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DATE

Monday, Sept. 14, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• Chair, and CEO - Annmarie Gayle
• President of Technology - Blair Cunningham
• Chief Financial Officer - Mark Kelly
• Investor Relations - Dillon King

TAKEAWAYS

• Revenue -- $7.7 million, increasing 9.2% year over year as growth in defense engineering offset declines in the marine technology segment.
• Pretax Income -- $1.8 million, an increase of 16% year over year supported by growth in the defense engineering and acoustic segments.
• Marine Technology Revenue -- $3.4 million, declining 15.2% year over year due to reduced customer activity in the Middle East and parts of Asia.
• Defense Engineering Revenue -- $2.7 million, rising 68.3% year over year reflecting increased activity and funding across long-standing defense programs.
• Acoustic Sensors Revenue -- $1.6 million, growing 10.4% year over year supported by demand for acoustic materials and test tank solutions in international markets.
• Consolidated Gross Margin -- 65.4%, down from 68.3% in the prior year period due to changes in revenue composition and product mix across segments.
• Marine Technology Gross Margin -- 78.5%, an increase from 77% in the prior year period reflecting higher rental contributions and lower commission costs.
• Defense Engineering Gross Margin -- 56.9%, compared to 58.9% in the prior year period due to the specific mix of contracts and program activity.
• Acoustic Sensors Gross Margin -- 52.4%, down from 54.8% in the prior year period primarily reflecting the mix of products delivered.
• Net Income -- $1.4 million, or $0.12 per diluted share, an increase from $1.3 million or $0.11 per diluted share in the third quarter of 2025.
• Cash and Equivalents -- $31.7 million as of July 31, 2026, with the company maintaining a debt-free balance sheet.
• Rental Revenue -- approximately $700,000, representing an increase of 131.1% year over year driven by improved asset utilization.
• Marine Technology Hardware Revenue -- $2.3 million, a 17.8% decrease year over year reflecting geopolitical instability affecting international sales.
• Sustainment Spares Orders -- exceeding $2.4 million year to date, driven by demand for repairs and spare parts for long-standing defense systems.
• DAVID System Deliveries -- 24 total systems delivered to the US Navy to date, following the delivery of 16 untethered systems earlier in the year.
• Post-Quarter DAVID Orders -- approximately $1.4 million, covering tethered systems, peripherals, and adoption of DAVID Flex technology.
• Operating Income -- $1.5 million, up from $1.4 million in the prior year period, resulting in an operating margin of 19.9%.
• SG&A Expense -- $2.8 million, or 36.1% of revenue, down from $2.9 million or 40.6% of revenue in the prior year period due to lower payroll costs.
• Total Assets -- $68.9 million at quarter end, an increase from $64.5 million as of Oct. 31, 2025.
• Training System Orders -- four DAVID Flex systems and Echoscope sonars, ordered by the US Navy specifically for use in diving school and academy curricula.

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RISKS

• Gayle stated, "While geopolitical instability in The Middle East adversely, affected customer activity in certain international markets, and resulted in lower revenue within our marine technology business," during the quarter.

SUMMARY

Coda Octopus Group, Inc. (CODA +7.09%) reported a shift in revenue composition as growth in defense engineering and acoustic sensors offset declines in the marine technology segment. Management reported that regional instability in the Middle East and Asia led to timing-related project deferrals, while the underlying market structure remained unchanged. The company reached a financial milestone during the period by achieving positive retained earnings for the first time in its history. Strategic focus centered on expanding the adoption of the DAVID diving system and Nano sonar series within global defense programs. Management also indicated an ongoing evaluation of potential acquisition opportunities to support long-term growth while maintaining a debt-free balance sheet and strong liquidity.

• Management reported that the US defense engineering business is currently supporting several prime contractors in the development of rugged deployable RF electronic warfare systems.
• CEO Gayle stated, "The quarter once again demonstrated the benefits of our diversified business model."
• The company achieved a financial milestone by transitioning from an accumulated deficit to positive retained earnings for the first time.
• Management indicated that the US Navy's authorization for use (ANU) assessment for the DAVID untethered system was successfully completed during the year.
• CFO Kelly noted that the company remains debt free and maintains a strong liquidity position to support organic growth and strategic acquisitions.
• Blair Cunningham stated, "We are actively working with a number of subsea robotic OEMs, research groups, and direct customers globally to integrate nano into next generation underwater platforms."
• Management noted that a prominent European Navy continues to evaluate DAVID systems, with a procurement roadmap expected later this year.

INDUSTRY GLOSSARY

• Echoscope: A real-time 3D imaging sonar that generates detailed subsea images even in zero visibility water conditions.
• DAVID: Diver Augmented Vision Display system, a mission-critical vision component for naval and commercial diving operations.
• Nano: An ultra compact real-time 3D imaging sonar designed for small subsea robotics and autonomous platforms.
• VoiceHub 4: A next generation digital audio communication system for underwater applications.
• ANU: Authorization for Navy Use, a critical regulatory approval hurdle for military technology deployment.
• SAT: Sea Acceptance Trials, the final phase of testing before a customer officially accepts and commissions subsea hardware.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Coda Third Quarter 2026 Earnings Conference Call. At this time, all participants A question and answer session will follow the formal presentation and you may be placed into As a reminder, this conference is being recorded. Now my pleasure to turn the call over to Dillon King, Investor Relations. Dylan, please go ahead.

Dillon King: Thank you, operator. Good morning, everyone, and welcome to Coda Octopus' third quarter fiscal 2026. Earnings conference call. Before management begins their formal remarks, we would like to remind everyone that some statements made today may be considered forward looking statements. Under US securities laws. These statements are subject to a number of risks and uncertainties. As a result, we caution you that there are a number of factors many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward looking statements.

For more detailed risks, uncertainties, and assumptions, relating to our forward looking statements, Please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur after the date of forward looking statements. Are made. Except as may be required by law. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances. Including, but not limited to, risks and uncertainties identified in our Form 10 k for year ended 10/31/2025.

Informed thank you for the first, second, and third quarters of our fiscal year 2026. You may get Coda Octopus' Securities and Exchange Commission filings free. By visiting the SEC website at www.sec.gov. I would also like to remind everyone that this call is being recorded and will be made available for replay through the Investor Relations section of Coda Octopus' website. Finally, as a reminder, this is our third quarter fiscal 26 reporting No comparisons unless explicitly stated otherwise are with our third quarter fiscal 25. With that, I will now turn the call over to the company's chair, and CEO, Annmarie Gayle. Annmarie?

Annmarie Gayle: Thanks, Dillon, and good morning, everyone. Thank you for joining us for our third quarter fiscal 26 earnings call. I believe we delivered a solid set of results during the quarter with consolidated revenue increasing 9.2% and pretax income increasing 16%. While geopolitical instability in The Middle East adversely, affected customer activity in certain international markets, and resulted in lower revenue within our marine technology business the strength of our defense engineering services and acoustic sensors and material businesses enabled us to deliver growth in both revenue and pretax income. Our performance this quarter highlights the resilience of our diversified business model and the strength of our financial fundamentals.

I am pleased with how the business has continued to perform despite challenging market conditions in some regions. Our company comprises 3 operating businesses, marine technology, defense engineering services, and acoustic sensors and materials. Our marine technology business remains the strategic centerpiece of the company and generated 43.8% of consolidated revenue during the quarter. Our long term growth strategy remains focused on expanding adoption of our proprietary underwater technologies, including Echoscope, David, and the recently introduced Nanoseries particularly within defense and autonomous underwater vehicle applications where we continue to see significant long term opportunities. Turning to our third quarter business highlights, marine technology business. Revenue in our marine technology business decreased 15.2% during the quarter.

The decline primarily reflected reduced customer activity in The Middle East and parts of Asia following geopolitical instability in the region. Hardware revenue decreased 17.8% to $2.3 million compared to $2.7 million in the prior year period. Partially offsetting this decline was significantly improved rental asset utilization with increased rental revenue by 131.1% to approximately $700 thousand compared with approximately $300 thousand in the prior year period. The higher contributions from rentals together with lower commission costs resulting from changes in sales geography, contributed positively to gross margins within this business. Turning to defense engineering services business. Our defense engineering services business delivered a strong quarter with revenue increasing 68.3% compared with the prior year period.

The business benefited from increased activity and funding across several long standing defense programs resulting in both higher order intake and higher execution levels during the quarter. Our UK defense operations experience increased customer activity and contributed higher revenues compared with the prior year period. Within our US defense engineering business, we continue to see strengthening demand for repairs and spares under some of the sustainment defense programs that we have supported for decades. During the quarter, 1 of our prime contractor customers was awarded a multiyear repair and sustainment contract by the US government Following that award, we experienced in increased repair related activity and additional subcontract opportunities associated with the program.

We continue to see encouraging demand trends in this area. Demand for spares supporting the sustainment defense system also remains strong with spares orders exceeding $2.4 million year to date. We also continue to make progress in electronic warfare, which remains an important area of defense investment. Our US defense engineering services is currently supporting several prime contractors in the development of rugged deployable RF electronic warfare systems for a range of platforms including unmanned systems, helicopters, airborne pods, and ground vehicles. We believe these programs represent a meaningful future opportunity enabling us to build upon our long standing positions on legacy defense systems while expanding into next generation defense programs as technologists and operational requirements continue to evolve.

Turning to our acoustic sensors and materials business, Our acoustic sensors and material business increased revenue by 10.4% during the quarter. While gross margins were lower due to product mix, we continue to see encouraging demand for our acoustic materials and acoustic test tank solutions across international markets. While market conditions in certain regions remain challenging, our diverse business model enabled us to deliver growth in both revenue and pretax income during the quarter. We remain focused on executing our long term growth strategy strengthening our position across defense, marine, and acoustic markets, and expanding adoption of our proprietary technologies.

With that, I will hand the call over to Blair Cunningham our president of technology, who will provide an update on our technology initiatives, recent milestones, and market activities.

Blair Cunningham: Thank you, Annmarie, and good morning, everyone. As Annmarie noted, our strategic focus remains on expanding adoption of our proprietary underwater technologies, including DAVID, Echoscope, Nano, and our next generation underwater communication system, VoiceHub 4. I will briefly highlight several notable developments during the quarter. A significant milestone during the year was the successful completion of the US Navy's authorization for Navy use assessment for the DAVID untethered system. Incorporating the DAVID Gen 4 HUD. As you know, we delivered 16 DAVID untethered systems to the US Navy earlier this year bringing total deliveries to 24 systems. With a new approval now in place, these systems can be fully evaluated and utilized by operational commands.

We continue to provide training and support for the untethered system and believe the military diving market represents a significant long term opportunity for DAVID. Since our last earnings call, we have received approximately $1.4 million of orders from the U. S. Navy for DAVID Tethered Systems and related peripherals. Supporting deployment to additional commands, and adoption of the latest DAVID Flex technology. We are also encouraged by indications that DAVID may be in into diving school and academy training curricula. The recent orders included 4 DAVID Flex systems and Ecoscope sonars specifically for training purposes. Which we believe reflects growing, institutional acceptance of the technology within the naval diving community.

Internationally, we continue to work closely with the European Navy that recently acquired DAVID Systems. We remain encouraged by customer feedback and believe this deployment provides a strong foundation for further expansion within international military diving markets. We expect to gain greater visibility into that customer's procurement roadmap later this year. In addition, we continue to make progress on a number of funded defense programs awarded during the year. Under separate contractual arrangements where our DAVID and Nanotechnologies are being integrated as key vision and mission enabling components.

These programs spanning diver machine teaming, critical diver health state monitoring, and advanced deep saturation diving provides further opportunities to demonstrate our technologies in operationally relevant environments and support their growing adoption across a broader range of defense applications. We are also pleased with the early response to our NanoGen series sonar, our ultra compact real-time 3D imaging sonar designed specifically for small subsea robotics and AI enabled autonomous underwater platforms. We are actively working with a number of subsea robotic OEMs research groups, and direct customers globally to integrate nano into next generation underwater platforms. Enabling advanced real time CV perception, navigation, and autonomy capabilities that were previously impractical on vehicles of this size.

Beyond our active programs, we continue to see growing interest in nano across both The US and European defense markets. Particularly for diving systems and delivery vehicles. Autonomous and unmanned underwater systems. We believe NANO's combination of ultra compact form factor low power consumption, and real-time 3D imaging capability positions it well to address the rapidly evolving requirements of this emerging sector. This growing interest is further supported by the innovative software and hardware ecosystem we have developed around Nano providing OEMs and integrators with multiple levels of engagement from straightforward sensor integration through to a more comprehensive solution incorporating Nano's real time data and processing capabilities.

Providing the high quality, real-time 3D data critical to delivering true AI-enabled 3D perception and autonomy solutions. As Annmarie commented with respect to our defense engineering businesses, we are seeing renewed demand across The US defense market driven both by increased spending on spares repairs and sustainment of established defense systems as well as investment in next generation capabilities, including electronic warfare, unmanned systems, and increasingly autonomous platforms. We believe this broader increase in defense spending combined with the growing demand for more capable and autonomous systems face additional opportunities for our nanotechnology Our established defense relationships, and engineering capabilities provide a strong pathway for introducing nano into these programs and expanding its long term growth potential.

Overall, I believe we are making steady progress in expanding adoption of our technologies and advance opportunities that support long term growth. With that, I will turn the call back to Anne Marie and look forward to answering your questions during the Q&A session.

Annmarie Gayle: Thank you, Blair. Before turning to the financial results, I would like to formally welcome Mark Kelly who recently joined the company as our chief financial officer. Mark brings extensive financial and operational leadership experience, and we are very pleased to have him as part of the executive team as we continue to execute our growth strategy. Mark will now take you through our third quarter 26 financial results Following his remarks, I will return with some closing observations before we open the lines for questions.

Mark Kelly: Thank you, Annmarie, and good morning, everyone. As this is my first earnings call since joining the company, I am pleased to have the opportunity to introduce myself to our shareholders and investors. I have enjoyed meeting the team, and becoming familiar with the business. And I look forward to supporting the company's continued growth and execution of its long term strategy. Let me now take you through our third quarter fiscal 26 financial results. Total revenue for the third quarter 2026 was $7.7 million. Compared with $7.1 million in the third quarter 2025. Representing an increase of 9.2%. As Annmarie highlighted earlier, our results reflect the benefits of our diversified business model.

While revenue in our marine technology business was impacted by reduced customer activity, in certain international markets, This was more than offset by strong performance in our defense engineering services business. And continued growth in our acoustic sensors and materials business. Marine technology revenue was $3.4 million, compared with $4 million in the prior year period. Representing a decrease of 15.2%. Acoustic sensors and materials revenue was $1.6 million, compared with $1.5 million in the prior year period. Representing an increase of 10.4%. Defense engineering services revenue was $2.7 million, compared with $1.6 million in the prior year period. Representing an increase of 68.3%.

Gross profit for the third quarter 2026 was $5.1 million compared with $4.8 million in the third quarter 2025. Consolidated gross margin was 65.4% compared with 68.3% in the prior year period. The movement in gross margin primarily reflects changes in revenue composition, during the quarter including the contribution from higher margin rental activity within our marine technology business. Changes in sales geography, and the mix of projects and products delivered across the group. Marine technology gross margin was 78.5%, compared with 77% in the prior year period. Acoustic sensors and materials gross margin was 52.4%, compared with 54.8% in the prior year period. Reflecting product mix during the quarter.

Defense engineering services gross margin was 56.9%, compared with 58.9% in the prior year period. Reflecting the mix of contracts and program activity during the reporting period. Turning now to operating expenses. Total operating expenses for the third quarter 26 were $3.5 million compared with $3.4 million the third quarter 2025. Selling, general, and administrative expenses were $2.8 million compared with $2.9 million in the prior year period. The movement in SG and A was primarily driven by lower payroll related costs and favorable foreign exchange movements. Partially offset by higher contingent consideration expense associated with the PAL earn out. SG and A represented 36.1% of consolidated revenue during the quarter compared with 40.6% in the third quarter 2025.

Operating income for the third quarter 2026 was $1.5 million compared with $1.4 million in the third quarter 2025. Operating margin was 19.9%, compared with 19.5% in the prior year period. Pretax income for the third quarter 2020 was $1.8 million compared with $1.5 million in the third quarter 2025. Net income after tax was $1.4 million or $0.12 per diluted share. Compared with $1.3 million or $0.11 per diluted share in the third quarter 2025. The provision for income taxes during the quarter $400 thousand compared with $300 thousand in the prior year period. Turning now to the balance sheet. As of 07/31/2026, the company had cash and cash equivalents of $31.7 million and remained debt free.

The company continues to maintain a strong balance sheet and healthy liquidity position providing financial flexibility to support both organic growth initiatives and potential strategic opportunities. Total assets at quarter end were $68.9 million compared with $64.5 million at 10/31/2025. Overall, we believe the company remains well financially, with a strong balance sheet, positive earnings, and substantial cash resources. That concludes my financial review. I will now turn the call back to Anne Marie for her closing remarks.

Annmarie Gayle: Thank you, Mark. I am pleased with our third quarter performance. Despite the challenging geopolitical environment, that affected customer activity in certain international markets, we delivered growth in both revenue and pretax income while maintaining our strong balance sheet and debt free position. The quarter once again demonstrated the benefits of our diversified business model. While our marine technology business experienced lower revenue due to the conditions in The Middle East, and parts of Asia, the strength of our defense engineering business and acoustic sensors and material businesses, enabled us to deliver overall growth and strong profitability. I am also encouraged by the progress we continue to make in advancing adoption of our core technologies.

During the quarter and subsequent to the period, we achieved a number of important milestones across DAVID, Echoscope, and Nano that we believe strengthen our position in key defense and underwater technology and support our long term growth objectives. We are particularly encouraged by the continued traction we are seeing within defense related applications we are increasing investments in underwater capabilities, our systems, and force modernization programs continues to create significant long term opportunities for our technologies. I am also pleased with the opportunities our US defense engineering business is seeing in supporting sustainment programs through repair and spare parts for long standing defense systems.

At the same time, the business is expanding its work with prime defense contractors on next generation defense technologies positioning it to participate in evolving defense requirements and future programs. From a financial perspective, I am also pleased that the company achieved an important milestone during the quarter transitioning from an accumulated deficit to positive retained earnings for the first time in its history. While primarily an accounting milestone, it reflects the sustained profitability financial discipline, and progress the company has achieved over recent years. In parallel, we continue to advance our M&A strategy and remain actively engaged in evaluating and progressing acquisition opportunities that align with our strategic objectives.

While we remain disciplined in our approach, we continue to pursue opportunities that could strengthen our business and support our long term growth strategy. Overall, we remain confident in our strategy encouraged by the progress we are making across the business, and well positioned to capitalize on opportunities in our core markets. Operator, we are now ready to open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to be placed in the question queue, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you like to remove your question from the queue. 1 moment please while we poll for questions. Our first question today is coming from Brian Kinstlinger from Alliance Global Partners. Your line is now live.

Brian Kinstlinger: Great. Thank you. Hi, Annmarie. Last quarter, you highlighted there was an underwater ROV OEM that purchased several Echoscopes, the NanoGen series for testing. Can you talk about any feedback from testing? And then do you have with that, time that is passed, do you have any more clear picture yet on how long test and evaluation may last for this or similar programs?

Annmarie Gayle: Good morning, Brian. Thank you very much for this question. So yes, we are making really good progress on that particular program. The key thing for us to understand with these programs, they are programs. So what that really means is that there is some amount of integration effort for all participants within the program. I am pleased to say that, we have reached really a very good point under that particular program. And, Blair, I think that program is going for SAT trials soon. Is that correct?

Blair Cunningham: Yes. that is correct, Annmarie, and good morning, Brian. Yes. The SAT trials will be imminent, and actually, I am I am with the customer as we speak at the moment. So, yes, we are in the water active with the with the vehicles, and things are going very, very well.

Annmarie Gayle: So we hope to conclude that. I would not be able to report that in the fourth quarter, I would hope.

Brian Kinstlinger: And given it is in a development phase, is the next big catalyst for this type of program a design win? Would you announce that in a in a PR?

Annmarie Gayle: Well, the main thing I would say, Brian, is being on the vehicle. Clearly, that very important. that is the starting point for us to really sort of see we can go into a procurement phase. We think this will be a big win for us because then whilst the initial orders were 3 systems on the vehicle, There are other opportunities for that vehicle that we have some amount of visibility. Clearly, the pre precondition for that is that the SAT trials go well. But if they go well, we can see in rapid succession a number of other customers coming on board for that particular solution. Great.

And then thanks for the updates on the DAVID, including the uses of training and some of the orders postquarter. As it relates to the ANU approval for the ANU, you have had that for a couple of months. I am curious how business development particularly the sales cycle, has changed as a result? So thanks again, Brian. So we should really understand again that the ANU is 1 of the hurdles that takes us closer to a cycle. The first thing for any defense technologies really is to put the technology in the field so deployment is important, and user acceptance tests then we can move forward to, if you like, larger scale procurement.

So I am pleased to say that we have removed the most important hurdle of getting the technology first of all, in the customer's hands and then moving forward to if you like, deployment and user acceptance testing These are all critical activities for the broader adoption of any defense technology, including DAVID.

Brian Kinstlinger: And can you share us the feedback? Because of these customers that it is in the hands of that are new and training and it sounds like we have got a bunch of new potential customers that are in trials.

Annmarie Gayle: Yes. So really, really positive feedback on the DAVID program. As we report in this quarter, which I see as a confirmation of the maturity of the technology, there is a potential that DAVID technology will be used in various institutions for training diving academies, for example. So we are very, very heartened by that, and that is really endorsement that the technology is moving forward. In addition to that, as Blair mentioned previously, we have several discrete contracts where DAVID and Nano are really being integrated in different programs where we are doing some integration work for adding DAVID and Nano as mission critical vision components in these different programs.

So I feel very much that the signal signaling that we have is wholly positive. And what I see is the technology moving forward. I think we should really understand, however, that these are longer term opportunities for our business. Great.

Brian Kinstlinger: I have a couple more. Mostly now from the financial perspective. With the war in the region, not seeing an end in sight and taking that into account, how should we think about Marine Technologies quarterly revenue Is there anything that could substantially increase or decrease from the last few quarters I guess, what are the puts and takes that could cause any volatility from where we were recently in the last few quarters?

Annmarie Gayle: Well, so the as we have always reported, Asia and The Middle East are strategically important markets for our business. Of course, the geopolitical situation has been very for our business. However, we think that this is not really structural. These are timing issues. So we continue to see opportunities. We continue to have visibility of what customers are doing, but the fact still remains that it is very challenging offshore to really run a project. Really, because of the disruption in the market. There are security issues, safety for personnel. Some of them are supply chain issues for end customers.

So I think that we are not seeing any structural, changes in the market, but what we are certainly seeing is deferral of opportunities because of the ongoing uncertainty.

Brian Kinstlinger: Great. 2 more. The marine engineering business has historically enjoyed stronger demand in the second half of the year compared to the first half? Looking back at the last few years and maybe that is seasonal. Gayle it is just timing. I am curious with this contract award from your prime, Do you see maybe the company sustaining types of revenue seen in the last 2 quarters? Or do you expect it will be continue to be lumpy as we have seen in the last few years.

Annmarie Gayle: Well, certainly, it will be lumpy. But what I can say on the sustainment program again, we should remember the way these procurement activities occur. So annually, for many of these programs, there is a fixed amount of spending for, if you like, parts to these programs. But as these parts are now, and most times, they are sitting in a warehouse, but what we are actually seeing now is that these parts are now actively being used, there has been they are now if you like, replenishing their warehouses And this is really where we see this opportunity for a spares and repairs coming through.

Of course, I cannot project the scale of the opportunity, but I can see at warehousing change and reduce what they have, we can see increased demand for spare and repairs.

Brian Kinstlinger: Great. that is helpful. My last question is just high level P and L strategy. How are you thinking about incremental investments, either in R and D or in SG and A that positions the company for stronger revenue growth. Versus controlling expenses to drive incremental margin and profit? How do you think about that as a strategy right now from where the company is?

Annmarie Gayle: Well, you know, as we have always said, really, organically, from an organic place, I see that the company has the fundamentals to grow significantly The company has well established revenue in the commercial offshore market, but there is a finite number of units we can sell quarter and quarter into that market. And therefore, our strategy, as you know, Brian, is to increase the number of defense programs that we are that are adopting our technology. Part of that will involve increased R&D efforts, increased SG&A spend, and we see we are doing more especially now with the acquisition of Pal in our group, who is 1 of the most foremost authorities on acoustics in the field.

We are now leveraging their capability across the group and then really looking at the next generation of different technologies that we can advance and bring to the market in addition to the disruptive technologies that we currently have. Let me remind you. Echoscope. Echoscope is the world's only real-time 3D imaging sonar that can generate a real-time 3D image in zero visibility water conditions. What have we done with that technology? We have future-proofed that technology to make sure that we can get on a broader suite of underwater vehicle platforms. Nano is a good example of that, and that is not just a whim.

That would have been an r and d planning for a good 4, 5 years before we could realize such a feat. So we have several programs, internal programs where we are looking to really leverage what we have. And, Blair, the what is the significance things that Blair mentioned is the VoiceHub 4 technology where the digital audio communication system that is still a very, very strong technology where our program sponsor is significantly invested in this technology. We had to revisit the technology to reduce the bill of material cost but we feel now, we are really at that point with, for example, VoiceHub 4 where our program sponsor could be seriously interested in the technology.

So I do not believe we are just, if you like, watching costs. We are actually investing across our group in r and d. And as I said, we are spending a lot of business development efforts on being contenders on different programs, and we measure our success by whether or not these programs are advancing and we continue to be part of that process. And we feel that we are really making good strides, but I also want to emphasize that defense programs are naturally longer term programs.

Brian Kinstlinger: Great. Thanks for taking all my questions. Thank you.

Operator: Thank you. Our next question is coming from Shamali Kumar from Freedom Capital Markets. Your line is now live.

Zahra: Hi, Annmarie. Thank you for taking my questions. Pleasure. First question is you previously discussed that on an initial DAVID deployment with European Navy. So what determines whether that customer moves to broader rollout? And can other navies use that qualification work to shorten their own procurement process?

Annmarie Gayle: Good. So thank you very much for that question. So Blair reported on that. We are making really, really good progress with that very influential European Navy. Later this year, we will have visibility into their procurement cycle. But what I can see is that, they continue to be engaged on the technology and really also the visibility that we see with this particular customer. This is not just about DAVID, but really pull through sales on the Ecoscope and our underwater inspection system which is actually in use in over 30 ports in the US as a security system. So we are making really good progress with that European customer. there is high level of engagement with that customer.

And we are hopeful that closer to the end of the fiscal year, we will have better visibility into their procurement process. But, again, I see this is a defense customer. They have got their own processes, and it will take time But what I can see is that I think this is moving forward. And, yes, they are also very influential and therefore, if they move forward to broader adoption, which we expect, we would see also other European navies follow suit because they are really the trendsetter here in diving.

Zahra: Okay. Thanks. that is helpful. And for the quick next 1, with a lower vessel procurement spending proposed in US Coast Guard for the 2027 budget. So how exposed is in your defense engineering business? And what could this mean for your next year?

Annmarie Gayle: Yes. So, you know, I am so I am I am quite heartened and excited by our defense engineering business in The US. Because, really, as customers' requirements evolve, and there is the new generation of, if you like, warfare technology, I am pleased to see that we are working and getting a lot of opportunities to look at for some of the new evolving requirements. We are working with no less than 4 prime defense contractors on different, opportunities around the same theme.

So I feel very much, you know, it is budgets may be reallocated but it does not change the fact that these new technologies will have to move forward because it is the new if you like, arena for fighting the next generation of warfare. So we are heartened to see that we are not just on the legacy programs, but we are evolving with our customers into the new technologies.

Zahra: Thank you. Appreciate for your answers. that is all.

Operator: Thank you. Thank you very much. Thank you. We reached the end of our question and answer session. I would like to turn the floor back over for any further or closing comments.

Annmarie Gayle: Thank you very much for your interest in Coda Octopus. Have a great day.

Operator: Thank you. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today. Thank you.