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OFFON

OCEAN POWER TECHNOLOGIES, INC.

(OPTT)
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OCEAN POWER TECHNOLOGIES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

09/13/2021 | 04:08pm EDT

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. Some of the information contained in this management's discussion and analysis is set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business, pending and threatened litigation and our liquidity, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of our Annual Report on Form 10-K for the year ended April 30, 2021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. References to a fiscal year in this Form 10-Q refer to the year ended April 30 of that year (e.g., fiscal 2021 refers to the year ended April 30, 2021).




Overview



We are a marine power equipment, data solutions and consulting services 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 generate actionable intelligence and control certain equipment. 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 marine protected 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 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. We are continuing to build upon our mission of connecting the oceans with those who operate, and manage the resource, in the environment. We do this through our solutions' 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.



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Our Power as a Service solutions deliver 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 solution 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 solutions generated sufficient power that could, with client assets, extend missions for longer durations.

Our Data as a Service solution is an evolution of the work we did for Harbour Energy (formerly known as Premier Oil) in 2019 in the North Sea. 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 solution 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 fiscal 2021 we delivered several transactions and projects laying the foundation for our growth in fiscal 2022. We have identified, and are pursuing, several new applications for our PowerBuoys® in the areas of defense, security and maritime domain awareness solutions. 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. During the first quarter of fiscal 2022, we commenced several research and development ("R&D") and commercial development programs, including commencing our custom software development efforts with Greensea and Fathom5 to further extend our edge computing and cloud hosting capabilities.

In November 2020, the Company entered into an agreement with the Offshore Operators Committee ("OOC") under which the Company provided engineering and technical services for a new project under the DeepStar Global Technology Consortium Program. This project showcased our Power as a Service offering among well-known operators in the industry.

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.

Business Update Regarding COVID-19

The COVID-19 pandemic presented substantial health and economic risks, uncertainties and challenges to our business, the global economy and financial markets. In March 2020, one of the Company's customers cancelled a portion of their contract due to the outbreak of COVID-19 and instead extended an existing lease. In April 2020, the Company declared force majeure on a contract with a different customer and delayed the deployment of its PB3 PowerBouy® in Chile. For additional information on various uncertainties and risks posed by the COVID-19 pandemic, see Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended April 30, 2021.

On March 27, 2020, the U.S. Government passed into law the Coronavirus Aid, Relief and Economic Security Act, or the ("CARES Act"). On May 3, 2020, the Company signed a Paycheck Protection Program ("PPP") loan with Santander as the lender for approximately $891,000 in support through the Small Business Association ("SBA") under the PPP loan. The PPP loan is unsecured and evidenced by a note in favor of Santander as the lender and governed by a Loan Agreement with Santander. The loan contained an interest rate of 1% and was repayable over two years. The loan contained customary events of defaults relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender could have required immediate repayment of all outstanding amounts under the loan. Interest and principal payments are deferred for the first 6 months from the date of the loan. Principal and interest were payable monthly commencing 6 months after the disbursement date and were allowed to be repaid by the Company at any time prior to maturity with no prepayment penalties. The Company received the proceeds on May 5, 2020.



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The Company filed its loan forgiveness application at the end of February 2021 asking for 100% forgiveness of the loan. In June 2021, the Company was informed that its application was approved, and that the loan is now fully forgiven. The Company recognized a gain on extinguishment of PPP loan of approximately $891,000 in the July 31, 2021 Consolidated Statement of Operations.

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 a 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.

? Scalability within a small site area. Due to the dense energy in ocean waves,

we believe that the electricity may be aggregated to supply larger payloads, as

a result, for example, of multiple PB3s which are placed in an array, occupying

a relatively small area. We believe the array of a larger number of PB3s could

offer end users a variety of advantages in availability, reliability and

scalability.

? Predictability. The generation of power from wave energy can be forecasted

several days in advance. Available wave energy can be calculated with a high

degree of accuracy based on satellite images and meteorological data, even when

the wave field is hundreds of miles away and days from reaching a PB3.

Therefore, we believe end-users relying on PB3 for power may be able to

proactively plan their logistics, payload scheduling and other operational

activities based on such data.

? Constant source of energy. The annual occurrence of waves at specific sites can

be relatively persistent and defined with relatively high accuracy. Based on

our studies and analyses of various sites of interest, we believe that we will

be able to deploy our PB3 in locations where the waves could produce usable

electricity for most of the year.

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 generate 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.



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hybrid PowerBuoy®


The Company has product launched a hybrid PowerBuoy® ("hPB") 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 intended for agile deployment applications, such as recharging and surface communications hub for electric remotely operated vehicles ("eROV") and autonomous underwater vehicles ("AUV") used for underwater inspections and short-term maintenance, subsea equipment monitoring and control, and provides a flexible platform to optimize power storage based on the environment and the application. 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 in relatively calm, low wave environments with high solar intensity 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 is fitted with additional stabilizing outriggers, and then 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 a 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.

During the first quarter of fiscal 2022, we commenced efforts to upgrade the current version of the hPB to host our MDA-S (as defined below) offering by adding further stabilizing features.



Subsea Battery


We have product launched a subsea battery that is complementary to both the 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.



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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 ("MDA-S")

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 the U.S. 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-S 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-S 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 MDA-S, 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, including tsunami, and water quality.

The development of our MDA-S is underway, and we intend to launch the first offshore demonstrations of the newly developed system during the second and third quarters of fiscal 2022.

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's services include simulation engineering, software engineering, concept design and motion analysis.



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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:




                                   Three months ended July 31,
                                   2021                  2020
Eni S.p.A.                                 0 %                  17 %
Harbour (p/k/a Premier Oil)                0 %                  16 %
EGP                                       55 %                  67 %
Valaris                                   33 %                   0 %
Other (no customer over 10%)              12 %                   0 %
                                         100 %                 100 %



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


? In June 2021, the Company was notified of a pre-award for a Department of

Energy ("DOE") Small Business Innovation Research program ("SBIR") to support

the development of the next generation of our wave energy conversion systems.

In August 2021, we completed all required documentation, signed the DOE

contract and initiated the 9-month project which will begin in the second

quarter of fiscal 2022.

? Throughout the first quarter of fiscal 2022, our strategic consulting services,

continued to generate revenues from prior and new customers of approximately

$220,000.

? In November 2020, the Company entered into an agreement with the OOC under

which the Company will provide engineering and technical services for a new

project under the DeepStar Global Technology Consortium Program. This project

showcased our Power as a Service solution among well-known operators in the

industry.

? In October 2020, the Company entered into an agreement with ACET to conduct a

feasibility study for the evaluation of a PB3 power and 5G communications

solution in support of the U.S. Navy Naval Postgraduate School's SLAMR. The

study was completed and the Company is currently in active discussions with the

Naval Postgraduate School on the project's next steps on providing the data and

power solution.

? In March 2020, Eni exercised their option from the March 2018 contract to

extend their lease of the PB3 for an additional 18 months. The initial

provision in March 2018 agreement provided for a minimum 24-month contract that

included an 18-month PB3 lease and associated project management. In November

2020, Eni retrieved the PB3 and returned it to shore due to a mooring issue.

The PB3 has since been returned to our headquarters in New Jersey and is

currently being refurbished to be redeployed.

? In September 2019, we entered into two contracts with subsidiaries of EGP,

which included the sale of a PB3 and the development and supply of a turn-key

integrated Open Sea Lab ("OSL") that was expected to be the Company's first

deployment off the coast of Chile. Due to the COVID-19 pandemic, force majeure

was declared in April 2020 and delayed the deployment. In March 2021, the

Company began the deployment process and placed the PB3 in the water. Final

deployment installation activities are anticipated in late 2021.

? In June 2018, we entered into a contract with Harbour Energy for the lease of a

PB3 to be deployed in one of Harbour Energy's offshore fields in the North Sea.

During its deployment, the PB3 provided unmanned EZM service. In early March

2020 the Company and Harbour Energy retrieved the PB3. This PB3 has since been

returned to our headquarters in New Jersey and is currently being refurbished

to be redeployed. We continue to have active discussions to engage with Harbor

Energy on the next phase of this project.




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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 focused on including, but not limited to, deployment and installations, sourcing of surface payloads, and integration with autonomous vehicles. To further develop the MDA-S, we recently entered into strategic software and robotics partnerships with two software companies, Greensea Systems, Inc. and Fathom5. We believe, the partnerships with Greensea and Fathom5 will further the development of our next-generation MDA-S product for the maritime industrial market and governmental defense and security organizations.

Greensea Systems, Inc. will be contributing to OPT's MDA-S by providing integration software, control software, autonomy and systems integration for the buoy sensor payload.

Fathom5 will be designing and building a customized industrial analytics platform to support OPT's MDA-S. 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 MDA-S payload and view sensor data in real time.

Furthermore, we are in active discussions with larger systems integrators to develop partnerships focused on selling our platforms and solutions as part of larger projects.




Business Strategy



During fiscal 2021 and the first quarter of fiscal 2022, 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 the 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:

? Integrated turn-key solutions sales or leases incorporating our products and

services. We believe our PB3 hybrid and our subsea battery solutions, as well

as our MDA-S, are well suited to enable many uncrewed, autonomous (non-grid

connected) offshore solutions, such as topside and subsea surveillance and

communications, subsea equipment monitoring, early warning systems platform and

subsea power and buffering, and weather and climate data collection. We have

investigated and realized market demand for some of these solutions and we

intend to sell and lease our products to these markets as part of these broader

integrated solutions. Additionally, we intend to provide services associated

with our solution offerings such as paid engineering studies, value-added

engineering, maintenance, remote monitoring and diagnostic, application

engineering, planning, training, project management, and marine and logistics

support required for our solution life cycle. We continue to increase our

commercial capabilities through new hires in sales and application support, and

through engagement of expert market consultants in various geographies.




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? Expand customer system solution offerings through new complimentary products

that enable shorter and more cost-efficient deployments. The hybrid is highly

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 system integration within each customer project.

The hybrid is primarily intended for shorter term deployment applications such

as eROV and AUV inspections and short-term maintenance, topside surveillance

and communications, and subsea equipment and controls. The Company has

developed a subsea battery system that is complimentary to the Company's

PowerBuoy® products. The subsea battery system offers the possibility of

creating a sea floor energy storage solution for remote offshore operations.

These subsea battery systems contain lithium-ion batteries, which provide high

power density to supply power to subsea equipment, sensors, communications, and

the recharging of AUVs and eROVs. Ideal for many remote offshore customer

applications, these subsea battery systems are anticipated to be safe, high

performance, cost-efficient, and quickly deployable.

? Concentrate sales and marketing efforts in global markets. We are currently

focusing our marketing efforts globally. We believe that each of these areas

has demand for our solutions, sizable end market opportunities, political and

economic stability, and high levels of industrialization and economic

development. In fiscal 2021, we opened an office in Houston, Texas to further

support our customers and strengthen our dialogue with our solution partners.

? Expand our relationships in key market areas through strategic partnerships and

collaborations. We believe that strategic partners are an important part of

commercializing new products. Partnerships and collaborations can be used to

improve the development of overall integrated solutions, create new market

channels, expand commercial know-how and geographic footprint, and bolster our

product delivery capabilities. We have formed such a relationship with several

well-known groups, and we continue to seek other opportunities to collaborate

with application experts from within our selected markets. These partnerships

have helped us source services, such as installation expertise, and products,

such as MDA enabling equipment, to meet our development and customer

obligations. Since our acquisition of 3Dent, we have been actively pursuing

additional opportunities to bring in-house skills, capabilities, and solutions

that are complementary to our strategy and enable us to scale more quickly.

? Partnering with fabrication, deployment and service support. In order to

minimize our capital requirements as we scale our business, we intend to

optimize and utilize state of the art fabrication, anchoring, mooring, cabling

supply, and in some cases, deployment of our products and solutions. Our PTO is

a proprietary subsystem that is assembled and tested at our facility. We

believe this distributed manufacturing and assembly approach enables us to

focus on our core competencies and ensure a cost-effective product by

leveraging a larger more established supply base. We continue to seek strategic

partnerships regarding servicing of our products and solutions.

? Cost reduction and PowerBuoy® solution development. Our engineering efforts are

mainly focused on addressing customer solutions; product and solution sales;

reducing production, installation, and product life-cycle costs; and improving

the energy output, reliability, maintenance interval and expected operating

life of our products. We continue to optimize the manufacturing of our designs

with a focus on cost competitiveness, and we believe we will be able to address

new applications by developing new payloads and solutions that address customer

  needs.



Through our 3Dent subsidiary, we plan to expand our customer base and increase our 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.



Liquidity


During the first three months ending July 31, 2021, the Company incurred a net loss of approximately $3.1 million and used cash in operations of approximately $5.3 million. The Company has continued to make investments in ongoing product development efforts in anticipation of future growth. The Company's future results of operations involve significant risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, performance of its products, its ability to market and commercialize its products and new products that it may develop, technology development, scalability of technology and production, dependence on skills of key personnel, concentration of customers and suppliers, deployment risks and integration of acquisitions, pending or threatened litigation, and the continued impact of COVID-19 on its business. The Company currently has committed sources of equity financing through its At the Market Offering Agreement with A.G.P/Alliance Global Partners ("AGP") and the Aspire Capital financing, but the Company cannot be sure that additional equity and/or debt financing will be available to the Company as needed on acceptable terms, or at all. Management believes the Company's current cash balance of $78.1 million is sufficient to fund its planned expenditures through at least September 30, 2022. In addition to the acquisition of 3Dent in the prior year, the Company is looking at further organic and inorganic growth opportunities to advance our data and power services and solutions.



  29






Capital Raises


At the Market Offering Agreements

On January 7, 2019, the Company entered into an At the Market Offering Agreement ("2019 ATM Facility") with AGP, under which the Company may issue and sell to or through AGP, acting as agent and/or principal, shares of the Company's common stock having an aggregate offering price of up to $25.0 million. From inception of the program through its termination on December 8, 2020, under the 2019 ATM Facility, the Company sold and issued an aggregate of 17,595,472 shares of its common stock with an aggregate market value of $23.4 million at an average price of $1.33 per share and paid AGP a sales commission of approximately $0.8 million related to those shares. The agreement was fully utilized and terminated on December 8, 2020.

On November 20, 2020, the Company entered into an At the Market Offering Agreement with AGP (the "2020 ATM Facility"). On December 4, 2020 the Company filed a prospectus with the Securities and Exchange Commission whereby, the Company could issue and sell to or through AGP, acting as agent and/or principal, shares of the Company's common stock having an aggregate offering price of up to $50.0 million. From inception of the 2020 ATM Facility through April 30, 2021, the Company sold and issued an aggregate of 17,179,883 shares of its common stock with an aggregate market value of $50.0 million at an average price of $2.91 per share and paid AGP a sales commission of approximately $1.6 million related to those shares. A prospectus supplement would need to be filed for the Company to sell additional amounts under the 2020 ATM Facility.

Equity Line Common Stock Purchase Agreements

On October 24, 2019, the Company entered into a common stock purchase agreement with Aspire Capital which provided that, subject to certain terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $10.0 million shares of the Company's common stock over a 30-month period. Through September 18, 2020, the Company had sold an aggregate of 6,424,205 shares of common stock with an aggregate market value of $4.0 million at an average price of $0.63 per share pursuant to this common stock purchase agreement. The agreement was fully utilized and terminated on September 18, 2020.

On September 18, 2020, the Company entered into a new common stock purchase agreement with Aspire Capital which provided that, subject to certain terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $12.5 million shares of the Company's common stock over a 30-month period subject to a limit of 19.99% of the outstanding common stock on the date of the agreement if the price did not exceed a specified price in the agreement. The number of shares the Company could issue within the 19.99% limit was 3,722,251 shares without shareholder approval. Shareholder approval was received at the Company's annual meeting of stockholders on December 23, 2020 for the sale of 9,864,706 additional shares of common stock which exceeds the 19.99% limit of outstanding common stock on the date of the agreement. Through July 31, 2021, the Company had sold an aggregate of 3,722,251 shares of common stock with an aggregate market value of $11.8 million at an average price of $3.17 per share pursuant to this common stock purchase agreement.

The sale of additional equity or convertible securities could result in dilution to our stockholders. If additional funds are raised through the issuance of debt securities or preferred stock, these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. The Company has obtained equity financing through its At the Market Offering Agreement with AGP and the Aspire Capital financing, but the Company cannot be sure that additional equity and/or debt financing will be available to the Company as needed on acceptable terms, or at all. If we are unable to obtain required financing when needed, we may be required to reduce the scope of our operations, including our planned product development and marketing efforts, which could materially and adversely affect our financial condition and operating results. If we are unable to secure additional financing, we may be forced to cease our operations.



Backlog


As of July 31, 2021, the Company's backlog was $0.4 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 revenue 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.



  30





Critical Accounting Policies and Estimates

To understand our financial statements, it is important to understand our critical accounting policies and estimates. We prepare our financial statements in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The preparation of financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

For a discussion of our critical accounting estimates, see the section entitled Item 7.- "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended April 30, 2021. There were no material changes to our critical accounting estimates or accounting policies during the three months ended July 31, 2021.

Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments." This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. In November 2019, the FASB issued No. 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date of ASU 2016-13 for Smaller Reporting Companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.



Financial Operations Overview


The following describes certain line items in our statement of operations and some of the factors that affect our operating results.



Revenues


A performance obligation is the unit of account for revenue recognition. The Company assesses the goods or services promised in a contract with a customer and identifies as a performance obligation either: a) a good or service (or a bundle of goods or services) that is distinct; or b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. A contract may contain a single or multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the contracted transaction price to each performance obligation based upon the relative standalone selling price, which represents the price the Company would sell a promised good or service separately to a customer. The Company determines the standalone selling price based upon the facts and circumstances of each obligated good or service. The majority of the Company's contracts have no observable standalone selling price since the associated products and services are customized to customer specifications. As such, the standalone selling price generally reflects the Company's forecast of the total cost to satisfy the performance obligation plus an appropriate profit margin.

The nature of the Company's contracts may give rise to several types of variable considerations, including unpriced change orders and liquidated damages and penalties. Variable consideration can also arise from modifications to the scope of services. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, performance and any other information (historical, current, and forecasted) that is reasonably available to us. There was no variable consideration as of July 31, 2021 and 2020.

The Company recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either (1) at a point in time or (2) over time. A good or service is transferred when or as the customer obtains control of it. The evaluation of whether control of each performance obligation is transferred at a point in time or over time is made at contract inception. Input measures such as costs incurred or time elapsed are utilized to assess progress against specific contractual performance obligations for the Company's services. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided. For the Company, the input method using costs incurred or time elapsed best represents the measure of progress against the performance obligations incorporated within the contractual agreements. When the Company's estimate of total costs to be incurred to satisfy the performance obligations exceed revenue, the Company recognizes the loss immediately.

The Company's contracts are either cost plus or fixed price contracts. Under cost plus contracts, customers are billed for actual expenses incurred plus an agreed-upon fee. Under cost plus contracts, a profit or loss on a project is recognized depending on whether actual costs are more or less than the agreed upon amount.



  31





The Company has two types of fixed price contracts, firm fixed price and cost-sharing. Under firm fixed price contracts, the Company receives an agreed-upon amount for providing products and services specified in the contract, a profit or loss is recognized depending on whether actual costs are more or less than the agreed upon amount. Under cost-sharing contracts, the fixed amount agreed upon with the customer is only intended to fund a portion of the costs on a specific project. Under cost sharing contracts, an amount corresponding to the revenue is recorded in cost of revenues, resulting in gross profit on these contracts of zero. The Company's share of the costs is recorded as product development expense. The Company reports its disaggregation of revenue by contract type since this method best represents the Company's business. For the three-month periods ended July 31, 2021 and 2020, all of the Company's contracts were classified as firm fixed price.

As of July 31, 2021, the Company's total remaining performance obligations, also referred to as backlog, totaled $0.4 million. The Company expects to recognize approximately 100%, or $0.4 million, of the remaining performance obligations as revenue over the next twelve months.

The Company also enters into lease arrangements for its PB3 with certain customers. Revenue related to multiple-element arrangements is allocated to lease and non-lease elements based on their relative standalone selling prices or expected cost plus a margin approach. Lease elements generally include a PB3 and components, while non-lease elements generally include engineering, monitoring and support services. In the lease arrangement, the customer is provided an option to extend the lease term or purchase the leased PB3 at some point during and/or at the end of the lease term.

The Company classifies leases as either operating or financing in accordance with the authoritative accounting guidance contained within ASC Topic 842, "Leases". At inception of the contract, the Company evaluates the lease against the lease classification criteria within ASC Topic 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a finance lease. All others are treated as an operating lease.

The Company recognizes revenue from operating lease arrangements generally on a straight-line basis over the lease term and is presented in Revenues in the Consolidated Statement of Operations. The lease income for the three months ended July 31, 2021 and 2020 was immaterial.

The following table provides information regarding the breakdown of our revenues by customer for the three months ended July 31, 2021 and 2020.



                                   Three months ended July 31,
                                   2021                  2020
                                         (in thousands)
Eni S.p.A.                     $           -         $          28
Harbour (p/k/a Premier Oil)                -                    27
EGP                                      149                   114
Valaris                                   89                     -
Other (no customer over 10%)              34                     -
                               $         272         $         169



We currently focus our sales and marketing efforts globally. The following table shows the percentage of our revenues by geographical location of our customers for the three months ended July 31, 2021 and 2020.



                        Three months ended July 31,
Customer Location       2021                  2020

Europe                          0 %                  33 %
South America                  55 %                  67 %
North America                  45 %                   0 %
                              100 %                 100 %




  32






Cost of revenues


Our cost of revenues consists primarily of subcontracts, incurred material, labor and manufacturing overhead expenses, such as engineering expense, equipment depreciation and maintenance and facility related expenses, and includes the cost of equipment to customize the PowerBuoy® supplied by third-party suppliers. Cost of revenues also includes PowerBuoy® system delivery and deployment expenses and may include anticipated losses at completion on certain contracts.

Engineering and product development costs

Our engineering and product development costs consist of salaries and other personnel-related costs and the costs of products, materials and outside services used in our product development and unfunded research activities. Our product development costs relate primarily to our efforts to increase the power output and reliability of our PowerBuoy® system, to enhance and optimize data monitoring and controls systems, and to the development of new products, product applications and complementary technologies. We expense all of our engineering and product development costs as incurred.

Selling, general and administrative costs

Our selling, general and administrative costs consist primarily of professional fees, salaries and other personnel-related costs for employees and consultants engaged in sales and marketing and support of our products and costs for executive, accounting and administrative personnel, professional fees and other general corporate expenses.



Interest income, net


Interest income, net consists of interest received on cash, cash equivalents and money market fund and interest paid on certain obligations to third parties.



Foreign exchange gain (loss)


We transact business in various countries and have exposure to fluctuations in foreign currency exchange rates. Foreign exchange gains and losses arise in the translation of foreign-denominated assets and liabilities, which may result in realized and unrealized gains or losses from exchange rate fluctuations. Since we conduct our business in U.S. dollars and our functional currency is the U.S. dollar, our main foreign exchange exposure, if any, results from changes in the exchange rate between the U.S. dollar and the British pound sterling, the Euro and the Australian dollar.

We maintain cash accounts that are denominated in British pounds sterling, Euros and Australian dollars. These foreign-denominated accounts had a balance of $0.3 million as of July 31, 2021 and July 31, 2020, compared to our total cash, cash equivalents and restricted cash balances of $78.3 million as of July 31, 2021 and $12.0 million as of July 31, 2020. These foreign currency balances are translated each month into our functional currency, and any resulting gain or loss is recognized in our results of operations.

In addition, a portion of our operations is conducted through our subsidiaries in countries other than the United States, specifically Ocean Power Technologies Ltd. in the United Kingdom, the functional currency of which is the British pound sterling, and Ocean Power Technologies (Australasia) Pty Ltd. in Australia, the functional currency of which is the Australian dollar. Both of these subsidiaries have foreign exchange exposure that results from changes in the exchange rate between their functional currency and other foreign currencies in which they conduct business.

We currently do not hedge our exchange rate exposure. However, we assess the anticipated foreign currency working capital requirements and capital asset acquisitions of our foreign operations and attempt to maintain a portion of our cash and cash equivalents denominated in foreign currencies sufficient to satisfy these anticipated requirements. We also assess the need and cost to utilize financial instruments to hedge currency exposures on an ongoing basis and may hedge against exchange rate exposure in the future.



  33






Results of Operations


This section should be read in conjunction with the discussion below under "Liquidity and Capital Resources."

Three months ended July 31, 2021 compared to the three months ended July 31, 2020

The following table contains selected statement of operations information, which serves as the basis of the discussion of our results of operations for the three months ended July 31, 2021 and 2020.



                                                Three months ended July 31,
                                                 2021                 2020
                                                       (in thousands)
Revenues                                    $          272       $          169
Cost of revenues                                       423                  334
Gross profit/(loss)                                   (151 )               (165 )
Operating expenses:
Engineering and product development costs            1,971                1,252
Selling, general and administrative costs            2,909                1,987
Total operating expenses                             4,880                3,239
Operating loss                                      (5,031 )             (3,404 )
Interest income, net                                    20                   11
Gain on extiguishment of PPP loan                      891                   -
Foreign exchange gain/(loss)                             -                    8
Loss before income taxes                            (4,120 )             (3,385 )
Income tax benefit                                   1,041                    -
Net loss                                    $       (3,079 )     $       (3,385 )




Revenues


Revenues for the three months ended July 31, 2021 and 2020 were $0.3 million and $0.2 million, respectively. The year-over-year increase was primarily due to higher levels of revenue derived from our EGP contract and new work with 3Dent projects as compared to the same period in the prior year.



Cost of revenues


Cost of revenues for the three months ended July 31, 2021 and 2020 were $0.4 million and $0.3 million, respectively. The increase of approximately $0.1 million over 2020 was mostly due to higher deployment and material costs incurred on the EGP contract for the three months ended July 31, 2021 as compared to the three months ended July 31, 2020.

Engineering and product development costs

Engineering and product development costs for the three months ended July 31, 2021 and 2020 were $2.0 million and $1.3 million, respectively. The increase of approximately $0.7 million is the result of higher spending on new product development projects of $0.5 million as compared to the same period in the prior year and increases in employee payroll of $0.6 million driven by higher headcount in the current year with the addition of 3Dent. These increases were partially offset by a decrease in overhead and penalties incurred during the first quarter of fiscal 2021, of $0.4 million.

Selling, general and administrative costs

Selling, general and administrative costs for the three months ended July 31, 2021 and 2020 were $2.9 million and $2.0 million, respectively. The increase of $0.9 million for the three months ended July 31, 2021 was primarily due to higher consulting costs of $0.3 million, increases in equity compensation of $0.2 million, professional fees of $0.2 million, and risk management insurance cost increases of $0.2 million.



Extinguishment of Debt


The Company filed its loan forgiveness application at the end of February 2021 asking for 100% forgiveness of the loan. In June 2021, the Company was informed that its application was approved, the loan is now fully forgiven and the Company recognized a gain on extinguishment of PPP loan of $0.9 million.

Liquidity and Capital Resources

Our cash requirements relate primarily to working capital needed to operate and grow our business including funding operating expenses. We have experienced and continue to experience negative cash flows from operations and net losses. The Company incurred net losses of $3.1 million and $3.4 million for the three months ended July 31, 2021 and 2020, respectively. Refer to "Liquidity Outlook" below for additional information.



  34





Net cash used in operating activities

During the three months ended July 31, 2021, net cash flows used in operating activities was $5.3 million, an increase of $2.6 million compared to net cash used in operating activities during the three months ended July 31, 2020. This increase is primarily due to higher project and employee related costs and the settlement of litigation of approximately $1.2 million.

Net cash used in investing activities

Net cash used in investing activities during the three months ended July 31, 2021 was $7,325, compared to no cash used for investing activities during the three months ended July 31, 2020. The increase in net cash used in investing activities was due to higher spending on the purchase of property, plant and equipment.

Net cash provided by financing activities

Net cash provided by financing activities during the three months ended July 31, 2021 was zero compared to net cash provided by financing activities during the three months ended July 31, 2020 of $3.8 million. The decrease in net cash provided by financing activities during the three months ended July 31, 2021 reflects the combination of no capital raises during the first quarter of fiscal 2022 in addition to proceeds related to the PPP loan and capital raises related to Aspire and AGP in the prior year.

Effect of exchange rates on cash and cash equivalents

The effect of exchange rates on cash and cash equivalents was an increase of approximately $14,000 during the three months ended July 31, 2021. The effect of exchange rates on cash and cash equivalents results primarily from gains or losses on consolidation of foreign subsidiaries and foreign denominated cash and cash equivalents.




Liquidity Outlook



Since our inception, the cash flows from customer revenues have not been sufficient to fund our operations and provide the capital resources for our business. For the two years ended April 30, 2021 and 2020, our aggregate revenues were $2.9 million, our aggregate net losses were $25.1 million and our aggregate net cash used in operating activities was $22.3 million.

Our business is capital intensive, and up through July 31, 2021, we have been funding our business principally through sales of our securities. As of July 31, 2021, cash and cash equivalents was $78.1 million and we expect to fund our business with this amount and, to a limited extent, with our revenues until, we generate sufficient cash flow to internally fund our business. Management believes the Company's current cash and cash equivalent is sufficient to fund its planned expenditures through at least September, 2022. In addition to the acquisition of 3Dent in the prior year, the Company is looking at further organic and inorganic growth opportunities to advance our data and power services and solutions.

We expect to devote substantial resources to continue our development efforts for our products and to expand our sales, marketing and manufacturing programs associated with the continued commercialization of our products. Our future capital requirements will depend on a number of factors, including but not limited to:



  ? our ability to commercialize our products, and achieve and sustain
    profitability;

  ? our continued development of our proprietary technologies, and expected
    continued use of cash from operating activities unless or until we achieve
    positive cash flow from the commercialization of our products and services;

  ? our ability to obtain additional funding, as and if needed which will be
    subject to a number of factors, including market conditions, and our operating
    performance;

  ? the impact of COVID-19 pandemic on our business, operations, customers,
    suppliers and manufacturers, and personnel;

  ? future acquisitions, which may use significant resources, may be unsuccessful
    or may expose us to unforeseen liabilities;

  ? our estimates regarding expenses, future revenues and capital requirements;

  ? the adequacy of our cash balances and our need for additional financings;

  ? our ability to develop and manufacture commercially viable products;

  ? our ability to successfully develop and market new products;




  35






  ? that we will be successful in our efforts to commercialize our products or the
    timetable upon which commercialization can be achieved, if at all;

  ? our ability to identify and penetrate markets for our products and our wave
    energy technology;

  ? our ability to implement our commercialization strategy as planned, or at all;

  ? our relationships with our strategic partners may not be successful and we may
    not be successful in establishing additional relationships;

  ? our ability to maintain the listing of our common stock on the NYSE American;

  ? the reliability of our technology and our products;

  ? our ability to improve the power output, survivability and reliability of our
    products;

  ? the impact of pending and threatened litigation on our business, financial
    condition and liquidity;

  ? changes in current legislation, regulations and economic conditions that
    affect the demand for renewable energy;

  ? our ability to compete effectively in our target markets;

  ? our limited operating history and history of operating losses;

  ? our sales and marketing capabilities and strategy in the United States and
    internationally; and



our ability to protect our intellectual property portfolio.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet financing activities.

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Financials (USD)
Sales 2021 1,21 M - -
Net income 2021 -14,8 M - -
Net cash 2021 81,0 M - -
P/E ratio 2021 -5,10x
Yield 2021 -
Capitalization 107 M 107 M -
EV / Sales 2020 -2,75x
EV / Sales 2021 38,9x
Nbr of Employees -
Free-Float 99,9%
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Managers and Directors
J. Philipp Stratmann President, Chief Executive Officer & Director
Joseph DiPietro CFO, Treasurer, CAO & Controller
Terence James Cryan Chairman
Maurice E. Kordahi Vice President-Engineering & Operations
Clyde Winston Hewlett Independent Director