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Ocean Power Technologies Inc. Reports Operating Results (10-K)

July 13, 2012 | About:
10qk

10qk

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Ocean Power Technologies Inc. (OPTT) filed Annual Report for the period ended 2012-04-30.

Ocean Power Technologies Inc has a market cap of $20.9 million; its shares were traded at around $2.61 with and P/S ratio of 3.1.

Highlight of Business Operations:

The development of our technology has been funded by capital we raised and by development engineering contracts we received starting in fiscal 1995. In fiscal 1996, we received the first of several research contracts with the US Navy to study the feasibility of wave energy. As a result of those research contracts, we entered into our first development and construction contract with the US Navy in fiscal 2002 under a project for the development and testing of our wave power systems at the US Marine Corps Base in Oahu, Hawaii. This project included the grid-connection of one of our utility-grade PowerBuoys at the Marine Corps Base. We generated our first revenue relating to our autonomous PowerBuoy system from contracts with Lockheed Martin Corporation, or Lockheed Martin, in fiscal 2003, and we entered into our first development and construction contract with Lockheed Martin in fiscal 2004 for the development and construction of a prototype demonstration autonomous PowerBuoy system. Subsequently, we received a contract from the US Navy to test our autonomous PowerBuoy system as a power source for the Navy s Deep Water Active Detection System (DWADS). In 2011, an autonomous PowerBuoy was deployed for ocean trials off the coast of New Jersey under a contract from the US Navy under its Littoral Expeditionary Autonomous PowerBuoy (LEAP) program. The LEAP PowerBuoy, incorporating a unique power take-off and on-board storage system, is significantly smaller and more compact than our standard utility PowerBuoy. It is designed to provide persistent, off-grid clean energy in remote ocean locations for a wide variety of maritime security, monitoring and other commercial applications. Also in 2011, ocean trials of our first 150kW PowerBuoy were conducted. These ocean trials were conducted at a site approximately 33 nautical miles from Invergordon, off Scotland s northeast coast. During the ocean trials, our 150kW- rated PowerBuoy produced power in excess of our expectations of performance. Our utility scale PB150 structure and mooring system achieved independent certification from Lloyd s Register. This certification from Lloyd s Register confirms that the PB150 design complies with the requirements of Lloyd s 1999 Rules and Regulations for the Classification of Floating Offshore Installations at Fixed Locations. At April 30, 2012, our total negotiated backlog was $6.8 million compared with $8.9 million at April 30, 2011. The decrease in backlog is a result of revenue recognized during the period offset by new orders during fiscal 2012, of $3.9 million and changes in foreign currency of $0.3 million. New orders during 2012 included a $3.2 million grant from the European Union related to our WavePort project to enhance the efficiency of our PowerBuoy. We anticipate that a majority of our backlog will be recognized as revenue over the next 12 months. Most of our backlog at April 30, 2012 and 2011 consisted of cost-sharing contracts as described in the Financial Operations Overview section of this Management s Discussion and Analysis. Our backlog includes both funded amounts, which are unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer (Congress, in the case of US Government agencies) and unfunded amounts, which are unfilled firm orders from the US Department of Energy (DOE) for which funding has not been appropriated. If any of our contracts were to be terminated, our backlog would be reduced by the expected value of the remaining terms of such contracts. Funded backlog was $4.8 million and $6.9 million at April 30, 2012 and 2011, respectively. 32

At April 30, 2012, our total negotiated backlog was $6.8 million compared with $8.9 million at April 30, 2011. The decrease in backlog is a result of revenue recognized during the period offset by new orders during fiscal 2012, of $3.9 million and changes in foreign currency of $0.3 million. New orders during 2012 included a $3.2 million grant from the European Union related to our WavePort project to enhance the efficiency of our PowerBuoy. We anticipate that a majority of our backlog will be recognized as revenue over the next 12 months. Most of our backlog at April 30, 2012 and 2011 consisted of cost-sharing contracts as described in the Financial Operations Overview section of this Management s Discussion and Analysis. Our backlog includes both funded amounts, which are unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer (Congress, in the case of US Government agencies) and unfunded amounts, which are unfilled firm orders from the US Department of Energy (DOE) for which funding has not been appropriated. If any of our contracts were to be terminated, our backlog would be reduced by the expected value of the remaining terms of such contracts. Funded backlog was $4.8 million and $6.9 million at April 30, 2012 and 2011, respectively.

As of April 30, 2012, we had federal and foreign net operating loss carryforwards of $81.7 million and $18.3 million, respectively, and federal and foreign research and development tax credits of $2.1 million and $0.7 million, respectively which may be used to offset future taxable income. As of April 30, 2012, we had state net operating loss carryforwards of $57.7 million. If not utilized, the net operating loss carryforwards and credit carryforwards will expire at various dates through 2032. We may not achieve profitability in time to utilize the tax credit and net operating loss carryforwards in full or at all. In addition, we have determined that the future utilization of our net operating loss carryforwards is subject to limitations based upon changes in ownership including changes resulting from our initial public offering in April 2007, pursuant to regulations promulgated under the Internal Revenue Code. As discussed in Note 12 to our consolidated financial statements included in this Annual Report, we have established a valuation allowance for our net deferred tax assets, which were $43.7 million as of April 30, 2012 and $39.9 million as of April 30, 2011. During the years ended April 30, 2012 and 2011, we sold New Jersey State net operating losses in the amount of $12.9 million and $4.4 million, respectively, resulting in the recognition of income tax benefits of $1.1 million and $0.4 million, respectively, recorded in our Statement of Operations.

As of April 30, 2012, we had federal and foreign net operating loss carryforwards of $81.7 million and $18.3 million, respectively, and federal and foreign research and development tax credits of $2.1 million and $0.7 million, respectively which may be used to offset future taxable income. As of April 30, 2012, we had state net operating loss carryforwards of $57.7 million. If not utilized, the net operating loss carryforwards and credit carryforwards will expire at various dates through 2032. We may not achieve profitability in time to utilize the tax credit and net operating loss carryforwards in full or at all. In addition, we have determined that the future utilization of our net operating loss carryforwards is subject to limitations based upon changes in ownership including changes resulting from our initial public offering in April 2007, pursuant to regulations promulgated under the Internal Revenue Code. As discussed in Note 12 to our consolidated financial statements included in this Annual Report, we have established a valuation allowance for our net deferred tax assets, which were $43.7 million as of April 30, 2012 and $39.9 million as of April 30, 2011.

We account for income taxes under the asset and liability method. Under this method, we determine deferred tax assets and liabilities based upon the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as well as net operating loss and tax credit carryforwards, using enacted tax rates in effect for the year in which such items are expected to affect taxable income. The tax consequences of most events recognized in the current year's financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because we assume that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, giving rise to a deferred tax asset or deferred tax liability. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. As discussed in Note 12 to our consolidated financial statements included in this Annual Report, we have established a valuation allowance for our net deferred tax assets, which was $43.7 million as of April 30, 2012 and $39.9 million as of April 30, 2011. During the years ended April 30, 2012 and 2011, we sold New Jersey State net operating losses in the amount of $12.9 million and $4.4 million, respectively, resulting in the recognition of income tax benefits of $1.1 million and $0.4 million, respectively, recorded in our Statement of Operations.

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