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OCEAN POWER TECHNOLOGIES 2018

Company´s losses caused an accumulated deficit of $197.5 million on April 30, 2018

Ocean Power Technologies was founded in 1984 and is headquartered in New Jersey. The company is the leader in ocean wave power conversion technology. The PB3 PowerBuoy™ is the company´s first fully commercial product which generates electricity by harnessing the renewable energy of ocean waves. In addition to PB3 PowerBuoy™, the Company continues to develop its PowerBuoy™ product line based on modular, ocean-going buoys, which have been periodically tested since 1997. The PB3 PowerBuoy™ generates power for use in remote offshore locations, independent of a conventional power grid.

In June 2018, the company entered into a contract with Premier Oil UK Limited (PMO) in the United Kingdom for the lease of a PB3 PowerBuoy™ to be deployed in one of PMO’s offshore fields in the North Sea. Under the agreement, the PowerBuoy™ will provide communications and remote monitoring services for PMO assets and will demonstrate its ability to monitor and alert vessels in the area.

In March 2018, Ocean Power Technologies entered into an agreement with ENI that provides for a minimum 24-month contract that includes an 18-month PB3 PowerBuoy™ lease and associated project management. The PB3 PowerBuoy™ will be deployed in the Adriatic Sea to advance ENI’s Clean Sea technology for marine environmental monitoring and offshore asset inspection using AUVs (autonomous underwater vehicles). The PB3 PowerBuoy™ will be used to demonstrate subsea battery charging, and eventually may be used to provide a stand-alone charging station and communications platform that would enable the long-term remote operation of AUVs. At the end of June 2018, the buoy build was 90% complete and a system level factory acceptance test was completed.

According to the Annual Financial Report, the company has currently four revenue-producing contracts or customers, compared to two of them in 2017. These four are: MES (Mitsui Engineering and Shipbuilding) in Japan, the U.S. Department of Defense, Office of Naval Research (ONR), ENI in the Adriatic Sea and PMO in the United Kingdom. MES includes engineering and other services for the PB3 PowerBuoy, shipped to Japan in February 2017 and successfully deployed off the coast of Japan in March 2017. The total percentage of MES revenue amounted to 43%, $218,000 in 2018 compared to 80% or $693,000 in 2017 and to 14% in 2016. In September 2016, Ocean Power entered into a contract with the U.S. Department of Defense, Office of Naval Research (ONR). The total percentage of ONR revenue amounted to 18% or $71,000 in 2018, compared to 20% or $178,000 in 2017 and 0% in 2016. The total percentage of ENI revenue amounted to 33% or $171,000 in 2018 compared to 0% in 2017. The total percentage of PMO revenue amounted to 10% or $51,000 in 2018, compared to 0% in 2017.

As of April 30, 2018, the company´s unfilled firm orders were $0.7 million, compared to $0.3 million on April 30, 2017. The company´s backlog can include both funded amounts, which are unfilled firm orders for which funding has been both authorized and appropriated by the customer and unfunded amounts.

Since the inception, the cash flows from customer revenues have not been sufficient to fund the company´s operations and provide the capital resources for the business. The company´s losses have caused an accumulated deficit of $197.5 million on April 30, 2018. Revenues for the fiscal years ended April 30, 2018 and 2017 were approximately $0.5 million and $0.8 million, respectively. The decrease of approximately $0.3 million or 39% over 2017 was attributable to the MES and ONR contracts being completed in the second quarter of fiscal year 2018, partly offset by the new ENI and Premier Oil contracts.

Cost of revenues for the fiscal years ending April 30, 2018 and 2017 were approximately $0.8 million and $0.9 million, respectively. The decrease of approximately $0.1 million or 19% over 2017 was due to lower revenue in the current year as compared to the previous year.

Product development costs consist of salaries and other personnel-related costs and the costs of products, materials and outside services used in product development and unfunded research activities. Product development costs during the fiscal year ending April 30, 2018 were $4.3 million as compared to $5.0 million for fiscal year 2017. The decrease of $0.7 million or 14% is primarily attributable to lower costs mainly related to redesigned commercial PB3 and preliminary design of PB15 in fiscal year 2017.

Selling, general and administrative costs during the fiscal year months ending April 30, 2018 were $7.0 million as compared to $6.6 for fiscal year 2017. The increase of $0.4 million or 6% is primarily attributable to higher employee costs of $0.7 million. 

For the two years ending April 30, 2018, the aggregate revenues were $1.4 million, while the aggregate net losses were $19.6 million, $10.1 million in 2018 and $9.5 million in 2017. The aggregate net cash used in operating activities was $20.7 million. 

Based on the company’s cash and cash equivalents and marketable securities balances as of April 30, 2018, the Company believes that it will be able to finance its capital requirements and operations into the quarter ending April 30, 2019, so that the company will continue as a going concern, based on its ability to raise additional external capital and increase revenues.

The company, however, cannot be assured that it will be able to increase its revenues and cash flow to a level which would support operations and provide sufficient funds to pay obligations for the foreseeable future. Furthermore, the company cannot be assured that it will be able to secure additional financing or raise additional capital if such financing would be extended. If Ocean Power Technologies is unable to raise additional capital and generate a positive cash flow, it is unlikely that it will be able to continue as a going concern and would be forced to cease operations, in which case investors would lose their entire investment in the company.