenditures in the Current Quarter decreased by 6.0% and were $648,304 compared to $689,995 in the Previous Quarter. This is largely due to the decrease in this area of expenditure in the Marine Technology Business.
Previous report
During the Current Quarter, research and development (“R&D”) expenses in our Marine Technology Business decreased by 19.3% to $456,067 compared to $565,385 in the Previous Quarter. The decrease primarily reflects a reduction in headcount within the R&D function.
Previous report
Stock-based compensation decreased and was a benefit of $13,704 in the Current Quarter compared to an expense of $66,239 in the Previous Quarter.
Previous report
Legal and Professional - This category increased by 1.7% in the Current Quarter reflecting the timing of the performance of certain services such as audit and tax consultancy fees.
Previous report
Rent and operating lease expenses - 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 PAL operating lease. The costs of our operating lease reflect Right of Use interest expense.
Previous report
General corporate administrative expenses in the Current Quarter were $375,855 or 5.4% of net revenues and $473,230 or 6.7% of net revenues in the Previous Quarter, respectively, which largely reflects a decrease in overheads costs attributable to reduction in our stock-based compensation expense which in the Current Quarter was a benefit of $13,704 compared to an expense in the Previous Quarter of $66,239.
Previous report
Operating Income: In the Current Quarter operating income increased by 64.8% and was $1,792,976 as compared to $1,087,684 in the Previous Quarter. The increase in operating income reflects the decrease in total operating expenses by 18.3% and which were $2,785,073 compared to $3,409,597 in the Previous Quarter. A significant factor in the decrease in our total operating expense in the Current Quarter is favorable foreign currency exchange rate variance adjustments which resulted in a benefit of $87,693 in the Current Quarter, compared to an exchange rate variance expense of $312,285 in the Previous Quarter.
Previous report
Other Income: In the Current Quarter, we had “Total Other Income, net” of $340,676 compared to $177,926, representing an increase of 91.5% from the Previous Quarter. The significant components within this category in the Current Quarter are interest earned on our certified deposit account which was $171,915 compared to $145,594 in the Previous Quarter; and gain on the sale of assets (our vessel and a vehicle) of $133,674. See Note 7 (Composition of Certain Financial Statement Captions for more detailed analysis of this). We anticipate that the interest earned in these certified deposit accounts will be material in the future if interest rates remain at similar levels.
Previous report
Income before income taxes: In the Current Quarter, we had pre-tax income of $2,133,652 compared to $1,265,610 in the Previous Quarter, representing an increase of 68.6%. Pre-tax income increased, largely due to the increase in our “income from operations” and “Total Other Income, net” for the reasons discussed above
Previous report
Net Income: In the Current Quarter we had Net Income of $1,697,810 compared to $908,762 in the Previous Quarter, representing an increase of 86.8%. In the Previous Quarter we recorded Current Tax Expense of $374,701 compared to $432,203 in the Current Quarter reflecting provision for income tax. We also recorded a Deferred Tax Benefit of $17,853 in the Previous Quarter compared to a Deferred Tax Expense of $3,639 in the Current Quarter, which relates to the cancellation of a stock award. Our effective tax rate is subject to significant variation due to several factors including variability in our pre-tax income and/or loss 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). The changes under the 2025 Tax Act as they relate to GILTI, including the computation method, will be effective for the Company in its 2027 financial statements. The Company’s UK subsidiaries have some restricted carry forward losses and annually qualify for R&D Tax credits which are applied to defray a percentage of our income tax liability in the UK.
Previous report
Comprehensive Income*.*Comprehensive income for the Current Quarter was $1,256,263, compared to $2,709,201 in the Previous Quarter. Comprehensive income is affected by fluctuations in foreign currency exchange rates, which influence both the translation of foreign-currency-denominated revenues and expenses and the remeasurement of monetary assets and liabilities. These impacts generally represent non-cash gains or losses recognized during the reporting period. A significant portion of the Company’s operations is based in the United Kingdom and Denmark; accordingly, a substantial share of our transactions is conducted in British Pounds and Danish Kroner and translated into U.S. dollars for reporting purposes. Note 7 (“Property and equipment by geographic areas”) provides additional information on the geographic distribution of our assets. In the Current Quarter, the U.S. dollar strengthened against the British Pound, Danish Kroner, and Euro, resulting in a $441,547 loss from foreign currency translation adjustments, compared to a $1,800,439 gain in the Previous Quarter. Table 1 in the MD&A section titled “Inflation & Foreign Currency” illustrates the impact of these currency movements on our Income Statement and Balance Sheet for the Current Quarter compared with the Previous Quarter.
Previous report
Results of Operations for the Current Six Month Period compared to the Previous Six Month Period
Previous report
Net Revenues: Total consolidated net revenues for the Current Six Month Period compared to the Previous Six Month Period increased by 11.3% and were $13,614,124 and $12,227,174, respectively. The primary factors for the increase are attributable to an increase in revenue from the Defense Engineering Services Business by 24.5% or $4,309,946 compared to $3,461,945 in the Previous Six Month Period and which reflects an increase in revenue derived from the UK arm of the Defense Engineering Services Business. PAL also increased revenue in the Current Six Month Period by 19.1% to $3,109,583 compared to $2,611,330 in the Previous Six Month Period, and which reflects an increase in the number of “Acoustic Test Environments” that have been sold in the period presented. The Marine Technology Business revenue in the Current Six Month Period compared to the Previous Six Month Period, was $6,194,595 and $6,153,899, respectively, representing an increase of 0.7%. A key market for Marine Technology Business is the offshore marine market sector in the Middle East and Asia. During the second quarter of the current fiscal year this segment was affected by the ongoing conflict in Iran and the effective closure of the Strait of Hormuz resulting in a steep decrease in order intake and sales emanating from the Middle East and Asia. Furthermore, due to delay in receiving awards from Defense Programs relating to DAVD, revenue from the Americas in the Current Six Month Period in the Marine Technology Business was down by 52.3% or $929,677 as compared to $1,778,337 in the Previous Six Month Period.
Previous report
Gross Profit Margins*:* Consolidated Margin percentage was higher in the Current Six Month Period at 65.7% (gross profit of $8,945,083) compared to 64.8% (gross profit of $7,925,751). The main factors which have resulted in the higher consolidated margins in the Current Six Month Period are primarily attributed to the decrease in hardware sales by 20.2% and which were $4,035,486 compared to $5,054,063 in the Previous Six Month Period. As a consequence of the foregoing, commission costs incurred by the Marine Technology Business decreased by 36.1% or $207,326, in conjunction with an increase in the utilization rate of our rental assets resulting in an increase in rental revenue by 283.6% to $1,508,295 in the Current Six Month Period compared to $393,234 in the Previous Six Month Period. Total consolidated commission costs for the Six Month Period were $480,512 compared to $635,893 in the Previous Six Month Period. The ongoing conflict involving Iran and the resulting instability in the Middle East have adversely affected customer activity in regions that are significant to our Marine Technology Business. A substantial portion of our customer base for this segment is located in the Middle East and Asia. The conflict, combined with the effective closure of the Strait of Hormuz—through which a significant portion of global maritime shipping transits—has disrupted commercial activity and reduced demand for our products and services in our second quarter which has impacted revenue in the Current Six Month Period.
Previous report
In the Current Six Month Period, gross profit margins for the Marine Technology Business were 76.1% compared to 69.7% in the Previous Six Month Period; and for PAL this was 60.4% compared to 63.6%; and for the Defense Engineering Business this was 54.6% compared to 57.1%.
Previous report
Gross profit margin for the Defense Engineering Services Business was lower at 54.6% in the Current Six Month Period compared to 57.1% in the Previous Six Month Period. This is largely due to the mix of projects undertaken in the period presented coupled with the increase in commission costs incurred in the Current Six Month Period where this was $66,980 compared to $12,765, representing an increase of 424.7%.
Previous report
Acoustics and Materials Business (PAL)
Previous report
Gross profit margin for PAL was 60.4% in the Current Six-Month Period compared to 63.6% in the Previous Six-Month Period. The decrease primarily reflects a higher proportion ofAcoustic Test Environments sold in the Current Six-Month Period. Commission costs for PAL decreased by 4.6%, totaling $46,782 in the Current Six-Month Period compared to $49,052 in the Previous Six-Month Period.
Previous report
In the Current Six Month Period gross profit margins for the Marine Technology Business were 76.1% compared to 69.7% in the Previous Six Month Period. This reflects less hardware sales to Asia due to the ongoing conflict with Iran and the effective closure of the Strait of Hormuz. This has resulted in lower hardware sales; lower sales being facilitated through our agents network and therefore commission costs incurred during the presented period (this was $366,750 in the Current Six Month Period compared to $574,076 in the Previous Six Month Period). Gross margin also improved as a result of a higher utilization rate on rental assets where rental revenue increased by 283.6% and was $1,508,295 in the Current Six Month Period compared to $393,234 in the Previous Six Month Period.
Previous report
Since there are more variable factors affecting gross profit margins in the Marine Technology Business, a table categorizing net revenues generated by this segment in the Current Six Month Period compared to the Previous Six Month Period is set out below:
Previous report
During the Current Six Month Period, the Defense Engineering Services Business R&D expenditure increased by 139.0% and was $180,887 compared to $75,694 in the Previous Six Month Period. R&D expenditures in this segment are primarily focused on advancing the Thermite® Octal range of mission-computer products, with the strategic objectives of expanding and diversifying revenue opportunities and improving gross profit margins.
Showing the first 40 of 52 passages. Open the source sections for the rest.
Reworded paragraphs (36)
Previous wording
The following discussion and analysis should be read in conjunction with our consolidated financial statements included herewith and the audited financial statements with their accompanying notes included in our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on January 29, 2026, as amended on our Form 10-K/A filed with the U.S. Securities and Exchange Commission on February 26, 2026. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Current wording
The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, filed with the SEC on January 29, 2026, as amended by Form 10-K/A filed on February 26, 2026. This discussion reflects management’s best assessment as of the date of this report and should not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein is indicative of future operating results.
Previous wording
We have organized our operations into three segments: Marine Technology Business, Acoustics Sensors and Materials Business and Defense Engineering Services Business. These segments reflect the way the Company evaluates its business performance and manages its operations. See Item 1 of Part 1 “Financial Statements – Note 15 – Segment Analysis.”
Current wording
We operate through three reportable segments: Marine Technology Business, Acoustics Sensors and Materials Business, and Defense Engineering Services Business. These segments reflect how management evaluates business performance, allocates resources, and manages operations. See Part I, Item 1, “Financial Statements – Note 15 – Segment Analysis.”
Previous wording
We expect some or all of these macroeconomic and geopolitical factors to continue to influence our operations during fiscal year 2026.
Current wording
We expect these factors to continue to influence customer demand, procurement activity, supply chain conditions, and our operating results during the remainder of fiscal year 2026.
Previous wording
We operate in global markets, and our results are affected by macroeconomic conditions and geopolitical developments that influence customer demand, supply chain reliability, and overall business activity. In the Current Quarter, $5,231,403 or 75.8% of our consolidated net revenues were generated outside the Americas.
Current wording
We operate in global markets, and our results are affected by macroeconomic conditions and geopolitical developments that influence customer demand, supply chain reliability, and overall business activity. During the Current Quarter, approximately 55.3% of our consolidated net revenues were generated outside the Americas compared to 63.5% in the Previous Quarter.
Previous wording
Volatility in Global Trade Policy Including Geopolitical Uncertainties
Current wording
Volatility in Global Trade Policy and Geopolitical Uncertainty
Previous wording
We are uncertain as to the extent of the impact the factors disclosed above and those in our Form 10-K as amended on our Form 10-K/A covering fiscal year ended October 31, 2025, are likely to have on our future financial results.
Current wording
We are uncertain as to the extent of the impact the factors disclosed above and those in our Form 10-K for fiscal year ended October 31, 2025, as amended, are likely to have on our future financial results.
Previous wording
These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As of April 30, 2026, we had cash and cash equivalents of $30,624,337 and cash provided by our operations of $2,047,284. Based on our outstanding obligations and our cash and cash equivalents, as well as our revolving line of credit with HSBC NA, we believe we have sufficient working capital to meet our anticipated cash needs for the next twelve months. However, any projections of future cash flows are subject to substantial uncertainty.
Current wording
These factors may adversely impact on our availability of free cash flow, working capital and business prospects. As of July 31, 2026, we had cash and cash equivalents of $31,714,519 and cash provided by our operations of $3,430,017. Based on our outstanding obligations and our cash and cash equivalents, as well as our revolving line of credit with HSBC NA, we believe we have sufficient working capital to meet our anticipated cash needs for the next twelve months. However, any projections of future cash flows are subject to substantial uncertainty.
Previous wording
Our Marine Technology Business revenues are derived from both sales and rental of underwater solutions for imaging, mapping, survey applications and diving. PAL’s revenues are derived from sales of acoustic sensors, materials and calibration services, and for our Defense Engineering Services Business for engineering services performed for third party customers who are primarily Defense Contractors. Our contracts do not include the possibility for additional contingent consideration so that our determination of the contract price does not involve having to consider potential additional variable consideration. Our product sales do not include a right of return by the customer.
Current wording
Our Marine Technology Business revenues are derived from both sales and rental of underwater solutions for imaging, mapping, survey applications and diving. PAL’s revenues are derived from sales of acoustic sensors, materials and calibration services, and our Defense Engineering Services Business revenues are derived from engineering services performed for third party customers who are primarily prime defense contractors (“DoD contractors”). Certain of these contracts require management to estimate contract progress and costs to complete, and revisions to these estimates may result in adjustments to revenue and profitability recognized in future periods. Our contracts do not include the possibility for additional contingent consideration so that our determination of the contract price does not involve having to consider potential additional variable consideration. Our product sales do not include a right of return by the customer.
Previous wording
For further discussion of our revenue recognition accounting policies, refer to Note 2 – “Revenue Recognition” in these unaudited consolidated financial statements and Note 2 “Summary of Accounting Policies” in our Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended October 31, 2025.
Current wording
For further discussion of our revenue recognition accounting policies, refer to Note 2 – “Revenue Recognition” to our unaudited consolidated financial statements and Note 2 “Summary of Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, as amended.
Previous wording
We value our inventory based on our cost. We adjust the value of our inventory to the extent our management determines that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, our management uses estimates of future demand and sales prices for each product to determine appropriate inventory reserves and to make corresponding reductions in inventory values to reflect the lower of cost or net realizable value. In the event of a higher incidence of inventory obsolescence, we could be required to increase our inventory reserve, which would increase our cost of revenues and decrease our gross profit.
Current wording
We value our inventory based on our cost. We adjust the value of our inventory to the extent our management determines that our cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, our management uses estimates of future demand and sales prices for each product to determine whether reductions in inventory values are required to reflect the lower of cost or net realizable value. In the event of a higher incidence of inventory obsolescence, we could be required to record additional reductions in inventory values, which would increase our cost of revenues and decrease our gross profit.
Previous wording
During the Current Quarter, the USD weakened against the British Pound and the Danish Kroner, resulting in translated foreign revenues being higher by $193,532 than when using the Previous Quarter exchange rate. In addition, the associated costs of our foreign subsidiaries including cost of revenues and operating expenses when translated from their respective functional currencies into USD for reporting purposes were higher due to the weakening of the USD, (for a discussion of the effect of foreign exchange rates see Item 2 “Inflation and Foreign Currency”).
Current wording
During the Current Quarter, the USD strengthened against the British Pound and weakened against the Danish Kroner, resulting in translated foreign revenues being lower by $26,608 than when using the Previous Quarter exchange rate. In addition, the associated costs of our foreign subsidiaries including cost of revenues and operating expenses when translated from their respective functional currencies into USD for reporting purposes were lower due to the strengthening of the USD, (for a discussion of the effect of foreign exchange rates see the discussion under “Inflation and Foreign Currency” below.
Previous wording
Consolidated net revenues in the Current Quarter decreased by 1.6% and was $6,904,012 compared to $7,017,459 in the Previous Quarter. During the Current Quarter total operating expenses decreased by 18.3% and income from operations increased by 64.8%. Pre-tax income in the Current Quarter was $2,133,652 compared to $1,265,610 in the Previous Quarter, representing an increase of 68.6%. A more detailed analysis of our results of operations is set out below.
Current wording
Consolidated net revenues in the Current Quarter increased by 9.2% and was $7,717,469 compared to $7,064,795 in the Previous Quarter. During the Current Quarter total operating expenses increased by 2.1% and income from operations increased by 11.1%. Pre-tax income in the Current Quarter was $1,791,351 compared to $1,543,749 in the Previous Quarter, representing an increase of 16.0%. A more detailed analysis of our results of operations is set out below.
Previous wording
In the Current Quarter 73.2% 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 to USD in the Current Quarter this was $5,051,341 compared to $4,857,809 when using the exchange rate applied in the Previous Quarter and therefore an increase in net revenue of $193,532.
Current wording
In the Current Quarter 60.7% of our consolidated net revenues was attributable to the Company’s foreign subsidiaries. When translating this amount from the native functional currencies of British Pound and Danish Kroner to USD in the Current Quarter this was $4,688,134 compared to $4,714,742 when using the exchange rate applied in the Previous Quarter and therefore a decrease in net revenues of $26,608.
Previous wording
In the Current Quarter 68.8% of our consolidated Operating Expenses and Cost of Revenues was attributable to the Company’s foreign subsidiaries and this was $3,516,419 (“Foreign Subsidiary Costs”) of our total costs of $5,111,036. When translating the Foreign Subsidiary Costs from the native functional currencies of British Pound and Danish Kroner to USD in the Current Quarter this was $117,428 higher when using the exchange rate of the Previous Quarter.
Current wording
In the Current Quarter 71.6% of our consolidated Operating Expenses and Cost of Revenues was attributable to the Company’s foreign subsidiaries and this was $4,410,741 (“Foreign Subsidiary Costs”) of our total costs of $6,162,814. When translating the Foreign Subsidiary Costs from the native functional currencies of British Pound and Danish Kroner to USD in the Current Quarter this was $29,408 lower when using the exchange rate of the Previous Quarter.
Previous wording
Acoustic Sensors and Materials Business (“PAL”)
Current wording
● PAL Business. PAL supplies acoustic sensors and related materials, which typically generate gross margins in the range of 55% to 65%. Actual margins may vary depending on product mix and the proportion of sales completed through sales agents during a reporting period.
Previous wording
In the Current Quarter, gross profit margins for the Marine Technology Business were 77.0% compared to 67.7% in the Previous Quarter; for PAL this was 53.7% compared to 65.4%; and for the Defense Engineering Services Business this was 62.0% compared to 55.5%.
Current wording
In the Current Quarter, gross profit margins for the Marine Technology Business were 78.5% compared with 77.0% in the Previous Quarter; for PAL, 52.4% compared with 54.8%; and for the Defense Engineering Services Business, 56.9% compared with 58.9% in the Previous Quarter.
Previous wording
Further information on the performance of each business segment, including revenues by type and geography, can be found in Notes 15 (Segment Analysis) and 16 (Disaggregation of Net Revenues) to the unaudited consolidated financial statements for the Current and Previous Quarters.
Current wording
Further information regarding the performance of each business segment, including revenues by product type and geographic region, is included in Notes 15, “Segment Analysis,” and 16, “Disaggregation of Net Revenues,” to the unaudited consolidated financial statements for the Current and Previous Quarters.
Previous wording
R&D expenditures in this business are incurred to support ongoing investment in the development and enhancement of our products and solutions. A significant portion of these costs consists of wages and salaries for engineering and technical personnel. Continued investment in R&D remains essential to our strategy, as innovation is critical to maintaining the competitiveness and technological relevance of our offerings.
Current wording
R&D expenditures in this business are incurred to support the ongoing development, enhancement and commercialization of our technologies, products and solutions. A significant portion of these costs consists of wages and salaries for engineering and technical personnel. Continued investment in R&D remains an important component of our growth strategy, as technological innovation is critical to maintaining the competitiveness, differentiation and long-term market relevance of our offerings.
Previous wording
During the Current Quarter, R&D expenses at PAL increased by 16.1% to $110,567 compared to $95,266 in the Previous Quarter. R&D expenditures in this business are incurred to support ongoing investment in the development of acoustic sensors, acoustic materials, and related solutions. A significant portion of these costs consists of wages and salaries for engineering and technical personnel.
Current wording
During the Current Quarter, R&D expenses at PAL increased by 57.9% to $155,494 compared to $98,502 in the Previous Quarter. R&D expenditures in this business are incurred to support ongoing investment in the development of acoustic sensors, acoustic materials, and related solutions. In the Current Quarter this was primarily attributable to a strategic engineering initiative within the PAL business to internally develop and enhance a key product line that was previously dependent on third-party supply arrangements. The initiative leverages engineering resources and expertise from across the Group and is expected to strengthen product development capabilities, increase vertical integration, and support future growth opportunities within this product category.
Previous wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Quarter decreased by 21.4% to $2,136,769 compared to $2,719,602 in the Previous Quarter. The primary driver of this decrease was favorable foreign currency exchange rate movements. Exchange rate variance adjustments resulted in a benefit of $87,693 in the Current Quarter, compared to an exchange rate variance expense of $312,285 in the Previous Quarter. Non-cash charges represented 9.1% of total SG&A, or $194,259, in the Current Quarter, compared to 24.7%, or $670,542, in the Previous Quarter. These non-cash charges include depreciation, amortization, stock-based compensation, allowance for credit losses, and foreign currency exchange rate variance adjustments.
Current wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Quarter decreased by 2.9% to $2,787,803 compared to $2,871,309 in the Previous Quarter. The decrease was primarily attributable to lower payroll-related costs and favorable foreign currency exchange rate movements. Payroll expenses decreased by 17.0% compared to the Previous Quarter, principally reflecting reduced headcount levels within certain operating businesses. In addition, foreign currency exchange rate variance adjustments resulted in a benefit of $42,377 during the Current Quarter, compared to an expense of $237,948 in the Previous Quarter. Non-cash charges represented 10.4% of total SG&A expenses, or $290,814, during the Current Quarter, compared to 20.2%, or $580,419, during the Previous Quarter and largely reflects exchange rate variance, where in the Current Quarter we had a benefit of $42,377 compared to an expense of $237,948 in the Previous Quarter. These non-cash charges primarily consisted of depreciation, amortization, stock-based compensation and foreign currency exchange rate variance adjustments.
Previous wording
Key Areas of SG&A Expenditure across the Company for the Current Quarter compared to the Previous Quarter are:
Current wording
Key areas of SG&A expenditure for the Current Quarter compared to the Previous Quarter are summarized below:
Previous wording
Wages and Salaries – This category decreased in the Current Quarter primarily due to reduced headcount, reflecting ongoing inflationary pressures in the engineering labor market and resulting workforce instability, particularly within the Defense Engineering Services Business. This business experienced elevated staff turnover during the period, contributing to a 17.9% reduction in wages and salaries. We expect wages and salaries to increase materially on a full-year basis in fiscal year 2026 compared to fiscal year 2025. We are currently operating with a reduced headcount and are actively recruiting to fill several vacant positions, including additions to our management team. Some of these hires may also result in incremental costs associated with our succession planning initiatives.
Current wording
Wages and Salaries – wages and salaries decreased in the Current Quarter primarily due to reduced headcount, reflecting ongoing inflationary pressures in the engineering labor market and resulting workforce instability, particularly within the Defense Engineering Services Business. This business experienced elevated staff turnover during the period, contributing to a 17.0% reduction in wages and salaries. We expect wages and salaries to increase materially on a full-year basis in fiscal year 2026 compared to fiscal year 2025. We are currently operating with a reduced headcount and are actively recruiting to fill several vacant positions, including additions to our management team. Some of these hires may also result in incremental costs associated with our succession planning initiatives.
Previous wording
Marketing and associated travel costs - We incur marketing expenses in connection with the promotion of our products and services. These expenses include wages and salaries for our Digitalization Team, which is responsible for content creation and video production related to our technologies, as well as costs associated with participation in industry trade shows, technology demonstrations, and travel for marketing activities. Marketing expenses decreased in the Current Quarter, primarily reflecting the timing of marketing events and related expenditures. On a full-year basis, we expect marketing expenses for fiscal year 2026 to be generally consistent with the levels incurred in fiscal year 2025.
Current wording
Marketing and associated travel costs: Marketing expenses consist primarily of personnel costs associated with our Digitalization Team, which supports content creation, product promotion and video production activities, together with expenses related to industry trade shows, technology demonstrations and customer engagement initiatives. Marketing expenditure decreased during the Current Quarter, primarily due to the timing of marketing events and related activities. On a full-year basis, we currently expect marketing expenses in fiscal year 2026 to be generally consistent with fiscal year 2025 levels.
Previous wording
Overhead related costs as a percentage of net revenue for Current Quarter, compared to the Previous Quarter
Current wording
***Overhead related costs as a percentage of net revenues for Current Quarter, compared to the Previous Quarter:***General corporate administrative expenses increased to $423,473 in the Current Quarter from $414,261 in the Previous Quarter. As a percentage of net revenues, these costs declined from 5.9% to 5.5%. The improvement primarily reflects increased consolidated net revenues during the Current Quarter and, to a lesser extent, lower stock-based compensation expense. Accordingly, corporate overhead costs were more efficiently absorbed across a larger revenue base during the Current Quarter.
Previous wording
Research and Development (R&D): R&D expenditures in the Current Six Month Period was $1,254,406 compared to the $1,233,121 in the Previous Six Month Period, representing an increase of 1.7%.
Current wording
Research and Development (R&D): R&D expenditures in the Current Nine Month Period were $1,983,622 compared to $1,805,589 in the Previous Nine Month Period, representing an increase of 9.9%.
Previous wording
During the Current Quarter, R&D expenses in the Defense Engineering Services Business increased by 178.3% to $81,670 compared to $29,344 in the Previous Quarter. R&D expenditures in this segment are primarily focused on advancing the Thermite® Octal range of mission-computer products, with the strategic objectives of expanding and diversifying revenue opportunities and improving gross profit margins. The table below sets out the R&D expenditure for each segment for the periods presented: -
Current wording
The table below sets out the R&D expenditure for each segment for the periods presented: -
Previous wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Six Month Period decreased by 1.1% and were $4,887,631 compared to $4,942,924 in the Previous Six Month Period. SG&A comprises both cash and non-cash components. The non-cash component was 15.3% or $750,101 of the total SG&A in the Current Six Month Period compared to 13.9% or $686,774 in the Previous Six Month Period. Non-cash charges comprise Depreciation, Amortization, Stock-based compensation and Exchange Rate Variance charge. Stock-based compensation in the Current Six Month Period was $13,285 compared to $166,383 in the Previous Six Month Period.
Current wording
Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Nine Month Period decreased by 1.8% to $7,675,434 compared to $7,814,233 in the Previous Nine Month Period, a decrease of $138,799. SG&A expenses comprise both cash and non-cash components. Non-cash expenses represented 13.6%, or $1,040,915, of total SG&A expenses during the Current Nine Month Period, compared to 16.2%, or $1,267,193, during the Previous Nine Month Period. Non-cash expenses primarily consist of depreciation, amortization, stock-based compensation and foreign exchange rate variance charges. Such foreign exchange charges were $95,279 during the Current Nine Month Period compared to $231,954 during the Previous Nine Month Period. Stock-based compensation expense was $39,063 during the Current Nine Month Period compared to $196,156 during the Previous Nine Month Period.
Previous wording
Key Areas of SG&A Expenditure across the Group for the Current Six Month Period compared to the Previous Six Month Period are:
Current wording
Key areas of SG&A expenditure across the Group for the Current Nine Month Period compared with the Previous Nine Month Period are set forth below:
Previous wording
Comprehensive Income*.*Comprehensive income for the Current Six-Month Period was $3,299,202, compared to $2,593,590 in the Previous Six-Month Period. Comprehensive income is influenced by fluctuations in foreign currency exchange rates, which affect both the translation of foreign-currency-denominated revenues and expenses, as well as the remeasurement of monetary assets and liabilities. These impacts generally represent non-cash gains or losses recognized during the reporting period. A significant portion of the Company’s operations is based in the United Kingdom and Denmark; accordingly, a substantial share of our transactions is conducted in British Pounds and Danish Kroner and translated into U.S. dollars for reporting purposes. Note 7 (“Property and equipment by geographic areas”) provides additional context regarding the geographic distribution of our assets. In the Previous Six-Month Period, we recorded a $771,853 gain from foreign currency translation adjustments, compared to a $670,669 gain in the Current Six-Month Period. During the Current Six-Month Period, the U.S. dollar weakened against both the British Pound and the Danish Kroner, the functional currencies of our two foreign subsidiaries. Table 2 in the MD&A section titled “Inflation & Foreign Currency” illustrates the impact of these currency movements on our Income Statement and Balance Sheet for the Current Six-Month Period compared with the Previous Six-Month Period.
Current wording
Comprehensive Income*:*Comprehensive income for the Current Nine-Month Period was $4,590,004, compared to $3,947,067 in the Previous Nine-Month Period. Comprehensive income was affected by foreign currency translation adjustments arising from the translation of the financial statements of Company’s foreign subsidiaries into U.S Dollars for reporting purposes. Because a significant portion of the Company’s operations and assets are based in the United Kingdom and Denmark fluctuations in exchange rates can materially affect comprehensive income through these translation adjustments. Note 7 (“Property and equipment by geographic areas”) provides additional information regarding the geographic distribution of our assets. In the Previous Nine-Month Period, the Company recorded a gain of $842,345 from foreign currency translation adjustments, compared to a gain of $571,859 in the Current Nine-Month Period. Additional information regarding the impact of foreign currency movements on the Company’s results of operations in included in Table 2 within the MD&A section titled “Inflation & Foreign Currency”.
Previous wording
As of April 30, 2026, the Company had an accumulated deficit of $648,028, working capital of $47,727,460, cash of $30,624,337 and stockholders’ equity of $61,414,232. For the six months ended April 30, 2026, the Company’s operating activities provided $2,047,284 cash.
Current wording
As of July 31, 2026, the Company had accumulated earnings of $741,584, working capital of $49,174,243, cash of $31,714,519 and stockholders’ equity of $62,730,812. For the nine months ended July 31, 2026, the Company’s operating activities provided $3,430,017 cash.
Previous wording
The Company entered into a $4,000,000 revolving line of credit with HSBC NA on November 27, 2019, at prime. The outstanding balance on the line of credit was $0 as of April 30, 2026. This revolving credit line is reviewed annually and discretionarily renewed by HSBC NA.
Current wording
The Company entered into a $4,000,000 revolving line of credit with HSBC NA on November 27, 2019, at prime. The outstanding balance on the line of credit was $0 as of July 31, 2026. This revolving credit line is annually reviewed and discretionarily renewed by HSBC NA.
Previous wording
In general, our subsidiaries conduct most of their financial transactions in their respective functional currencies. However, from time to time, a subsidiary may enter into transactions denominated in a foreign currency—for example, purchasing inventory from an overseas supplier. In addition, we hold significant cash balances in foreign currencies, including British Pounds, Euros, and Danish Kroner. As a result, movements in exchange rates can impact our cash and cash equivalents, as well as our overall financial position. We cannot predict the extent to which future currency fluctuations may affect our business, and such fluctuations may adversely impact on our sales, profitability, and liquidity.
Current wording
In general, our subsidiaries conduct most of their financial transactions in their respective functional currencies. However, from time to time, a subsidiary may enter into transactions denominated in a foreign currency—for example, purchasing inventory from an overseas supplier. In addition, we hold significant cash balances in foreign currencies, including British Pounds, Euros, and Danish Kroner. As a result, movements in exchange rates can impact our cash and cash equivalents, as well as our overall financial position. We cannot predict the extent to which future currency fluctuations may affect our business, and such fluctuations may adversely impact our sales, profitability, and liquidity.
Previous wording
To provide additional transparency, we present information regarding the effect of changes in foreign exchange rates versus the U.S. Dollar on our net sales, operating expenses, operating income, and certain balance sheet items. This information illustrates how our results for the three- and six-month periods would have differed had foreign exchange rates remained consistent with those in the comparable prior-year periods.
Current wording
To provide additional transparency, we present information regarding the effect of changes in foreign exchange rates versus the U.S. Dollar on our net revenues, operating expenses, operating income, and certain balance sheet items. This information illustrates how our results for the three- and nine-month periods would have differed had foreign exchange rates remained consistent with those in the comparable prior-year periods.
Previous wording
Information for Indian Rupees is not presented separately due to the immaterial level of activity in that jurisdiction; however, INR impacts are included within the consolidated totals.
Current wording
In Table 1 and Table 2 below, information for Indian Rupees (“INR”) and Australian Dollars (“AUD”) are not presented separately due to the immaterial level of activity in those jurisdictions; however, INR and AUD impacts are included within the consolidated totals (“Total USD” columns).
Previous wording
As shown in the table above, the change in exchange rates between the Current Quarter and the Previous Quarter had a favorable impact on our results, increasing net income from operations by $76,104 and increasing net assets by $758,741 for the six-month period since October 31, 2025.
Current wording
As shown in the table above, the change in exchange rates between the Current Quarter and the Previous Quarter had a favorable impact on our results, increasing net income from operations by $2,800 and increasing net assets by $673,535 for the nine-month period since October 31, 2025.
Previous wording
As shown in the table above, the change in exchange rates between the Current Six Month and the Previous Six Month had a favorable impact on our results, increasing net income from operations by $213,289 and increasing net assets by $758,741 for the six-month period since October 31, 2025.”
Current wording
As shown in the table above, the change in exchange rates between the Current Nine Month Period and the Previous Nine Month Period had a favorable impact on our results, increasing net income from operations by $162,664 and increasing net assets by $673,535 for the nine-month period since October 31, 2025.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Acoustics Sensors and Materials Business (“PAL”)
Current report — wording carried from elsewhere
Acoustics Sensors and Materials Business (PAL)
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Wages and salaries - In the Current Six Month Period decreased by 7.6% when compared to the Previous Six Month Period. This is primarily due to reduced headcount, reflecting ongoing inflationary pressures in the engineering labor market and resulting workforce instability, particularly within the Defense Engineering Services Business. This business experienced elevated staff turnover during the period, contributing to a 7.6% reduction in our consolidated wages and salaries. We expect wages and salaries to increase materially on a full-year basis in fiscal year 2026 compared to fiscal year 2025. We are currently operating with a reduced headcount and are actively recruiting to fill several vacant positions, including additions to our management team. Some of these hires may also result in incremental costs associated with our succession planning initiatives.