**SECURITIES
      AND EXCHANGE COMMISSION**


Washington, D.C. 20549




**FORM
      10-Q/A**


(Mark
      One)




x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      quarterly period ended July 31, 2008




OR




**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES****EXCHANGE
                ACT OF 1934**




For
      the
      transition period from ______________ to ______________




*Commission
      File Number 000-52815*





**CODA
      OCTOPUS GROUP, INC.**


(Exact
      name of registrant as specified in its charter)





Delaware
            
            34-200-8348(State
                or other jurisdiction of Incorporation or organization)
            
            (I.R.S.
                Employer Identification Number)164
                West, 25thStreet, 6thFloor, New York
            
            10001(Address
                of principal executive offices)
            
            (Zip
                Code)Registrant's
                telephone number, including area code:
            
            (212)
                924-3442




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes o No x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
      one): o





Large
                accelerated filero
            Accelerated
                filero
            Smaller
                reporting companyx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x





The
      number of shares outstanding of issuer's common stock, $0.001 par value as
      of
      September 14, 2008: 48,853,664.







**EXPLANATORY
      NOTE**




This
      amendment to the quarterly report of Coda Octopus Group, Inc. for the quarter
      ended July 31, 2008 is being filed to correct certain typographical errors
      in
      the sections included herein and to provide the GAAP reconcilliation with EBITDA
      figures previously reported that was inadvertently omitted from the original
      filing.







**Item
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Forward-Looking
      Statements**





The
      information herein contains forward-looking statements. 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 assurances 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.





The
      following discussion and analysis should be read in conjunction with our
      financial statements, included herewith. 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**





We
      are a
      developer of underwater technologies and equipment for imaging, mapping, defense
      and survey applications. We are based in New York, with research and
      development, sales and manufacturing facilities located in the United Kingdom,
      United States and Norway as well as two engineering companies located in the
      United States and the United Kingdom.





The
      consolidated financial statements include the accounts of Coda Octopus and
      our
      domestic and foreign subsidiaries that are more than 50% owned and controlled
      except that the financial statements, including Colmek, which was acquired
      on
      April 6, 2007. All significant intercompany transactions and balances have
      been
      eliminated in the consolidated financial statements.





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the amounts reported in the consolidated financial statements and
      accompanying disclosures. Although these estimates are based on management's
      best knowledge of current events and actions that we may undertake in the
      future, actual results may differ from those estimates.





**Background**





We
      are
      engaged in 3-D subsea technology and are the developer and patent holder of
      real-time 3-D sonar products which we expect to play a critical role in the
      next
      generation of underwater port security. We produce hardware, software and fully
      integrated systems which are sold and supported on a worldwide basis, with
      wide
      applications in two distinct market segments:





·
            marine
                geophysical survey (commercial), which focuses around oil and gas,
                construction and oceanographic research and exploration, where we
                market
                to survey companies, research institutions, salvage companies. This
                was
                our original focus, from original founding in 1994, with current
                products
                spanning geophysical data collection and analysis, through to printers
                to
                output geophysical data collected by sonar. We believe that our marine
                geophysical survey markets are experiencing rapid growth due to:
                1)
                successful new product introductions in recent periods; 2)
                market-proximity benefits derived from 2004 relocation to the United
                States; 3) initial market penetration into new sub-sectors of the
                marine
                geophysical survey markets; 4) the high price of oil and gas in the
                past
                few years, resulting in unprecedented exploration and production
                activity.·
            underwater
                defense/ security, where we market to ports and harbors, state and
                federal
                government agencies and defense contractors. We started to focus
                on this
                market following the acquisition of OmniTech AS, a Norwegian Company,
                in
                December 2002, a company which had developed a prototype system,
                the**Echoscope**TM,
                a unique, patented instrument which permits accurate three-dimensional
                visualization, measurement, data recording and mapping of underwater
                objects. We have recently completed developing and commenced marketing
                this first real time, high resolution, three-dimensional underwater
                sonar
                imaging device which we believe has particularly important applications
                in
                the fields of port security, defense and undersea oil and gas
                development.





In
      addition, through our two engineering services subsidiaries, Martech Systems
      (Weymouth) Ltd, based in Weymouth, England, UK, and Colmek Systems Engineering,
      based in Salt Lake City, Utah, USA , we provide engineering services to a wide
      variety of clients in the subsea, defense, nuclear, government and
      pharmaceutical industries. These engineering capabilities are increasingly
      being
      combined with our product offerings, bringing opportunities to provide complete
      systems, installation and support.


3




For
      the
      foreseeable future, we intend to intensify our focus on port security. We
      believe that in the post 9/11 era there are significant growth opportunities
      available in that particular market segment because of increased government
      expenditures aimed at enhancing security. Specifically, we believe that we
      have
      the ability to capitalize on this opportunity as a result of:




o
            First
                mover advantage in 3-D sonar markets based on our patented technology,
                our
                research and development efforts and extensive and successful testing
                in
                this area that date back almost two decades as well as broad customer
                acceptance.o
            Early
                recognition of need for 3-D real-time sonar in defense/security
                applications.o
            Expansion
                into new geographies, such as North America.o
            Expansion
                into new commercial markets, such as construction and dredging, with
                innovative products.o
            Recent
                sole source classification for one of our products and its derivatives
                by
                certain government procurement
                agencies.





Further,
      we believe the EchoscopeTM will transform certain segments of the sonar products
      market. In addition, 3-D sonar, currently in the early stages of adoption,
      has
      disruptive technology qualities as it has the ability to change industry
      standard practice in respect of the method for visualization and imaging of
      underwater objects and environment. Therefore, it will likely change who the
      suppliers into this market are as well as our market position and that of our
      competitors. We believe the market opportunity in underwater security and
      defense could grow at a rapid pace over the next several years.





Approximately
      52% of our nine month 2008 revenues of $13,232,440 were attributable to pure
      products business. The rest was attributable to our engineering businesses
      at
      Colmek and Martech, and a development contract with TSWG fulfilled through
      our
      corporate Research and Development division.





To
      this
      established base of business, we now plan to add other
      sub-sections:




o
            we
                are now starting to bid (sometimes in partnership, where areas of
                focus
                other than underwater sonar and wireless video surveillance capability
                are
                demanded) for complete port security and other solutions. We have
                bid on a
                small number of these in the last six months and hope for our first
                successes shortly. We have not yet been awarded any contracts for
                the
                purchase of complete solutions. However, in March of 2008, we received
                a
                $1.6 million follow on order from the U.S. Department of Defense
                to
                deliver an additional next-generation Underwater Inspection System
                (UIS)TM
                for TSWG and other potential users, to enable rapid underwater searches
                in
                the nation’s ports and waterways. In addition to the additional hardware
                (we delivered four original units in December of 2007) TSWG has committed
                to a $1 million development project to help advance the product.
                The
                contract includes additional options which, if fully funded, would
                require
                us to deliver further UISTM systems in fiscal 2009. The contract was
                awarded to us on a sole source basis, which means that the product
                is
                considered to be available from one source only and under Federal
                rules
                may be acquired from that source without competitive bidding process.
                Although this is not a complete port security system, it represents
                the
                first step towards achieving this.o
            we
                are currently reviewing the possibility of launching next year, in
                partnership with others, a services business based on our product
                set.
                This business will be port based and will, for example, provide ship
                hull
                inspections by way of rental of equipment and provision of a team
                to
                operate the equipment for any ship entering that particular
                port.





**Critical
      Accounting Policies**





This
      discussion and analysis of our financial condition and results of operations
      are
      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 US 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 3, "Summary of Significant Accounting Policies"
      of
      our Consolidated Financial Statements.





*Revenue
      Recognition*





We
      record
      revenue in accordance with the guidance of the SEC's *Staff
      Accounting Bulletin SAB No. 104* (SAB
      104), which supersedes SAB
      No. 101 in order
      to encompass EITF
      No. 00-21 , *Revenue
      Arrangements with Multiple Deliverables* (EITF
      00-21).


4





Revenue
      is derived from sales of underwater technologies and equipment for imaging,
      mapping, defense and survey applications. Revenue is also derived through
      contracts gained by our Martech, Colmek and Innalogic businesses.





Revenue
      is recognized when conclusive evidence of firm arrangement exists, delivery
      has
      occurred or services have been rendered, the contract price is fixed or
      determinable, and collectability is reasonably assured. No right of return
      privileges are granted to customers after shipment.





For
      arrangements with multiple deliverables, we recognize product revenue by
      allocating the revenue to each deliverable based on the fair value of each
      deliverable in accordance with EITF
      No. 00-21 and SAB
      No. 104, and recognize revenue for equipment upon delivery and for installation
      and other services as performed. EITF No. 00-21 was effective for revenue
      arrangements entered into in fiscal periods beginning after June 15,
      2003.





Our
      contracts typically require customer payments in advance of revenue recognition.
      These deposit amounts are reflected as liabilities and recognized as revenue
      when the Company has fulfilled its obligations under the respective
      contracts.





Revenues
      derived from our software license sales are recognized in accordance with
      Statement of Position (SOP) SOP No. 97-2, “Software Revenue Recognition,” and
      SOP No. 98-9, “Modifications of SOP No. 97-2, Software Revenue Recognition with
      Respect to Certain Transactions”. For software license sales for which any
      services rendered are not considered essential to the functionality of the
      software, we recognize revenue upon delivery of the software, provided (1)
      there
      is evidence of an arrangement, (2) collection of our fee is considered probable
      and (3) the fee is fixed and determinable.





*Recoverability
      of Deferred Costs*





We
      defer
      costs on projects for service revenue. Deferred costs consist primarily of
      direct and incremental costs to customize and install systems, as defined in
      individual customer contracts, including costs to acquire hardware and software
      from third parties and payroll costs for our employees and other third
      parties.





We
      recognize such costs in accordance with our revenue recognition policy by
      contract. For revenue recognized under the completed contract method, costs
      are
      deferred until the products are delivered, or upon completion of services or,
      where applicable, customer acceptance. For revenue recognized under the
      percentage of completion method, costs are recognized as products are delivered
      or services are provided in accordance with the percentage of completion
      calculation. For revenue recognized ratably over the term of the contract,
      costs
      are recognized ratably over the term of the contract, commencing on the date
      of
      revenue recognition. At each balance sheet date, we review deferred costs,
      to
      ensure they are ultimately recoverable. Any anticipated losses on uncompleted
      contracts are recognized when evidence indicates the estimated total cost of
      a
      contract exceeds its estimated total revenue.




*Stock
      Based Compensation*




SFAS
      No. 123, “Accounting for Stock-Based Compensation,” established and
      encouraged the use of the fair value based method of accounting for stock-based
      compensation arrangements under which compensation cost is determined using
      the
      fair value of stock-based compensation determined as of the date of the grant
      or
      the date at which the performance of the services is completed and is recognized
      over the periods in which the related services are rendered. The statement
      also
      permitted companies to elect to continue using the current intrinsic value
      accounting method specified in Accounting Principles Board (“APB”) Opinion
      No. 25, “Accounting for Stock Issued to Employees,” to account for
      stock-based compensation to employees. Prior to the adoption of SFAS 123(R)
      we
      elected to use the intrinsic value based method for grants to our employees
      and
      directors and have disclosed the pro forma effect of using the fair value based
      method to account for our stock-based compensation to employees.




On
      December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 123R (revised 2004), “Share-Based Payment” (“Statement 123R”) which is a
      revision of SFAS No. 123.




Statement
      123R supersedes APB opinion No. 25 and amends SFAS No. 95, “Statement of Cash
      Flows”. Generally, the approach in Statement 123R is similar to the approach
      described in Statement 123. However, Statement 123R requires all share-based
      payments to employees, including grants of employee stock options, to be
      recognized in the income statement based on their fair values. Pro-forma
      disclosure is no longer an alternative. This statement does not change the
      accounting guidance for share based payment transactions with parties other
      than
      employees provided in SFAS No. 123(R). This statement does not address the
      accounting for employee share ownership plans, which are subject to AICPA
      Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership
      Plans.” On April 14, 2005, the SEC amended the effective date of the provisions
      of this statement. The effect of this amendment by the SEC is that the Company
      had to comply with Statement 123R and use the Fair Value based method of
      accounting no later than the first quarter of 2006. We implemented SFAS
      No. 123(R) on November 1, 2004 using the modified prospective method.
      The fair value of each option grant issued after November 1, 2004 will be
      determined as of grant date, utilizing the Black-Scholes option pricing model.
      The amortization of each option grant will be over the remainder
      of the vesting period of each option grant.  We use the fair value method
      for equity instruments granted to non-employees and use the Black Scholes model
      for measuring the fair value. The stock based fair value compensation is
      determined as of the date of the grant or the date at which the performance
      of
      the services is completed (measurement date) and is recognized over the periods
      in which the related services are rendered.




5




*Income
      Taxes*





Deferred
      income taxes are provided using the asset and liability method for financial
      reporting purposes in accordance with the provisions of Statements of Financial
      Standards No. 109, "Accounting for Income Taxes". Under this method, deferred
      tax assets and liabilities are recognized for temporary differences between
      the
      tax bases of assets and liabilities and their carrying values for financial
      reporting purposes, and for operating loss and tax credit carry forwards.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be removed or settled. The effect on deferred tax
      assets and liabilities of a change in tax rates is recognized in the
      consolidated statements of operations in the period that includes the enactment
      date.





*Purchase

      price allocation and impairment of intangible and long-lived
      assets*





Intangible
      and long-lived assets to be held and used are reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amounts of such
      assets may not be recoverable. Determination of recoverability is based on
      an
      estimate of undiscounted future cash flows resulting from the use of the asset,
      and its eventual disposition. Measurement of an impairment loss for intangible
      and long-lived assets that management expects to hold and use is based on the
      fair value of the asset as estimated using a discounted cash flow
      model.




We
      measure the carrying value of goodwill recorded in connection with the
      acquisitions for potential impairment in accordance with SFAS No. 142, Goodwill
      and Other Intangible Assets”. To apply SFAS 142, a company is divided into
      separate “reporting units”, each representing groups of products that are
      separately managed. For this purpose, we have one reporting unit. To determine
      whether or not goodwill may be impaired, a test is required at least annually,
      and more often when there is a change in circumstances that could result in
      an
      impairment of goodwill. If the trading of our common stock is below book value
      for a sustained period, or if other negative trends occur in our results of
      operations, a goodwill impairment test will be performed by comparing book
      value
      to estimated market value. To the extent goodwill is determined to be impaired
      an impairment charge is recorded in accordance with SFAS 142.





**Results
      of Operations**




Introduction





The
      third
      quarter ending July 31, 2007 contained $1,521,675 of TSWG (US Coast Guard)
      Revenues which had an unusual impact on that period. Comparisons will be
      dramatically impacted by that anomaly. In fact, business with the Coast Guard
      has continued but has not had as significant effect on quarterly revenues as
      were realized in the third quarter of 2007.




***Comparison
      of Three Months Ended July 31, 2008 (“2008 Period”) to Three Months Ended July
      31, 2007 (“2007 Period”)***





Revenues . Total
      revenues for the 2008 period and the 2007 period were $5,008,525 and $5,859,907
      respectively. This represented a decrease of $851,382 or 14.5%. The acquisition
      of Colmek occurred on April 6, 2007 which makes the period to period comparisons
      consistent for the first time without breaking out the subsidiary. This reflects
      increased business in our products division specifically with regard to the
      oil
      and gas business in Europe, the construction business in the Middle East, the
      US
      Coast Guard continuing to purchase products and services, and a UISTM (Underwater
      Inspection System) sale to a law enforcement agency in the US. Alongside this
      was a decrease in TSWG/USCG revenues, reflecting the current status of the
      contract in each year.




Margins . Gross
      margins were 60.4% in the 2008 period compared with 60.7% for the 2007 period.
      This was achieved with the increase in the sale of our signature products,
      the
      EchoscopeTM and the UISTM, as well as the mix of traditional products which are
      sold at higher margins and are becoming a dominant part of the revenue stream.
      The engineering contracting business represented $1,772,894 or 35.4% of sales
      with the products business attaining a level of $2,450,727 or 48.9% of revenues.
      The company is targeting an average gross margin in the vicinity of 63% going
      forward.




Research
      and Development (R&D) .
      R&D increased 39% to $880,339 in the 2008 period from $634,679 in 2007. This
      reflects further development of the EchoscopeTM and UISTM tied to the TSWG (US
      Coast Guard) contract, the initial stage of which finished in January, with
      the
      next stage having begun in March. Additionally, work commenced on the
      development contract for the company’s new application which deploys the
      Echoscope TM for underwater construction. The company continues to invest in new
      applications of its signature product.


6





Selling,
      General and Administrative Expenses (SG&A) .
      SG&A expenses for the 2008 period decreased to $3,311,267 from $3,594,560 in
      2007, or by 7.9%. However, the non-cash charges attributable to stock and option
      compensation were $433,478 against $805,825 which brings SG&A for the 2008
      Period to $2,786,391 against $2,788,735 for the 2007 Period, virtually static
      year on year.




Key
      areas
      of expenditures include wages and salaries where the company spent $1,719,375
      while the 2007 period was $1,534,028; legal and professional fees, including
      accounting, audit and investment banking services, decreased to $241,928 in
      2008
      from $480,892 in 2007; travel increased to $186,297 from $127,283; rent
      increased to $164,306 in 2008, from $148,376; and marketing increased to
      $294,732 from $74,031 in 2007, mainly due to reclassification of
      consultants.




Operating
      Income/Loss .
      Adjusted Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
      for the period, without non-cash charges for stock and options, were a loss
      of
      $298,310 against positive $172,853 for the 2007 Period. The Company produced
      an
      operating loss for the period of $1,167,795 (which, when adjusted for non-cash
      charges, becomes $498,778) against a loss of $670,060 in 2007.




Interest
      Expense. Interest
      expense for the period was $481,876, of which $383,571 was associated with
      the
      convertible debenture financing by the Royal Bank of Scotland. Interest expense
      in 2007 was $561,350.




Preferred
      Dividends . During
      the 2008 period there was a $31,819 dividend paid on the remaining series A
      preferred stock versus $31,851 in 2007. All of the series B preferred stock
      and
      most of the series A preferred stock was converted to equity in April/May
      2007.





***Comparison
      of Nine Months Ended July 31,***  ******  ***2008
      (“2008 Period”) to the Nine Months Ended July 31, 2007 (“2007
      Period”)***





Introduction





Due
      to
      the acquisition of Colmek in April 2007, the financial information presented
      for
      Coda Octopus for the period ended July 31, 2007 (the "2007 Period"), includes
      activity in Colmek from April 6 to the end of the period, combined with revenue,
      other income and SG&A expenses of the rest of Coda Octopus Group, Inc. for
      the period ending July 31, 2007. The financial information presented (“2007
      Period") includes revenues and expenses for Colmek only for the period after
      the
      acquisition which occurred on April 6, 2007. As a result, the increased
      revenues and expenses in the accompanying consolidated statements of operations
      for the period in 2008 compared to those in 2007 may not be a meaningful
      comparison.





Revenues . Total
      revenues for the 2008 Period and the 2007 Period were $13,232,440 and
      $10,794,621 respectively, representing an increase of 22.6%. Contributions
      from
      Colmek were $1,709,014 in the 2007 period against $2,928,495 for 2008.
      Subtracting the contribution from this acquisition to the 2008 and 2007 Periods,
      there was a 13.4% increase in our original businesses. This was due to a strong
      demand for our traditional products in the geophysical and hydrographic survey
      markets as well as added traction in selling the UISTM and
      EchoscopeTM.





Gross
      Margins .
      Margins were stronger in the 2008 Period at 62.7% compared with 58.2% for the
      2007 period reflecting stronger sales in our traditional products business,
      a
      UISTM sale to a US law enforcement agency and several EchoscopesTM sold to various
      customers including three units sold into the construction market.




Research
      and Development (R&D) .
      R&D spending increased to $2,333,840 in the 2008 Period from $1,736,437 in
      the 2007 Period, an increase of 34.4%, as we continue to focus considerable
      effort into enhancing the EchoscopeTM and releasing other products in our suite
      of marine geophysical offerings. In particular, work focused on delivering
      our
      Underwater Inspection System (UISTM), a turnkey system built around the
      EchoscopeTM platform and further development work for the US Coast Guard on the
      UISTM system. Additionally, the company began development work on the project
      which deploys the EchoscopeTM in the underwater construction market.





Selling,
      General and Administrative Expenses (SG&A) .
      SG&A expenses for the 2008 Period increased to $9,170,389 (the costs for the
      period include $1,323,029 in share compensation, amortization and depreciation
      which are non-cash charges) from $8,883,099 during the 2007 Period ,
      an
      increase of $287,290 or 3.2%. Some of the increase is attributable to the
      acquisition of Colmek which was included for the entire period in
      2008.





Key
      areas
      of expenditure include wages and salaries, where we spent $4,614,613 of our
      SG&A costs (2007 Period was $3,736,218 ); legal and professional fees,
      including accounting, audit and investment banking services, amounted to
      $877,821(2007 Period was $1,169,935); travel costs increased to $418,687 in
      2008
      from $389,987 in 2007; rent for our various locations increased to $394,811
      in
      2008, from $390,526 in 2007; marketing increased to $905,794 in 2008 from
      $200,459 in 2007, which included reclassification of certain consultants engaged
      in sales of our signature products who were previously included in legal and
      professional fees.





Other
      Operating Expenses . We
      incurred other operating expenses of $435,000 in the 2007 Period for fees
      incurred connected with equity fund raising. We incurred no comparable expenses
      in the 2008 Period.


7




Operating
      Loss . The
      adjusted EBITDA results for the 2008 period were a loss of $1,887,226, not
      including non-cash charges for stock and options compensation, against a loss
      of
      $1,946,429 for the 2007 period. As a result of the foregoing, the Company incurred a loss from
      operations of $3,206,055 during the 2008 Period compared to a loss from
      operations of $4,773,016 during the 2007 Period.





Interest
      Expense .
      Interest expense for the 2008 Period decreased to $1,051,181 (consisting of
      accrued bond interest and factoring) from $6,349,946 during the 2007 Period.
      Of
      the 2007 amount, $5,544,445 was attributable to the valuation of warrants issued
      as part of our financing, booked as a non-cash financing charge.





Dividends
      and Other Stock Charges . During
      the 2008 Period, dividends of $106,843 were declared against $346,630 in the
      2007 Period on preferred stock (most of the preferred stock was converted into
      common stock during the 2007 Period). The 2007 amount includes $238,950 paid
      on
      the series A preferred stock and $107,680 on the series B preferred. In
      addition, the 2007 Period included $800,000 in non-cash charges for the
      beneficial conversion feature related to the issuance of series B preferred
      stock in January 2007. This took the net loss applicable to common shares to
      $12,196,051 or $0.34 per share for the 2007 Period, based on an average of
      35,490,398 shares outstanding, compared to a loss of $4,267,300 or $0.09 per
      share for the 2008 Period, based on an average of 48,369,873 shares outstandin g.





**Non-GAAP
      Financial Measures**





Following
      is a reconciliations of differences between non-GAAP financial information
      that
      may be required in connection with issuing the company’s quarterly financial
      results included herein.




As
      is
      common in our industry, we use EBITDA as a measure of performance to demonstrate
      earnings exclusive of interest and non-cash events. We manage our business
      based
      on our cash flows. The Company, in its daily management of its business affairs
      and analysis of its monthly, quarterly and annual performance, makes its
      decisions based on cash flows, not on the amortization of assets obtained
      through historical activities. The Company, in managing its current and future
      affairs, cannot affect the amortization of the intangible assets to any material
      degree, and therefore uses EBITDA as its primary management guide. Since an
      outside investor may base its evaluation of the Company’s performance based on
      the Company’s net loss not its cash flows, there is a limitation to the EBITDA
      measurement. EBITDA is not, and should not be considered, an alternative to
      net
      loss, loss from operations, or any other measure for determining operating
      performance of liquidity, as determined under accounting principles generally
      accepted in the United States (GAAP). The most directly comparable GAAP
      reference in the Company’s case is the removal of interest, depreciation,
      amortization, taxes and other non-cash expense. In assessing the overall health
      of its business during the third quarter of 2008 and 2007, the Company excluded
      the following:




·
            *Stock-Based
                Compensation*:
                The Company believes that because of the variety of equity awards
                used by
                companies, varying methodologies for determining stock-based compensation
                and the assumptions and estimates involved in those determinations,
                the
                exclusion of non-cash stock-based compensation enhances the ability
                of
                management and investors to understand the impact of non-cash stock-based
                compensation on our operating results. Further, the Company believes
                that
                excluding stock-based compensation expense allows for a more transparent
                comparison of its financial results to previous
                periods.




·
            *Other
                Income:*The
                Company considers this a one time transaction, and it is not an indication
                of current or future operating performance. Therefore the Company
                does not
                consider the inclusion of this transaction helpful in assessing its
                current financial performance compared to previous periods as well
                as
                prospects for the future.


8


**CODA
      OCTOPUS GROUP, INC.**


**RECONCILIATION
      OF NET INCOME (LOSS) TO ADJUSTED EBITDA**


**FOR
      THE THREE AND NINE MONTHS ENDED JULY 31, 2008 AND 2007**




**(Unaudited)**


**Three Months Ended**
              
              **Nine Months Ended****July 31, 2008**
              
              **July 31, 2007**
              
              **July 31, 2008**
              
              **July 31, 2007**Net (loss), as
                  reported
              
              $
              (1,602,117
              )
              $
              (1,195,665
              )
              $
              (4,160,457
              )
              $
              (11,049,422
              )Interest
                  expense, net
              
              
              481,876
              
              
              561,350
              
              
              1,051,181
              
              
              6,349,946Depreciation
                  and amortization
              
              
              200,468
              
              
              65,596
              
              
              453,623
              
              
              226,309EBITDA
              
              
              (919,773
              )
              
              (568,719
              )
              
              (2,655,653
              )
              
              (4,473,167
              )Adjustments:Other
                  expense (income)
              
              
              (47,554
              )
              
              (35,745
              )
              
              (96,779
              )
              
              (73,540
              )Stock
                  based compensation
              
              
              669,017
              
              
              777,317
              
              
              865,206
              
              
              2,600,278Adjusted
                  EBITDA
              
              $
              (298,310
              )
              $
              172,853
              
              $
              (1,887,226
              )
              $
              (1,946,429
              )





**Liquidity
      and Capital Resources**





As
      of
      July 31, 2008 the Company had positive working capital of $10,892,026 and cash
      totaling $6,050,996.





The
      net
      loss of $4,160,457 generated a cash flow deficit from operations of $4,117,784
      in the 2008 Period, compared to $8,031,167 in 2007. During the 2008 Period,
      we
      also invested around $291,000 in tangible and intangible assets for use within
      our various businesses, and completed the acquisition of Colmek for an outlay
      of
      a final amount of $763,936. During the 2008 Period, we raised $12M through
      the
      issuance of a convertible debenture in February 2008 (this was $10,453,421
      after
      the deduction of associated costs), which, combined with the cash flow uses
      outlined above, resulted in a net cash flow into the company for the period
      of
      $5,134,739. The secured convertible debenture attracts interest at a rate of
      8.5%, and has a conversion price of $1.05 per share callable after 2 years
      at
      $2.50, after 3 years at $2.90, and after 4 years at $3.50. The instrument is
      redeemable after 7 years at 130%. The company feels that this funding will
      enable the company to execute its plan over the next 12
      months.





Our
      plan
      to move from loss to profit is based upon intensifying our focus on port
      security. We believe that in the post 9/11 era there are significant growth
      opportunities available in the market segment in which we operate because of
      increased government expenditures aimed at enhancing security. We also have
      had
      a measure of success in the off shore construction area. We believe that we
      can
      continue to sell into that market with success.





In
      the
      short term, our plan involves, specifically:




·
            Continue
                to sell our current range of products into a mixture of commercial,
                defense and security markets, increasing sales of these products
                over the
                course of this financial year - we have seen strong growth over the
                course
                of the year so far.





·
            Start
                to sell complete turnkey systems based around our leading EchoscopeTM 3-D
                technology, to open markets in law enforcement and inspection - a
                great
                deal of our R&D expenditure has been directed towards refining our
                product and completing sales this year that are currently in our
                pipeline,
                with first deliveries occurring in this financial year.


9




·
            Continue
                to deliver to the Coast Guard on the contract we were awarded last
                July.
                Work on stage 2 began in the second quarter of this year and continues
                until at least the end of the financial
                year.




·
            Deliver
                on our first port security solution contract through the provision
                of our
                unique 3-D technology and other products and services, enabling us
                to
                provide complete solutions.




·
            Leverage
                our subsidiaries to take advantage of our lead in underwater sonar
                technology by cross marketing all group products and services from
                each
                company.





·
            Continue
                to review and refocus our cost base where necessary to achieve a
                cost
                level commensurate with our current level of
                activity.





Through
      these measures, we aim to move from cash negative for last year and the first
      quarter of this year to cash positive. We also aim to move from heavily
      loss-making for the past 2 years to profitable for the coming year, prior to
      any
      non-cash charges made to our income statement. Although we intend to pursue
      our
      plans aggressively as set forth in the previous paragraph, there can be no
      assurance that we will be successful in our attempt to make the company
      profitable in the near future, or ever.




**Inflation
      and Foreign Currency**





The
      Company maintains its books in local currency: US Dollars for the parent holding
      Company in the United States of America and the US operations, Pounds Sterling
      for UK operations and Norwegian Kroner for Norwegian operations.





The
      Company’s operations are primarily inside of the United States through its
      wholly-owned subsidiaries, though a significant proportion of revenues and
      costs
      are incurred outside of the US. As a result, fluctuations in currency exchange
      rates may significantly affect the Company's sales, profitability and financial
      position when the foreign currencies of its international operations are
      translated into U.S. dollars for financial reporting. In additional, we are
      also
      subject to currency fluctuation risk with respect to certain foreign currency
      denominated receivables and payables. Although the Company cannot predict the
      extent to which currency fluctuations may, or will, affect the Company's
      business and financial position, there is a risk that such fluctuations will
      have an adverse impact on the Company's sales, profits and financial position.
      Because differing portions of our revenues and costs are denominated in foreign
      currency, movements could impact our margins by, for example, decreasing our
      foreign revenues when the dollar strengthens and not correspondingly decreasing
      our expenses. The Company does not currently hedge its currency exposure. In
      the
      future, we may engage in hedging transactions to mitigate foreign exchange
      risk.





It
      is the
      opinion of the Company that inflation has not had a material effect on its
      operations.




**Financing
      Activities**





Since
      February 2005, we have raised approximately $36,724,289 in cash through the
      issuance in private offerings at various times of shares of our common stock,
      and units consisting of shares of preferred stock and warrants to purchase
      common stock.




In
      February 2005, we issued a total of 1,000,000 shares of our common stock for
      a
      total cash consideration of $800,534.




In
      October 2005, we issued a total of 15,000 Series A Preferred Stock (Sterling
      Denominated), since converted into 2,655,000 shares of common stock, for a
      total
      cash consideration of £1,500,000 equivalent to approximately $2,655,000, based
      upon a conversion ratio of $1.77 for each UK Pound at the time of the
      investment.




On
      April
      30, 2006, we issued to one investor a total of 7,320.88 shares of our Series
      A
      Preferred Stock to a group of individual investors for total cash consideration
      of £684,618.83 UK Pounds equivalent to $1,211,755 based upon a conversion ratio
      of $1.77 for each UK Pound at the time of the investment.




From
      June
      2006 through January 2007, we issued to one institutional investor units
      consisting 46,000 shares of our Series B Preferred Stock and four five year
      warrants to purchase 9.2 million shares of our common stock at a price ranging
      from $1.30 to $2.00 per share and 650,000 shares of our Common Stock for a
      total
      cash consideration of $4,600,000. Of these 46,000 shares of Series B Preferred
      Stock, 18,181 were redeemed in April 2007 and the remaining shares were
      converted into 2,781,900 shares of our common stock.


10




In
      July
      2006, we issued to two individual investors 820 shares of our Series A Preferred
      Stock for a total cash consideration of $82,000. These have since been converted
      into 820,000 shares of our common stock.




On
      October 31, 2006, we issued to one investor 500 shares of our Series A Preferred
      Stock for a total consideration of $50,000. These have since been converted
      into
      50,000 shares of our common stock.




In
      January 2007, we issued to one investor 3,000 shares of our Series B Preferred
      Stock plus five-year warrants to purchase 300,000 shares of our common stock
      at
      $1.30 per share and five-year warrants to purchase 300,000 shares of our common
      stock at $1.70 per share for a total cash consideration of $300,000. The 3,000
      shares of Series B Preferred Stock have since been converted into 300,000 shares
      of our common stock.




In
      April
      2007, we issued to an individual investor 25,000 shares of our common stock
      plus
      five-year warrants to purchase the same number of shares of common stock (of
      which 12,500 may be purchased at $1.30 and the balance at $1.70 per share)
      for a
      total of $25,000.




During
      April and May 2007, we issued to a group of investors a total of 15,000,000
      shares of our common stock plus five-year warrants to purchase the same number
      of shares of common stock (of which 7,500,000 may be purchased at $1.30 and
      the
      balance at $1.70 per share) for a total of $15,000,000.





In
      February 2008, we issued $12 million of 8.50% secured convertible debentures.
      This instrument is convertible into common stock at $1.05 per share. It is
      callable by the company at $2.50 after two years, $2.90 after three years and
      at
      $3.50 after four years. It matures at 130% after seven years.




**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off balance sheet arrangements that are reasonably likely to have
      a
      current or future effect on our financial condition, revenues, results of
      operations, liquidity or capital expenditures.


11





**Item
      6. Exhibits**




31
            Certifications
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to
                Rule 13a-14(a)




32
            Certifications
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002


12




**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




**Coda
                Octopus Group, Inc.**
              (Registrant)Date:
                September 17, 2008
            
            /s/ Jason
                ReidJason
                ReidPresident
                and Chief Executive Officer




Date:
                September 17, 2008
            
            /s/ Jody
                E. FrankJody
                FrankChief
                Financial Officer


13