Quarterly Report for Quarter Ending July 31, 2026 (Form 10-Q)

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

Forward-Looking Statements

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.

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.

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.

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.

General Overview

Throughout these discussions, the following terms shall have the meaning set forth below:

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Current Quarter refers to the three months ended July 31, 2026.

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Previous Quarter refers to the three months ended July 31, 2025.

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Current Nine Month Period refers to the nine months ended July 31, 2026.

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Previous Nine Month Period refers to the nine months ended July 31, 2025.

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."

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.

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.

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.

Factors Affecting our Business in the Current Quarter

The following discussion highlights significant factors that affected our business, financial condition, and results of operations during the Current Quarter.

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.

Business Disruption caused by the ongoing Iranian Conflict and the closure of the Strait of Hormuz

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.

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.

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.

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.

Volatility in Global Trade Policy and Geopolitical Uncertainty

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.

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.

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.

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.

Currency Fluctuation and Foreign Exchange Risks

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.

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.

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.

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.

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.

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.

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

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.

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.

Impact on Revenues and Earnings

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.

Impact on Liquidity, Balance Sheet and Assets

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.

Critical Accounting Policies and Estimates

The Management's discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements. These unaudited consolidated financial statements have been prepared in conformity with GAAP in the United States which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We evaluate our estimates based on our historical experience and various other assumptions that are believed to be reasonable under the circumstances. These estimates relate to revenue recognition, the assessment of recoverability of goodwill and intangible assets and the recognition and measurement of deferred income tax assets and liabilities. Actual results could differ from those estimates and may have material effects on our operating results and financial position.

Below is a discussion of accounting policies that we consider critical to an understanding of our financial condition and operating results and that may require complex judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, "Summary of Accounting Policies" of our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, as amended on Form 10-K/A.

Revenue Recognition

Our revenues are earned under formal contracts with our customers.

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.

Regarding our Marine Technology Business and PAL, all of our products are sold on a stand-alone basis, and those market prices are evidence of the value of the products. To the extent that we also provide services (e.g., field installation, training, or calibration services etc.), those services are either included as part of the product or are subject to written contracts based on the stand-alone value of those services. Revenue from performing engineering services is recognized when those services have been provided to the customer and evidence of the provision of those services exists.

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.

Inventory Allowance

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.

Consolidated Results of Operations for the Current Quarter compared to the Previous Quarter

Our consolidated results of operations include the results of the Company's foreign subsidiaries. Our foreign subsidiaries' results are translated from their respective functional currencies into United States Dollar (USD) for reporting purposes. Currency fluctuations can therefore impact (positively or negatively) on our consolidated results including net revenues, profitability and the value of our assets and liabilities included in the consolidated balance sheet.

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.

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.

A brief summary of the impact of exchange rate fluctuations is shown immediately below:

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

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.

Cost of Revenues and Operating Costs Impact from our Foreign Subsidiaries

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.

Segment Summary

Marine Technology Business ("Products")

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.

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%.

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.

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.

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.

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%.

Acoustics Sensors and Materials Business ("PAL")

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.

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.

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.

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%.

Defense Engineering Services Business ("Services")

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.

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.

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.

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%.

Results of Operations for the Current Quarter compared to the Previous Quarter

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.

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.

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.

Our gross profit margins may vary from period to period due to several factors, including changes in our revenue mix across business segments, product categories and geographic regions. Key drivers include:

● Revenue Mix by Business Segment. Gross margins differ across our operating segments. The Marine Technology Business generally generates higher gross margins than the Defense Engineering Services Business and PAL. Accordingly, changes in the relative contribution of each segment to consolidated revenues may significantly impact overall consolidated gross margins.

● Marine Technology Business Mix. Gross margins within the Marine Technology Business vary based on product mix and geographic region. Sales in certain regions, particularly Asia, often involve commission-based distribution arrangements that reduce margins. Margins also differ among hardware, software, rental and service revenues, with software and rental revenues generally generating higher margins than hardware sales.

● Defense Engineering Services Business. Revenue in this segment is predominantly generated from time-and-materials subcontract work supporting Department of Defense programs. These contracts typically yield lower gross margins than those generated by the Marine Technology Business.

● 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.

● Commission Structure. All business units utilize sales and distribution agents. Commission rates vary by product type, geography and transaction structure. A higher proportion of agent-facilitated sales, particularly within Asia for both the Marine Technology Business and PAL, may reduce gross margins. See Note 3, "Cost of Revenues," for additional information.

● Rental Asset Utilization. Gross margins within the Marine Technology Business are influenced by both the size and utilization of the rental asset base. Depreciation expense associated with rental assets may fluctuate depending on investment levels and rental activity.

● Engineering Project Mix. Within the Defense Engineering Services Business, margins may vary depending on the nature of engineering projects performed and the relative mix of prototyping, design services and manufacturing activities.

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.

Since gross profit margins within the Marine Technology Business are influenced by the mix of product, rental, software and service revenues, as well as the geographic distribution of sales, a summary of revenues by category for the Current Quarter compared with the Previous Quarter is set out below:

		Three Months Ended July 31, 2026				Three Months Ended July 31, 2025
Description		Marine Technology Business ("Products")				Marine Technology Business ("Products")				Percentage Change
Equipment Sales		$	2,257,201			$	2,746,255				(17.8	%)
Equipment Rental			703,927				304,617				131.1	%
Software Sales			94,971				236,803				(59.9	%)
Services			321,373				696,800				(53.9	%)
Total Net Revenues		$	3,377,472			$	3,984,475				(15.2	%)

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.

Research and Development (R&D): R&D expenditures in the Current Quarter increased 27.4% to $729,216 compared to $572,468 in the Previous Quarter. The increase 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.

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Marine Technology Business

During the Current Quarter, research and development ("R&D") expenses in our Marine Technology Business increased by 10.7% to $473,749 compared to $428,007 in the Previous Quarter. The increase was primarily attributable to the deployment of engineering resources and expertise in support of a strategic cross-group product development initiative focused on the internal development and enhancement of a key PAL product line.

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.

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Acoustics Sensors and Materials Business (PAL)

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.

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Defense Engineering Services Business

During the Current Quarter, R&D expenses in our Defense Engineering Services Business increased 117.5% to $99,973, compared to $45,959 in the Previous Quarter. R&D expenditures in this segment are primarily focused on advancing the Thermite® Octal family of mission-computing products and related technologies. The increase in R&D expenditures during the Current Quarter principally reflects increased engineering activities associated with product development initiatives, including efforts to enhance functionality, support future product offerings and address evolving customer and market requirements. As the defense technology market continues to evolve, we expect to continue investing in engineering capabilities and product development initiatives designed to support long-term growth opportunities within this segment.

Segment		Three Months Ended July 31, 2026				Three Months Ended July 31, 2025				Percentage Change
Marine Technology Business		$	473,749			$	428,007				10.7	%
Acoustics Sensors and Materials Business (PAL)		$	155,494			$	98,502				57.9	%
Defense Engineering Services Business		$	99,973			$	45,959				117.5	%

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.

Stock-based compensation expense decreased by 13.4% to $25,778 in the Current Quarter, compared to $29,773 in the Previous Quarter.

Key areas of SG&A expenditure for the Current Quarter compared to the Previous Quarter are summarized below:

		July 31,				July 31,				Percentage
Expenditure		2026				2025				Change
Wages and Salaries		$	939,705			$	1,131,777				(17.0	)%
Legal and Professional Fees (including accounting, audit and tax)		$	414,049			$	386,046				7.3	%
Rent and operating lease		$	30,003			$	5,750				421.8	%
Contingent Consideration Expense - PAL Earn-Out		$	438,588			$	158,872				176.1	%
Marketing (Excluding associated travel)		$	51,711			$	58,812				(12.1	)%
Travel associated with marketing activities		$	48,722			$	43,314				12.5	%
Office costs		$	236,683			$	191,770				23.4	%

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.

Legal and professional fees - increased by 7.3% during the Current Quarter. The increase primarily reflects the timing of professional services, including audit, tax and accounting-related activities.

Rent and operating lease expenses - The Company owns the majority of its operating facilities and, accordingly, rent and operating lease expenses do not represent a significant component of its cost structure. These expenses primarily relate to the Copenhagen office lease and the PAL facility lease. The expense includes lease costs recognized in accordance with ASC 842 in connection with the Company's operating lease arrangements.

Contingent Consideration Expense - PAL Earn-Out: During the Current Quarter, the Company reassessed the probability of achieving the performance targets associated with the second-year earn-out provisions of the PAL acquisition. Based on PAL's operating performance during the Current Nine-Month Period and management's updated assessment of forecast performance through the remainder of the earn-out measurement period, the Company concluded that achievement of the applicable earn-out targets had become highly probable. As a result, the Company recognized the full estimated Year 2 earn-out obligation of $438,588 during the Current Quarter. By comparison, during the Previous Quarter, the Company recognized $158,872 relating to the Year 1 earn-out arrangement while continuing to assess the likelihood of achievement of the applicable performance conditions following the acquisition. Accordingly, the increase in expense primarily reflects a reassessment of contingent consideration associated with the PAL acquisition and does not represent an increase in the underlying operating cost structure of the business.

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.

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.

Operating Income: In the Current Quarter operating income increased by 11.1% to $1,533,275 in the Current Quarter, compared to $1,379,979 in the Previous Quarter. The increase primarily reflects higher consolidated net revenues, which increased 9.2% during the Current Quarter compared to the Previous Quarter.

Other Income: In the Current Quarter, total other income, net, increased by 57.6% to $258,076, compared to $163,770 in the Previous Quarter. The increase was primarily attributable to higher interest income earned on the Company's certificate of deposit accounts and a non-recurring interest receipt of $44,249 from tax authorities relating to delayed payment of Employment Retention Credit (ERC). Interest income was $233,817 during the Current Quarter, compared to $154,848 in the Previous Quarter. For additional information regarding the components of other income, net, see Note 7, Composition of Certain Financial Statement Captions, to the condensed unaudited consolidated financial statements. Interest income has become a significant component of other income due to the Company's cash balances and investment of such balances in interest-bearing deposit accounts. To the extent cash balances and prevailing interest rates remain at comparable levels, we expect interest income to continue to contribute meaningfully to other income in future periods.

Income before income taxes: In the Current Quarter, pre-tax income increased by 16.0% to $1,791,351 in the Current Quarter, compared to $1,543,749 in the Previous Quarter. The increase primarily reflects higher income from operations resulting from increased consolidated net revenues, together with higher interest income earned on the Company's interest-bearing deposit accounts.

Net Income: Net income for the Current Quarter was $1,389,612, compared to $1,282,985 in the Previous Quarter, representing an increase of 8.3%. The increase was driven by a 16.0% increase in pre-tax income, partially offset by a higher provision for income taxes during the Current Quarter. Current income tax expense was $408,583 in the Current Quarter, compared to $268,786 in the Previous Quarter. The increase primarily reflects higher taxable income and changes in the geographic mix of earnings among the jurisdictions in which the Company operates. Deferred tax expense was $6,844 in the Current Quarter, compared to a deferred tax benefit of $8,022 in the Previous Quarter. The deferred tax adjustments primarily related to stock-based compensation activity during the respective periods. The Company's effective tax rate may vary significantly from period to period due to a number of factors, including changes in the level and geographic mix of pre-tax income and losses, the applicability of special tax regimes, changes in tax laws and regulations, stock-based compensation activity and movements in the Company's stock price, changes in the valuation of deferred tax assets and liabilities, and foreign currency gains and losses. The geographic mix of earnings also affects the Company's exposure to Global Intangible Low-Taxed Income ("GILTI"). The provisions of the One Big Beautiful Bill Act affecting the Company's GILTI calculations, including changes to the computation methodology, are expected to become effective for the Company beginning in fiscal year 2027. The Company's UK subsidiaries have certain restricted tax loss carryforwards and are eligible for research and development tax credits, which may be used to reduce UK income tax liabilities, subject to applicable tax rules and limitations. The availability and expected utilization of these tax attributes are considered in estimating the Company's income tax provision and effective tax rate.

Comprehensive Income. Comprehensive income for the Current Quarter was $1,290,802 compared to $1,353,477 in the Previous Quarter, a decrease of $62,675, or 4.6%. Comprehensive income was affected by foreign currency translation adjustments arising from the translation of the financial statements of the Company's foreign subsidiaries into U.S dollars for reporting purposes. Because a significant portion of the Company's operations and assets are located in the United Kingdom and Denmark, fluctuations in exchange rates can materially affect comprehensive income through these translation adjustments. In the Previous Quarter, the Company recorded a gain of $70,492 from foreign currency translation adjustments, compared to a loss of $98,810 in the Current Quarter. Information regarding the geographic distribution of the Company's assets is included in Note 7, "Property and Equipment by Geographic Area." Additional information regarding foreign currency translation is included in Note 5, "Foreign Currency Translation," and in the "Inflation and Foreign Currency" section below.

Results of Operations for the Current Nine Month Period compared to the Previous Nine Month Period

Net Revenues: Total consolidated net revenues for the Current Nine Month Period increased by 10.6% to $21,331,593, compared to $19,291,969 for the Previous Nine Month Period. The increase was primarily driven by a 38.5% increase in revenue from the Defense Engineering Services Business, which generated revenues of $7,039,023 compared to $5,083,729 in the Previous Nine Month Period. The increase reflects higher revenues generated by the UK operations of the Defense Engineering Services Business. PAL revenues increased by 16.0% to $4,720,503 in the Current Nine Month Period from $4,069,866 in the Previous Nine Month Period, reflecting an increase in the number of Acoustic Test Environments sold during the period. Revenues from the Marine Technology Business were $9,572,067 in the Current Nine Month Period compared to $10,138,374 in the Previous Nine Month Period, representing a decrease of 5.6%. The Marine Technology Business serves customers operating in the offshore marine sector, including customers in the Middle East and Asia. During the Current Nine Month Period, revenues from this segment were adversely affected by reduced demand from customers in these regions, which management believes was associated with geopolitical instability and uncertainty in the Middle East. Revenue from the Middle East region was $673,265 in the Current Nine Month Period compared to $1,056,831 in the Previous Nine Month Period, a decrease of 36.3%. Based on information currently available, management does not believe that the reduction in demand from customers in the region is indicative of a structural change in the market. However, ongoing geopolitical uncertainty and security considerations affecting offshore operations, including activities involving transit through or near the Strait of Hormuz, continue to create operational challenges for customers and may impact the timing of future projects and deployments in the region.

Gross Profit Margins: Consolidated gross profit increased to $13,995,377 in the Current Nine Month Period from $12,749,507 in the Previous Nine Month Period. Consolidated gross profit margin decreased slightly to 65.6% from 66.1%. The decrease in consolidated gross profit margin was primarily attributable to changes in revenue mix among our operating segments. The Marine Technology Business, which generally generates higher gross profit margins than our Defense Engineering Services Business and Acoustics Sensors and Materials Business ("PAL"), contributed 44.9% of consolidated net revenues during the Current Nine Month Period, compared to 52.6% in the Previous Nine Month Period. Conversely, the Defense Engineering Services Business and PAL collectively contributed 55.1% of consolidated net revenues during the Current Nine Month Period, compared to 47.4% in the Previous Nine Month Period. This shift in revenue mix toward businesses with comparatively lower gross margin profiles had an unfavorable impact on consolidated gross profit margin. The lower contribution from the Marine Technology Business was partially attributable to reduced customer activity in certain Middle East markets during the Current Nine Month Period, which management believes was associated with ongoing geopolitical uncertainty in the region.

Our gross profit margins may vary from period to period due to several factors, including changes in our revenue mix across business segments, product categories, and geographic regions. Key drivers include:

	●	Revenue Mix by Business Segment Gross margins differ across our operating segments. The Marine Technology Business generally yields higher gross margins than the Defense Engineering Services Business and PAL. As a result, the percentage of consolidated net revenues attributable to each segment in a given period affects our overall gross margin.
	●	Marine Technology Business Mix Gross margins within the Marine Technology Business vary based on product mix and geography. Sales in certain regions, particularly Asia, often involve commission-based distribution arrangements that reduce margins. Margins also differ between hardware and software sales, with hardware typically generating lower margins and software generating higher margins. In addition, margins vary between custom engineering services and field services performed by our technical support engineers.
	●	Defense Engineering Services Business Revenue in this segment is primarily derived from time-and-materials contracts under Department of Defense subcontracts. These contracts generally yield lower gross margins compared to the Marine Technology Business.
	●	PAL Business PAL supplies acoustic sensors and 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 the reporting period.
	●	Commission Structure All business units utilize sales and distribution agents, and commission levels vary based on product type, geography, and sales volume. A higher proportion of agent-facilitated sales, particularly in Asia for the Marine Technology Business and PAL, may reduce gross margins. See Note 3, "Cost of Revenues," for additional information.
	●	Rental Asset Utilization Gross margins in the Marine Technology Business are also affected by the size and utilization of the rental asset pool. Depreciation expense associated with rental assets may vary depending on investment levels and rental activity.
	●	Engineering Project Mix Within the Defense Engineering Services Business, margins may fluctuate based on the nature of engineering projects performed, including the mix between prototyping, design services, and manufacturing activities.

Defense Engineering and Services Business (Services Business)

Gross profit margin for the Defense Engineering Services Business decreased to 55.5% in the Current Nine Month Period from 57.7% in the Previous Nine Month Period. The decrease was primarily attributable to the mix of projects performed during the Current Nine Month Period, together with higher commission expense. Commission costs increased to $83,236 in the Current Nine Month Period from $12,765 in the Previous Nine Month Period, representing an increase of approximately 552.1%.

Acoustics Sensors and Materials Business (PAL)

Gross profit margin for PAL decreased to 57.7% in the Current Nine Month Period from 60.4% in the Previous Nine Month Period. The decrease primarily reflects a higher proportion of Acoustic Test Environment sales during the Current Nine Month Period compared to the Previous Nine Month Period. Commission costs decreased to $62,416 in the Current Nine Month Period from $99,885 in the Previous Nine Month Period, representing a decrease of approximately 37.5%. The reduction in commission expense partially offset the impact of product mix on gross profit margin.

Marine Technology Business (Products)

Gross profit margin for the Marine Technology Business increased to 76.9% in the Current Nine Month Period from 72.6% in the Previous Nine Month Period. The improvement was primarily attributable to increased rental asset utilization and a reduction in hardware sales, together with a corresponding decrease in commission expense resulting from fewer sales completed through third-party sales agents. Gross profit margin also benefited from increased rental asset utilization. Rental revenues increased to $2,212,222 in the Current Nine Month Period from $697,851 in the Previous Nine Month Period, representing an increase of approximately 217.0%.

Since gross profit margins within the Marine Technology Business are influenced by revenue mix among equipment sales, rental revenue, software sales and services revenue, the following table presents net revenues by category for the periods presented:

		Nine Months Ended July 31, 2026				Nine Months Ended July 31, 2025
Description		Marine Technology Business ("Products")				Marine Technology Business ("Products")				Percentage Change
Equipment Sales		$	6,292,687			$	7,800,318				(19.3	)%
Equipment Rental		$	2,212,222			$	697,851				217.0	%
Software Sales		$	439,015			$	585,651				(25.0	)%
Services		$	628,143			$	1,054,554				(40.4	)%
Total Net Revenues		$	9,572,067			$	10,138,374				(5.6	)%

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%.

●

Defense Engineering Services Business

During the Current Nine Month Period, R&D expenses in our Defense Engineering Services Business increased by 130.9% to $280,860, compared to $121,653 in the Previous Nine Month Period. R&D expenditures in the Current Nine Month Period was principally attributable to higher engineering activity associated with product development initiatives, including efforts to enhance existing product functionality, support future product offerings, and address evolving customer and market requirements.

●

Acoustics Sensors and Materials Business (PAL)

During the Current Nine Month Period, R&D expenses in our Acoustics Sensors and Materials Business increased by 32.1% to $376,070, compared to $284,732 in the Previous Nine Month Period. R&D expenditures in this business support the development of acoustic sensors, acoustic materials, and related solutions. The increase during the Current Nine Month Period was primarily attributable to a strategic engineering initiative to internally develop and enhance a key product line that was previously dependent on third-party supply arrangements. This initiative utilizes engineering resources and expertise from across the Group and is intended to strengthen product development capabilities, increase vertical integration, and support future growth opportunities within this product category.

●

Marine Technology Business

During the Current Nine Month Period, R&D expenses in our Marine Technology Business decreased by 5.2% to $1,326,692, compared to $1,399,204 in the Previous Nine Month Period. The decrease was primarily attributable to reduced engineering headcount during the Current Nine Month Period.

R&D expenditures in this business support the ongoing development, enhancement and commercialization of our technologies, products and solutions. A significant portion of these expenditures relates to compensation and associated costs for engineering and technical personnel.

The Marine Technology Business accounted for approximately 66.9% of the Group's total R&D expenditures during the Current Nine Month Period, compared to 77.5% during the Previous Nine Month Period.

The table below sets out the R&D expenditure for each segment for the periods presented: -

Segment		July 31, 2026				July 31, 2025				Percentage Change
Marine Technology Business		$	1,326,692			$	1,399,204				(5.2	)%
Acoustics Sensors and Materials Business (PAL)		$	376,070			$	284,732				32.1	%
Defense Engineering Services Business		$	280,860			$	121,653				130.9	%

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.

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:

		July 31,				July 31,				Percentage
Expenditure		2026				2025				Change
Wages and Salaries		$	2,845,124			$	3,194,346				(10.9	)%
Legal and Professional Fees (including accounting, audit, tax and investor relations)		$	1,315,624			$	1,318,124				(0.2	)%
Rent and operating lease		$	56,390			$	57,680				(2.2	)%
Contingent Consideration Expense - PAL Earn Out		$	438,588			$	158,872				176.1	%
Marketing (Excluding associated travel)		$	228,633			$	287,191				(20.4	)%
Travel associated with marketing activities		$	118,662			$	95,810				23.9	%
Office costs		$	660,478			$	526,826				25.4	%

Wages and Salaries - Wages and salaries decreased by 10.9% to $2,845,124 during the Current Nine Month Period compared to $3,194,346 during the Previous Nine Month Period. The decrease was primarily attributable to lower headcount across the Group during the Current Nine Month Period. The Company continues to recruit for a number of vacant positions, including certain management and technical roles.

Legal and professional fees, including accounting, audit, tax and investor relations expenses, decreased by 0.2% to $1,315,624 during the Current Nine Month Period compared to $1,318,124 during the Previous Nine Month Period. The slight decrease primarily reflects the timing of professional services engagements and related activities.

Rent and operating lease expenses decreased by 2.2% to $56,390 during the Current Nine Month Period compared to $57,680 during the Previous Nine Month Period. The Company owns the majority of its operating facilities and, accordingly, rent and operating lease expenses do not represent a significant component of its cost structure. These expenses primarily relate to the Copenhagen office lease and the PAL facility lease and include lease costs recognized under ASC 842.

Contingent Consideration Expense - PAL Earn-Out - During the Current Nine Month Period, the Company reassessed the probability of achieving the performance targets associated with the second-year earn-out provisions of the PAL acquisition. Based on PAL's operating performance during the period and management's updated assessment of expected performance through the remainder of the earn-out measurement period, the Company concluded that achievement of the applicable performance targets had become highly probable. As a result, the Company recognized compensation expense of $438,588 related to the estimated Year 2 earn-out obligation. By comparison, during the Previous Nine Month Period, the Company recognized $158,872 relating to the Year 1 earn-out arrangement. Accordingly, the increase primarily reflects a reassessment of contingent consideration associated with the PAL acquisition and is not indicative of an increase in the Company's underlying operating cost structure.

Marketing and associated travel costs - Marketing expenses, excluding associated travel costs, decreased by 20.4% to $228,633 during the Current Nine Month Period compared to $287,191 during the Previous Nine Month Period. Marketing expenses consist primarily of personnel costs associated with the Company's Digitalization Team, which supports content creation, product promotion and video production activities, together with expenditures related to industry trade shows, technology demonstrations and customer engagement initiatives. The decrease primarily reflects the timing of marketing events and related activities during the Current Nine Month Period. Travel costs associated with marketing activities increased by 23.9% to $118,662 during the Current Nine Month Period compared to $95,810 during the Previous Nine Month Period, primarily reflecting increased travel associated with customer engagement activities, trade shows and business development initiatives.

Overhead related costs as a percentage of net revenues for Current Nine Month Period, compared to the Previous Nine Month Period: General corporate administrative expenses during the Current Nine Month Period were $1,403,936, representing 6.6% of net revenue, compared to $1,668,799, representing 8.7% of net revenue, during the Previous Nine Month Period. The decrease in overhead-related costs was primarily attributable to lower stock-based compensation expense, which was $39,063 during the Current Nine Month Period compared to $196,156 during the Previous Nine Month Period, as well as lower marketing expenditures. As a percentage of net revenue, general corporate administrative expenses declined as revenue increased to $21,331,593 during the Current Nine Month Period from $19,291,969 during the Previous Nine Month Period. For additional information regarding general corporate administrative expenses, see Note 15, Segment Analysis, to the accompanying unaudited consolidated financial statements.

Operating Income: Income from operations during the Current Nine Month Period was $4,336,321 compared to $3,129,685 during the Previous Nine Month Period, representing an increase of 38.6%. The improvement primarily reflected higher consolidated net revenues, which increased 10.6% to $21,331,593 during the Current Nine Month Period from $19,291,969 during the Previous Nine Month Period. The higher revenue resulted in increased gross profit, while total operating expenses modestly increased by 0.4% compared to the Previous Nine Month Period. As a result, a significant portion of the increase in gross profit flowed through to operating income.

Other Income: During the Current Nine Month Period, total other income was $775,455 compared to $614,534 during the Previous Nine Month Period, an increase of $160,921, or 26.2%.The increase primarily reflected higher interest income earned on certificates of deposit, together with a gain on the sale of a vessel of $133,566 recognized during the Current Nine Month Period and interest received from the tax authorities of $44,249 relating to the delayed payment of Employee Retention Credit (ERC) amounts. Refer to Note 7, Composition of Certain Financial Statement Captions, for additional information regarding the components of other income. Future interest income will depend on the amount of cash invested and prevailing interest rates and may fluctuate from period to period.

Income before income taxes: During the Current Nine Month Period, income before income taxes was $5,111,776 compared to $3,744,219 during the Previous Nine Month Period, an increase of $1,367,557, or 36.5%. The increase was driven primarily by higher consolidated net revenues, resulting in increased gross profit, together with higher other income, as discussed above.

Net Income: Net income for the Current Nine Month Period was $4,018,145 compared to $3,104,722 in the Previous Nine Month Period, representing an increase of $913,423, or 29.4%. The increase in net income was primarily attributable to higher pre-tax income generated during the Current Nine Month Period. Income tax expense for the Current Nine Month Period was $1,104,002 compared to $692,361 in the Previous Nine Month Period. The increase in income tax expense was primarily attributable to higher taxable income generated during the Current Nine Month Period and the geographic mix of earnings among jurisdictions in which we operate. We also recorded deferred tax benefits of $10,371 and $52,864 during the Current and Previous Nine Month Periods, respectively, primarily related to the cancellation of stock awards.

Our effective tax rate may vary significantly from period to period due to a number of factors, including the level of pre-tax income, the geographic mix of earnings and losses, the applicability of special tax regimes, changes in tax laws and regulations, changes in the valuation of deferred tax assets and liabilities, stock-based compensation activity, foreign currency gains and losses, and our liability for Global Intangible Low-Taxed Income ("GILTI").

During the Current Nine Month Period, approximately 27.4% of consolidated net revenues was generated by our U.S. subsidiaries. The provision for income taxes attributable to our U.S. operations, including federal, state, and GILTI taxes, was $456,831. The Company's UK subsidiaries have certain restricted tax loss carryforwards and are eligible for research and development tax credits, which may be used to reduce UK income tax liabilities, subject to applicable tax rules and limitations. The availability and expected utilization of these tax attributes are considered in estimating the Company's income tax provision and effective tax rate. During the Current Nine Month Period, we recorded a provision for income taxes of $563,398 related to our United Kingdom subsidiaries and $83,773 related to our Danish subsidiary, where the statutory corporate income tax rate is 22.0%.

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".

Liquidity and Capital Resources

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.

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.

We believe our cash flow generated from operations and our cash and cash equivalents as well as our revolving line of credit will be sufficient to meet our anticipated cash needs for the next twelve months. However, any projections of future cash flows are subject to substantial uncertainty.

Inflation and Foreign Currency

The Company and its subsidiaries maintain their accounting records in the functional currencies of their respective jurisdictions, as follows:

	●	U.S. Dollars - United States operations
	●	British Pound - United Kingdom operations
	●	Danish Krone - Danish operations
	●	Australian Dollars - Australian operations (currently dormant)
	●	Indian Rupees - Indian operations (currently dormant)

Our consolidated financial results therefore reflect the translation of these functional currencies into U.S. Dollars. See Note 5 - Foreign Currency Translation to our unaudited consolidated financial statements for additional information on the exchange rates used for balance sheet and income statement translation.

Because our consolidated results include both U.S. and foreign operations, fluctuations in currency exchange rates can affect our reported sales, profitability, and financial position when the financial statements of our foreign subsidiaries are translated into U.S. Dollars. We are also exposed to foreign currency risk on certain receivables and payables denominated in currencies other than the functional currency of the entity involved, including cross-border transactions such as inventory purchases.

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.

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.

* 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).

Table 1: Three Months ended July 31, 2026

		Based British Pounds								Based Danish Kroner								TOTAL USD
		Actual				Constant				Actual				Constant				Actual				Constant				*Total
		Results				Rates				Results				Rates				Results				Rates				Effect
		($)				($)				($)				($)				($)				($)				($)
Revenues		$	4,166,049			$	4,193,246			$	522,085			$	521,496			$	4,688,134			$	4,714,742			$	(26,608	)
Costs		$	4,457,065			$	4,486,161			$	(51,686	)		$	(51,628	)		$	4,410,741			$	4,440,149			$	(29,408	)
Net profit from operations		$	(291,016	)		$	(292,915	)		$	573,771			$	573,124			$	277,393			$	274,593			$	2,800
Assets		$	34,854,500			$	34,071,811			$	1,864,592			$	1,874,269			$	36,728,383			$	35,955,926			$	772,457
Liabilities		$	(4,511,301	)		$	(4,409,996	)		$	(432,162	)		$	(434,405	)		$	(4,959,959	)		$	(4,861,037	)		$	(98,922	)
Net assets		$	30,343,199			$	29,661,815			$	1,432,430			$	1,439,864			$	31,768,424			$	31,094,889			$	673,535

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.

Table 2: Nine Months ended July 31, 2026

		Based British Pounds								Based Danish Kroner								TOTAL USD
		Actual				Constant				Actual				Constant				Actual				Constant				*Total
		Results				Rates				Results				Rates				Results				Rates				Effect
		($)				($)				($)				($)				($)				($)				($)
Revenues		$	13,631,066			$	13,207,437			$	1,854,806			$	1,744,276			$	15,485,872			$	14,951,713			$	534,159
Costs		$	11,646,080			$	11,284,141			$	127,997			$	120,370			$	11,794,601			$	11,423,106			$	371,495
Net profit (losses) from operations		$	1,984,986			$	1,923,296			$	1,726,809			$	1,623,906			$	3,691,271			$	3,528,607			$	162,664
Assets		$	34,854,500			$	34,071,811			$	1,864,592			$	1,874,269			$	36,728,383			$	35,955,926			$	772,457
Liabilities		$	(4,511,301	)		$	(4,409,996	)		$	(432,162	)		$	(434,405	)		$	(4,959,959	)		$	(4,861,037	)		$	(98,922	)
Net assets		$	30,343,199			$	29,661,815			$	1,432,430			$	1,439,864			$	31,768,424			$	31,094,889			$	673,535

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.