Quarterly Report for Quarter Ending July 31, 2025 (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 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.

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, 2025. 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.

General Overview

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

"Current Quarter"		Three month period ended July 31, 2025
"Previous Quarter"		Three month period ended July 31, 2024
"Current Nine Month Period"		Nine month period ended July 31, 2025
"Previous Nine Month Period"		Nine month period ended July 31, 2024

We sell our goods and services internationally, with $4,484,660 or 63.5% of our consolidated net revenue in the Current Quarter derived from outside of the United States. Macroeconomic factors, including changes in inflation and interest rates, as well as global economic and geopolitical developments including unpredictable shifts in global tariffs, world events, significant changes in trade policies and funding policies, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. These factors may adversely affect customer demand for our products and services and our ability to forecast spending patterns and therefore overall demand for our goods and services. We expect some or all of these factors to continue to impact our operations in fiscal year 2025.

The new U.S. Administration is rapidly changing key policies in the area of trade, defense and foreign policy which have resulted in general uncertainty around the world. Our core business has a leading solution in the offshore renewable market. Following the change in the US renewables policy many offshore renewable permits for U.S. developments have been suspended and many leading developers such as Shell, Orsted, BP and Total Energy have either reduced or halted their US offshore renewable programs. We believe that these factors have resulted in weak demand from European developers and offshore suppliers for our rental solutions which caused a decrease in rental revenue and associated services from the geographic region of Europe (the Marine Technology's main rental hub) in the Current Quarter. Nevertheless, we believe that new U.S. policy on prioritizing domestic energy production of Oil & Gas also favors our products and solutions, and we believe that in the foreseeable future this may offset the reduction of revenue from U.S. offshore renewables. Furthermore, a key part of our growth strategy as a Group relies on Defense spending and the U.S. new foreign policy on Defense has also seen Europe including the United Kingdom committing to significant increases defense spending, with Germany expecting to spend about €400 billion ($428 billion) on defense over the coming years in addition to creating a special fund of €500 billion ($535 billion) for infrastructure spending over the next 10 years. European Union member states have also agreed to allow the member states to exceed the debt ceilings that are in place to allow the countries to borrow for defense investments. We therefore believe that despite the short-term disruption caused by uncertainty around the new U.S. Administration's critical policies, many of these changes are likely to be favorable for our Business.

The Company operates three distinct businesses:

	●	the Marine Technology Business (also referred to in this Form 10-Q as "Products Business", or "Products Segment" or "Core Business");
	●	Acoustic Sensors and Materials Business (also referred to in this Form 10-Q as "PAL");
	●	the Marine Engineering Business (also referred to in this Form 10-Q as "Engineering Business").

Our Marine Technology Business constitutes our core business and is critical for our growth strategy. It is an established technology solution provider of over 30 years to the offshore subsea market. It owns key proprietary technology (comprising both hardware and software) including its real time 3D volumetric imaging sonar (Echoscope^®) and its cutting-edge augmented reality diving solution DAVD (Diver Augmented Vision Display) system. These solutions are used in both the underwater Defense and Commercial markets. It recently launched its new underwater digital communications system which advances the offering in the market from analog voice communications to digital voice communications underwater (Voice-Hub-4). All innovation, design, development, manufacturing and support are performed within the Company.

Our novel diving technology is distributed under the name "CodaOctopus^® DAVD" to the global defense and commercial diving markets. The DAVD technology is an advanced Augmented Reality display technology designed to enhance divers' safety, performance and situational awareness, especially in low-visibility and technically challenging environments. It seamlessly integrates several different streams of real-time data, on-demand information (such as drawings, pictures, videos) and Echoscope 3D sonar imagery, projecting these onto the diver's field of vision through the DAVD Augmented Reality Head-Up display (HUD).

Although we generate most of our revenues from our real time 3D sonar and DAVD which include both proprietary hardware and software, we have several other products such as our inertial navigation systems (F280 Series^®) and our geophysical hardware (DA4G) and software solutions (GeoSurvey and Survey Engine^®, which include artificial intelligence based automatic detection systems). Our customers include offshore service providers to major oil and gas companies, renewable energy companies, underwater construction companies, law enforcement agencies, ports, mining companies, defense bodies, prime defense contractors, navies, research institutes and universities and diving companies.

On October 29, 2024, we acquired PAL which is a recognized leader in the ultrasound and acoustic measurement field. PAL supplies acoustic sensors and materials to a broad range of markets including the medical, aerospace, subsea and automotive industries. It also provides measurement and calibration services for the sensors that they supply. PAL recently received accreditation to the ISO/IEC 17025 standard. PAL is one of only two organizations in the United Kingdom with this certification, alongside the National Physical Laboratory (NPL). Globally, only a handful of facilities hold ISO/IEC 17025 accreditation for these measurements. Ultrasonic free-field sensitivity calibration is critical for markets that require precision ultrasonic measurement, strict safety compliance, and full metrological traceability. These include regulated and high-risk applications, such as diagnostic and therapeutic medical ultrasound and defense and underwater acoustics, where free-field calibration is essential to ensure accurate beam sensitivity and minimal interference.

The Marine Engineering Business has operations in the USA and UK. Its central business model is working with Prime Defense Contractors to design and manufacture sub-assemblies for utilization into larger defense mission critical integrated systems ("MCIS"). An example of such MCIS is the US Close-In-Weapons Support (CIWS) Program for the Phalanx radar-guided cannon used on combat ships. These proprietary sub-assemblies, once approved within the MCIS program, afford this business the status of preferred supplier. Such status permits it to supply these sub-assemblies and upgrades in the event of obsolescence or advancement of technology for the life of the MCIS program. Clients include prime defense contractors such as Raytheon, Northrop Grumman, Thales Underwater and BAE Systems. The scope of services provided by the Marine Engineering Business encompasses concept, design, prototype, manufacturing and support.

Key Pillars for our Growth Plans ("Core Business")

Our volumetric real time 3D imaging sonar technology (the Echoscope^® technology) and our DAVD are our most promising products for the Company's near-term growth.

The Echoscope® is widely used in the Commercial Offshore marine market for a wide range of activities from real time 3D monitoring, salvage and recovery, placements and landings, mining, etc. The biggest market opportunity for scalable growth around the Echoscope is in the Defense space which is undergoing a major transformation through the deployment of new classes of underwater vehicles, including manned, unmanned surface, and fully autonomous platforms. These platforms vary dramatically in size, from large vehicles exceeding 85 feet in length and weighing over 85 tons, to compact, one-person-deployable systems. Despite this diversity, a common requirement across all platforms is the need for reliable underwater vision. This capability is essential for safe and accurate navigation, situational awareness, environmental understanding, data collection, and mission execution. The Echoscope directly addresses these needs by providing high-resolution, real-time 3D imaging in complex underwater environments. The defense sector deploys these underwater vehicles for a range of mission-critical applications, most notably: Mine Countermeasures (MCM), Anti-Submarine Warfare (ASW), Surveillance and Reconnaissance, and Infrastructure Protection. Currently, the Echoscope is being evaluated for integration into active future defense programs supporting three of these core mission areas, positioning it as a vital enabler in next-generation underwater operations.

All next-generation defense vehicle programs share a common objective: integrating advanced technologies and enhanced capabilities. Central to this evolution is the development of smarter vehicles equipped with tools like the Echoscope® which deliver real-time, three-dimensional data for informed decision-making. Its versatility across a wide range of defense mission applications supports the consolidation of sensor suite requirements on these platforms. A key advantage lies in addressing SWaP (Size, Weight, and Power) constraints. By reducing the number of sensors required, the Echoscope helps lower power consumption and overall vehicle weight, directly contributing to extended mission durations. This capability represents a unique and valuable benefit the Echoscope brings to the defense underwater vehicles programs.

We also believe that the DAVD system, which is a relatively new technology and presents significant capabilities to the diving market, is poised to radically change the way diving operations are performed globally by providing a fully integrated suite of sensor data shared in real time by the dive supervisor on the surface and the diver. Current diving is done largely by voice command missions from the topside using disparate suite of systems for video data, communications, and positioning.

There are two distinct addressable underwater market applications for the DAVD solution. The tethered diving market and the untethered diving market. The tethered market includes both the commercial diving market and the Defense diving market. The untethered variant serves the Defense market.

The DAVD untethered variant is now a commercial offering and is in the early stages of adoption with the US Navy in over 12 commands. We continue to work to achieve adoption in the global market.

The DAVD untethered solution (DUS) presents the biggest market opportunity for the DAVD technology. In the USA alone there are over 14,000 divers that could utilize this solution including U.S. Special Operations Forces (SOF), EOD, US Army, Marine Corps, US Coast Guard, first responders and law enforcement. The DAVD untethered solution has been the subject of a joint funded U.S and Foreign Navy hardening program under which the DAVD technology was adapted for SOF applications, and in fiscal year 2024 we made significant progress by delivering major project deliverables such as a new generation head up display (DAVD HUD), which is in a much smaller form factor and higher resolution. In our first quarter 2025, we received the first order for sixteen DAVD DUS systems which will be used for field trials across different communities of users such as the EOD (Explosive Ordinance Disposal) community in the U.S. We successfully delivered these systems in our third quarter and continue to support the customer's evaluation program. We also are actively working with two foreign navies who are in an advanced stage of readiness to start adopting the technology (in small batches), and which will be used to introduce the technology to their divers.

During the Current Quarter, we delivered the final deliverables under the DUS Hardening Program to the foreign navy sponsor and this delivery included a number of DUS systems with the new generation HUD. This now enables this foreign navy to start using the DUS technology on live missions, which will be a critical to their evaluation program.

Factors Affecting our Business in the Current Quarter

The following are some of the most critical factors that affected our business during the Current Quarter. Our annual report on Form 10-K for the fiscal year ended October 31, 2024, contains additional factors that are hereby deemed incorporated by reference.

Inflation

Inflation measured as the Consumer Price Index has affected the global economy since calendar year 2022, and which was caused by supply chain issues resulting from the coronavirus pandemic and which has since been further compounded by the war in Ukraine which has affected the price of commodities such as oil. Inflation has since remained volatile in the countries in which we operate and continue to be a threat to the global economy. For the 12-month period preceding July 2025, this was:

	Ø	Denmark 2.3% - source: Statistics Denmark,
	Ø	UK 4.2% - source: Office of National Statistics; and
	Ø	USA 2.7% - source: U.S. Bureau of Labor Statistics.

Inflation affects our business in a number of areas including increasing our cost of operations and materials and demand for our goods and services in general, and therefore our overall financial results. See "Inflation and Foreign Currency" section of this Form 10-Q.

Change in Global Trade Policy

We sell our goods and services globally and a large percentage of our revenue emanates from international sales. Any change in U.S. policy that restricts the free flow of goods and services is likely to dampen demand for our goods and services globally. The recent change in trade policy by the U.S. vis-à-vis the rest of the world has created significant uncertainties. Our revenue mix is a combination of outright sales and rentals. Rentals are driven by offshore projects. However, since the change in the U.S. Administration's policy on the funding for offshore renewables programs, we have seen reduced demand for our rental and associated solutions from our European customers who were down-selected for developing many offshore renewables projects in the USA. Furthermore, some of our products sold in the U.S. market are manufactured in the UK. Therefore, we are subject to a 10% tariff on items which are imported into the U.S. from the UK. In the Current Quarter approximately 42.6% of our Marine Technology Business revenue was generated from sales made in the U.S.

Currency Fluctuation/Foreign Exchange Risks

The Company has operations in the UK, USA, Denmark, Australia and India. 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".

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

The Marine Engineering Business revenues are highly concentrated and are mostly generated from sub-contracts with Prime Defense Contractors, although recently we have received direct contracts from the Department of Defense. 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 Marine Engineering 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, 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.

Impact on Revenues and Earnings

We are uncertain as to the extent of the impact the factors disclosed above and in our Form 10-K covering fiscal year ended October 31, 2024, 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, 2025, we had cash and cash equivalents of $26,196,439, and cash provided by our operations of $4,307,865. 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

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared under accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported values of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported levels of revenue and expenses during the reporting period. Actual results could materially differ from those estimates.

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, 2024.

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 and materials and for our Marine Engineering Business from 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.

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., 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" in these 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, 2024.

Business Combination

Assets acquired and liabilities assumed as part of a business acquisition are recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of identifiable assets, particularly intangibles acquired also requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset.

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 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 sales 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 revenue, profitability and the value of our assets and liabilities included in the consolidated balance sheet. During the Current Quarter, the USD weakened against the British Pound and the Danish Kroner, resulting in translated foreign revenues being higher by $264,175 than when using the Previous Quarter exchange rate. In addition, the associated costs of our foreign subsidiaries including cost of sales 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"). Consolidated net revenue in the Current Quarter increased by 29.0% and was $7,064,795 compared to $5,476,544 in the Previous Quarter. During the Current Quarter total operating expenses increased by 29.6% and income from operations decreased by 0.8%. Commission costs were 46.5% higher in the Current Quarter or $146,921 compared to $100,290 in the Previous Quarter due to an increase in sales deriving from Asia (see Notes 15 and 16 to the unaudited Consolidated Financial Statements for more information on Segment reporting and Disaggregation of Revenue by segment and geography). Pre-tax income in the Current Quarter was $1,543,749 compared to $1,631,246 in the Previous Quarter, representing a decrease of 5.4%, largely caused by an increase in our SG&A costs which includes a provision for the Current Nine Month Period of $158,872 for contingent liability related to the PAL's year one Earn Outs, representing 75% of the first year Earn Out contingent liability. A more detailed analysis of our results of operations is set out below.

PAL was acquired on October 29, 2024 and therefore for the purpose of our MD&A discussion, no prior year comparative financial data is presented.

As mentioned above, exchange rate fluctuations were a key factor in our results of operation in the Current Quarter.

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

In the Current Quarter 66.1% 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 in the Current Quarter this was $4,670,202 compared to $4,406,027 when using the exchange rate applied in the Previous Quarter and therefore an increase in net revenue of $264,175.

Cost of Revenue and Operating Costs Impact from our Foreign Subsidiaries

In the Current Quarter 71.8% of our consolidated Operating Expenses and Cost of Revenue was attributable to the Company's foreign subsidiaries and this was $4,082,816 ("Foreign Subsidiary Costs") of our total costs of $5,684,816. 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 $224,023 higher when using the exchange rate of the Previous Quarter.

Segment Summary

Products Business (Core Business)

We sell our products internationally (57.4% of sales by our Products Business in the Current Quarter are attributed to sales outside of the USA). In the Current Quarter, the Products Business generated $3,984,475 or 56.4% of our net revenues compared to $3,048,544 or 55.7% in the Previous Quarter, representing an increase of $935,931 or 30.7%. The increase in sales is due to a combination of factors including increase in hardware sales, mainly derived from the Americas and Middle East & Africa, by 103.6% to $2,746,255 in the Current Quarter compared to $1,349,010 in the Previous Quarter. Sales derived from the U.S. increased by 148.6% to $1,696,334 compared to $682,477 in the Previous Quarter, driven mainly by an increase in DAVD related sales of $1,235,300. Gross profit margin decreased from 82.9% in the Previous Quarter to 77.0% in the Current Quarter, which reflects several factors including the mix of sales. The Products Business mix of sales in the Current Quarter includes a higher percentage of units of hardware sales (which yields a lower gross profit margin) and a lower percentage of rentals (which yields a higher gross profit margin). Also, sales from Europe (our rental hub) decreased significantly and were $157,227 in the Current Quarter compared to $662,700 in Previous Quarter which we believe is a result of the change in the funding policy by the U.S. Administration for offshore renewables which has resulted in many European developers (such as Orsted and BP) cancelling offshore renewable development projects. In the Current Quarter total operating expenses increased by 14.6% in the Products Business and were $1,770,863 compared to $1,545,374 in the Previous Quarter. This is due to a combination of factors including recording in the Current Quarter an exceptional item of $158,872 for PAL related Earn Outs, exchange rate translation expenses as a result of the USD weakening against the British Pound and Danish Kroner, the functional currencies of our foreign subsidiaries, and which resulted in a $238,551 foreign currency related expense compared $163,440 in the Previous Quarter. Pre-tax income was $1,426,739 in the Current Quarter compared to $1,154,300 in the Previous Quarter, reflecting an increase in revenue and gross profit.

Acoustic Sensors and Materials Business (PAL)

In the Current Quarter, PAL generated $1,458,536 or 20.6% of our consolidated net revenue. Gross profit margin was 54.8%; commission costs incurred on sales generated in the Current Quarter were $50,833; total operating expenses were $550,090. PAL's transactions are in its native currency of British Pound. Pre-tax income was $252,108.

Marine Engineering Business

In the Current Quarter, the Marine Engineering Business generated $1,621,784 or 23.0% of our consolidated net revenues compared to $2,428,000 or 44.3% in the Previous Quarter, representing a decrease in sales of 33.2%. Our U.S. based Marine Engineering Business has experienced delays in receiving orders from its prime defense contractors' customers resulting from delays in the appropriation of the defense budgets. Gross profit margin decreased from 62.6% in the Previous Quarter to 58.9% in the Current Quarter, reflecting the mix of engineering projects. In the Current Quarter total operating expenses increased by 32.3% in the Marine Engineering Business and were $708,563 compared to $535,421 in the Previous Quarter. Pre-tax income in the Current Quarter was $277,335 compared to $1,030,488 in the Previous Quarter.

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

Net Revenue: Total consolidated net revenues for the Current Quarter increased by 29.0% when compared to the Previous Quarter and were $7,064,795 and $5,476,544, respectively. Revenue increased in the Marine Technology Business, while it decreased in the Marine Engineering Business. PAL contributed 20.6% to our consolidated net revenue. Without the inclusion of PAL our consolidated net revenue would have increased by 2.4% to $5,606,259 in the Current Quarter, compared to $5,476,544 in the Previous Quarter. This is as a result of an increase in the Products Business revenue by 30.7% offset by a significant decrease in the Marine Engineering Business revenue caused by delays in receiving awards from its prime defense contractor customers due to delays in appropriation of the line items under the Federal Budget.

Gross Profit Margins: Margin percentage was weaker in the Current Quarter at 68.3% (gross profit of $4,823,756) compared to 73.9% (gross profit of $4,048,538) in the Previous Quarter largely due to the mix of sales. In the Current Quarter, gross profit margins in our Marine Technology Business were weaker due to the composition of sales in the Current Quarter, which had more units of hardware sales with a concentration of DAVD hardware, and less units of rental sales. Our net commission costs in the Current Quarter were $146,921 compared to $100,290 in the Previous Quarter, representing an increase of 46.5%.

Gross profit margins reported in our financial results may vary according to several factors. These include:

	●	The percentage of consolidated net sales attributed to the Marine Technology Business versus the Marine Engineering Business and PAL. The Marine Technology Business gross profit margin may vary with the mix of products and geography from which those sales are derived from (most sales from Asia incur commission costs which impact margins). The gross profit margin yielded by the Marine Technology Business is generally higher than that of the Marine Engineering Business and PAL.
	●	The percentage of consolidated net sales attributed to the Marine Engineering Business. The Marine Engineering Business yields a lower gross profit margin on generated sales which are largely based on time and materials for our Department of Defense contracts (DoD subcontracts).
	●	The percentage of consolidated net sales attributed to PAL. PAL supplies acoustic sensors and materials and its gross margin for these are typically between 55 - 62%. This may vary with the mix of products and also the percentage of reported sales that are performed through sales agents during the reporting period.
	●	The geography from which the sales are derived and the mix of sales within the Marine Technology Business during the reporting period:

	●	Hardware related sales versus Software related sales (Hardware margins are lower and Software margins are higher).
	●	Custom engineering around its technology ("services") versus field services (where our technical support engineers are deployed to the field to provide support to our customers in their use of our technology).

	●	Level of commission on products which may vary according to volume. All our business units work with sales/distribution agents. Most of the Marine Technology Business and PAL's sales in Asia are completed via agents or distributors. See Note 3 "Cost of Goods Sold" for more discussion on this.
	●	Level of Rental Assets in the Marine Technology Business' Rental Pool and therefore the depreciation expenses may vary accordingly.
	●	The mix of engineering projects performed by our Engineering Business (Prototyping Designs versus manufacturing), may also affect gross profit margins.

Our net commission costs incurred in the Current Quarter increased by 46.5% and were $146,921 compared to $100,290 in the Previous Quarter. In the Current Quarter this is largely due to the inclusion of PAL into the Group which incurred $50,833 of commission costs in the Current Quarter.

In the Current Quarter, gross profit margins for the Marine Technology Business were 77.0% compared to 82.9% in the Previous Quarter and for the Marine Engineering Business these were 58.9% in the Current Quarter compared to 62.6% in the Previous Quarter and for PAL it was 54.8%.

Since there are more variable factors affecting gross profit margins in the Marine Technology Business, a table showing a summary of break-out of sales generated by this business in the Current Quarter compared to the Previous Quarter is set out below:

		July 31, 2025				July 31, 2024				Percentage
Description		Products				Products				Change
Equipment Sales		$	2,746,255			$	1,349,011				103.6	%
Equipment Rental			304,617				805,259				(62.2	)%
Software Sales			236,803				251,488				(5.8	)%
Services			696,800				642,786				8.4	%
Total Net Sales		$	3,984,475			$	3,048,544				30.7	%

Further information on the performance of each business segment, including revenues by type and geography, can be found in Notes 15 and 16 to the unaudited consolidated financial statements for the Current and Previous Quarters.

Research and Development (R&D): R&D expenditure in the Current Quarter increased by 15.3% and was $572,468 compared to $496,359 in the Previous Quarter. The increase is largely attributed to the inclusion of PAL into the Group combined with the impact of foreign currency translation from British Pound to USD for reporting purpose (and where a significant portion of our R&D expenses are incurred).

●

Products Business

During the Current Quarter our Products Business R&D expenditure decreased by 6.9% and was $428,007 as compared to $459,879 in the Previous Quarter. R&D expenditure is incurred by this business in connection with investments it makes in developing its products and solutions and a significant component of these expenditures comprises wages and salaries. This expenditure is an essential part of our business, as we need to continue to innovate our solutions on an ongoing basis. The increase is related to exchange rate variance as all of the costs related to this category have been translated from British Pound to USD and during the Current Quarter the USD weakened against the British Pound, the functional currency in which these costs are incurred.

●

Acoustics and Materials Business (PAL)

This is a newly acquired business unit and therefore there is no financial comparative data for the Previous Quarter. During the Current Quarter, PAL incurred R&D expenditure of $98,502. R&D expenditure is incurred by this business in connection with investments it makes in developing its acoustic sensors, solutions and materials. A significant component of these expenditures comprises wages and salaries and we anticipate that R&D costs associated with this business unit will be approximately $450,000 on an annualized basis.

●

Marine Engineering Business

During the Current Quarter, the Marine Engineering Business R&D expenditure increased by 26.0% and was $45,959 compared to $36,480 in the Previous Quarter. The Marine Engineering Business incurs research and development expenses mainly on advancing its Thermite^® Octal range of mission computer products with the strategic goals of increasing and diversifying its revenues and improving gross profit margins.

										Percentage
Segment		July 31, 2025				July 31, 2024				Change
Marine Technology R&D Expenditures		$	428,007			$	459,879				(6.9	)%
PAL R&D Expenditure		$	98,502			$	-				N/A
Marine Engineering R&D Expenditures		$	45,959			$	36,480				26.0	%

Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Quarter increased by 32.8% to $2,871,309 from $2,161,405 in the Previous Quarter. There are several factors which have resulted in higher SG&A costs in the Current Quarter, including:

	●	The inclusion of PAL into the Group has resulted in an increase in SG&A in the Current Quarter by 20.1% or $451,588.
	●	A contingent liability of $158,872 representing 75% of the first year Earn Outs provided for under PAL acquisition agreement. This amount is subject to adjustment during the Company's fourth quarter based on PAL's actual total revenue and pre-tax profits for the current fiscal year.
	●	The increase in non-cash charges as a component of SG&A which were 20.2% or $580,419 compared to 15.0% or $324,462 in the Previous Quarter. SG&A includes both cash charges and non-cash charges. The non-cash charges comprise Depreciation, Amortization, Stock-based compensation and Exchange Rate Variance charges. In the Current Quarter, the most significant factors which account for the increase in non-cash charges component were (i) exchange rate adjustment expenses increased by 80.5% and were $237,948 compared to $131,856 in the Previous Quarter, reflecting the weakening of the USD against British Pound and Danish Kroner; and (ii) Depreciation expenses increased by 61.9% to $176,439 in the Current Quarter compared to $108,956 in the Previous Quarter; and (iii) Amortization expenses increased by 946.5% and were $136,259 compared to $13,020, as a result of the acquisition of PAL in the Group. Stock-based compensation decreased by 57.8% and was $29,773 in the Current Quarter compared to $70,630 in the Previous Quarter.

Key Areas of SG&A Expenditure across the Company for the Current Quarter compared to the Previous Quarter are:

Expenditure		July 31, 2025				July 31, 2024				Change
Wages and Salaries		$	1,131,777			$	909,504				24.4	%
Legal and Professional Fees (including accounting, audit, tax and investor relations)		$	386,046			$	352,671				9.5	%
Rent and operating lease		$	5,750			$	6,651				(13.5	)%
Commitment and Contingency - PAL Earn Out		$	158,872			$	-				100.0	%
Marketing (Excluding associated travel)		$	58,812			$	104,496				(43.7	)%
Travel associated with marketing activities		$	43,315			$	27,193				59.3	%

Wages and Salaries - this category of expenses increased primarily due to the inclusion of PAL into the Group. Wages and salaries related to PAL in the Current Quarter are $141,748. Without PAL, this category of expenses would have increased by 8.9%, reflecting inflation as we are operating on a lower head count than in the Previous Quarter. We anticipate that during the current fiscal year this category will increase materially over our previous fiscal year as we are currently operating on a reduced headcount and are seeking to recruit for several vacant positions and to expand our management team.

Legal and Professional fees increased by 9.5% in the Current Quarter reflecting the timing of the performance of certain services such as tax consultants' fees. In the Current Quarter this category includes professional fees attributable to PAL of $27,732.

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 existing lease which we assumed as part of the acquisition of PAL.

Commitment and Contingent Liability - Based on the performance of PAL during the Current Nine Month Period, we have included a provision for year one Earn Out of $158,872 which represents three quarters of the Earn Outs that would be payable if PAL meets the pre-conditions relating to revenue and pre-tax income. The remaining portion will be expensed in the Company's fourth quarter if the pre-conditions are met, otherwise this provision will be reversed in our fourth quarter 2025.

Marketing and associated travel costs: We incur marketing expenses in connection with the promotion of our goods and services. These expenses include the wages and salaries of our Digitalization Team, which is responsible for content creation and video production relating to our products and solutions. They also include costs associated with participation in industry trade shows, marketing events and travel for marketing activities. Marketing costs attributable to PAL in the Current Quarter were negligible.

Overhead related costs as a percentage of net revenue for Current Quarter, compared to the Previous Quarter

General corporate administrative expenses in the Current Quarter were $414,261 or 5.9% of net revenue and $576,969 or 10.5% of net revenue in the Previous Quarter, respectively, representing an increase in our consolidated net revenue by 29.0%. For more information on general corporate administrative expenses, please see Note 15 (Segment Analysis).

Operating Income: In the Current Quarter operating income decreased by 0.8% and was $1,379,979 as compared to $1,390,774 in the Previous Quarter. Although consolidated net revenue increased by 29.0% our Total Operating Expenses increased by 29.6%, largely as a result of the recording in the Current Quarter of $158,872 for year one PAL-related Earn Out of $158,872 which represents three quarters of the year one Earn Outs payable if PAL meets the revenue and pre-tax income pre-conditions; and non-cash charges as a component of SG&A increasing by 78.9%.

Other Income: In the Current Quarter, we had "Other Income" of $163,770 compared to $240,472, representing a decrease of 31.9% from the Previous Quarter. A significant component of "Other Income" is interest of $154,848 earned on our certified deposits. In February 2023, the Company established certified deposit accounts with its existing bankers. These accounts are for a fixed term of up to 3-month rolling periods and constitute "cash equivalents" in our current unaudited Consolidated Financial Statements for the period ended July 31, 2025 (see Note 7 (Composition of Certain Financial Statement Captions for a more detailed analysis). We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain broadly the same.

Income before income taxes: In the Current Quarter, we had pre-tax income of $1,543,749 compared to $1,631,246 in the Previous Quarter, representing a decrease of 5.4%. Pre-tax income decreased, primarily due to an increase in our Total Operating Expenses which increased for the reasons discussed above.

Net Income: In the Current Quarter we had Net Income of $1,282,985 compared to $1,274,658 in the Previous Quarter, representing an increase of 0.7%. In the Previous Quarter we recorded Current Tax Expense of $325,625 compared to $268,786 in the Current Quarter reflecting provision for income tax. We also recorded a Deferred Tax Expense of $30,963 in the Previous Quarter compared to a Deferred Tax Benefit of $8,022 in the Current Quarter, which relates to the granting of stock awards. 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 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. In the Current Quarter, the U.S. subsidiaries generated 33.9% of our consolidated net revenue and generated taxable income which resulted in a provision for income tax in the Current Quarter of $219,600. The Company's UK subsidiaries have carryforward losses and qualify for R&D Tax credits which are applied to defray a percentage of our income tax liability in the UK. In Current Quarter we have made provision of $49,186 for tax liability for the Company's foreign subsidiaries.

Comprehensive Income. In the Current Quarter comprehensive income was $1,353,477 compared to $1,668,038 for the Previous Quarter reflecting adjustments resulting from foreign currency translations. In the Current Quarter, the USD weakened against the British Pound, Danish Kroner and Euro and we had a gain of $70,492 on foreign currency translation adjustment transactions compared to $393,380 in the Previous Quarter. A significant part of the Company's operations is based in the UK and Denmark, and therefore a major part of our assets and liabilities recorded in our unaudited consolidated balance sheet and financial transactions are translated from the functional currencies of these subsidiaries into USD for reporting purposes (Note 7 "property and equipment (by geographic areas) provide an indication of the split of our property). See the section below which concerns "Inflation & Foreign Currency" which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in the Current Quarter compared to the Previous Quarter.

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

Net Revenue: Total consolidated net revenues for the Current Nine Month Period and the Previous Nine Month Period were $19,291,969 and $15,260,913 respectively, representing an increase of 26.4%. In the Current Nine Month Period, the Marine Technology Business net revenues were $10,138,374 compared to $10,116,024 representing a marginal increase of 0.2% when compared to the Previous Nine Month Period. PAL net revenues in the Current Nine Month Period were $4,069,866. The Marine Engineering Business revenues in the Current Nine Month Period and the Previous Nine Month Period were $5,083,729 and $5,144,889, respectively, representing a decrease of 1.2%. The increase in our consolidated net revenue in the Current Nine Month Period is attributable to the inclusion of PAL which we recently acquired into the Company. Without PAL our net revenue in the Current Nine Month Period would have been lower by 0.3% at $15,22,103 compared to $15,260,913 in the Previous Nine Month Period.

Gross Profit Margins: Consolidated margins percentage was weaker in the Current Nine Month Period at 66.1% (gross profit of $12,749,507) compared to 71.3% (gross profit of $10,873,708). The main factors which have resulted in the lower consolidated margins percentage in the Current Nine Month Period are attributable our Core Business (Marine Technology Business) and the introduction of PAL's products into the mix of sales which has a different margin profile. Our Core Business sales derived from Asia increased by 11.5% and were $4,871,995 compared to $4,368,330, resulting in commission costs increasing by 28.0% from $523,671 in the Previous Nine Month Period to $670,164 in the Current Nine Month Period. Moreover, the composition of this business' sales in the Current Nine Month Period included a higher percentage of hardware sales and a lower percentage of rentals and associated services sales, which impacted margins. Sales made to Europe (our rental hub) by our Marine Technology Business decreased in the Current Nine Month Period. We secure most of our rental and associated services revenue from the European market and in the Current Nine Month Period our rental revenue decreased by 63.0% when compared to the Previous Nine Month Period. We believe that the change in the U.S. Administration Policy on funding for offshore renewables development projects has affected our rental revenue as many European developers have cancelled or shelved many U.S offshore renewable programs including Shell, Orsted, BP and Total Energy. Net commission costs for the Nine Month Period were $782,814 compared to $525,696 in the Previous Nine Month Period, representing an increase of 48.9%.

Gross profit margins reported in our financial results may vary according to several factors. These include:

	●	The percentage of consolidated net sales attributed to the Marine Technology Business versus the Marine Engineering Business and PAL. The Marine Technology Business gross profit margin may vary with the mix of products and geography from which those sales are derived from (most sales from Asia incur commission costs which impact margins). The gross profit margin yielded by the Marine Technology Business is generally higher than that of the Marine Engineering Business and PAL.
	●	The percentage of consolidated net sales attributed to the Marine Engineering Business. The Marine Engineering Business yields a lower gross profit margin on generated sales which are largely based on time and materials for our Department of Defense contracts (DoD subcontracts).
	●	The percentage of consolidated net sales attributed to PAL. PAL supplies acoustic sensors and materials and its gross margin for these are typically between 55 - 62%. This may vary with the mix of products and also the percentage of reported sales that are performed through sales agents during the reporting period.
	●	The geography from which the sales are derived and the mix of sales within the Marine Technology Business during the reporting period as most sales derived from Asia are performed through our network of sales agents, thus incurring commission costs.

	●	Level of commission on products which may vary according to volume. All our business units work with sales/distribution agents. Most of the Marine Technology Business and PAL's sales in Asia are completed via agents or distributors. See Note 3 "Cost of Goods Sold" for more discussion on this.
	●	Level of Rental Assets in the Marine Technology Business' Rental Pool and therefore the depreciation expenses may vary accordingly.
	●	The mix of engineering projects performed by our Marine Engineering Business (Prototyping Designs versus manufacturing), may also affect gross profit margins.

Marine Engineering Business

Gross Profit Margins for the Marine Engineering Business were marginally higher at 57.7% in the Current Nine Month Period compared to 57.3% in the Previous Nine Month Period. This is largely due to the types of engineering projects ongoing in the reporting period (contract manufacturing versus design and development work scopes), the former yielding a higher margin profile.

Acoustics and Materials Business (PAL)

This is a newly acquired business unit and therefore there is no comparative data for the Previous Nine Month Period. For context, Gross Profit Margin for PAL in our first Quarter 2025 was 61.7%, second Quarter 2025 was 65.4% and for the Current Quarter 54.8% (the decrease in the Current Quarter reflects higher commission costs) and for the Current Nine Month Period 60.4%. In the Current Nine Month Period PAL incurred commission costs of $99,885. PAL sells its acoustics sensors and materials globally and has several agents in Asia and therefore it incurs commission costs on sales concluded in Asia.

Marine Technology Business

In the Current Nine Month Period gross profit margin for the Marine Technology Business was 72.6% compared to 78.3% in the Previous Nine Month Period. The weakening of gross profit margins reflects higher commission costs incurred in the Current Nine Month Period and which were $670,164 compared to $523,671 in the Previous Nine Month Period, representing an increase of 28.0%, combined with more units of hardware sensor sales (which yield a lower gross profit margin) and lower percentage of units of rentals and associated engineering support services (which yield a higher gross profit margin). These factors together resulted in a decrease in gross margin.

Since there are more variable factors affecting gross profit margins in the Marine Technology Business, a breakdown of sales for this business in the Current Nine Month Period is set out below:

		July 31, 2025				July 31, 2024				Percentage
Description		Products				Products				Change
Equipment Sales		$	7,800,318			$	5,730,411				36.1	%
Equipment Rental			697,851				1,885,732				(63.0	)%
Software Sales			585,651				653,759				(10.4	)%
Services			1,054,554				1,846,122				(42.9	)%
Total Net Sales		$	10,138,374			$	10,116,024				0.2	%

The increase in Equipment sales in the Current Nine Month Period is a result of an increase in sales derived from the strategic region of Asia where sales increased to $4,871,995 from $4,368,330 and sales derived from the U.S increased to $3,474,671 in the Current Nine Month Period compared to $1,660,492 in the Previous Nine Month Period and which mainly relates to DAVD technology sales.

Rental assets were significantly underutilized in the Current Nine Month Period resulting in a reduction of rental and associated services revenue due to weak demand caused by reduced offshore renewables project activities conducted by Shell, Orsted, BP and Total Energy. This is reflected in the reduction of sales from Europe, which is the region where we generate most of our rental and services revenue from. See Note 16 for more information on the composition and disaggregation of our revenue. Rental revenue in the Current Nine Month Period was $697,851 compared to $1,885,732 in the Previous Nine Month Period, representing a 63.0% decrease.

Research and Development (R&D): R&D expenditures in the Current Nine Month Period were $1,805,589 compared to the $1,524,817 in the Previous Nine Month Period, representing an increase of 18.4%. This is due to the inclusion of PAL into the Group.

●

Marine Engineering Business

During the Current Nine Month Period, the Marine Engineering Business R&D expenditure increased by 2.7% and was $121,653 compared to $118,502 in the Previous Nine Month Period. R&D expenditure is primarily incurred by the Marine Engineering Business on its Thermite^® range of mission computers and other developments which the business deem will advance its business strategy. The Thermite® product line remains important to the Marine Engineering Business for growth and diversification of revenue. As we understand our customer base requirements for the Thermite® mission computers, we may incur more R&D expenditure on developing this range of products.

●

Acoustics and Materials Business (PAL)

This is a newly acquired business unit and therefore there is no comparative data for the Previous Nine Month Period. During the Current Nine Month Period, PAL incurred R&D expenditure of $284,732. R&D expenditure is incurred by this business in connection with investments it makes in developing its acoustic sensors, solutions and materials. A significant component of these expenditures comprises wages and salaries and we anticipate that R&D costs associated with this business unit will be approximately $400,000 to $450,000 on an annualized basis.

●

Marine Technology Business

During the Current Nine Month Period R&D expenditure in the Marine Technology Business marginally decreased by 0.5% from $1,406,315 in the Previous Nine Month Period to $1,399,204. R&D expenditure is incurred by this business in connection with investments in developing its products and solutions. This expenditure is an essential part of our business, as our market competitiveness is predicated on continued innovation.

										Percentage
Segment		July 31, 2025				July 31, 2024				Change
Marine Technology R&D Expenditures		$	1,399,204			$	1,406,315				(0.5	)%
PAL R&D Expenditure		$	284,732			$	-				N/A
Marine Engineering R&D Expenditures		$	121,653			$	118,502				2.7	%

Selling, General and Administrative Expenses (SG&A): SG&A expenses for the Current Nine Month Period increased by 29.1% and were $7,814,233 compared to $6,052,350 in the Previous Nine Month Period. There are several factors which have resulted in higher SG&A costs in the Current Nine Month Period and these include:

	●	The inclusion of PAL into the Group has resulted in SG&A in the Current Nine Month Period being higher by 16.6% or $1,298,765.Without the addition of PAL including the related earn out provision, SG&A costs would have increased by 5.0% (to $6,356,596 in the Current Nine Month Period compared to $6,052,350 in the Previous Nine Month Period).
	●	A contingent liability of $158,872 representing 75% of the first year Earn Outs provided for under PAL acquisition agreement. This amount is subject to adjustment during the Company's fourth quarter based on PAL's actual total revenue and pre-tax profits for the current fiscal year.
	●	The increase in non-cash charges as a component of total SG&A costs which was 16.7% or $1,308,448 in the Current Nine Month Period as compared to 10.5% or $635,999 in the Previous Nine Month Period. Non-cash charges comprise Depreciation, Amortization, Stock-based compensation and Exchange Rate Variance charge.
	●	Increase in Amortization costs caused by the inclusion of PAL in the Group and which were $394,566 compared to $46,888 in the Previous Nine Month Period, representing a 741.5% increase and which is a result of the addition of PAL to the Group.
	●	As a component of SG&A costs, stock based compensation charges were $196,156 compared to $86,843 in the Previous Nine Month Period, reflecting an increase in the awards of restricted stock awards both under the Plan and outside of the Plan during the Current Nine Month Period.

Key Areas of SG&A Expenditure across the Group for the Current Nine Month Period compared to the Previous Nine Month Period are:

										Percentage
Expenditure		July 31, 2025				July 31, 2024				Change
Wages and Salaries		$	3,194,346			$	2,748,812				16.2	%
Legal and Professional Fees (including accounting, audit, tax and investor relations)		$	1,318,124			$	1,190,181				10.7	%
Rent and operating lease		$	57,680			$	22,201				159.8	%
Commitment and Contingency - PAL Earn Out		$	158,872			$	-				100.0	%
Marketing (Excluding associated travel)		$	287,191			$	267,562				7.3	%
Travel associated with marketing activities		$	95,811			$	50,216				90.8	%

Wages and salaries in the Current Nine Month Period increased by 16.2% over the Previous Nine Month Period. This category has increased primarily due to the addition of PAL to the Group. In the Current Nine Month Period, $367,639, representing 11.5% of the total Wages and Salaries costs for the Current Nine Month Period is attributable to PAL. Without the inclusion of PAL this category would have remained broadly in line with the Previous Nine Month Period and would have been $2,826,707 in the Current Nine Month Period compared to $2,748,812 in the Previous Nine Month Period, reflecting inflation. Notwithstanding, we anticipate that on a full year basis in the fiscal year 2025 this category will increase materially over the fiscal year 2024 as we are currently operating on a reduced headcount and are seeking to recruit for several vacant positions along with expanding our management team.

The increase in the "Legal and Professional" category of expenditures in the Current Nine Month Period reflects the addition of PAL into the Group and in the Current Nine Month Period 7.9% or $104,770 of this category of expenses is attributable to PAL. Without the addition of PAL, this category would have increased by 1.9% to $1,213,354 in the Current Nine Month Period compared to $1,190,181 in the Previous Nine Month Period.

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 existing lease which we assumed as part of the acquisition of PAL. The increase in lease costs in the Current Nine Month Period is attributable to PAL. We anticipate that lease costs will remain at approximately this level in fiscal year 2025.

Commitment and Contingent Liability - Based on the operating results of PAL during the Current Nine Month Period, we have included a provision for year one Earn Out of $158,872 which represents three quarters of the year one Earn Outs that would be payable if PAL meets the pre-conditions relating to revenue and pre-tax income. The remaining portion will be expensed in the Company's fourth quarter if the pre-conditions are met, or otherwise will be reversed.

Marketing and associated travel costs: We incur marketing expenses in connection with the promotion of our goods and services. These expenses include wages and salaries of our Digitalization Team which is responsible for content creation and video production relating to our products and solutions. They also include costs associated with participation in industry trade shows, marketing events such as demonstrations of our technology and travel for marketing activities.

Overhead related costs as a percentage of net revenue for Current Nine Month Period, compared to the Previous Nine Month Period

General corporate administrative expenses in the Current Nine Month Period were $1,668,799 or 8.7% of net revenue and $1,642,771 or 10.8% of net revenue in the Previous Nine Month Period, respectively, reflecting an increase in net revenue by 26.4% in the Current Nine Month Period. For more information on general corporate administrative expenses, please see Note 15 (Segment Analysis).

Operating Income: Our income from our operating activities in the Current Nine Month Period was $3,129,685 as compared to $3,296,541 in the Previous Nine Month Period which represents a decrease of 5.1%. This is due to an increase in our Total Operating Expenses which increased from $7,577,167 in the Previous Nine Month Period compared to $9,619,822 in the Current Nine Month Period, representing a 27.0% increase as a result of the inclusion of PAL, which accounts for 16.7% of our Total Operating Expenses in the Current Nine Month Period. Without the inclusion of PAL and the related Earn Out provision discussed earlier, our Total Operating Expenses in the Current Nine Month Period would have been more in line with the Previous Nine Month Period and would have been $7,877,453 compared to $7,577,167 in the Previous Nine Month Period.

Other Income: In the Current Nine Month Period, this decreased by 19.0% and was $614,534 as compared to $758,864 in the Previous Nine Month Period. In the Current Nine Month Period $494,613 of our "Other Income" is attributable to interest earned on our rolling certified deposit accounts which are restricted for up to 3 months. Since establishing the certified deposit accounts, the applicable interest rates have decreased, resulting in the amount of interest earned reducing. See Note 7 (Composition of Certain Financial Statement Captions) for more detailed analysis of this. We anticipate that the interest earned on these certified deposit accounts will be material in the future if interest rates remain broadly the same.

Income before income taxes: In the Current Nine Month Period, we had pre-tax income of $3,744,219 as compared to $4,055,405 in the Previous Nine Month Period, representing a decrease of 7.7%. The decrease in pre-tax income is due to higher operating costs for the reasons explained earlier including the provision of the contingent liability related to the PAL Earn Outs for year one.

Net Income: In the Current Nine Month Period we had Net Income of $3,104,722 as compared to $3,319,784 in the Previous Nine Month Period, representing a decrease of 6.5%. In the Previous and Current Nine Month Periods we recorded Current Tax Expense of $692,361 and $482,683, respectively, reflecting provision for income tax in the respective periods. We also recorded a Deferred Tax Expense of $252,938 in the Previous Nine Month Period compared to a Deferred Tax Benefit of $52,864 in the Current Nine Month Period, which relates to the granting of stock awards. 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 and foreign currency gains (losses). The mix of jurisdictions and related income or losses also affects our tax liability for 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. In the Current Nine Month Period, the U.S. subsidiaries generated 34.7% of our consolidated net revenue and generated taxable income and we have recorded a provision of $394,560 for federal taxes including GILTI. The Company's UK subsidiaries have carryforward losses and R&D Tax credits which are applied to defray a percentage of our income tax liability. We have made a provision of $297,801 for tax liability for the UK and Danish subsidiaries in our consolidated results for the Current Nine Month Period.

Comprehensive Income (loss). In the Current Nine Month Period Comprehensive Income was $3,947,067 compared to $4,305,061 for the Previous Nine Month Period. This category is affected by fluctuations in foreign currency exchange transactions both relating to our net revenue and related expenses and our assets and liabilities on our balance sheet and are largely paper losses or gains, as may be applicable in the reporting period. A significant part of the Company's operations is based in the UK and Denmark, and therefore a significant part of our financial transactions is performed in British Pounds and Danish Kroner which are translated into USD for reporting purposes (Note 7 "property and equipment (by geographic areas) provide an indication of the split of our property). In the Previous Nine Month Period we had a gain of $985,277 on foreign currency translation adjustment transactions compared to a gain of $842,345 in the Current Nine Month Period. In the Current Nine Month Period, the USD has weakened against the British Pound and Danish Kroner (the functional currencies of our two operating foreign subsidiaries). See Table 2 under the MD&A section which concerns "Inflation & Foreign Currency", and which shows the impact of the currency adjustments on our Income Statement and Balance Sheet in the Current Nine Month Period compared to the Previous Nine Month Period.

Liquidity and Capital Resources

As of July 31, 2025, the Company had an accumulated deficit of $4,301,769, working capital of $43,239,402, cash of $26,196,439 and stockholders' equity of $57,271,746. For the nine months ended July 31, 2025, the Company's operating activities provided $4,307,865 in 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, 2025. This revolving credit line will expire on November 26, 2025, unless renewed.

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 accounts in the native currencies of their operations, and which are:

US Dollars		For US Operations
British Pound		For United Kingdom Operations
Danish Kroner		For Danish Operations
Australian Dollars		For Australian Operations (operations are currently dormant)
Indian Rupees		For Indian Operations (operations are currently dormant)

The Company's consolidated financial results therefore include the translation of its subsidiaries functional currencies into U.S Dollar. See "Note 5 - Foreign Currency Translation" of our unaudited consolidated financial statements, for more information on the applicable rates used for our Balance Sheet transactions and Statement of Income and Comprehensive Income.

The Company's consolidated results are a combination of its U.S. and foreign operations and these companies maintain their accounts in the functional currencies of their jurisdictions which are noted above. Fluctuations in currency exchange rates can directly impact on the Company's sales, profitability and financial position when the transactions of the foreign subsidiaries are translated from their functional currencies into USD for financial reporting. In addition, the Company is also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables incurred in the ordinary course of its business operations (cross-border transactions such as inventory purchasing). In general, the Company's subsidiaries perform financial transactions in their native currencies. Occasionally, a subsidiary may perform financial transactions in currencies other than its native or functional currency (purchasing inventory from a foreign supplier, for example, in foreign currency). Furthermore, the Company holds significant cash balances in foreign currencies, such as British Pound, Euro and Danish Kroner. The Company cannot predict the extent to which currency fluctuations may affect its business and financial position, and there is a risk that such fluctuations may have an adverse impact on the Company's sales, profits, cash and cash equivalent balances and its overall financial position.

Information regarding the effect of foreign exchange rates versus the U.S. Dollar on our net sales, operating expenses, and operating income and balance sheet items is provided to show the periods ended the three months and nine months operating results had the foreign exchange rates remained the same as those in effect in the correlated previous periods. The effect on our net sales, operating expenses and operating income along with our balance sheet items from changes in our foreign exchange rates versus the U.S. Dollar is as follows:

Information is not specified for INR as there is a limited scope of operations in this jurisdiction and therefore contributions are immaterial. However, the information for INR is included in the totals.

Table 1: Three Months ended July 31, 2025

		Based British Pounds								Based Australian Dollar								Based Danish Kroner								TOTAL USD
		Actual				Constant				Actual				Constant				Actual				Constant				Actual				Constant				*Total
		Results				Rates				Results				Rates				Results				Rates				Results				Rates				Effect
		($)				($)				($)				($)				($)				($)				($)				($)				($)
Net Revenues			3,330,437				3,148,227				-				-				1,339,765				1,257,800				4,670,202				4,406,027				264,175
Net Costs			3,868,249				3,656,615				956				977				206,584				193,945				4,082,816				3,858,793				224,023
Net profit (losses) from operations			(537,812	)			(508,388	)			(956	)			(977	)			1,133,181				1,063,855				587,386				547,234				40,152
Assets			30,530,296				29,607,524				19,136				19,442				2,666,267				2,534,376				33,227,114				32,173,243				1,053,871
Liabilities			(3,068,480	)			(2,975,736	)			(2,940	)			(2,987	)			(500,027	)			(475,292	)			(3,593,027	)			(3,476,513	)			(116,514	)
Net assets			27,461,816				26,631,788				16,196				16,455				2,166,240				2,059,084				29,634,087				28,696,730				937,357

This table shows that the effect of exchange rates changes (the Current Quarter's exchange rate compared to the Previous Quarter's exchange rate) increased our net income from operations by $40,152 and increased net assets by $937,357, when compared to our net assets as at October 31, 2024.

Table 2: Nine Months ended July 31, 2025

		Based British Pounds								Based Australian Dollar								Based Danish Kroner								TOTAL USD
		Actual				Constant				Actual				Constant				Actual				Constant				Actual				Constant				*Total
		Results				Rates				Results				Rates				Results				Rates				Results				Rates				Effect
		($)				($)				($)				($)				($)				($)				($)				($)				($)
Net Revenues			8,683,904				8,471,026				-				-				3,921,850				3,887,690				12,605,754				12,358,716				247,038
Net Costs			10,044,757				9,798,519				4,405				4,573				624,870				619,427				10,695,813				10,444,966				250,847
Net profit (losses) from operations			(1,360,853	)			(1,327,493	)			(4,405	)			(4,573	)			3,296,980				3,268,263				1,909,941				1,913,750				(3,809	)
Assets			30,530,296				29,607,524				19,136				19,442				2,666,267				2,534,376				33,227,114				32,173,242				1,053,872
Liabilities			(3,068,480	)			(2,975,736	)			(2,940	)			(2,987	)			(500,027	)			(475,292	)			(3,593,027	)			(3,476,513	)			(116,514	)
Net assets			27,461,816				26,631,788				16,196				16,455				2,166,240				2,059,084				29,634,087				28,696,729				937,358

This table shows that the effect of exchange rates changes (the Current Nine Month period exchange rate compared to the Previous Nine Month period exchange rate) decreased our net income from operations by $3,809 and increased net assets by $937,358, when compared to net assets as at October 31, 2024.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.