UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
For the fiscal year ended April 30, 2022
or
For the transition period from to .
Commission
File Number 001-33417
Ocean
Power Technologies, Inc.
28
ENGELHARD DRIVE, SUITE B
MONROE
TOWNSHIP, NJ08831
(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 Trading symbol Name of Exchange on Which Registered
Common Stock, par value $0.001 OPTT 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 ☒
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 ☒
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 ☒ 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 ☒ 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. ☒
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
aggregate market value of the common stock of the registrant held by non-affiliates as of October 31, 2021, 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 NYSE American.
The
number of shares outstanding of the registrant’s common stock as of July 13, 2022 was 55,881,861.
OCEAN
POWER TECHNOLOGIES, INC.
ANNUAL
REPORT ON FORM 10-K
TABLE
OF CONTENTS
Page
PART I
Item 1. Business 2
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 32
Item 2. Properties 32
Item 3. Legal Proceedings 32
Item 4. Mine Safety Disclosures 32
PART II
Item 6. Selected Financial Data 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42
Item 8. Financial Statements and Supplementary Data 42
Item 9A. Controls and Procedures 42
Item 9B. Other Information 43
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 43
PART III
Item 10. Directors, Executive Officers and Corporate Governance 44
Item 11. Executive Compensation 47
Item 14. Principal Accountant Fees and Services 55
PART IV
Item 15. Exhibits, Financial Statement Schedules 55
PowerBuoy®,
PB-Vue ®, PowerTower ®, Making Waves in Power ®, Talk on Water ®, WAM-V®
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 2022 are to the fiscal year ended April 30, 2022. 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
Our
solutions focus on three major services areas, Data as a Service, which includes data collected by our Wave Adaptive Modular Vessel (WAM-V®)
autonomous vehicles or our PowerBuoy® Product lines; Power as a Service, which includes our PowerBuoy® and Subsea battery products;
and our Strategic Consulting Services.
We
provide ocean data collection and reporting, marine power, offshore communications, and Maritime Domain Awareness (“MDA”)
products and consulting services. We offer our products and services to a wide-range of customers, including those in government and
offshore energy, oil and gas, construction, wind power and other industries. We are involved in the entire life cycle of product development,
from product design through manufacturing, testing, deployment, maintenance and upgrades. working closely with partners across our supply
chain. We also work closely with our third party partners that provide us with, among other things, software, controls, sensors, integration
services, and marine installation services. Our solutions enable technologies for data collection, analysis, and communication in ocean
and other offshore environments, and generate actionable intelligence via a variety of inputs. We then channel the information we collect,
and other communications, through control equipment linked to edge computing and cloud hosting environments.
Our
mission is to provide intelligent maritime solutions and services that enable more secure and more productive utilization of our oceans
and waterways, provide clean energy power services, and offer sophisticated surface and subsea maritime domain awareness solutions. We
achieve this through our proprietary, state-of-the-art technologies that are at the core of our clean and renewable energy platforms,
and our solutions and services.
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
Data
as a Service
Our
Data as a Service solution is at the forefront of our strategic plan to be a leader in offshore data collection, integration, analytics
and real time communication for a variety of important applications. For example, our solutions can track surface movement for maritime
border enforcement, illegal fishing interdiction, provide security for offshore wind farms and oil and gas fields, or provide harbor
or port security as well as logistics support. We have the ability to support aquaculture and gather information on ocean currents, water
quality, wind and other weather metrics, and map shorelines or subsurface areas. Additionally, we offer 24/7 monitoring solutions that
can provide meaningful real time information, and long term data collection and analytics for sophisticated applications across many
industries and scientific applications.
As
part of our Data as a Service division, 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”).
Maritime
Domain Awareness Solution (“MDAS”)
The
International Maritime Organization defines Maritime Domain Awareness (“MDA”) as the effective understanding of any activity
that could impact the security, safety, economy, or environment related to and within our oceans and seas. Since 2002, the United States
of America has had an active strategy to secure the Maritime Domain, primarily through the U.S. Navy. Furthermore, in 2020 the U.S. Coast
Guard elevated Illegal, Unreported and Unregulated (“IUU”) fisheries, one aspect of MDA security, as the leading global maritime
threat.
We
have designed our solution to provide detailed, localized maritime domain awareness that can be utilized for a wide range of applications
across market segments. Our MDAS base hardware consists of a high-definition radar, a stabilized high-definition optical and thermal
imaging camera, and a vessel automatic identification system (“AIS”) detection module. This hardware can be customized or
supplemented by other solutions, depending on our customer’s requirements, These devices are mounted on our products, such as our
PB3 PowerBuoy® or WAM-V®, and then utilizing integrated command and control software, data is sent to us and to our customers
via secure communications channels. Multiple sensors can be used on a single unit based on the comprehensiveness of customer needs. Capabilities
of our MDAS include 24/7 vessel tracking, automatic radar plotting, automated vessel warnings, and high-definition optical and thermal
video surveillance capable of providing actionable intelligence day or night, in real time.
We
anticipate that data from our MDAS will be processed onboard our buoys or WAM-Vs using edge computing, transmitted to our cloud-based
analytics platform via secure Wi-Fi, cellular, and/or satellite systems. Surveillance data can be integrated with third party 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. This network can be coordinated with the use of our WAM-Vs so that
customers can have mobile sensor networks linked to our self-powered buoy data and communication hubs. The data can also be integrated
with satellite, weather, bathymetric, and other third party data feeds to form a detailed surface and subsea picture of a monitored area.
The
development of a complete, integrated MDAS is still underway, however, we achieved a key milestone in October 2021, with the initiation
of our offshore demonstration of the new system utilizing our hardware and TimeZero software off the coast of New Jersey. To date we
have collected more than 2,000 radar and AIS tracks from this demonstration, which is being used to refine the design of our MDAS. Initial
field demonstration of our MDAS software began in May 2022 and is ongoing.
Autonomous
Vehicles (“WAM-V®”)
On
November 15, 2021, the Company acquired all of the outstanding equity interest of Marine Advanced Robotics, Inc. (“MAR”).
Founded in 2004, MAR is the developer of the patented Wave Adaptive Modular Vessel (WAM-V®) technology, which enables roaming capabilities
for uncrewed maritime systems in waters around the world. MAR launched the first WAM-V® in 2007 as a new vessel class
to deliver to customers reliable autonomous surface vehicles that could provide robust, real-time data collection and reporting. MAR
also provides RaaS (Robotics as a Service) allowing customers to lease WAM-V® robotics and access information from our
WAM-V’s while we maintain ownership and maintenance and repair responsibilities. Today, WAM-Vs® operate in 11
countries for commercial, military and scientific uses. Our WAM-Vs exist in three primary sizes, 8, 16, and 22 feet, however, many of
the design components are common across the sizes, allowing for integration of different payloads and adaption of the payload platforms
for larger equipment. All sizes can be adapted to suit different propulsion methods.
This
acquisition immediately provided the Company with an established product line that highly complements the Company’s business strategy
and can be used inshore, nearshore, and offshore. Since the acquisition, the business of MAR has continued to grow and is further expanding
into its core marine survey and maritime security markets in Europe, Asia, Oceania and the Americas. As we continue to leverage MAR technology
with OPT, we expect to expand on the synergistic opportunities we have identified. For example, we plan to integrate the MDAS platform
onto the WAM-V® to expand our MDA offering to provide a roaming MDA solution to our customers.
Power
as a Service
Power
as a Service solutions deliver value to customers by utilizing our managed power platforms. We continue to develop and commercialize
our proprietary power platforms that generate electricity primarily by harnessing the renewable energy of ocean waves for our PowerBuoy®
(“PB3”), solar power for our hybrid PowerBuoy® (the “hybrid PB”) and have the option of adding small
wind turbines to supplement power generation. We also continue to commercialize our subsea battery for topside and subsea power applications
and as additional storage when combined with our buoy platforms. Our focus for these solutions is on bringing autonomous clean power
to our customers wherever it is required. Moreover, offshore data and communications networks require power to function, and our solution
solves for this need without requiring ongoing battery replacement or older technologies such as shore to station power cables.
PB3
PowerBuoy®
The
PB3 uses proprietary technologies that convert the kinetic energy created by the motion of ocean waves into electricity. 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 nameplate capacity rating of up to 3 kilowatts (“kW”) of peak power during recharging
of the onboard batteries. Power generation is deployment-site dependent, as wave activity impacts power generation. Our energy storage
system (“ESS”) has a 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 offshore locations. The hull consists of a main spar structure
compliantly 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.
A
single MDAS equipped PB3 can monitor vessel traffic, with or without AIS turned on, across a specific offshore area of interest, with
the ability to utilize 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 activity, and water quality.
hybrid
PowerBuoy®
The
hybrid PowerBuoy® (“hybrid PB”) is an alternative platform to the PB3 capable of utilizing solar and
wind power. The hybrid PB is capable of providing reliable power in remote offshore locations, regardless of ocean wave conditions.
We believe this product is complementary to the PB3 as it addresses a broader spectrum of customer deployment needs, including
low-wave and nearshore environments, with the potential for greater product integration within each customer project. The hybrid PB
is intended to provide a stable energy platform for our MDAS solution, and for agile deployment of subsea power applications, such
as a surface communications hub for electric remotely operated vehicles (“eROV”) and autonomous underwater vehicles
(“AUV”) used for underwater inspections and short-term maintenance, and subsea equipment monitoring and control. The
design has a high payload capacity for surveillance and communications equipment, with the capability of being tethered to subsea
payloads such as batteries, or with a conventional anchor mooring system. Energy is stored in onboard lithium ion batteries which
can power subsea and topside payloads. As with the PB3, the control system uses sensors and an onboard computer to continuously
monitor the hybrid PB subsystems. The hybrid PB is designed to be able to operate over a broad range of temperature and ocean wave
conditions. It has a 30kW-hour battery system and carries up to 1.2MW-hour energy when combined with the current onboard propane
storage system. We are also developing another hybrid system with increased solar capacity and increased battery storage with the option
of adding incremental wind turbine power generation, replacing the propane system.
Subsea
Battery
Our
subsea battery is complementary to both the PB3 and hybrid PB products and can be deployed together with our PowerBuoys® or as a
standalone unit. 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 pressure-tested lithium-ion phosphate subsea batteries supply power that can enable subsea
equipment, sensors, communications and AUV and eROV recharge. Our PB3 and hybrid PB 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 provides both long 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 100kW-hours of available energy storage and is designed
to operate in a water depth of up to 500 meters. 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.
Strategic
Consulting Services
The
focus of our Strategic Consulting Services is 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 integrated
in support of our broader Power and/or Data as a Service solutions, utilizing our products or on an independent basis for third party
clients. In the near term, we will focus on increasing our market share in the offshore wind market, the broader floating foundation
design market, as well as with our offshore energy customers.
We
intend to continue to grow our service sectors and strengthen our solutions through internal developments, partnerships, and potential
acquisitions. Our Strategic Consulting Services were materially expanded with the acquisition of 3dent Technology, LLC (“3Dent”),
in February 2021. Our team of dedicated consultants/designers has expertise in structural engineering, hydrodynamics and naval architecture.
Consulting services include simulation engineering, software engineering, concept design and motion analysis. We also offer a full range
of high-level offshore engineering to offshore wind developers, offshore construction companies, drilling contractors, major oil companies,
service companies, shipyards, and engineering firms. For example, we advise offshore drill rig owners, including owners of floaters,
jackups, and lift boats. The Company saw an increase in consulting services activity for conventional offshore energy and for offshore
wind projects in the second half of fiscal 2022.
Strategy
and marketing
Our
strategy includes developing integrated solutions and services, including autonomous and cloud-based delivery systems for ocean data
and predictive analytics to provide actionable intelligence for our clients. 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, data collection, and communications,
either by supplying electric power to payloads that are integrated directly with our products or located in its vicinity, such as on
the surface, the seabed, or in the water column. Our recent projects have been in the offshore energy and science and research industries.
Based
on our market research and publicly available data, including but not limited to the 2019 DOE Report: Exploring Opportunities
for Marine Renewable Energy in Maritime Markets (the “Powering the Blue Economy Report”) Report, the Westwood Global
Energy World ROV Operations Forecast 2019-2023, we believe there is an increasing need for our products
and services in maritime domain awareness applications and numerous other markets.
Potential
customers include, but are not limited to, defense and security, offshore oil and gas, science and research, and offshore wind markets,
as well as government applications in border security, vessel tracking, fishery protection and monitoring of marine protected areas.
For example, autonomously monitoring and surveying offshore wind farm lease areas would enable developers to collect data needed to support
environmental impact studies with low carbon emissions. This could be done with buoys and vehicles.
Competitive
Advantages
We
continue to commercialize our current and future 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 border protection, fishery
protection and marine protected areas) that require resident, semi-resident, or roaming platforms. Our platforms provide stable and reliable
power sources in nearshore and 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:
Our
Target Markets
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 released the Powering the Blue Economy Report. 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 monitoring and powering subsea equipment
control systems).
Defense
and Security
Our
MDAS provides the ideal understanding of the global maritime domain impacting the defense and security markets by generating actionable
intelligence from the sea. This modular, standalone solution can be deployed across multiple platforms and provides remote, autonomous
monitoring that enables enforcement of maritime law in dangerous and remote ocean environments to improve safety at sea. Applications
include port security, maritime border protection, and illegal, unreported, and unregulated fishing protection, among others. Using an
integrated suite of monitoring components and data communications and analysis software, our MDAS can enable 24/7, real-time, unmanned
offshore monitoring capabilities.
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. One example of an 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
U.S. Navy’s Naval Postgraduate School’s Sea, Land, Air, Military Research Initiative (“SLAMR”). PB3’s enabled
with our MDAS provide actionable intelligence from 24/7/365 radar and AIS vessel tracking (including “dark vessels”), automatic
notifications and vessel warnings, real-time visual and Infra-Red video surveillance, with an integrated command and control user interface.
Other examples of applications include 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.
In
addition, our WAM-V® is an ideal platform servicing multiple applications within the defense and security markets, including
high value asset protection, marine domain awareness, security perimeter, mine counter measures and explosive ordinance disposal, anti-submarine
warfare, and border security. Multiple WAM-V’s® can also autonomously work together to provide a security perimeter
and coordinate to intercept suspicious vessels and provide valuable information before the threat gets near the protected asset. WAM-Vs®
can coordinate to intercept suspicious vessels and provide valuable information before the threat gets near the protected asset.
The portability of the WAM-V® provides quick relocation of the entire system by air, sea or ground and the scalability
of the WAM-V® technology means that a common platform can be used for multiple missions with varying requirements. Our
platforms and systems are designed to be operated in compliance with our customers’ and our internal cybersecurity standards and
integrate with our customers’ command and control systems (“C2”). Additionally, we actively manage cybersecurity at the corporate
level.
IUU
fishing has become a global issue with both environmental and economic consequences. According to a report published in Science Advances
by the American Association for the Advancement of Science 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 over 1,200 OPVs in service currently. We believe that our autonomous surveillance
solution, which can be combined with satellite imagery, from our WAM-V®, 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.
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. There are over 10,000 offshore oil and gas platforms worldwide,
including exploration, production, reservoir management, and sites pending decommissioning based on information from organizations
such as the U.S. Bureau of Ocean Energy Management (“BOEM”) and industry organizations and publications. Driven by
the growing demand for electrification, we believe that we have opportunities to implement one or more PB3s at some of these sites to
displace current power solutions or augment existing technologies. Customer feedback obtained through engineering studies with multiple
oil and gas customers has helped identify target applications for the PB3 – namely, temporary power for fields experiencing umbilical
degradation and subsea docking stations for future resident ROV/AUV applications for inspection, maintenance, and repair. In addition,
according to a 2019 Rystad Energy report, Norway is estimated to have 40% of its oil and gas production from electrified fields
by 2015, 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 2,000 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. This is evidenced by the interest in the PB3 technology demonstrated by the DeepStar and Harbour Energy feasibility studies
completed by us to evaluate the use of PB3s in this application. These studies have helped us further identify specific applications
in which the PB3 can reliably provide interim power for fields experiencing umbilical degradation. In addition, we believe the survey
capability afforded by our WAM-V’s® is perfectly suited to serve the survey needs of the oil and gas industry. WAM-V® stability
produces excellent sonar data quality in higher sea conditions than comparably sized vessels and can be used as a force multiplier to
existing manned assets or as the sole deployment tool. WAM-V’s® can be outfitted with various sonar solutions depending on
requirements and identify any underwater obstacles or hazards.
Marine
Charting
Since
2019, WAM-Vs have been used in support of nautical charting efforts for NOAA-backed projects in the Great Lakes and Western Alaska. WAM-V’s®
are teamed up with crewed assets to provide a force multiplier capability when compared to a crewed assets. This capability improves
the production efficiency of the project as well as lowers the overall carbon footprint.
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.
Offshore
Wind and Other Markets
Opportunities
also exist in other markets such as supporting offshore wind farm development and aquaculture. Based on an article in the 2021 edition
of the Offshore Wind Market by the US Department of Energy, the US offshore wind energy and product development pipeline grew to a potential
generating capacity of 35,324 megawatts in 2020.
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.
While 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. There are also opportunities to support ongoing survey
work once wind farms are operational to mitigate carbon emissions and to provide communication stations for aerial drones providing maintenance
materials. Furthermore, the U.S. recently approved the permits for the first major utility scale offshore wind farm. Providing wave power
solutions to utility scale renewable developments offers an attractive proposition to support renewable power and autonomous operations.
Our solutions can support aquaculture development with systems such as species escape tracking, effluent monitoring, and other water
quality considerations.
Our
WAM-V’s® are used to perform sonar surveys that support the marine infrastructure required for offshore wind development and
installation. They can also assist during the planning and environmental permitting phase including metocean and environmental data and
mammal tracking. We can also protect operations through Maritime Domain Awareness to monitor operations and vessel traffic and motion
data analysis for predictive maintenance and safety.
We
also provide offshore engineering, consulting, and design services for offshore wind, drilling contractors, defense contractors, construction
yards, engineering firms, and oil and gas, wave energy, and marine construction and service companies including design review, forensic
investigation, and expert witness services.
Business
Strategy
During
fiscal 2022, we advanced our marketing programs, products, and solutions. We have made progress in transitioning from an R&D focused
organization to more robust commercialization efforts and we are moving further into the ocean data as a service market. We intend to
build on these efforts by introducing additional processes and making investments in appropriate human capital to target potential
customers more effectively from demand generation to close of contract. In addition we are focusing on customer care and service
efforts to increase repeat business opportunities. This strategy was further enhanced by our acquisition of MAR in November 2021.
The
majority of the Company’s potential customers are in areas of maritime domain awareness, hydrographic survey, and IUU fishing to
support persistent surveillance. These are largely for customers in the United States where the end use may be both domestic and
abroad. Further, the Company’s recent acquisition of MAR provides an unmanned surface vehicle platform for use in oil & gas,
renewable energy, hydrographic survey, and security and defense markets largely in North America and Europe.
Historically,
demonstration projects have been a requisite step towards broad solution deployment and revenues associated with specific applications
like our New Jersey MDAS test array as part of our Data as a Service solution. A proposal phase typically lasts from three months to
two years. 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 the Company and its capabilities. Such demonstrations
are often a required step prior to leasing and may include negotiation of standard terms and conditions. Many proposals contain provisions
which would provide the option to purchase or lease of our PowerBuoy® or WAM-V® product upon successful conclusion of the demonstration
project. The Company has successfully demonstrated the capabilities of many of its solutions on its own or in customers sponsored evaluation
projects and remains focused on further demonstrations to build customer awareness and confidence and to drive sales.
The
Company is pursuing a long-term growth strategy to expand its market value proposition while growing the Company’s revenue base.
This strategy includes partnerships with leading companies and organizations in adjacent and complementary markets. We continue to develop
our PowerBuoy® and WAM-V® products for use in offshore power, data acquisition, and real-time data communications applications,
and in order to achieve this goal, we are pursuing the following business objectives:
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 as well as expert consultants, particularly in geography. Because our solutions
use technology that is not yet fully adopted by customers within our target markets in every case, we expect that the customer decision
process will continue to include substantial time educating end-users and stakeholders, which may result in a continued lengthy sales
cycle.
We
have built a database of companies and organizations who have offshore operations. We market our products and solutions to these companies
and entities, prioritizing those who we believe are most likely to want 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, data gateways and robust data acquisition storage and communication systems.
One
of the primary ways we showcase our Company, products and services is through demonstrations, conferences, and trade shows. We
utilize our database to select conferences and trade shows where we will have the most effective visibility to our potential clients.
Since early 2020, COVID-restrictions have significantly impacted our attendance as, many conferences and trade shows were cancelled,
rescheduled, or held virtually. In fiscal 2022, OPT presented at a number of these conferences virtually and in-person. During fiscal
2023, we have plans to attend and present at various demonstrations, conferences, and trade shows in the U.S., Europe, and Asia.
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 in the Data as a Service, Power as a Service, and Strategic Consulting industries. Our Data as
a Service solution competes with other data acquisition companies in a variety of industries, from sensor and measurement equipment providers
to other providers of autonomous vehicles.
Our
Power as a Service solution competes with other offshore autonomous power sources, primarily consisting of subsea batteries, solar and
fossil-fuel power sources, where many of the providers are substantially larger than us and may have access to greater financial resources.
Incumbent sources of offshore 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 offshore 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 or underwater vessels where our PowerBuoys® could provide charging and enhanced communications capabilities.
Competition
for the WAM-V® product line includes companies marketing solutions as autonomous surface vehicles (“ASVs”)
and uncrewed surface vehicles (“USVs”) which can also be referred to as unmanned surface vehicles. There are several established
competitors in this space with the pace of new entrants increasing in-line with the expanding market opportunities.
The
vast majority of the companies in the DOE’s wave energy converter database are small, early-stage companies with a limited number
of employees 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 small-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 stages of 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.
Our
Strategic Consulting Services group competes with offshore engineering firms. These include large and small engineering firms that specialize
in naval architecture, structural engineering, and hydrodynamics as applied to the design of jack-ups, wind turbine installation vessels,
and semi-submersibles.
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,
Transocean Ltd. 15 % — %
Valaris PLC 12 % — %
Diamond Offshore Drilling, Inc. 11 % — %
United States Department of Energy 11 % — %
Enel Green Power Chile, LTDA 9 % 61 %
Eni S.p.A. 1 % 22 %
Other (no other customers over 10%) 41 % 17 %
In
order to achieve success in ongoing commercializing efforts for 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. We expect 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
Business
Relationships
We
believe that our solutions are best developed, sold, deployed, and maintained together with subject matter experts in their respective
fields. This enables the Company to protect, maintain, and evolve our various platforms and integrate them with surface and subsea payloads.
The Company has previously entered into business relationships focused on including, but not limited to, deployment and installations,
sourcing of surface payloads, and integration with autonomous vehicles. To further develop the MDAS, we recently entered into strategic
software and robotics partnerships with two software companies, Greensea Systems, Inc. and Fathom5. We believe the business relationships
with Greensea and Fathom5 will further the development of our next-generation MDAS product for the maritime industrial market and governmental
defense and security organizations.
Greensea
Systems, Inc. is contributing to the Company’s MDAS by providing integration software, control software, autonomy and systems integration
for the buoy sensor payload.
Fathom5
has designed and is building a customized industrial analytics platform to support the Company’s MDAS. The Fathom5 customized platform
will integrate sensor technologies, combine data feeds, and provide a flexible plug-in analytic capability to apply artificial intelligence
and machine learning to sensor feeds. Fathom5 is also building the user interface that will allow remote operators to control the MDAS
payload and view sensor data in real time.
We
also maintain active dialogue with several offshore deployment and marine operations partners in the North Sea and North America to support
our projects.
Backlog
As
of April 30, 2022, the Company’s backlog was $0.6 million. As of April 30, 2021, backlog was $0.2 million. Our backlog can include
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 revenues is recognized
using the input method used to measure completion over time of customer contracts, 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 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
PB and including other wave energy converter platforms through partnerships with other wave power energy developers. In parallel, the
Company is investigating larger power alternatives, in cooperation with design and installation contractors, and other technical resources.
These efforts include further developments of our Mass on Spring Wave Energy Converter “MOSWEC”, which allows for greater
modularity and decreased maintenance intervals.
MDAS
Expanding
on our experience with our own initial prototype Marine Surveillance Solutions (“MSS”) system, we intend for the development
of the next generation MDAS, which will combine radar, marine automatic identification system (“AIS”) and camera data with