[PART I - Financial Information](index=3&type=section&id=PART%20I%20-%20Financial%20Information) [Financial Statements](index=3&type=section&id=Item%201%3A%20Financial%20Statements) The company's financial statements for the period ended April 30, 2019, reflect significant year-over-year growth across assets, revenue, and profitability [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of April 30, 2019, the company's balance sheet strengthened significantly, driven by increased assets and stockholders' equity while liabilities decreased Consolidated Balance Sheet Highlights (Unaudited) | Account | April 30, 2019 ($) | October 31, 2018 ($) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **31,948,932** | **28,736,611** | **+11.2%** | | Cash | 9,257,932 | 7,512,422 | +23.2% | | Total Current Assets | 20,965,165 | 18,122,307 | +15.7% | | Property and Equipment, net | 6,121,877 | 5,246,183 | +16.7% | | **Total Liabilities** | **3,808,905** | **4,349,661** | **-12.4%** | | Total Current Liabilities | 2,847,583 | 3,241,211 | -12.1% | | **Total Stockholders' Equity** | **28,140,027** | **24,386,950** | **+15.4%** | [Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20%28Loss%29%20and%20Comprehensive%20Income%20%28Loss%29) The company achieved substantial revenue growth and a significant turnaround to net income for both the three and six-month periods ended April 30, 2019 Key Performance Indicators - Income Statement (Unaudited) | Metric | Three Months Ended April 30, 2019 ($) | Three Months Ended April 30, 2018 ($) | YoY Change | Six Months Ended April 30, 2019 ($) | Six Months Ended April 30, 2018 ($) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | **6,783,272** | **3,526,396** | **+92.4%** | **12,541,780** | **6,576,953** | **+90.7%** | | Gross Profit | 4,724,662 | 2,585,538 | +82.7% | 8,257,734 | 4,689,988 | +76.1% | | Income (Loss) from Operations | 2,282,753 | (80,569) | N/A | 3,625,224 | (152,415) | N/A | | **Net Income (Loss)** | **1,973,494** | **(77,325)** | **N/A** | **3,212,507** | **(245,264)** | **N/A** | | Diluted EPS | 0.18 | (0.01) | N/A | 0.30 | (0.03) | N/A | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity significantly increased for the six months ended April 30, 2019, primarily driven by net income and positive foreign currency translation - Total Stockholders' Equity grew from **$24,386,950** at October 31, 2018, to **$28,140,027** at April 30, 2019[14](index=14&type=chunk) - The growth in equity was primarily due to the net income of **$3,212,507** for the six-month period[12](index=12&type=chunk)[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company generated substantial cash from operating activities for the six months ended April 30, 2019, leading to a significant overall increase in cash Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended April 30, 2019 ($) | Six Months Ended April 30, 2018 ($) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | **3,208,619** | **242,715** | | Net Cash used in Investing Activities | (1,374,714) | (521,594) | | Net Cash used in Financing Activities | (481,231) | (211,029) | | **Net Increase in Cash** | **1,745,510** | **85,028** | | Cash at End of Period | 9,257,932 | 6,936,567 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes provide details on accounting policies, revenue recognition, customer concentration, segment performance, tax carryforwards, and subsequent events - The company adopted the new revenue recognition standard, Topic 606, on November 1, 2018, concluding that it did not have a material cumulative effect on financial statements as the previous policy was substantially consistent[19](index=19&type=chunk) - For the six months ended April 30, 2019, one customer accounted for **$3,209,220**, or **26% of net revenues**[53](index=53&type=chunk) - The company operates in two segments, Marine Technology (Products) and Marine Engineering (Services), with revenues for the six months ended April 30, 2019, almost evenly split at **$6,249,719** and **$6,292,061** respectively[65](index=65&type=chunk)[76](index=76&type=chunk) - As of October 31, 2018, the company had federal tax Net Operating Loss (NOL) carryforwards of **$8,353,186**, which will expire between 2028 and 2029[102](index=102&type=chunk) - Subsequent to the reporting period, on May 17, 2019, the company received a payment of **$166,514** representing short-swing profits recovered from a beneficial owner[108](index=108&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant revenue growth driven by both Marine Technology and Marine Engineering segments, alongside changes in gross margin, operating income, R&D investments, and the impact of Brexit and foreign currency fluctuations Six-Month Performance Comparison (Current vs. Previous Period) | Metric | Current Six Month Period (ended Apr 30, 2019) ($) | Previous Six Month Period (ended Apr 30, 2018) ($) | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **12,541,780** | **6,576,953** | **+90.7%** | | - Services Segment Revenue | 6,292,061 | 2,360,720 | +167% | | - Products Segment Revenue | 6,249,719 | 4,216,233 | +48% | | Gross Profit Margin | 65.8% | 71.3% | -5.5 p.p. | | Operating Income (Loss) | 3,625,224 | (152,415) | N/A | | Net Income (Loss) | 3,212,507 | (245,264) | N/A | - The company is developing a first-generation prototype Heads Up Display (HUD) for NAVSEA under a Cooperative Research and Development Agreement (CRADA), with the first prototype approved as 'trial ready' and live trials planned with NASA[145](index=145&type=chunk)[146](index=146&type=chunk) - Management identifies the UK's withdrawal from the EU (Brexit) as a significant concern that could affect its UK operations, which generate a substantial portion of earnings[115](index=115&type=chunk)[116](index=116&type=chunk)[121](index=121&type=chunk) - Fluctuations in foreign currency, particularly the weakening of the British Pound against the US Dollar, negatively impacted results, decreasing net income by **$116,177** and net assets by **$938,186** for the six-month period[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - As of April 30, 2019, the company had working capital of **$18.1 million** and significantly reduced its HSBC loan outstanding balance to **$1.3 million**[186](index=186&type=chunk)[188](index=188&type=chunk) [Quantitative and Qualitative Disclosures about Market Risks](index=43&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This section is not applicable as the company qualifies as a smaller reporting company - Disclosure about market risk is not required for smaller reporting companies[200](index=200&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of April 30, 2019, due to material weaknesses, with remediation efforts underway through increased accounting staff - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period[202](index=202&type=chunk) - The ineffectiveness is attributed to material weaknesses related to limited staffing and inadequate review procedures[203](index=203&type=chunk) - Remediation efforts include increasing the number of accounting staff to improve segregation of duties and financial review[204](index=204&type=chunk) [PART II - Other Information](index=44&type=section&id=PART%20II%20-%20Other%20Information) [Legal Proceedings](index=44&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not currently involved in any material lawsuits or legal proceedings[206](index=206&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A%3A%20Risk%20Factors) This section is not applicable as the company qualifies as a smaller reporting company - Disclosure of Risk Factors is not required for smaller reporting companies[207](index=207&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the reporting period, the company issued common stock to a director, exempt from registration under Section 4(2) of the Securities Act of 1933 - On or around February 3, 2019, the company issued **7,143 shares** of common stock to a director[207](index=207&type=chunk) - The securities were issued pursuant to an exemption from registration requirements under Section 4(2) of the Securities Act[208](index=208&type=chunk) [Default Upon Senior Securities](index=44&type=section&id=Item%203%3A%20Default%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[209](index=209&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not Applicable[210](index=210&type=chunk) [Other Information](index=44&type=section&id=Item%205%3A%20Other%20Information) No information was reported under this item [Exhibits](index=44&type=section&id=Item%206%3A%20Exhibits) The report includes required CEO and CFO certifications and XBRL-related documents filed as exhibits - Exhibits filed include CEO/CFO certifications (Rule 13a-14(a) and Section 906) and XBRL data files[211](index=211&type=chunk)[212](index=212&type=chunk)

PART I - Financial Information [Financial Statements](index=3&type=section&id=Item%201%3A%20Financial%20Statements) The company's unaudited statements show a significant turnaround with net income reaching $1.24 million from a prior-year loss [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $31.1 million and stockholders' equity increased to $26.0 million as of January 31, 2019 Consolidated Balance Sheet Highlights (as of Jan 31, 2019 vs. Oct 31, 2018) | Metric | Jan 31, 2019 (Unaudited) | Oct 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $19,907,816 | $18,122,307 | | Cash and Cash Equivalents | $8,801,189 | $7,512,422 | | **Total Assets** | **$31,057,332** | **$28,736,611** | | **Total Current Liabilities** | $3,931,152 | $3,241,211 | | Total Liabilities | $5,028,069 | $4,349,661 | | **Total Stockholders' Equity** | **$26,029,263** | **$24,386,950** | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Net revenues grew 88.8% year-over-year to $5.76 million, resulting in a net income of $1.24 million Income Statement Summary (Three Months Ended Jan 31) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $5,758,508 | $3,050,557 | +88.8% | | Gross Profit | $3,533,072 | $2,104,450 | +67.9% | | Income (Loss) from Operations | $1,342,471 | $(71,846) | Turnaround | | **Net Income (Loss)** | **$1,239,013** | **$(167,939)** | **Turnaround** | | **Diluted EPS** | **$0.12** | **$(0.02)** | **Turnaround** | [Consolidated Statement of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to $26.03 million, driven by net income and foreign currency translation adjustments - Stockholders' equity increased by **$1.64 million** during the quarter, mainly due to **net income of $1,239,013** and **other comprehensive income of $297,855**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company generated $2.42 million in cash from operations, ending the period with a cash balance of $8.80 million Cash Flow Summary (Three Months Ended Jan 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,418,625 | $(160,337) | | Net Cash used in Investing Activities | $(919,135) | $(245,822) | | Net Cash (used in) from Financing Activities | $(508,578) | $4,587,664 | | **Net Increase in Cash** | **$1,288,767** | **$5,137,442** | | **Cash at End of Period** | **$8,801,189** | **$11,988,981** | [Notes to (Unaudited) Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20%28Unaudited%29%20Consolidated%20Financial%20Statements) Key notes detail revenue recognition adoption, customer concentration, debt reduction, and subsequent real estate transactions - The company adopted the new revenue recognition standard, **Topic 606**, concluding it had **no material effect** on revenue reporting[19](index=19&type=chunk) - For the three months ended January 31, 2019, **two customers accounted for 45% of net revenues** ($2,616,171)[49](index=49&type=chunk) - Total loans and notes payable **decreased significantly to $1.41 million** from $2.02 million, primarily due to the repayment of a **$500,000 CEO loan**[51](index=51&type=chunk) - Subsequent to the quarter's end, the company sold a residential property for **$725,000** and contracted to purchase a new business property for **$684,000**[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q1 2019 results to an 88.8% revenue increase driven by both Products and Services segments [Consolidated Results of Operations](index=25&type=section&id=Consolidated%20Results%20of%20Operations) Revenue grew 88.8% YoY, driven by a 191% increase in the Services Segment, though gross margin declined due to sales mix Segment Revenue Growth (Q1 2019 vs Q1 2018) | Segment | Q1 2019 Revenue | Q1 2018 Revenue | Growth | | :--- | :--- | :--- | :--- | | Products Segment | $2,829,536 | $2,042,942 | +39% | | Services Segment | $2,928,972 | $1,007,615 | +191% | | **Total** | **$5,758,508** | **$3,050,557** | **+88.8%** | - The increase in Services Segment revenue was due to receiving **backlog defense contracts** for calendar years 2017 and 2018[108](index=108&type=chunk)[112](index=112&type=chunk) - **Gross margin percentage declined to 61.4%** from 69.0% YoY, reflecting a sales mix shift toward lower-margin services[113](index=113&type=chunk) - **R&D expenses decreased 14.8% YoY** due to the finalization of the Thermite® Octal development, but are expected to increase in fiscal 2019[114](index=114&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with $16.0 million in working capital and significantly reduced its debt - As of January 31, 2019, the company had **working capital of $16.0 million** and **stockholders' equity of $26.0 million**[127](index=127&type=chunk) - Overall loan indebtedness was **reduced to $1.41 million** from $6.91 million in the prior-year quarter, causing a **75.6% drop in interest expense**[121](index=121&type=chunk)[129](index=129&type=chunk) [Inflation and Foreign Currency](index=29&type=section&id=Inflation%20and%20Foreign%20Currency) Unhedged foreign currency exposure negatively impacted net income by approximately $69,390 and net assets by $1.19 million Impact of Foreign Currency Fluctuations (Q1 2019) | Metric | Effect of Currency Change | | :--- | :--- | | Revenues | $(199,898) | | Net Income | $(69,390) | | Net Assets | $(1,185,878) | - The company operates in multiple currencies and **does not currently hedge its currency exposure**, making it subject to risks from exchange rate fluctuations[133](index=133&type=chunk)[134](index=134&type=chunk) [Quantitative and Qualitative Disclosures about Market Risks](index=29&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This disclosure is not required for smaller reporting companies - Not required for smaller reporting companies[138](index=138&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Based on an evaluation as of January 31, 2019, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[140](index=140&type=chunk) - There were **no material changes** in internal controls over financial reporting during the quarter[142](index=142&type=chunk) PART II - Other Information [Legal Proceedings](index=30&type=section&id=Item%201%3A%20Legal%20Proceedings) The company is not aware of any legal proceedings that would have a material adverse effect on the business - The company is **not currently aware of any material legal proceedings**[143](index=143&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A%3A%20Risk%20Factors) This disclosure is not required for smaller reporting companies - Not required for smaller reporting companies[144](index=144&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 23,965 shares of common stock for $105,446 in a private placement exempt from registration - On November 16, 2018, the company issued **23,965 shares of common stock at $4.40 per share**, raising $105,446 in an unregistered sale[144](index=144&type=chunk)[145](index=145&type=chunk) [Other Items (3, 4, 5, 6)](index=30&type=section&id=Other%20Items%20%283%2C%204%2C%205%2C%206%29) The company reports no defaults on senior securities, notes mine safety is not applicable, and lists filed exhibits - Item 3: **No defaults upon senior securities**[146](index=146&type=chunk) - Item 4: **Mine Safety Disclosures are not applicable**[147](index=147&type=chunk) - Item 6 lists **exhibits filed**, including CEO/CFO certifications and XBRL documents[148](index=148&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 2018 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-38154 CODA OCTOPUS GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 34-200-8348 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Id ...