Ocean Power Technologies, Inc. released its financial results for its Fiscal 2014 fourth quarter and full-year ended April 30, 2014 (“fiscal 2014”).
David L. Keller, Interim Chief Executive Officer of OPT, stated: “Over the last several months, we announced the termination of both the Reedsport, Oregon and Victoria Wave Partners projects. Additionally, we are deferring our WavePort deployment in the European Union into calendar 2015, due to a number of logistics factors, such as the readiness of the proposed deployment site. Furthermore, the summer 2013 deployment of our APB-350 Autonomous PowerBuoy led us to determine that several design modifications to address critical operation and reliability issues were required. Taken as a whole, these results indicate that our basic technology needs further advancement before we commit to large-scale utility projects with typical commercial risk-sharing, even when partially subsidized by government grants.”
On July 8, 2014, Victorian Wave Partners Pty Ltd (“VWP”), an indirect consolidated subsidiary of Ocean Power Technologies, Inc. (the “Company”), tendered a notice (the “Termination Notice”) to the Australian Renewable Energy Agency (“ARENA”) of VWP’s intent to terminate the Renewable Energy Demonstration Program Funding Deed, dated as of September 9, 2010, entered into between VWP and the Commonwealth of Australia, as amended by a Deed of Variation dated January 9, 2014 (“the Funding Deed”). Unless agreed otherwise, pursuant to the terms of the Funding Deed, it will terminate on October 8, 2014
Strategic Focus on Smaller Scale Devices
The Company has shifted its immediate focus to smaller-scale devices, such as the PB-40, intended to be deployed off the coast of Spain, and the utility scale PowerBuoy, under development with Mitsui Engineering and Shipbuilding, which are suitable for both autonomous and utility applications. OPT recognizes that deployments are critical to technology advancement in order to accumulate successful operating history that demonstrates durability and reliability at acceptable levels of commercial risk-taking. The Company has accumulated a significant body of knowledge through PowerBuoy deployments of varying capabilities which is now an integral part of its engineering design and development processes.
Commenting on the strategic shift from large, utility-scale projects, Mr. Keller noted, “We believe that we can move faster to optimize our technology on smaller-scale power outputs which are more economical to manufacture and deploy than larger buoys.”
Fourth Quarter Fiscal 2014
Revenue for the quarter was $0.4 million, unchanged from the prior-year period. Revenue in the current fiscal fourth quarter included revenue associated with OPT’s project with Mitsui Engineering & Shipbuilding, which offset the delayed WavePort project off the coast of Spain. The net loss for the three months ended April 30, 2014 was $3.3 million as compared with a net loss of $4.2 million for the three months ended April 30, 2013. The favorable decrease in the Company’s net loss year-over-year reflects lower product development costs and a favorable change in a contract loss reserve, offset by higher selling, general and administrative costs. The decrease in product development costs was due primarily to a lower level of activity for OPT’s project in Oregon. The favorable change in contract loss reserve was due to a change in OPT’s intent to complete a previous project. SG&A increased due to employee-related costs and costs associated with site development related to the VWP project in Australia.
Fiscal 2014
OPT had revenue of $1.5 million in fiscal 2014 compared with revenue of $3.6 million in fiscal 2013. The decline reflects the suspension of the PowerBuoy project off the coast of Oregon, decreased billable work on PowerBuoy development projects, the completion of a project with MES in the prior fiscal year and a decrease in the estimated contract value associated with the WavePort project off the coast of Spain.
Net loss was $11.2 million compared with $14.8 million in the prior year. The reduction in net loss was due primarily to a decline in product development costs associated with OPT’s project in Oregon, a favorable change in contract loss reserves and a higher income tax benefit due to the sale of New Jersey net operating tax losses and research and development tax credits. These improvements were somewhat offset by higher selling, general and administrative (“SG&A”) costs. Higher SG&A reflects fees associated with the establishment of an At-The-Market (“ATM”) Agreement and site development expenses related to the VWP project in Australia.