OPTT US Equity☆

10-K

1

form10-k.htm

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

Form

10-K

For the fiscal year ended April 30, 2021

or

For the transition period from to .

Commission

File Number 001-33417

Ocean

Power Technologies, Inc.

28

ENGELHARD DRIVE, SUITE B

MONROE

TOWNSHIP, NJ 08831

(Address

of principal executive offices, including zip code)

Registrant’s

telephone number, including area code: (609) 730-0400

Securities

registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Exchange on Which Registered

Common Stock, par value $0.001 NYSE American

Securities

registered pursuant to Section 12(g) of the Act:

None

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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 [X] No [ ]

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule

405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit such files). Yes [X] No [ ]

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Emerging growth company [ ]

If

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]

Indicate

by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. [X]

Indicate

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The

aggregate market value of the common stock of the registrant held by non-affiliates as of October 31, 2020, the last business day of

the registrant’s most recently completed second fiscal quarter, was $40.8 million based on the closing sale price of the registrant’s

common stock on that date as reported on the Nasdaq Capital Market.

The

number of shares outstanding of the registrant’s common stock as of July 15, 2021 was 52,458,011.

OCEAN

POWER TECHNOLOGIES, INC.

ANNUAL

REPORT ON FORM 10-K

TABLE

OF CONTENTS

Page

PART I

Item 1. Business 2

Item 1A. Risk Factors 16

Item 1B. Unresolved Staff Comments 28

Item 2. Properties 28

Item 3. Legal Proceedings 28

Item 4. Mine Safety Disclosures 29

PART II

Item 6. Selected Financial Data 30

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38

Item 8. Financial Statements and Supplementary Data 39

Item 9A. Controls and Procedures 39

Item 9B. Other Information 39

PART III

Item 10. Directors, Executive Officers and Corporate Governance 40

Item 11. Executive Compensation 40

Item 14. Principal Accountant Fees and Services 40

PART IV

Item 15. Exhibits, Financial Statement Schedules 41

PowerBuoy®

and the Ocean Power Technologies logo are trademarks of Ocean Power Technologies, Inc. All other trademarks appearing in this annual

report are the property of their respective holders.

i

Special

Note Regarding Forward-Looking Statements

We

have made statements in this Annual Report on Form 10-K (the “Annual Report”) in, among other sections, Item 1 - “Business,”

Item 1A - “Risk Factors,” Item 3 - “Legal Proceedings,” and Item 7 - “Management’s Discussion and

Analysis of Financial Condition and Results of Operations” that are forward-looking statements. Forward-looking statements convey

our current expectations or forecasts of future events. Forward-looking statements include statements regarding our future financial

position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “may,”

“continue,” “estimate,” “intend,” “plan,” “will,” “believe,”

“project,” “expect,” “anticipate” and similar expressions may identify forward-looking statements,

but the absence of these words does not necessarily mean that a statement is not forward-looking.

Any

or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. We have based these forward-looking statements

on our current expectations and projections about future events and financial trends that we believe may affect our financial condition,

results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or unknown

risks and uncertainties, including the risks, uncertainties and assumptions described in Item 1A - “Risk Factors.” In light

of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur

as contemplated and actual results could differ materially from those anticipated or implied by the forward-looking statements.

You

should not unduly rely on these forward-looking statements, which speak only as of the date of this filing. Unless required by law, we

undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise.

Our

fiscal year begins on May 1 and ends on April 30. When we refer to a particular fiscal year, we are referring to the fiscal year ending

on April 30 of that year. References to fiscal 2021 are to the fiscal year ended April 30, 2021. When the term “twelve month ended”

is used, this is synonymous with “fiscal year ended.”

Unless

the context indicates otherwise, the terms “Company,” “Ocean Power Technologies,” “OPT,” “we,”

“our” or “us” as used herein refers to Ocean Power Technologies Inc. and its subsidiaries.

ii

PART

I

ITEM

1. BUSINESS

Overview

We

are a marine power equipment, data solutions and service provider. We control the design, manufacture, sales, installation, operations

and maintenance of our solutions and services while working closely with commercial, technical, and other development partners that provide

software, controls, mechatronics, sensors, integration services, and marine installation services. We believe our renewable autonomous

ocean solutions deliver power and data collection, analysis and communication in remote ocean environments, allowing users to gather

actionable intelligence with their ocean jurisdictions. Our mission and purpose are to provide intelligent maritime solutions and services

that enable safer and more productive ocean operations for the defense and security, offshore oil and gas, science and research, and

offshore wind markets. We achieve this through our proprietary, state-of-the-art technologies that are at the core of our clean and renewable

energy platforms upon which we offer our solutions and services.

We

continue to develop and commercialize our proprietary systems that generate electricity by harnessing the renewable energy of ocean waves

for our PowerBuoy® (“PB3”), and solar power for our hybrid PowerBuoy® (the “hybrid”). The PB3 uses proprietary

technologies that convert the kinetic energy created by the heaving motion of ocean waves into electricity. Our strategy includes developing

complete solutions and services, including cloud-based delivery systems for ocean data and predictive analytics to provide actionable

intelligence for our clients. Based on feedback from our current customers, discussions with potential customers in the defense and security,

offshore oil and gas, science and research, and offshore wind markets, as well as government applications in fishery protection and protected

marine areas, together with our market research and publicly available data, we believe that numerous markets have a direct need for

our solutions. Our recent projects have been in the offshore oil and gas and science and research industries. We believe there is an

increasing need for our products and services in areas such as fishery protection, offshore windfarm support, and maritime domain awareness

applications. We believe that having demonstrated the capability of our solutions, we can advance our product and services and gain further

adoption from our target markets. Our marketing efforts are focused on offshore locations that require a cost-efficient solution for

renewable, reliable, and persistent power and communications, either by supplying electric power to payloads that are integrated directly

with our product or located in its vicinity, such as on the seabed and in the water column. We believe we are the leader in offshore

autonomous ocean wave power conversion technology which provides renewable power for offshore operations that were previously logistically

problematic and difficult to decarbonize.

We

are continuing to build upon our mission of connecting the oceans with those who operate and manager the resource in the environment.

We do this through our solution offerings, that are based on our proprietary renewable power platforms and engineering skills. Our solutions

focus on three major services areas, Data as a Service, supported and enabled by Power as a Service, and underpinned by our Strategic

Consulting Services, which we expanded with the acquisition of 3dent Technology, LLC (“3Dent”), in February 2021. Over the

course of fiscal 2022, we intend to continue to grow our service sectors and develop, evolve, and strengthen our solutions.

Our

Power as a Service segment delivers value to customers by utilizing our managed power platforms, such as the PB3 PowerBuoy® or hybrid

PowerBuoy®, and subsea battery for topside and subsea power applications. Our focus for this segment is on bringing autonomous clean

power to our customers wherever it is required. On our project with Eni S.p.A. (“Eni”), we utilized our PB3 PowerBuoy®,

which operated in the Adriatic Sea for

over 600 days of continuous operation as part of Eni’s resident autonomous underwater vehicle (“AUV”) feasibility

studies. During commercial operations, an AUV would remain on site to perform various inspection, maintenance, and repair tasks. As demonstrated

during our project with Eni, our Power solutions generated sufficient power that could, with client assets extend missions for longer

durations.

Our

Data as a Service segment is an evolution of the work we did for Premium Oil (now known as Harbour Energy) in the North Sea in 2019.

Since then, we have been developing a Maritime Domain Awareness solution (“MDA-S” or “MDA”) to introduce edge

computing and artificial intelligence modules that can be delivered to customers via cyber secure cloud environments.

Our

Strategic Consulting Services, materially strengthened by the acquired 3Dent team, focus on delivering value to our customers in the

areas of ocean engineering, structural and dynamic analysis, Front End Engineering and Design (“FEED”) studies, and motion

simulation. These services can be delivered as part of our broader Power and/or Data as a Service utilizing our solutions or on a standalone

basis. In the near term, we are focusing on increasing our market share in the floating offshore wind market and the broader floating

foundation design market, as well as our business with offshore oil and gas customers.

Throughout

FY21 we delivered several transactions and projects laying the foundations for our growth in FY22. In February 2021, the Company acquired

all the outstanding equity interest of 3Dent, a company based in Houston, Texas, that offers offshore engineering and design services

that are complementary to our technology and products and strengthen our Strategic Consulting Services.

In

November 2020, the Company entered into an agreement with the Offshore Operators Committee (“OOC”) under which the Company

will provide engineering and technical services for a new project under the DeepStar Global Technology Consortium Program. This forms

part of our Power as a Service offering.

In

October 2020, the Company entered into an agreement with Adams Communication & Engineering Technology, Inc. (“ACET”)

to conduct a feasibility study for the evaluation of a PB3 power and 5G communications solution in support of the U.S. Navy’s Naval

Postgraduate School’s Sea, Land, Air, Military Research Initiative (“SLAMR”). This forms part of our Data as a Service

division.

We

also strengthened our balance sheet by raising over $81.0 million of cash through At the Market (“ATM”) and equity line of

credit (“ELOC”) programs with Alliance Group Partners (“AGP”) and Aspire Capital (“Aspire”).

We

were incorporated under the laws of the State of New Jersey in April 1984 and began commercial operations in 1994. On April 23, 2007,

we reincorporated in Delaware.

Our

Solutions and Power Generating Platform Services

PB3

PowerBuoy®

The

PB3 generates electricity by harnessing the renewable energy of ocean waves. The PB3 features a unique onboard power take-off (“PTO”)

system, which incorporates both energy storage and energy management and control systems. The PB3 generates a nominal name-plated capacity

rating of up to 3 kilowatts (“kW”)of peak power during recharging of the onboard batteries. Power generation is deployment-site

dependent. Our standard energy storage system (“ESS”) has an energy capacity of up to a nominal 150 kW-hours to meet specific

application requirements.

The

PB3 is designed to generate power for use independent of the power grid in remote offshore locations. The hull consists of a main spar

structure loosely moored to the seabed and surrounded by a floating annular structure that can freely move up and down in response to

the passage of the waves. The PTO system includes a mechanical actuating system, an electrical generator, a power electronics system,

our control system, and our ESS which is sealed within the hull. As ocean waves pass the PB3, the mechanical stroke action created by

the rising and falling of the waves is converted into rotational mechanical energy by the PTO, which in turn, drives the electric generator.

The power electronics system then conditions the electrical output which is collected within an ESS. The operation of the PB3 is controlled

by our customized, proprietary control system.

The

control system uses sensors and an onboard computer to continuously monitor the PB3 subsystems. We believe that this ability to optimize

and manage the electric power output of the PB3 is a significant advantage of our technology. In the event of large storm waves, the

control system automatically locks the PB3, and electricity generation is suspended. However, the load center (either the on-board payload

or one in the vicinity of the PB3) may continue to receive power from the ESS. When wave heights return to normal operating conditions,

the control system automatically unlocks the PB3 and electricity generation and ESS replenishment recommences. This safety feature helps

to prevent the PB3 from being damaged by storms.

The

PB3 can be transported over land to the deployment port using conventional transportation methods. Once at port, the PB3 can be lifted

into the water or onboard a vessel using a readily available crane of appropriate capacity. The PB3 may then be towed to site using a

standard vessel (if the location is within an appropriate distance from the port), or the PB3 may be carried aboard a vessel to its offshore

location and craned into the water at site. The PB3 is then attached to the mooring system, which is installed during a separate operation,

after which a brief commissioning process places the PB3 into operation.

We

believe that using wave energy for electricity generation has the following potential benefits, compared to existing incumbent solutions.

Based

on our market research and publicly available data, including but not limited to the U.S. Department of Energy (“DOE”) 2019

Powering the Blue Economy Report, the Westwood Energy World ROV Operations Forecast 2019-2023, and the World Bank Database, we believe

that numerous markets may have a direct need for our PB3 including defense and security, offshore oil and gas, science and research,

and offshore wind, as well as government applications in fishery protection and marine protected areas. Depending on payload power requirements,

sensor types and other considerations, we have found that our PB3 could satisfy several application requirements within these markets.

We believe that the PB3 can generates sufficient power to meet the requirements of many potential customer applications within our target

markets, and that the hybrid could provide ample power in geographies where wave conditions may not be sufficient to allow the PB3 to

generate sufficient power.

hybrid

PowerBuoy®

The

Company has product launched a hybrid PowerBuoy® that is a solar powered surface buoy, compared to the wave power generating PB3.

The hybrid PowerBuoy® is powered primarily through solar panels with an efficient and clean burning external combustion Stirling

engine to provide back-up power and is capable of providing reliable power in remote offshore locations, regardless of ocean wave conditions.

We believe this product is complementary to the PB3 by providing the Company the opportunity to address a broader spectrum of customer

deployment needs, including low-wave environments, with the potential for greater product integration within each customer project. It

is primarily intended for shorter term deployment applications, such as electric remotely operated vehicle (“eROV”) and autonomous

underwater vehicle (“AUV”) inspections and short-term maintenance, topside surveillance and communications, and subsea equipment

and controls. The hybrid can be quickly deployed and offers customers a cost-effective solution. The design has a high payload capacity

for communications and surveillance, with the capability of being tethered to subsea payloads such as batteries, or with a conventional

anchor mooring system. The hybrid generates power from both an array of solar panels and an efficient, clean burning 1 kW Stirling engine

fueled by liquid propane. This energy is stored in onboard batteries which power subsea and topside payloads. The Company has designed

the hybrid with a Stirling engine backup system to outperform traditional diesel buoys, which we believe have more frequent service and

refueling intervals and higher carbon intensities. We believe the hybrid will be able to operate over a broad range of temperature and

ocean wave conditions.

The

towable, boat-shaped hull design of the hybrid is appropriate for deployment throughout the world. Power is generated independent of

wave activity, making it a good solution for providing power through extreme weather and in heaving seas, or in calm, low wave environments

and is complimentary to the PB3.

As

with the PB3, the control system uses sensors and an onboard computer to continuously monitor the hybrid subsystems. We believe that

this ability to optimize and manage the electric power output of the hybrid is a significant advantage of our technology. In the event

of extended cloudy periods, the control system automatically switches electricity generation from the solar panels to the backup engine.

However, the load center, either the on-board payload or one in the vicinity of the hybrid, may continue to receive power from the on-board

ESS. When more suitable solar power generation conditions return, the control system automatically stops the backup up engine and ESS

replenishment recommences by way of solar electricity generation.

The

hybrid is designed for use with a single point umbilical and mooring but can be adapted for a 3-point mooring installation for use as

a temporary replacement for PB3 installations during planned maintenance or repairs.

The

hybrid can be transported over land to the deployment port using conventional transportation methods. Once at port, the hybrid can be

lifted into the water or onboard a vessel using a readily available crane of appropriate capacity. The hybrid may then be towed to site

using a standard vessel (if the location is within an appropriate distance from the port), or the hybrid may be carried aboard a vessel

to its offshore location and craned into the water at site. The hybrid is then attached to the single point mooring system, which is

installed during a separate operation, after which a brief commissioning process places the hybrid into operation.

The

hybrid is configured with a nominal 30 kW-hours of battery energy storage and approximately 1 megawatt-hour (“MWh”) of stored

energy in the propane system. While the batteries are primarily charged through solar power generation, the propane powered Stirling

engine system on the hybrid can be considered reserve energy storage, with propane having a much higher energy storage density than lithium-ion

batteries. It can be utilized when needed based on load demand and will provide approximately 1 MWh of stored energy capacity. We believe

that this amount of stored energy offers an attractive local, autonomous energy solution for clients in a range of industries, including

but not limited to offshore oil and gas and marine observation, particularly for shorter term deployments.

Subsea

Battery

We

have product launched a subsea battery that is complementary to both of our PB3 and hybrid products and can be deployed together with

our PowerBuoys® or on its own. It offers customers the option of placing additional modular and expandable energy storage on the

seabed near existing or to be installed subsea equipment. Our lithium-ion subsea batteries supply power that can enable subsea equipment,

sensors, communications and AUV and eROV recharge. Our PB3 and hybrid are complimentary to the subsea batteries by providing a means

for recharging during longer term deployments, or the batteries can be used independently for shorter term deployments.

The

subsea battery has been designed to provide continuous and/or short-term power supply from its integrated energy storage system, enabling

us to supply into a range of industries and applications, from backup power to critical subsea infrastructure to continuous operation

of subsea equipment, such as electric valves. The base design of the subsea battery has a nominal 100 kW-hours of energy storage. The

subsea battery can be transported over land to the deployment port using conventional transportation methods. Once at port, the subsea

battery can be lifted onboard a vessel using a readily available crane of appropriate capacity. The battery can then be carried aboard

a vessel to its offshore location and craned into the water at site. It comes installed on a ready deployable subsea skid suitable for

installation on the seabed. The subsea battery can be integrated into other subsea equipment on land prior to deployment. The battery

is then connected to the other components on the seabed with the use of an eROV.

Maritime

Domain Awareness Solution

The

International Maritime Organization defines Maritime Domain Awareness as the effective understanding of any activity that could impact

upon the security, safety, economy, or environment. Since 2002 the United States of America, for example, has had an active strategy

to secure the Maritime Domain. Furthermore, in 2020 US Coast Guard elevated Illegal, Unreported and Unregulated (“IUU”) fisheries,

one aspect of MDA security, as the leading global maritime threat. It is estimated that tens of billions of Dollars are lost every year

to IUU fishing alone.

We

intend our MDA Solution payload to consist of a high-definition radar, gyro-stabilized high-definition optical and thermal imaging cameras,

vessel automatic identification system (“AIS”) detection, and integrated command and control software and as customer needs

dictate. Capabilities include 24/7 vessel tracking, automatic radar plotting, automated vessel warnings, and high-definition optical

and thermal video surveillance capable of providing evidentiary backup of activity to aid in prosecution.

We

intend data from our MDA solution will be processed onboard our buoys using edge computing, developed together with our software partners,

transmitted to shore-based command stations via cyber-secure Wi-Fi, cellular, and/or satellite systems, depending upon location, and

then further processed in our cloud-based analytics platform. Surveillance data can be integrated with readily available marine monitoring

software or with our own MDA software solution developed together with leading partners in the technology industry to provide command

and control features of a multi-buoy surveillance network. The data can also be integrated with satellite, weather, bathymetric, and

other data feeds to form a detailed surface and subsea picture of a monitored area.

A

single buoy Maritime Domain Awareness Solution, coupled with a PB3 PowerBuoy®, can monitor vessel traffic, with or without AIS turned

on, across an area approximately 1,300 square nautical miles of ocean territory on a permanent or temporary basis, with the ability to

link multiple surveillance assets together over large ocean areas giving end-users visibility into potentially damaging environmental

or illegal activities. Customized solutions are also available including the addition of subsea sensors to monitor for acoustic signatures,

tsunami, and water quality.

Strategic

Consulting Services

In

addition to work being performed by OPT for the DeepStar project, through our technology subsidiary, 3Dent, we also offer a full range

of high-level offshore engineering, including providing consulting engineering and design services to offshore wind developers, offshore

construction companies, drilling contractors, major oil companies, service companies, shipyards, and engineering firms. 3Dent’s

team of dedicated consultants/designers has expertise in structural engineering, hydrodynamics and naval architecture. Among its services

is a focus on addressing the issues current or would-be owners of offshore floaters, jackups, and lift boats have with their fleet. 3Dent’sservices

include simulation engineering, software engineering, concept design and motion analysis.

Competitive

Advantages

We

intend to commercializing our products and solutions by targeting customers in our principal markets (defense and security, offshore

oil and gas, science and research, and offshore wind, as well as government applications in fishery protection and marine protected areas)

that require reliable and persistent power sources in remote offshore locations for short and long-term deployments. We believe that

our solutions and our existing commercial relationships provide the following competitive advantages in our target markets:

Market

Opportunities

The

Company takes a rigorous approach to market evaluation. Utilizing publicly available and purchased data, we evaluate total addressable

market sizes. We apply screening criteria to narrow our focus within these markets and identify sub-segments and associated service addressable

market sizes. These market evaluations are updated on an ongoing basis throughout the year and more formally twice annually in line with

our financial calendar. In 2019 the DOE’s Water Power Technology Office (WPTO) released the report Powering the Blue Economy:

Exploring Opportunities for Marine Renewable Energy in Maritime Markets. The report described eight non-grid applications where renewable

marine energy could provide consistent, reliable power. The identified marine energy applications are ocean observation, underwater vehicle

charging, marine aquaculture, marine algae, seawater mining, seawater desalination, coastal resiliency and disaster recovery, and isolated

communities. We have been focused on addressing the energy needs of many of these applications (e.g., ocean observation, underwater vehicle

charging), and other offshore applications (e.g., maritime domain awareness, well-head monitoring and subsea equipment control).

Offshore

Oil and Gas

We

believe the offshore oil and gas industry is undergoing a significant transformation as it continues to invest in new technologies that

enable carbon reduction, cost savings and the electrification and digitization of operations. The industry encompasses more than 10,000

offshore sites, including exploration, production, reservoir management, and sites pending decommissioning based on information from

organizations such as the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) and industry organizations and publications.

We believe that we have opportunities to implement one or more PB3s at some of these sites to provide power in applications that are

not currently possible, displace current power solutions, or augment existing technologies. This is partially driven by the growing demand

for electrification. For example, according to a 2019 Rystads report, Norway is estimated to have 40% of its oil and gas production from

electrified fields, as well as a growing desire for decarbonization and autonomous operations. Similarly, the market for remote and autonomous

charging of subsea assets, such as ROVs and AUVs, is rapidly taking shape. Based on various reports, other applications in the oil and

gas market include providing power to unmanned platforms and area surveillance during decommissioning activities. Although estimates

vary in these reports, they generally point towards more than 4,000 platforms (and corresponding wells) that need to be decommissioned

over the next 10 years across the globe. We see this market materializing primarily in the North Sea and regions such as Brazil and Australia.

Furthermore, there is an increasing market demand for providing interim power solutions for tie-backs where umbilicals are exhibiting

failures.

Defense

and Security

We

believe that our PB3 is uniquely positioned to be used to provide power and communications for multiple applications within the defense

and security markets. The PB3’s ability to power multiple payloads may be an attractive feature for these markets, as their systems

can be easily integrated into other PowerBuoy® applications allowing their operation to be concealed. An example application for

domestic and international defense departments and defense contractors includes forward deployed energy and communications outposts (which

is a current U.S. Department of Defense program), both above and below sea surface, as indicated in the completed study for the Naval

Postgraduate School. Other example of applications includes perimeter security, early detection and warning systems, remote sensing stations,

high frequency radar, sonar, electro-optical and infrared sensors for maritime security, network communications systems, and unmanned

underwater vehicle docking stations.

IUU

fishing has become a global issue with both environmental and economic consequences. According to a report published in Sciences Advances

by The University of British Columbia in February 2020, it is estimated the global economic impact from illegal fishing to be as high

as $50 billion. Most exclusive economic zone monitoring is done by offshore patrol vessels (“OPV”), which is one of the fastest

growing naval product markets with around 1,242 OPVs in service currently. We believe that our autonomous surveillance solution, which

can be combined with satellite imagery, can deliver substantial economic impact to governments over incumbent solutions in securing remote

fisheries and MPAs. In the USA specifically, IUU fishing is considered a major maritime threat by the Department of Homeland Security.

Science

and Research

The

science and research market provides environmental intelligence to the entire ocean enterprise, which supports ocean measurement, observation

and forecasting, and is an important provider of information to maritime commerce and the entire “blue economy.” Maritime

commerce and the scientific community depend on information in areas such as meteorology, climate change, ocean currents, and biological

processes to inform operations and development. These groups often require a power and communications solution in remote offshore locations.

Additionally, the increased interest in protecting marine habitats offers opportunities to collaborate with governments and NGOs to monitor

marine sanctuaries. The European Union’s Copernicus Program is estimated to have enabled € 190 million in revenues during

2018 for ocean monitoring alone and this is expected to reach € 206 million in 2020 with an average growth rate of 4% annually.

Offshore

Wind and Other Markets

We

believe that opportunities also exist in other markets such as supporting offshore windfarm development and aquaculture. Based on an

article in Wind Power Monthly in October 2019, the offshore wind fleet is forecast to grow 15-fold by 2040 and move further offshore

with Europe alone connecting over 500 turbines in 2019. Whilst these turbines develop significant power, there are opportunities pre-installation

of the turbines; to autonomously collect ocean data during the early stages and monitoring of marine habitats during construction. To

mitigate carbon emissions there are also opportunities to support ongoing survey work once windfarms are operational and to provide communication

stations for aerial drones providing maintenance materials. Furthermore, the United States of America recently approved the permits for

the first major utility scale offshore windfarm. Providing wave power solutions to utility scale renewable developments offers an attractive

proposition to support renewable power and autonomous operations. We believe that our solutions can support aquaculture development with

systems such as species escape tracking, effluent monitoring, and other water quality considerations.

Business

Strategy

During

fiscal 2021, we advanced our marketing programs, products, and solutions. We have made progress in transitioning from R&D to commercialization

and we intend to build on these efforts by implementing processes and solutions that cover the entire life cycle, from demand generation

to close of contract, and from channel strategies to customer care.

Most

of the Company’s opportunities with potential customers have been for projects in Western Europe, including the North Sea, as well

as North America and Asia. Nearly two-thirds of these opportunities have progressed past initial feasibility and non-disclosure agreement

stages to more detailed, confidential discussions around specific customer applications.

Many

proposal requests are for projects where one of our PowerBuoy® products, either the PB3, the hybrid, or our subsea battery is part

of a larger solution deployment, and typically include the potential lease or sale of one or more PowerBuoys®, as well as required

services and maintenance support. A majority of hybrid inquiries are for shorter term deployments in calmer waters. Historically, demonstration

projects have been a necessary step toward broad solution deployment and revenues associated with specific applications. A proposal phase

typically lasts from three months to more than one year. During the demonstration project specification, negotiation and evaluation period,

we are often subject to the prospective customer’s vendor qualification process, which entails substantial due diligence of our

company and capabilities and may include negotiation of standard terms and conditions. Many proposals contain provisions which would

mandate the sale or lease of our PowerBuoy® product upon successful conclusion of the demonstration project.

We

believe this is an accurate depiction of the overall sales cycle for new technology in each of our target markets, including our products

and solutions. Cycle times for each step of the sales cycle will vary depending on several customer factors, including, but not limited

to, technical evaluation, project priorities, project funding approval process, and alignment of new technology integration with the

customer’s broader operational strategy. We believe that the resulting evidence of potential demand, vis-à-vis specific

application proposal requests, is indicative of progress in our commercialization strategy. We believe that we have the potential for

growth as a result of our positioning for higher volume production of our PowerBuoy® products and the initial indications of demand

for our PowerBuoy® products in multiple customer applications.

The

Company is pursuing a long-term growth strategy to expand its market value proposition while building the Company’s revenue base.

This strategy includes partnerships with leading companies in adjacent and complementary markets. We continue to commercialize our PowerBuoy®

products for use in remote offshore power and real-time data communications applications, and in order to achieve this goal, we are pursuing

the following business objectives:

Through

its 3Dent Technology subsidiary, the Company plans to expand its customer base and increase its revenue base, by providing consulting

engineering and design services to offshore wind developers, offshore construction companies, drilling contractors, major oil companies,

service companies, and engineering firms.

Marketing

and Sales

We

continue to enhance our marketing capabilities across our target markets, and we are actively marketing our products and solutions.

We currently use a direct sales force consisting of employees and industry expert consultants. Because our solutions use technology which

is not yet fully adopted by our target markets, we expect that the customer decision process could require us to spend substantial time

educating end-users and stakeholders, which may result in a lengthy sales cycle.

In

the past year, given the global pandemic COVID-19 restrictions, many conferences and trade shows were cancelled, rescheduled, or held

virtually. OPT attended and presented at a number of these virtual conferences. Given the progress being made globally in reducing COVID

through vaccines and other practices, we are starting to see in person conferences being scheduled for the second half of 2021. We have

plans to attend and present at a few conferences and trade shows in the U.S., Europe, and Asia.

We

market our products and solutions to companies and entities requiring remote offshore power and data services, including for example,

offshore oil and gas companies. We also see opportunities for defense and security applications such as maritime domain awareness solutions

that require autonomous offshore power and data gateways.

Additionally,

we seek to enter into strategic relationships to develop application solutions with commercial and military sensor and equipment manufacturers.

Competition

We

expect to compete with other providers of in-ocean autonomous power sources, primarily consisting of subsea batteries, solar and fossil-fuel

power sources, where many of the providers are substantially larger than OPT and may have access to greater financial resources. Incumbent

sources of in-ocean power may also represent established and reliable power sources and may have already gained customer acceptance.

Our ability to compete successfully for business from applications seeking in-ocean power will depend on (a) our ability to produce and

store energy reliably and at a total cost that is competitive with or lower than that of other sources, and (b) the demonstrated reliability

of our products and positive customer perception of our company. We also may have the opportunity to cooperate with other solution providers,

such as other suppliers of subsea batteries where our PowerBuoys® could provide recharging capabilities or other providers

of autonomous surface vessels where our PowerBuoys® could provide charging and enhanced

communications capabilities.

As

of April 2021, there were over 400 companies, some with institutional funding, listed in the OpenEi Marine Renewable Energy (“MRE”)

Database. The MRE database is developed and maintained by the National Renewable Energy Laboratories with support from DOE and other

partners. Many of these companies are located in the U.K., continental Europe, Japan, Israel, the U.S. and Australia, and many of those

companies are pursuing the utility, grid-connected energy market. The MRE industry continues to evolve as participants strive to differentiate

themselves by promoting their specific technology focusing on cost and efficiency. The companies are subdivided by implementation: wave

power, current power, tidal and ocean thermal energy conversion. Within wave power, the technologies are classified as point absorber,

oscillating wave column, overtopping device, attenuator and oscillating wave surge converter. Our PowerBuoy®

wave energy converter is classified as a point absorber.

The

vast majority of the companies in the DOE’s database are small, start-up type companies with a small number of employees and in

early-stage development that do not have our in-ocean validation experience. Only a few of these companies have conducted testing similar

to us, such as accelerated life testing and extensive wave tank testing on reduced scale models of their devices. We believe our in-ocean

experience is critical towards proving the reliability, survivability and performance of any wave energy system, which we believe our

future customers will require before adopting any wave generated energy solution. We believe our experience gained through full scale

in-ocean deployments, coupled with other types of factory and laboratory testing, and our resulting understanding of risks and failure

modes provides us with an advantage compared to potential wave energy competitors.

Based

on market and industry observations, we believe there are only a small number of companies that are developing systems to compete in

the offshore autonomous power market; however, their technologies are in earlier stage development with limited commercial deployments.

Through our ongoing product development and building upon our years of commercial deployment data, we believe that we continue to maintain

a first mover advantage in the smaller scale autonomous offshore power market.

We

continuously monitor non-traditional competitive threats, such as multi domain drones and artificial intelligence tools utilizing satellite

data. We are in active discussions with companies in these markets to evaluate synergistic solution development where we believe there

may be a demand for cooperative solutions.

Commercial

Activities

We

continue to seek new strategic relationships and further develop our existing partnerships. We collaborate with companies that have developed

or are developing in-ocean applications requiring a persistent source of power that is also capable of real time data collection, processing

and communication, to address potential customer needs. The table below shows the percentage of the Company’s revenues derived

from customers whose revenues accounted for at least 10% of the Company’s consolidated revenues for at least one of the periods

indicated:

Twelve months ended April 30,

Other (no cutomer over 10%) 17 % 18 %

In

order to achieve success in commercializing our products, we must expand our customer base and obtain commercial contracts to lease or

sell our solutions and services to customers. Our potential customer base for our solutions includes

various public and private entities, and agencies that require remote offshore power. To date, substantially all of our revenue producing

contracts have been with a small number of customers under contracts to fund a portion of the costs of our operational efforts to develop

and improve our technology, validate our product through ocean and laboratory testing, and business development activities with potential

commercial customers. Our goal in the future is that an increased portion of our revenues will be from the lease or sale of our products

and related maintenance as well as consultative and other services.

Current

and Recent Customers

Partnerships

We

believe that our solutions are best developed, sold, deployed, and maintained together with subject matter experts in their respective

fields. This enables OPT to protect, maintain, and evolve our power platforms and integrate them with surface and subsea payloads. OPT

has previously entered into partnerships focusing on including, but not limited to, deployment and installations, sourcing of surface

payloads, and integration with autonomous vehicles. OPT is also entering into software and robotics partnerships to further develop the

MDA solution offering.

Furthermore,

we are in active discussions with larger systems integrators to develop partnerships focusing on selling our platforms and solutions

as part of larger projects.

Backlog

As

of April 30, 2021, our backlog was $0.2 million compared to a backlog of $1.0 million as of April 30, 2020. Our backlog includes unfilled

firm orders for our products and services from commercial or governmental customers. If any of our contracts were to be terminated, our

backlog would be reduced by the expected value of the remaining terms of such contract.

The

amount of contract backlog is not necessarily indicative of future revenue because modifications to or terminations of present contracts

and production delays can provide additional revenue or reduce anticipated revenue. A substantial portion of our revenue is recognized

using the percentage-of-completion method, and changes in estimates from time to time may have a significant effect on revenue and backlog.

Our backlog is also typically subject to large variations from time to time due to the timing of new awards.

Research

and Development

Larger

Power

We

believe there is a near and longer-term demand for larger power for applications in several markets. The continued electrification of

the seabed, together with the increased volume of sensors and vehicles available on the market, requires larger power devices in the

<20kW range.

We

continue to innovate through our research and development efforts to bring to market devices with power ranges larger than the hybrid

and including other wave energy converter platforms beyond our current offerings. In parallel, the Company is investigating larger power

alternatives, in cooperation with design and installation contractors, and other technical resources.

MDA-S

Expanding

on our experience with our own initial prototype MSS system, we intend development of the next generation MDA-S, which will combine radar,

marine automatic identification system (“AIS”) and camera data with a custom developed command and control system to provide

actionable information for our end users. We believe the sensor suite will be a combination of off-the-shelf components selected to optimize

performance and cost.

This

system could be utilized as a standalone node or in an array, which we believe will provide near real-time information about the marine

activity within a customer’s area of interest.

PB3

PowerBuoy®

We

engaged our resources to improve PB3 efficiency, reliability and power output, and improve manufacturability while reducing cost and

complexity. Our recent efforts have been focused on reducing the cost of our PB3 systems and their deployment costs in order to balance

customer cost with our solution value proposition. We continue to seek to increase the capabilities of our PB3 systems by designing flexible

interfaces and rendering them sensor and payload agnostic.

Intellectual

Property

We

believe that our technology differentiates us from other providers of wave energy conversion technologies. As a result, our success depends

in part on our ability to obtain and maintain proprietary protection for our products, technology and know-how, to operate without infringing

upon the proprietary rights of others, and to prevent others from infringing upon our proprietary rights. Our policy is to seek to protect

our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology,

inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how, and continuing

technological innovation and may rely on licensing opportunities to develop and maintain our proprietary position.

As

of April 2021, we have been issued 66 U.S. patents, of which 41 are active, 14 have expired and 9 were abandoned. Outside of the U.S.,

we have been issued 239 patents across 15 countries with 20 of the active U.S. patents having at least one corresponding issued foreign

patent. We have filed one additional U.S. patent application since April 29, 2020, and such patent application has four corresponding

foreign patent applications at this time. Our 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 our issued U.S. patents range from 2021 to 2039. We do not consider any single patent or patent application that

we hold to be material to our business. The patent positions of companies like ours are generally uncertain and involve complex legal

and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in

continuing to obtain effective patent claims and enforcing those claims once granted. In addition, certain technologies that we developed

with U.S. federal government funding are subject to certain government rights as described in “Risk Factors - Risks Related to

Intellectual Property.”

We

use trademarks on nearly all our products and believe that having distinctive marks is an important factor in marketing our products.

We have registered our PowerBuoy®, PB-Vue ®, PowerTower ®, Making Waves in Power ®,