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

December 14, 2012 | About:
10qk

10qk

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Ocean Power Technologies Inc. (OPTT) filed Quarterly Report for the period ended 2012-10-31.

Ocean Power Technologies has a market cap of $24.8 million; its shares were traded at around $2.22 with and P/S ratio of 5.1.

Highlight of Business Operations:

During the three months ended October 31, 2012, we received new orders from Mitsui Engineering & Shipbuilding, for further work towards development of our PowerBuoy technology for application in Japanese sea conditions, and from the US Department of Homeland Security, to perform a new round of in-ocean tests on our autonomous PowerBuoy to further demonstrate its use for ocean surveillance. We continue to work on developing our PB500 PowerBuoy and plan to deploy a 150kW PowerBuoy off the coast of Reedsport, Oregon during calendar 2013. Our efforts continued in connection with the planned 19MW wave power project off the coast of Victoria, Australia. Funding for this project includes a grant of A$66.5 million (approximately US $70 million) awarded by the Commonwealth of Australia. The grant is subject to certain terms, including funding milestones, which require significant additional funding to enable the receipt of the grant funds and the completion of the project. In November 2012, we engaged a financial advisor to lead efforts to structure and secure appropriate financing for this project. The Board of Directors of the Commonwealth s agency managing the grant, the Australian Renewable Energy Agency, is scheduled to review the status of this project during December 2012. At October 31, 2012, our total negotiated backlog was $5.2 million compared with $8.8 million at October 31, 2011. We anticipate that a majority of our backlog will be recognized as revenue over the next 12 months. Most of our backlog at October 31, 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 can include 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 $5.2 million and $6.8 million at October 31, 2012 and 2011, respectively.

For the three months ended October 31, 2012, we generated revenues of $1.4 million and incurred a net loss attributable to Ocean Power Technologies, Inc. of $4.8 million, compared to revenues of $1.5 million and a net loss attributable to Ocean Power Technologies, Inc. of $3.9 million for the three months ended October 31, 2011. For the six months ended October 31, 2012, we generated revenues of $2.3 million and incurred a net loss attributable to Ocean Power Technologies, Inc. of $9.1 million, compared to revenues of $3.4 million and a net loss attributable to Ocean Power Technologies, Inc. of $8.9 million for the six months ended October 31, 2011. As of October 31, 2012, our accumulated deficit was $135.1 million. We have not been profitable since inception, and we do not know whether or when we will become profitable because of the significant uncertainties with respect to our ability to successfully commercialize our PowerBuoy systems in the emerging renewable energy market.

For the three months ended October 31, 2012, we generated revenues of $1.4 million and incurred a net loss attributable to Ocean Power Technologies, Inc. of $4.8 million, compared to revenues of $1.5 million and a net loss attributable to Ocean Power Technologies, Inc. of $3.9 million for the three months ended October 31, 2011. For the six months ended October 31, 2012, we generated revenues of $2.3 million and incurred a net loss attributable to Ocean Power Technologies, Inc. of $9.1 million, compared to revenues of $3.4 million and a net loss attributable to Ocean Power Technologies, Inc. of $8.9 million for the six months ended October 31, 2011. As of October 31, 2012, our accumulated deficit was $135.1 million. We have not been profitable since inception, and we do not know whether or when we will become profitable because of the significant uncertainties with respect to our ability to successfully commercialize our PowerBuoy systems in the emerging renewable energy market.

23 We operated at a small gross profit in the three month periods ended October 31, 2012 and 2011. Most of our projects in the three month periods ended October 31, 2012 and 2011 were under cost-sharing contracts. Under cost-sharing contracts, we receive a fixed amount agreed upon with the customer that is only intended to fund a portion of the costs on a specific project. We fund the remainder of the costs primarily as part of our product development efforts. Revenue is typically recorded using the percentage-of-completion method applied to the contractual amount agreed upon with the customer. An equal amount corresponding to the revenue is recorded in cost of revenues resulting in gross profit on these contracts of zero. Our share of the costs is considered to be product development expense. Our ability to generate a gross profit will depend on the nature of future contracts, our success at increasing sales of our PowerBuoy systems and on our ability to manage costs incurred on our fixed price contracts.

We operated at a small gross profit in the six month periods ended October 31, 2012 and 2011. Most of our projects in the six month periods ended October 31, 2012 and 2011 were under cost-sharing contracts. Under cost-sharing contracts, we receive a fixed amount agreed upon with the customer that is only intended to fund a portion of the costs on a specific project. We fund the remainder of the costs primarily as part of our product development efforts. Revenue is typically recorded using the percentage-of-completion method applied to the contractual amount agreed upon with the customer. An equal amount corresponding to the revenue is recorded in cost of revenues resulting in gross profit on these contracts of zero. Our share of the costs is considered to be product development expense. Our ability to generate a gross profit will depend on the nature of future contracts, our success at increasing sales of our PowerBuoy systems and on our ability to manage costs incurred on our fixed price contracts. Product development costs Product development costs decreased by $0.3 million, or 6%, to $4.9 million in the six months ended October 31, 2012, as compared to $5.2 million in the six months ended October 31, 2011. Product development costs were attributable primarily to our efforts to increase the power output and reliability of our utility PowerBuoy system, especially for our utility-scale PowerBuoy system. The decrease in product development costs was related primarily to a decrease in activity related to our project off the coast of Scotland. The Scotland project was completed in fiscal 2012. This was partially offset by an increase in activity related to our PowerBuoy project off the coast of Oregon. Over the next several years, it is our intent to fund the majority of our research and development expenses, including cost-sharing arrangements, with sources of external funding. If we are unable to obtain external funding, we may curtail our research and development expenses or we may decide to self-fund significant research and development expenses, in which case our product development costs may increase. During the six months ended October 31, 2012, the majority of funding for our PB500 PowerBuoy development project was from external sources. Selling, general and administrative costs Selling, general and administrative costs increased by $0.5 million, or 11%, to $4.5 million for the six months ended October 31, 2012 as compared to $4.0 million for the six months ended October 31, 2011. The increase was due primarily to an increase in site development expenses related to a potential project in Australia. Interest income Interest income decreased approximately 63% to $90,000 for the six months ended October 31, 2012, as compared to $246,000 in the six months ended October 31, 2011, due to a decrease in cash, cash equivalents and marketable securities and a decrease in average yield. Foreign exchange loss Foreign exchange loss was $6,000 for the six months ended October 31, 2012, compared to a foreign exchange gain of $20,000 for the six months ended October 31, 2011. The difference was attributable primarily to the relative change in value of the British pound sterling, Euro, Australian dollar and Japanese yen compared to the US dollar during the two periods. 26

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