Ocean Power Technologies (OPT) is a pioneer in renewable wave-energy technology that converts ocean wave energy into electricity. The Company's proprietary Power Buoy System undergoes periodic full-scale ocean performance validation and integrates patented technologies in hydrodynamics, electronics, energy conversion, and computer control systems to extract the natural energy in ocean waves and to turn wave power into reliable, clean, and environmentally beneficial electricity for offshore applications and power requirements of the following markets: defence & security; oil & gas; ocean monitoring and offshore wind.
According to the Annual Financial Report, the Company experienced substantial and recurring losses in 2016 from operations. This caused an accumulated deficit of $177.9 million at the end of the 2016 fiscal year. The Company generated revenue of only $0.7 million in fiscal year 2016 compared to $4.1 million in 2015, which represented a decrease by $3.4 million or 83%. The decrease in revenue was due to a lack of billable work and revenue-producing contracts to fund the Company´s product development costs during the 2016 fiscal year. The Company generated revenue from the following customers: the EU for Wave Port project (58% in 2016 and 23% in 2015); the US Department of Energy (28% in 2016 and 37% in 2015); Mitsui Engineering & Shipbuilding (14% in 2016 and 40% in 2015).
Cost of revenue decreased by approximately $4.0 million, or 86%, to $0.7 million in the 2016 fiscal year, compared to $4.7 million in the 2015 fiscal year. The decrease in cost of revenue is related to lower costs incurred during 2016 as a result of decreased billable work on contracts performed in that period. Product development costs increased by approximately $2.9 million, or 70%, to $7.0 million in the 2016 fiscal year, compared to $4.1 million in the 2015 fiscal year. The increase in product development costs was related primarily to increased costs. Selling, general and administrative costs decreased by approximately $2.8 million, or 30%, to $6.7 million for 2016, compared to $9.6 million for 2015. The decrease was due to site development expenses incurred in 2015, which was related to the Company´s project in Australia, lower patent costs, lower recruiting and third party consultant fees in 2016.
The Company has incurred net losses since it began operations in 1994. The net loss in 2016 amounted to $13.08 million compared to $13.22 million in 2015. Aggregate revenue for the two-year period of from 2015 to 2016 were $4.8 million, aggregate net losses for the same period were $26.3 million and aggregate net cash used in operating activities was $28.1 million.To achieve profitability, the Company needs to increase revenue and gross profit, control fixed costs and reduce expenses, including unfunded product development expenditure.
In 2016, OPT held 62 U.S. patents, of which 48 are active and 14 have expired. A total of 22 of the active U.S. patents were issued with foreign patent protection. The patent portfolio includes patents and patent applications with claims directed to system design, control systems, power conversion, anchoring and mooring, and wave farm architecture. The expiration dates for the U.S. patents issued range from 2018 to 2032.
Since the 2002 fiscal year, government agencies have accounted for a significant portion of Company´s revenues. These revenues were largely for the support of the Company´s development efforts relating to technology and development of its Power Buoys. The Company aims to increase revenues from the sale or lease of its products and sales of services, but it is obvious that over the next few years the Company will need to raise additional external capital funding from commercial relationships, including cost-sharing, in order to fund the majority of product development efforts and be able to continue as a going concern.
If the Company is not successful in its efforts to raise additional capital sufficient to support its operations, it will be forced to cease operations and investors would lose their entire investment in the Company.