​Coda Octopus Group, Inc. (NASDAQ:CODA) is one of the Undervalued Aerospace Stocks to Buy Now. On September 15, Coda Octopus Group, Inc. (NASDAQ:CODA) released results for its fiscal third quarter of 2025. The company delivered $7.06 million in revenue, representing a 29% year-over-year increase and surpassing expectations by $300,800. Moreover, the EPS of $0.11 also topped estimates by $0.02. ​Management noted that the growth was mainly driven by its Marine Technology Business. The segment grew 30.7% year ...

Financial Data and Key Metrics Changes - In Q3 2025, total revenue increased by 29% to $7.1 million compared to $5.5 million in Q3 2024 [24] - Gross profit rose to $4.8 million from $4.0 million, with a consolidated gross margin of 68.3%, down from 73.9% in the previous year [25][26] - Operating income slightly decreased to $1.38 million from $1.39 million, resulting in an operating margin of 19.5% compared to 25.4% in Q3 2024 [27][28] Business Line Data and Key Metrics Changes - The marine technology business generated $4.0 million in revenue, a 30.7% increase from $3.0 million in Q3 2024, accounting for 56.4% of total revenue [24][25] - The marine engineering business saw a revenue decline of 33.2%, down to $1.6 million from $2.4 million in Q3 2024 [24][26] - The newly acquired Precision Acoustics Ltd contributed 20.6% to net revenue, generating $1.5 million [24][25] Market Data and Key Metrics Changes - Hardware sales in the marine technology business increased by 103.6% to $2.7 million, while rental asset utilization was low, impacting gross profit margins [8][26] - Revenue from the Echoscope accounted for 57.7% of marine technology revenue, while DAVD contributed 42.3% [8] Company Strategy and Development Direction - The company is focusing on increasing market share in the defense sector for underwater imaging sensors, particularly with the Echoscope and DAVD technologies [5][6] - The launch of the NanoGen series sonars aims to address the growing demand for smaller underwater vehicles and enhance situational awareness [12][13] - The company is pursuing an M&A strategy to build a pipeline of complementary technologies, particularly in the defense sector [32][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the global policy environment but expressed confidence in the growth strategy and progress made in key milestones [4][31] - The company is optimistic about achieving $4 million in DAVD-related revenue for the fiscal year, a significant increase from $1.2 million the previous year [37][46] Other Important Information - The company has $26.2 million in cash and cash equivalents with no debt, reflecting a $3.7 million increase since October 2024 [28] - The marine engineering business is reliant on defense program funding, which has been delayed, affecting contract awards [9][26] Q&A Session Summary Question: Feedback on Echoscope Type Nano Gen series - Management received positive feedback regarding the reduced size and weight of the new Echoscope, which allows for integration into smaller platforms [34][35] Question: Changes in DAVD revenue target - The company expects to achieve $4 million in DAVD revenue, up from a previous target of $4.5 million, reflecting significant growth from last year's $1.2 million [36][37] Question: Exposure to China and supply chain concerns - The company has minimal exposure to China, with most components sourced from Europe, and has faced challenges in exporting to China due to government restrictions [40][41] Question: Echoscope as a revenue driver - Echoscope remains a key revenue driver, with recent sales growth attributed to hardware sales, although rental revenues have decreased due to shifts in funding for offshore renewables [42][43][44] Question: Thoughts on stock buyback program - Management indicated that stock buyback decisions are for the board to consider, focusing currently on M&A opportunities [48][50]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue increased by 29% to $7.1 million from $5.5 million in Q3 2024 [24] - Gross profit rose to $4.8 million, with a consolidated gross margin of 68.3%, down from 73.9% in the previous year [25][26] - Operating income slightly decreased to $1.38 million, with an operating margin of 19.5%, compared to 25.4% in Q3 2024 [27][28] Business Line Data and Key Metrics Changes - The marine technology business generated $4.0 million in revenue, a 30.7% increase from $3.0 million in Q3 2024, accounting for 56.4% of net revenue [4][24] - The marine engineering business saw a revenue decline of 33.2%, down to $1.6 million from $2.4 million in Q3 2024 [9][24] - The newly acquired Precision Acoustics Ltd contributed 20.6% to net revenue, generating $1.5 million [10][24] Market Data and Key Metrics Changes - Hardware sales in the marine technology business increased by 103.6%, reaching $2.7 million compared to $1.3 million in Q3 2024 [8][24] - Revenue from the Echoscope accounted for 57.7% of marine technology business revenue, while DAVD contributed 42.3% [8] Company Strategy and Development Direction - The company is focusing on increasing market share in the defense sector for underwater imaging sensors, particularly with the Echoscope technology [5][6] - The launch of the NanoGen series sonars aims to address the growing demand for smaller underwater vehicles and enhance situational awareness [12][13] - The company is pursuing an M&A strategy to build a pipeline of complementary technologies, particularly for the DAVD product line [32][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving $4 million in DAVD revenue for the fiscal year, a significant increase from $1.2 million the previous year [37][46] - The company is experiencing delays in contract awards within the marine engineering business due to funding issues in defense programs [9][28] - Management highlighted the importance of the defense market for scalable growth, noting that the evaluation process for technology integration can be lengthy [44][46] Other Important Information - The company reported an increase in cash and cash equivalents to $26.2 million, with no debt [28] - The gross margin for the marine technology business decreased to 77.0% from 82.9% in the previous year, reflecting a shift in sales mix [25][26] Q&A Session Summary Question: Feedback on Echoscope Type Nano Gen series - Management received positive feedback regarding the reduced size and weight of the Echoscope, which allows for integration into smaller platforms [34][35] Question: Change in DAVD-related revenue target - The company is now targeting $4 million in DAVD revenue for the fiscal year, up from the previous target of $4.5 million [36][37] Question: Exposure to China and supply chain concerns - The company has minimal exposure to China, with most components sourced from Europe, and has faced challenges in exporting to China due to regulatory barriers [40][41] Question: Echoscope as a revenue driver - Echoscope remains a key revenue driver, with recent sales growth attributed to hardware sales, although rental revenues have declined due to shifts in funding for offshore renewables [43][44]

Financial Data and Key Metrics Changes - The company reported total revenue of $7.1 million for Q3 2025, a 29% increase from $5.5 million in Q3 2024 [26] - Gross profit for Q3 2025 was $4.8 million, compared to $4.0 million in Q3 2024, with a consolidated gross margin of 68.3% versus 73.9% in the previous year [27] - Operating income decreased slightly to $1.38 million in Q3 2025 from $1.39 million in Q3 2024, resulting in an operating margin of 19.5% compared to 25.4% [29][30] Business Line Data and Key Metrics Changes - The marine technology business generated $4.0 million in revenue, a 30.7% increase from $3.0 million in Q3 2024, accounting for 56.4% of total net revenue [4][26] - The marine engineering business saw a revenue decline of 33.2%, generating $1.6 million compared to $2.4 million in Q3 2024 [10][26] - The newly acquired Precision Acoustics Ltd contributed 20.6% to net revenue and 18% to operating income in Q3 2025 [11][26] Market Data and Key Metrics Changes - The marine technology business's hardware sales increased by 103.6% to $2.7 million, while rental assets were underutilized, impacting gross profit margins [9][27] - The company noted a decrease in hardware sales to Asia by approximately 27.9%, which affected commission costs [9] Company Strategy and Development Direction - The company is focusing on increasing market share in the defense sector for underwater imaging sensors, particularly with the Echoscope technology [6][7] - The launch of the NanoGen series sonars aims to address the growing demand for smaller underwater vehicles and platforms [15][19] - The company is pursuing an M&A strategy to enhance its capabilities and diversify its revenue streams [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the global policy environment but expressed confidence in the growth strategy and progress made in key milestones [4][32] - The company is optimistic about the potential for increased revenue from the DAVD product line, projecting $4 million in revenue for the fiscal year [38][46] Other Important Information - The company has $26.2 million in cash and cash equivalents as of July 31, 2025, with no debt, reflecting a $3.7 million increase from the previous year [30] Q&A Session Summary Question: Feedback on Echoscope Type Nano Gen series - Management received positive feedback regarding the reduced size and weight of the Echoscope Type Nano Gen series, which allows for integration into smaller platforms [35][36] Question: Changes in DAVD-related revenue target - The company is targeting $4 million in DAVD revenue for the fiscal year, a significant increase from $1.2 million last year [38] Question: Exposure to China and supply chain concerns - The company has minimal exposure to China, with most components sourced from Europe, and has faced challenges in exporting to China due to government restrictions [41][42] Question: Echoscope as a revenue driver - Echoscope remains a key revenue driver, with recent sales growth attributed to hardware sales, although rental revenues have decreased due to shifts in funding for offshore renewables [44][46] Question: Thoughts on stock buyback program - Management indicated that stock buyback decisions are for the board to consider, while focusing on M&A opportunities to enhance business value [50]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue increased by 29% to $7.1 million from $5.5 million in Q3 2024 [27] - Gross profit rose to $4.8 million, with a consolidated gross margin of 68.3%, down from 73.9% in the previous year [28] - Operating income slightly decreased to $1.38 million, with an operating margin of 19.5%, compared to 25.4% in Q3 2024 [30][31] Business Line Data and Key Metrics Changes - The marine technology business generated $4.0 million in revenue, a 30.7% increase from $3.0 million in Q3 2024, accounting for 56.4% of total revenue [27][28] - The marine engineering business saw a revenue decline of 33.2%, down to $1.6 million from $2.4 million in Q3 2024 [27][28] - The newly acquired Precision Acoustics Ltd contributed 20.6% to net revenue, generating $1.5 million [27][28] Market Data and Key Metrics Changes - Hardware sales in the marine technology business increased by 103.6%, reaching $2.7 million compared to $1.3 million in Q3 2024 [9][28] - Revenue from the Echoscope accounted for 57.7% of marine technology revenue, while DAVD contributed 42.3% [9] Company Strategy and Development Direction - The company aims to increase market share in underwater imaging sensors, particularly in the defense sector, leveraging the unique capabilities of the Echoscope and DAVD technologies [6][14] - The launch of the NanoGen series sonars is expected to enhance the company's position in the defense and underwater robotics markets [18][24] - The company is focused on executing its M&A strategy to pivot the revenue model towards multi-year, multiple sales opportunities [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the global policy environment but expressed confidence in the growth trajectory, particularly in defense-related markets [4][33] - The company is optimistic about the future, citing strong interest in its technologies and ongoing trials with defense customers [14][18] Other Important Information - The company has no debt and reported $26.2 million in cash and cash equivalents as of July 31, 2025, an increase from $22.5 million at the end of the previous fiscal year [31] - The company is experiencing delays in contract awards for the marine engineering business due to funding issues in defense programs [10] Q&A Session Summary Question: Feedback on Echoscope Type Nano Gen series - Management received positive feedback regarding the reduced size and weight of the Echoscope, which allows for integration into smaller platforms [36][37] Question: Change in DAVD-related revenue target - The company expects to achieve $4 million in DAVD revenue for the fiscal year, a significant increase from $1.2 million last year [38] Question: Exposure to China and supply chain concerns - The company has minimal exposure to China, with most components sourced from Europe, and has faced challenges in exporting to China due to regulatory barriers [42][43] Question: Echoscope as a revenue driver - Echoscope remains a key revenue driver, with recent sales growth attributed to hardware sales, although rental revenues have declined due to shifts in funding for offshore renewables [45][46] Question: Thoughts on stock buyback program - Management indicated that stock buyback decisions are for the board to consider, emphasizing a focus on M&A opportunities instead [49][51]

PART I – Financial Information [Item 1: Financial Statements](index=4&type=section&id=Item%201%3A%20Financial%20Statements) This section presents unaudited consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with notes on accounting policies and captions for periods ended July 31, 2025, and October 31, 2024 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) | Metric | July 31, 2025 (Unaudited) | October 31, 2024 | | :-------------------------- | :------------------------ | :----------------------- | | Total Assets | $61,913,058 | $57,544,544 | | Cash and Cash Equivalents | $26,196,439 | $22,479,072 | | Accounts Receivable, net | $3,871,769 | $3,493,463 | | Unbilled Receivables | $2,723,141 | $1,657,827 | | Total Current Assets | $47,408,155 | $42,982,015 | | Total Liabilities | $4,641,312 | $4,416,021 | | Total Stockholders' Equity | $57,271,746 | $53,128,523 | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Revenues | $7,064,795 | $5,476,544 | $19,291,969 | $15,260,913 | | Cost of Revenues | $2,241,039 | $1,428,006 | $6,542,462 | $4,387,205 | | Gross Profit | $4,823,756 | $4,048,538 | $12,749,507 | $10,873,708 | | Income From Operations | $1,379,979 | $1,390,774 | $3,129,685 | $3,296,541 | | Net Income | $1,282,985 | $1,274,658 | $3,104,722 | $3,319,784 | | Basic EPS | $0.11 | $0.11 | $0.28 | $0.30 | | Diluted EPS | $0.11 | $0.11 | $0.27 | $0.29 | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) | Metric | October 31, 2024 | July 31, 2025 | | :-------------------------- | :----------------------- | :----------------------- | | Total Stockholders' Equity | $53,128,523 | $57,271,746 | | Common Stock | $11,195 | $11,249 | | Additional Paid-in Capital | $63,096,583 | $63,292,685 | | Accumulated Other Comprehensive Loss | $(2,510,831) | $(1,668,486) | | Accumulated Deficit | $(7,406,491) | $(4,301,769) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Net Cash provided by (used in) Operating Activities | $4,307,865 | $458,013 | | Net Cash (used in) provided by Investing Activities | $(822,191) | $235,981 | | Net Cash Used in Financing Activities | $0 | $(15,633) | | Net Increase in Cash and Cash Equivalents | $3,717,367 | $769,124 | | Cash and Cash Equivalents at End of Period | $26,196,439 | $25,217,965 | [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [NOTE 1 – Accounting Policies and Supplemental Disclosures](index=10&type=section&id=NOTE%201%20%E2%80%93%20Accounting%20Policies%20and%20Supplemental%20Disclosures) - Financial statements are unaudited, prepared under SEC interim reporting rules, and 2025 operating results may not predict the full fiscal year due to seasonal factors[21](index=21&type=chunk) - Consolidated financial statements include Coda Octopus Group, Inc. and its wholly-owned subsidiaries, with all material intercompany transactions eliminated[22](index=22&type=chunk) - Management's significant estimates, such as the percentage of completion method for contracts, impact reported financial statement amounts[23](index=23&type=chunk) [NOTE 2 – Revenue Recognition](index=10&type=section&id=NOTE%202%20%E2%80%93%20Revenue%20Recognition) - Revenue recognition follows FASB Topic 606, employing a five-step process from contract identification to recognition upon obligation satisfaction[24](index=24&type=chunk)[25](index=25&type=chunk) - Marine Technology Business recognizes revenue for outright sales upon delivery, rentals daily, and services upon obligation fulfillment, with software licenses recognized upon delivery of installers and activation codes[26](index=26&type=chunk) - Marine Engineering Business recognizes revenue based on fixed hourly rates, reimbursable costs, or the percentage of completion method for fixed-price contracts, measured by costs incurred[36](index=36&type=chunk) [NOTE 3 – Cost of Goods Sold](index=13&type=section&id=NOTE%203%20%E2%80%93%20Cost%20of%20Goods%20Sold) - Cost of goods sold comprises materials, direct costs, and commissions paid to sales agents for RFP participation[43](index=43&type=chunk) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commission Costs | $146,921 | $100,290 | $782,814 | $525,696 | [NOTE 4 – Fair Value of Financial Instruments](index=13&type=section&id=NOTE%204%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) - Fair values of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their carrying amounts due to their short-term nature[44](index=44&type=chunk) [NOTE 5 – Foreign Currency Translation](index=13&type=section&id=NOTE%205%20%E2%80%93%20Foreign%20Currency%20Translation) - Assets and liabilities are translated at balance sheet date exchange rates, revenues and expenses at weighted average rates, and stockholders' equity at historical rates[45](index=45&type=chunk) - Translation adjustments are recorded in accumulated other comprehensive income (loss), while foreign currency transaction gains and losses are included in consolidated statements of income[46](index=46&type=chunk) [NOTE 6 – Operating Leases](index=15&type=section&id=NOTE%206%20%E2%80%93%20Operating%20Leases) - The company has a non-cancellable operating lease for PAL, acquired October 29, 2024, with a remaining life of **7.67 years** expiring March 31, 2033[47](index=47&type=chunk) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------------- | :-------------------- | :-------------------- | | Lease Liability | $401,149 | $413,171 | | Future Minimum Lease Payments | $538,404 | $568,076 | | Remaining Lease Life (Years) | 7.67 | 8.42 | | Discount Rate | 6.75% | 6.75% | [NOTE 7 – Composition of Certain Financial Statement Captions](index=15&type=section&id=NOTE%207%20%E2%80%93%20Composition%20of%20Certain%20Financial%20Statement%20Captions) - Cash equivalents include certified deposit interest-bearing accounts with HSBC NA and HSBC UK, classified for short-term periods not exceeding **3 months**[49](index=49&type=chunk) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------- | :-------------------- | :-------------------- | | Inventory | $13,712,377 | $13,975,529 | | Raw materials and other sub-components | $10,560,839 | $10,368,350 | | Finished goods | $2,716,479 | $3,340,464 | | Total Property and Equipment, net | $7,175,397 | $6,822,990 | | Property and Equipment, net (USA) | $1,964,741 | $1,743,840 | | Property and Equipment, net (Europe) | $5,210,656 | $5,079,150 | | Total Accrued Expenses and Other Current Liabilities | $1,683,758 | $1,604,596 | | Commitment and Contingent Liability – PAL Earn Out | $158,872 | $0 | [NOTE 8 – Contracts in Progress](index=18&type=section&id=NOTE%208%20%E2%80%93%20Contracts%20in%20Progress) | Metric | July 31, 2025 | October 31, 2024 | | :------------------------------------------ | :-------------------- | :-------------------- | | Unbilled Receivables | $2,723,141 | $1,657,827 | | Deferred Revenue (Current) | $1,215,065 | $1,225,634 | | Deferred Revenue (Non-Current) | $75,064 | $56,121 | - Deferred revenue includes customer technical support (including TLS) and product warranty, amortized over **12-60 month** contract periods[57](index=57&type=chunk)[60](index=60&type=chunk) [NOTE 9 – Acquisitions](index=19&type=section&id=NOTE%209%20%E2%80%93%20Acquisitions) - Precision Acoustics Limited (PAL) was acquired on October 29, 2024, for **$6,538,569** in cash, with a net cash outlay of **$4,605,285**[61](index=61&type=chunk) - The PAL acquisition aims to leverage its acoustic and medical imaging expertise for the subsea market and expand capabilities for larger Defense contracts[62](index=62&type=chunk) | PAL Contribution | 3 Months Ended July 31, 2025 | 9 Months Ended July 31, 2025 | | :----------------------------- | :--------------------------- | :--------------------------- | | Revenues | $1,458,536 | $4,069,866 | | Net Income | $248,948 | $811,785 | - A contingent liability of **$158,872** (**75%** of year one Earn Out) was recorded for PAL, exceeding original financial expectations, with the remaining **25%** contingent on Q4 revenue targets[68](index=68&type=chunk) [NOTE 10 – Concentrations](index=21&type=section&id=NOTE%2010%20%E2%80%93%20Concentrations) - For the three months ended July 31, 2025, two customers generated **27.5%** of net revenues (**$1,942,295**) and accounted for **18.7%** of net receivables (**$723,585**)[75](index=75&type=chunk) - For the nine months ended July 31, 2025, no single customer generated sales exceeding **10%** of net revenues[76](index=76&type=chunk) [NOTE 11 – Recent Accounting Pronouncements](index=21&type=section&id=NOTE%2011%20%E2%80%93%20Recent%20Accounting%20Pronouncements) - ASU 2023-07 (Segment Reporting) will impact segment information reporting starting with the **FY2025 10-K**[78](index=78&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) enhances transparency for specific expense categories, effective for annual periods beginning after December 15, 2026 (**FY2028 10-K**)[79](index=79&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) will enhance income tax transparency, effective for annual periods beginning after December 15, 2024 (**FY2026 10-K**), expected to materially impact disclosures but not financial condition[80](index=80&type=chunk) [NOTE 12 – Goodwill and Identified Intangible Assets](index=21&type=section&id=NOTE%2012%20%E2%80%93%20Goodwill%20and%20Identified%20Intangible%20Assets) | Metric | July 31, 2025 | October 31, 2024 | | :-------------------------- | :-------------------- | :-------------------- | | Total Intangible Assets, net | $3,302,087 | $3,687,034 | | Goodwill | $3,639,334 | $3,639,334 | | Amortization of Intangible Assets | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amortization Expense | $136,259 | $13,020 | $394,566 | $46,887 | - Goodwill represents future economic benefits from acquired intangible assets not separately recognized, including an experienced workforce and expected synergies from integrating PAL's products[70](index=70&type=chunk) [NOTE 13 – Earnings Per Share](index=23&type=section&id=NOTE%2013%20%E2%80%93%20Earnings%20Per%20Share) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.11 | $0.11 | $0.28 | $0.30 | | Diluted EPS | $0.11 | $0.11 | $0.27 | $0.29 | | Basic Weighted Average Common Shares | 11,237,654 | 11,173,819 | 11,226,665 | 11,157,799 | | Diluted Outstanding Shares | 11,304,549 | 11,311,236 | 11,293,560 | 11,295,216 | [NOTE 14 – 2017 and 2021 Stock Incentive Plans](index=23&type=section&id=NOTE%2014%20%E2%80%93%202017%20and%202021%20Stock%20Incentive%20Plans) - The 2017 and 2021 Stock Incentive Plans (SIPs) aim to attract and retain qualified individuals through equity participation[86](index=86&type=chunk) - As of July 31, 2025, **1,376,848 shares** were available for future issuance under the 2017 and 2021 Plans[90](index=90&type=chunk) | Stock Compensation Expense | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Expense | $29,773 | $37,081 | $196,156 | $86,843 | [NOTE 15 – Segment Analysis](index=25&type=section&id=NOTE%2015%20%E2%80%93%20Segment%20Analysis) - The company operates three reportable segments: Marine Technology, Acoustic Sensors and Materials (PAL), and Marine Engineering, managed separately by operations, resource allocation, and markets[92](index=92&type=chunk) - The Marine Technology Business is the core, supplying real-time **3D volumetric imaging sonars (Echoscope)** and **DAVD** diving solutions to the underwater/subsea market[96](index=96&type=chunk) - PAL, acquired October 29, 2024, supplies acoustic sensors and materials to medical, subsea, defense, and research markets, also providing **ISO/IEC 17025** accredited calibration services[97](index=97&type=chunk) | Segment Net Revenues (3 Months Ended July 31) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Marine Technology Business | $3,984,475 | $3,048,544 | | Acoustic Sensors and Materials Business (PAL) | $1,458,536 | N/A | | Marine Engineering Business | $1,621,784 | $2,428,000 | | **Total Net Revenues** | **$7,064,795** | **$5,476,544** | | Segment Net Revenues (9 Months Ended July 31) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Marine Technology Business | $10,138,374 | $10,116,024 | | Acoustic Sensors and Materials Business (PAL) | $4,069,866 | N/A | | Marine Engineering Business | $5,083,729 | $5,144,889 | | **Total Net Revenues** | **$19,291,969** | **$15,260,913** | [NOTE 16 – Disaggregation of Revenue](index=30&type=section&id=NOTE%2016%20%E2%80%93%20Disaggregation%20of%20Revenue) - Net sales are attributed to geographic areas by customer location and disaggregated by major goods/service lines[108](index=108&type=chunk) | Revenue by Geography (3 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :---------------------------------- | :---------------- | :---------- | :----------------- | :---------- | | Americas | $1,696,334 | $299,861 | $583,940 | $2,580,135 | | Europe | $157,227 | $619,730 | $1,037,844 | $1,814,801 | | Australia/Asia | $1,079,902 | $501,892 | $0 | $1,581,794 | | Middle East/Africa | $1,051,012 | $37,053 | $0 | $1,088,065 | | **Total Revenues** | **$3,984,475** | **$1,458,536** | **$1,621,784** | **$7,064,795** | | Revenue by Goods/Service (3 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :------------------------------------ | :---------------- | :---------- | :----------------- | :---------- | | Equipment Sales | $2,746,255 | $1,169,611 | $269,036 | $4,184,902 | | Equipment Rentals | $304,617 | $3,084 | $0 | $307,701 | | Software Sales | $236,803 | $0 | $0 | $236,803 | | Engineering Parts | $0 | $0 | $1,100,991 | $1,100,991 | | Services | $696,800 | $285,841 | $251,757 | $1,234,398 | | **Total Revenues** | **$3,984,475** | **$1,458,536** | **$1,621,784** | **$7,064,795** | | Revenue by Geography (9 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :---------------------------------- | :---------------- | :---------- | :----------------- | :---------- | | Americas | $3,474,671 | $732,083 | $2,416,400 | $6,623,154 | | Europe | $734,877 | $1,816,858 | $2,667,329 | $5,219,064 | | Australia/Asia | $4,871,995 | $1,422,636 | $0 | $6,294,631 | | Middle East/Africa | $1,056,831 | $98,289 | $0 | $1,155,120 | | **Total Revenues** | **$10,138,374** | **$4,069,866** | **$5,083,729** | **$19,291,969** | | Revenue by Goods/Service (9 Months Ended July 31, 2025) | Marine Technology | PAL | Marine Engineering | Total | | :------------------------------------ | :---------------- | :---------- | :----------------- | :---------- | | Equipment Sales | $7,800,318 | $3,467,688 | $456,547 | $11,724,553 | | Equipment Rentals | $697,851 | $3,084 | $0 | $700,935 | | Software Sales | $585,651 | $59,600 | $0 | $645,251 | | Engineering Parts | $0 | $0 | $3,921,190 | $3,921,190 | | Services | $1,054,554 | $539,494 | $705,992 | $2,300,040 | | **Total Revenues** | **$10,138,374** | **$4,069,866** | **$5,083,729** | **$19,291,969** | [NOTE 17 – Income Taxes](index=33&type=section&id=NOTE%2017%20%E2%80%93%20Income%20Taxes) - Interim tax provision is estimated using the annual effective tax rate, adjusted for discrete items, and subject to variation from pre-tax income and jurisdictional mix[113](index=113&type=chunk)[114](index=114&type=chunk) - The **2025 Tax Act** reinstates **100%** accelerated depreciation and immediate expensing of domestic R&D costs, retroactive to January 20, 2025, and January 1, 2025, respectively, with no major changes to U.S. cash taxes anticipated for 2025[115](index=115&type=chunk) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 9 Months Ended July 31, 2025 | 9 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective Tax Rate | 16.9% | 21.9% | 17.1% | 18.1% | | Income Tax Provision | $268,786 | $325,625 | $692,361 | $482,683 | | Deferred Tax Benefit (Expense) | $8,022 | $(30,963) | $52,864 | $(252,938) | [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and operations, highlighting performance factors, critical accounting policies, financial comparisons, liquidity, capital resources, and the impact of inflation and foreign currency fluctuations [General Overview](index=34&type=section&id=General%20Overview) - Consolidated net revenue in the Current Quarter was **$7,064,795**, with **63.5%** (**$4,484,660**) derived from outside the United States[122](index=122&type=chunk) - Weak demand for European rental solutions in the Current Quarter stemmed from changes in U.S. renewables policy, but new U.S. policy prioritizing domestic Oil & Gas and increased European defense spending are expected to be favorable[123](index=123&type=chunk) - The Marine Technology Business, featuring **Echoscope 3D sonar** and **DAVD** augmented reality diving solutions, is critical for growth, particularly in the evolving Defense market for underwater vehicles[125](index=125&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - The **DAVD** untethered solution is an early-stage commercial offering with **12+ US Navy commands** and is being evaluated by two foreign navies, targeting over **14,000 divers** in the USA alone[135](index=135&type=chunk)[136](index=136&type=chunk) - Inflation rates for the **12 months** preceding July 2025 were Denmark **2.3%**, UK **4.2%**, and USA **2.7%**[140](index=140&type=chunk)[145](index=145&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) - Financial statements are prepared under GAAP, requiring management estimates for assets, liabilities, revenue, and expenses, where actual results may materially differ[147](index=147&type=chunk) - Revenue recognition follows Topic 606, with specific methods for Marine Technology (sales/rentals), PAL (sensors/materials), and Marine Engineering (services)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Assets and liabilities from business acquisitions are recorded at fair value, with any excess purchase price recorded as goodwill, requiring management estimates for identifiable intangibles[153](index=153&type=chunk) - Inventory is valued at cost, with obsolescence adjustments based on estimates of future demand and sales prices to reflect the lower of cost or net realizable value[154](index=154&type=chunk) [Consolidated Results of Operations for the Current Quarter compared to the Previous Quarter](index=40&type=section&id=Consolidated%20Results%20of%20Operations%20for%20the%20Current%20Quarter%20compared%20to%20the%20Previous%20Quarter) | Metric | Current Quarter (July 31, 2025) | Previous Quarter (July 31, 2024) | Change | | :-------------------------------- | :------------------------------ | :------------------------------ | :------- | | Consolidated Net Revenues | $7,064,795 | $5,476,544 | +29.0% | | Gross Profit | $4,823,756 | $4,048,538 | +19.1% | | Gross Profit Margin | 68.3% | 73.9% | -5.6 pp | | Total Operating Expenses | $3,443,777 | $2,657,764 | +29.6% | | Income From Operations | $1,379,979 | $1,390,774 | -0.8% | | Pre-tax Income | $1,543,749 | $1,631,246 | -5.4% | | Net Income | $1,282,985 | $1,274,658 | +0.7% | - Foreign currency translation increased net revenue by **$264,175** and foreign subsidiary costs by **$224,023** in the Current Quarter due to USD weakening[158](index=158&type=chunk)[159](index=159&type=chunk) | Products Business Sales (3 Months Ended July 31) | 2025 | 2024 | 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%** | - Marine Engineering Business revenue decreased by **33.2%** due to delays in orders from prime defense contractors[163](index=163&type=chunk)[165](index=165&type=chunk) - SG&A expenses increased by **32.8%** to **$2,871,309**, driven by PAL's inclusion (**$451,588**), a **$158,872** contingent liability for PAL Earn Outs, and a significant increase in non-cash charges[176](index=176&type=chunk)[179](index=179&type=chunk) [Consolidated Results of Operations for the Current Nine Month Period compared to the Previous Nine Month Period](index=46&type=section&id=Consolidated%20Results%20of%20Operations%20for%20the%20Current%20Nine%20Month%20Period%20compared%20to%20the%20Previous%20Nine%20Month%20Period) | Metric | Current Nine Month Period (July 31, 2025) | Previous Nine Month Period (July 31, 2024) | Change | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------- | | Consolidated Net Revenues | $19,291,969 | $15,260,913 | +26.4% | | Gross Profit | $12,749,507 | $10,873,708 | +17.2% | | Gross Profit Margin | 66.1% | 71.3% | -5.2 pp | | Income From Operations | $3,129,685 | $3,296,541 | -5.1% | | Pre-tax Income | $3,744,219 | $4,055,405 | -7.7% | | Net Income | $3,104,722 | $3,319,784 | -6.5% | - The increase in consolidated net revenue is attributable to PAL's inclusion, contributing **$4,069,866**; without PAL, net revenue would have been lower by **0.3%**[190](index=190&type=chunk) - Marine Technology Business rental revenue decreased by **63.0%** due to weak demand from reduced offshore renewables project activities by major developers[191](index=191&type=chunk)[200](index=200&type=chunk) | Products Business Sales (9 Months Ended July 31) | 2025 | 2024 | 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%** | - SG&A expenses increased by **29.1%** to **$7,814,233**, driven by PAL's inclusion (**$1,298,765**), a **$158,872** contingent liability for PAL Earn Outs, and increased non-cash charges (amortization up **741.5%**, stock-based compensation up **125.9%**)[207](index=207&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric (as of July 31, 2025) | Amount | | :--------------------------- | :----------- | | Cash and Cash Equivalents | $26,196,439 | | Working Capital | $43,239,402 | | Stockholders' Equity | $57,271,746 | | Accumulated Deficit | $(4,301,769) | - Operating activities provided **$4,307,865** in cash for the nine months ended July 31, 2025[220](index=220&type=chunk) - The company holds a **$4,000,000** revolving line of credit with HSBC NA, with a **$0** outstanding balance as of July 31, 2025, expiring November 26, 2025[221](index=221&type=chunk) - Management believes current cash flow from operations, cash and cash equivalents, and the revolving line of credit are sufficient to meet anticipated cash needs for the next **twelve months**[222](index=222&type=chunk) [Inflation and Foreign Currency](index=52&type=section&id=Inflation%20and%20Foreign%20Currency) - The company's consolidated financial results are impacted by foreign exchange rate fluctuations due to operations in multiple currencies (USD, GBP, DKK, AUD, INR)[223](index=223&type=chunk)[224](index=224&type=chunk) - USD weakening against the British Pound and Danish Kroner in the Current Quarter resulted in higher translated foreign revenues and associated costs[155](index=155&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) | Impact of FX Changes (3 Months Ended July 31, 2025) | Total Effect (USD) | | :-------------------------------------------------- | :----------------- | | Net Revenues | +$264,175 | | Net Costs | +$224,023 | | Net Profit (Losses) from Operations | +$40,152 | | Assets | +$1,053,871 | | Liabilities | $(116,514) | | Net Assets | +$937,357 | | Impact of FX Changes (9 Months Ended July 31, 2025) | Total Effect (USD) | | :-------------------------------------------------- | :----------------- | | Net Revenues | +$247,038 | | Net Costs | +$250,847 | | Net Profit (Losses) from Operations | $(3,809) | | Assets | +$1,053,872 | | Liabilities | $(116,514) | | Net Assets | +$937,358 | [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company does not have any off-balance sheet arrangements[229](index=229&type=chunk) [Item 3: Quantitative and Qualitative Disclosures about Market Risks](index=54&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) Quantitative and qualitative disclosures about market risks are not required for smaller reporting companies - Not required for smaller reporting companies[230](index=230&type=chunk) [Item 4: Controls and Procedures](index=54&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management, including the CEO and Interim CFO, concluded that disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal controls over financial reporting during the period - As of July 31, 2025, the CEO and Interim CFO concluded the company's disclosure controls and procedures were effective[233](index=233&type=chunk) - No material changes occurred in internal controls over financial reporting during the reporting period[234](index=234&type=chunk) PART II – Other Information [Item 1: Legal Proceedings](index=56&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to materially adversely affect its business, financial condition, or operating results - The company is not aware of any legal proceedings expected to materially adversely affect its business, financial condition, or operating results[236](index=236&type=chunk) [Item 1A: Risk Factors](index=56&type=section&id=Item%201A%3A%20Risk%20Factors) This item is not required for smaller reporting companies - Not required for smaller reporting companies[237](index=237&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities and use of proceeds to report[237](index=237&type=chunk) [Item 3: Default Upon Senior Securities](index=56&type=section&id=Item%203%3A%20Default%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities to report[237](index=237&type=chunk) [Item 4: Mine Safety Disclosures](index=56&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[238](index=238&type=chunk) [Item 5: Other Information](index=56&type=section&id=Item%205%3A%20Other%20Information) No other information was reported under this item - No other information was reported under this item[239](index=239&type=chunk) [Item 6: Exhibits](index=56&type=section&id=Item%206%3A%20Exhibits) This section lists exhibits filed with the 10-Q report, including CEO and CFO certifications and various Inline XBRL documents - The report includes CEO and CFO certifications, Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase), and the Cover Page Interactive Data File[239](index=239&type=chunk) [Signatures](index=57&type=section&id=Signatures) The report was officially signed on September 15, 2025, by Annmarie Gayle, CEO, and Gayle Jardine, Interim CFO - The report was signed by Annmarie Gayle (CEO) and Gayle Jardine (Interim CFO) on September 15, 2025[242](index=242&type=chunk)

Core Insights - Coda Octopus Group, Inc. reported a 29.0% increase in total revenue for the fiscal third quarter ended July 31, 2025, reaching approximately $7.1 million compared to $5.5 million in the same quarter of the previous year [2][6][9] - The company continues to invest in its growth strategy, particularly through the Diver Augmented Vision Display (DAVD) program, with expected sales of $3.5 million to $4.0 million for fiscal year 2025, up from $1.2 million in the previous fiscal year [3][4] Financial Performance - Revenues from the Marine Technology Business increased by 30.7% to $4.0 million, while revenues from the Marine Engineering Business decreased by 33.2% to $1.6 million [6][9] - Gross profit for TQ2025 was $4.8 million, with a gross margin of 68.3%, down from 73.9% in TQ2024 [6][9] - Operating income was $1.38 million, a slight decrease of 0.8% from $1.39 million in TQ2024, with an operating margin of 19.5% [6][9] Product Development and Market Opportunities - The company successfully completed the DUS Hardening Program, leading to an order for sixteen DAVD untethered systems from the U.S. Navy, which were delivered in TQ2025 [4][5] - The launch of the Echoscope PIPE NANO GEN SERIES® is expected to open new market opportunities, particularly in defense and underwater robotics, with the UUV market projected to grow from $4.8 billion in 2024 to $11.1 billion by 2030 [10][15] Cash Position and Investments - Coda Octopus Group's cash balance increased to $26.2 million at the end of TQ2025, up from $22.5 million at the end of October 2024 [8] - Research and Development expenditures rose by 15.3% to approximately $0.6 million, reflecting the company's commitment to innovation [12]

Core Viewpoint - Coda Octopus Group, Inc. has launched its new ultra-small Echoscope PIPE NANO GEN Series of real-time 3D, 4D, 5D, and 6D imaging sonars, designed for smaller underwater vehicles and diving platforms, enhancing capabilities in subsea intelligence and diving technology [1][2][3]. Product Development - The NANO GEN Series sonars are compact, slightly larger than a smartphone, making them suitable for deployment on smaller underwater vehicles and diving platforms [2]. - These sonars maintain the high-quality imaging capabilities of the existing Echoscope PIPE sonars while introducing new features for obstacle avoidance and spatial awareness [3][4]. - The development of the NANO GEN Series involved a significant investment in a new custom technology chipset, allowing for the miniaturization of advanced imaging technology [3][4]. Market Demand and Applications - There is an increasing demand for smaller underwater vehicles that require advanced imaging capabilities, which the NANO GEN Series addresses by consolidating multiple sensors into a single, power-efficient unit [4]. - Successful trials have been conducted with key Defense customers, indicating strong interest in integrating this technology into their programs [5][6]. - The NANO GEN Series is also applicable for diving platforms, diver wearable solutions, and various underwater robotics [5][6]. Company Background - Coda Octopus Group, founded in 1994, is a supplier to the underwater/subsea market, providing hardware and software solutions, including proprietary real-time imaging sonars and diving technology [7]. - The company's Echoscope technology is utilized globally for various applications, including underwater mapping, subsea intervention, and search and rescue operations [7]. Recent Acquisitions - The company recently acquired Precision Acoustics Limited, a leader in ultrasound and acoustic measurement, enhancing its capabilities in medical imaging and Non-Destructive Testing (NDT) [9]. - Coda Octopus also operates two Defense engineering businesses, providing sub-assemblies for mission-critical programs, which allows for repeat orders throughout the life of these programs [10].

Company Overview - Coda Octopus Group, Inc. is a global leader in real-time 3D/4D/5D and 6D imaging sonar technology for subsea intelligence and augmented reality diving technology [1][4] - The company was founded in 1994 and provides hardware and software solutions for the underwater/subsea market, including proprietary imaging sonars marketed as Echoscope and Echoscope PIPE [4] - The recently launched Diver Augmented Vision Display (DAVD) system is designed to enhance global diving operations by integrating topside control and diver HUD systems [5] Upcoming Conference Call - The company will host a conference call on September 15, 2025, at 10:00 a.m. Eastern time to discuss its fiscal third quarter results for the period ending July 31, 2025 [1][2] - A press release detailing the results will be issued before the market opens on the same day [2] Recent Developments - Coda Octopus Group has recently acquired Precision Acoustics Limited, which specializes in acoustics sensors and materials [6] - The company operates two defense engineering businesses, Coda Octopus Martech Ltd and Coda Octopus Engineering, which supply sub-assemblies for mission-critical programs [7]

Core Insights - Coda Octopus Group, Inc. has received ISO:17025 accreditation for its subsidiary Precision Acoustics Limited, recognizing its ultrasonic hydrophone calibration capabilities [1][2] - This accreditation places the company among a select group, being one of only two organizations in the UK with this certification, enhancing its reputation in precision ultrasonic measurement [2] - The company specializes in underwater imaging technology and has a range of products including Echoscope® and Diver Augmented Vision Display (DAVD) systems [3][4] Group 1: Accreditation and Recognition - The ISO/IEC 17025 accreditation is significant for markets requiring precision ultrasonic measurement and safety compliance, including high-risk applications [2] - Precision Acoustics has manufactured and calibrated thousands of hydrophone systems and supplied over 10,000 transducers, reinforcing customer confidence in its products [2] Group 2: Product Offerings - Coda Octopus Group provides advanced hardware and software solutions for the underwater/subsea market, including real-time 4D/5D/6D imaging sonars [3] - The Echoscope PIPE® sonar generates real-time images of moving underwater objects, even in zero visibility conditions, and is used in various applications such as mapping, salvage, and offshore renewables [3] - The newly launched DAVD system integrates sonar technology for improved diving operations, allowing for shared critical information between topside and divers [4] Group 3: Business Expansion - The company recently acquired Precision Acoustics Limited, a leader in ultrasound and acoustic measurement, focusing on medical imaging and Non-Destructive Testing (NDT) [5] - Coda Octopus Group also includes defense engineering businesses that supply sub-assemblies for mission-critical programs, providing opportunities for repeat orders [8]