Quarterly rev of $4Million.... but NetLoss of $13Million
WOW.............. they are bleeding.
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Fiscal Year Ended Fiscal Year Ended % Change
April 30, 2015 April 30, 2014 2015 Period
As a % of As a % of to
Amount Revenues (1) Amount Revenues (1) 2014 Period
Revenues .......................................................... $ 4,105,424 100% $ 1,498,892 100% 174%
Cost of revenues ............................................... 4,671,403 114 1,510,336 101 209
Gross (loss) profit...................................... (565,979) (14) (11,444) (1) 4,846
Operating expenses:
Product development costs ........................... 4,149,388 101 4,564,898 305 (9)
Change in contract loss reserve ................... - - (785,000) -
Selling, general and administrative costs ...... 9,571,193 233 9,358,967 624 2
Total operating expenses ........................... 13,720,581 334 13,138,865 877 4
Operating loss .................................................. (14,286,560) (348) (13,150,309) (877) (9)
Interest (expense) income, net .......................... (31,634) (1) 29,656 2 (207)
Other income .................................................... 419,432 10
Foreign exchange (loss) gain ............................ (462,777) (11) 183,704 12 352
Loss before income taxes ................................. (14,361,539) (350) (12,936,949) (863) (11)
Income tax benefit ............................................ 1,137,872 28 1,745,895 116 (35)
Net loss ............................................................. (13,223,667) (322) (11,191,054) (747) (18)
Less: Net loss attributable to the
noncontrolling interest in Ocean Power
Technologies (Australasia) Pty Ltd ........... 109,115 — 221,862 — (51)
Net loss attributable to Ocean Power
Technologies, Inc.......................................... $ (13,114,552) (319)% $ (10,969,192) (732)% (20)%
(1) Certain subtotals may not add due to rounding.
Revenues
Revenues increased by $2.6 million, or 174%, to $4.1 million in fiscal 2015, as compared to $1.5 million in fiscal 2014.
The increase in revenue is primarily related to increased billable work for the removal of the anchoring and mooring equipment
from the seabed off the coast of Oregon, increased billable work under the current phase of our project with MES and revenue
related to the completion of our WavePort contract with the EU. These increases were partially offset by decreased revenue on
other billable development projects.
Cost of revenues
Cost of revenues increased by $3.2 million, or 209%, to $4.7 million in fiscal 2015, as compared to $1.5 million in fiscal
2014. The increase in cost of revenues is primarily related to costs for increased billable work for the removal of the anchoring
and mooring equipment from the seabed off the coast of Oregon, increased billable work under the current phase of our project
with MES and cost of revenue related to the completion of our WavePort contract with the EU. Our firm fixed price contract
with MES recorded under the percentage-of-completion method had an increase in estimated total costs of the project. This
increase in estimated project costs resulted in a gross loss and we recorded an accrual for the future anticipated loss on the
contract. These increases were partially offset by decreased cost of revenues on other billable development projects.
Some of our projects in fiscal 2015 and 2014 were under cost-sharing contracts. Under cost-sharing contracts, we receive
a fixed amount agreed upon with the customer that is only intended to fund a portion of the costs on a specific project. We fund
the remainder of the costs primarily as part of our product development efforts. Revenue is typically recorded using the
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percentage-of-completion method applied to the contractual amount agreed upon with the customer. An equal amount
corresponding to the revenue is recorded in cost of revenues resulting in gross profit on these contracts of zero. Our share of the
costs is considered to be product development expense. Our ability to generate a gross profit will depend on the nature of future
contracts, our success at achieving commercialization of our PowerBuoys and on our ability to manage costs incurred on our
fixed price contracts.
Product Development Cost
Product development costs decreased by $0.4 million, or 9%, to $4.1 million in fiscal 2015 as compared to $4.6 million in
fiscal 2014. The decrease in product development costs was related primarily to the substantial completion of our cost-sharing
contract with the DOE for our Reedsport project in Oregon, offset by increased costs associated with other internally funded
development projects. Over the next several years, it is our intent to fund the majority of our research and development expenses,
including cost-sharing arrangements, with sources of external funding. If we are unable to obtain external funding, we may curtail
product development expenses and/or scope as necessary.
Change in contract loss reserve
Change in contract loss reserve was $0 and $0.8 million in fiscal 2015 and 2014, respectively. This amount represents a
reversal of a previous project-specific reserve where the underlying project had encountered technical issues during deployment.
While the Company had no specific legal obligation to continue work on the project, management’s intention had been to
complete certain elements of the project. Effective as of April 30, 2014, management made a determination not to pursue its
efforts to complete the project and reversed the contract loss reserve.
Selling, general and administrative costs
Selling, general and administrative costs increased by approximately $0.2 million, or 2%, to $9.6 million for fiscal 2015 as
compared to $9.4 million for fiscal 2014. The increase was related primarily to legal fees to address the shareholder litigation
and related matters. In addition, costs increased related to third party consultant fees and patent costs due to shortening the
estimated useful lives for recording amortization expense. These increases were offset by decreased employee related costs and
decreased site development expenses related to our terminated project in Australia. In addition, during fiscal 2014, we had a
favorable adjustment for a doubtful allowance on a customer receivable. We believe that we have met our retention limit under
our D&O insurance policy during fiscal 2015 for shareholder litigation and future related legal costs will be paid by our insurance
carrier.
Interest (expense) income, net
Interest expense was $32,000 for fiscal 2015, as compared to interest income of $30,000 in fiscal 2014. This change was
related primarily to interest expense recorded for the repayment of funds received in March 2014 from ARENA of $5.2 million.
Foreign exchange (loss) gain
Foreign exchange loss was $463,000 for fiscal 2015, compared to a foreign exchange gain of $184,000 for fiscal 2014. The
difference was attributable primarily to the relative change in value of the British pound sterling, Euro and Australian dollar
compared to the US dollar during the two periods.
Other income
During fiscal 2015, we reached a favorable settlement with a vendor regarding a disputed transaction, which comprises the
amount of $185,000 recorded within other income. In fiscal 2015, we also received a refund of $234,000 related to research and
development expenditures in Australia.
Income tax benefit
During the years ended April 30, 2015 and 2014, we sold New Jersey state net operating losses in the amount of $14.0
million and $15.3 million, respectively, resulting in the recognition of income tax benefits of $1.1 million and $1.7 million,
respectively.
39
Net Loss Outlook
We have incurred net losses since we began operations in 1994. To achieve profitability, we believe we will need to increase
revenue and gross profit, control our fixed costs and possibly reduce our unfunded research and development expenditures.
We do not know whether or when we will become profitable because of the significant uncertainties with respect to our
ability to successfully commercialize our PowerBuoys in the emerging renewable energy market. Even if we do achieve
profitability at some point in the future, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Liquidity and Capital Resources
Since our inception, the cash flows from customer revenues have not been sufficient to fund our operations and provide the
capital resources for the planned growth of our business. For the two years ended April 30, 2015, our aggregate revenues were
$5.6 million, our aggregate net losses were $24.4 million and our aggregate net cash used in operating activities was $23.7
million.
Years Ended April 30,
2015 2014
Net loss ............................................................................................................... (13,223,667) $ (11,191,054)
Adjustments for noncash operating items ........................................................... 1,764,229 913,846
Net cash operating loss ....................................................................................... (11,459,438) (10,277,208)
Net change in operating assets and liabilities ...................................................... (5,714,790) 3,780,130
Net cash used in operating activities ................................................................... (17,174,228) $ (6,497,078)
Net cash provided by (used in) investing activities ............................................. 21,171,387 $ (6,445,638)
Net cash (used in) provided by financing activities ............................................ (100,659) $ 20,427,707
Effect of exchange rates on cash and cash equivalents ....................................... 419,425 $ 880
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