OPT Optima Health Plc

Ocean Power Technologies, Inc. (Nasdaq: OPTT) (“OPT” or “the Company”) announces its financial results for the third quarter and nine months ended January 31, 2011 of its fiscal year ending on April 30, 2011.

Third Quarter Highlights

• Revenue increased by 78% and 73% for the three and nine months ended January 31, 2011, compared to the respective periods last year.
• Expanded relationship with Mitsui Engineering & Shipbuilding Co. Ltd. (“MES” or “Mitsui”) with the signing of a new contract to tailor OPT’s PowerBuoy® technology for Japanese sea conditions.
• Achieved Lloyd’s Register certification for the PB150 PowerBuoy design, providing independent, third-party assurance of its compliance with international standards.
• Subsequent to the end of the third quarter, the Company announced it had completed the construction of the first of a new generation utility scale PowerBuoy device, the PB150. It is currently being prepared for ocean trials at a site off Scotland’s northeast coast. Sea trials are expected to commence as soon as weather conditions permit.

Charles F. Dunleavy, Chief Executive Officer of OPT, said: “We continue to make significant progress in developing our core PowerBuoy technology and executing our business strategy. We achieved strong revenue growth, expanded our involvement in Japan with a new contract with Mitsui and gained certification of our PB150 design from Lloyd’s Register. The high tempo of activity is continuing in the fourth quarter with the completion of the first of our new generation of utility scale buoy, with sea trials due to commence off the coast of Scotland shortly.”

Operational Review

During the third fiscal quarter ended January 31, 2011, the Company achieved milestones in a number of ongoing projects, which include the following:

HAWAII, US – OPT continues to demonstrate the in-ocean reliability and survivability of the first ever grid connected wave energy device in the US, at the Marine Corps Base Hawaii, in conjunction with the US Navy. This PB40 PowerBuoy was deployed in December 2009 and has demonstrated the ability of OPT’s PowerBuoy systems to produce utility-grade, renewable energy that can be transmitted to the grid in a manner fully compliant with national and international standards.

SCOTLAND, UK – As announced on February 28, 2011, construction of OPT’s first PB150 PowerBuoy has been completed in Scotland, representing a multi-million pound sterling investment in the local region. The sea trials, to be conducted off the northeast coast of Scotland, are expected to commence as soon as weather conditions permit deployment. This 150 kilowatt-rated system is the largest, most powerful PowerBuoy built by OPT to date. The Company is seeking additional funding for the commercial utilization of the buoy after the trial phase is completed, including its possible deployment at various potential sites. A second PB150 is under construction for a utility scale project in Oregon, and the Company is developing other planned projects in Australia, Japan and Europe that may utilize PB150 PowerBuoys.

PB150 CERTIFICATION – OPT achieved independent certification for its utility scale PB150 PowerBuoy by the internationally respected Lloyd’s Register. The certification confirms that the PB150 design complies with certain international standards promulgated for floating offshore installations. The process followed by Lloyd’s included detailed design analysis and appraisals, including the PB150’s structure, hydrodynamics, mooring and anchoring. In July 2007, OPT announced that its PowerBuoy interface with the electrical utility power grid had been certified as compliant with international standards, including UL1741 and IEEE1547, by Intertek Testing Services (“Intertek”), an independent laboratory.

REEDSPORT, OREGON, US – Fabrication of the power take-off (“PTO”) and control system as well as the steel structure of the PB150 device is now complete. This device, which is being built in Oregon, draws on the experience gained from the construction of the first buoy in this series in Scotland. Testing of the PTO and control system has commenced in OPT’s production facility. Following initial testing of its sub-assemblies, the complete PTO system will commence cycle testing in an environment reflective of varying wave conditions. Ocean trials of the PB150 are due to commence later in calendar year 2011.

JAPAN – The Company signed a new $220,000 contract with MES to develop a PowerBuoy for Japanese sea conditions. Under this new contract, MES and OPT will work together to develop a new mooring system for OPT’s PowerBuoy, customized for wave power stations off the coast of Japan. The new system will undergo testing at MES’s wave tank facilities to verify the results of extensive computer modeling. The companies intend to complete work on the mooring system and progress the identification of a project site for an in-ocean trial of the PowerBuoy system.

US NAVY “LEAP” PROJECT – Work continued under the Company’s $2.75 million award under the US Navy’s Littoral Expeditionary Autonomous PowerBuoy (“LEAP”) program to provide an autonomous PowerBuoy wave energy conversion system for homeland protection and security. In this second stage of the program, OPT will build and ocean-test a LEAP system off the coast of New Jersey during the second half of calendar year 2011. The design of the LEAP system is now in progress. The new award follows the successful completion by OPT of the first stage of the US Navy’s LEAP program: during the first 12-month period, OPT delivered, in September 2010, the design and testing of a new power take-off system developed under this program for its autonomous PowerBuoy.

PB500 PRODUCT DEVELOPMENT – Concept development of the PB500 major subsystems is in progress, and wave tank testing of models has been completed. The Company’s strategy is to fund such development primarily with external grants and other contracts rather than to use OPT’s existing capital resources. Since April 2010, the total of such external awards received by the Company for the development of the PB500 is $6.2 million.

Financial Review

Third Quarter-

OPT’s contract backlog at January 31, 2011 was $5.8 million, compared to $5.7 million at April 30, 2010 and $7.5 million at October 31, 2010. Reported contract backlog at January 31, 2011 excluded two new funding awards from the US Department of Energy totaling $4.8 million, for the deployment of one of OPT’s PowerBuoys at Reedsport, Oregon and for the development of the PB500, as the contracts for these two awards had not yet been received by the Company. Subsequent to January 31, 2011, one of these contracts for $2.4 million was executed. OPT is in the process of obtaining the contract for the other grant.

For the three months ended January 31, 2011, OPT reported revenues of $1.5 million, an approximately 78 percent increase compared to revenues of $0.9 million in the three months ended January 31, 2010. The growth in revenues primarily reflects an increase in revenues from the Company’s development of the PB500 PowerBuoy and an increase in revenues from OPT’s PB150 PowerBuoy project in Reedsport, Oregon. The revenue increases in these projects were partially offset by declines in revenues from OPT’s Deep Water Active Detection System (“DWADS”) project with the US Navy and a utility PowerBuoy project with the US Navy at the Marine Corps Base in Hawaii as both of these projects neared completion.

Operating loss for the three months ended January 31, 2011 was $3.8 million compared to $6.1 million for the three months ended January 31, 2010. This change primarily reflects a decrease in product development costs, principally for the PB150 system in Scotland, and a reduction in selling, general and administrative costs. The decrease in selling, general and administrative costs was largely due to lower compensation and recruiting costs.

Net loss was $3.4 million for the three months ended January 31, 2011 compared to $5.7 million for the same period in the prior year. This decrease in net loss was primarily due to the decrease in operating loss, a tax benefit recorded from the sale of New Jersey net operating tax losses, offset by a decrease in foreign exchange gains and interest income.

Nine Months-

For the nine months ended January 31, 2011, OPT reported revenues of $4.8 million, a 73 percent increase compared to revenues of $2.7 million in the nine months ended January 31, 2010. The growth in revenues primarily reflects an increase in revenues from the US Navy under the LEAP program. In addition, there was an increase in revenues from OPT’s PB150 PowerBuoy project in Reedsport, Oregon and the Company’s PB500 development project. The revenue increases in these projects were partially offset by declines in revenues from OPT’s DWADS project with the US Navy, a utility scale project in Spain and a utility PowerBuoy project with the US Navy at the Marine Corps Base in Hawaii as all of these projects neared completion.

Operating loss for the nine months ended January 31, 2011 was $15.8 million compared to $14.9 million for the nine months ended January 31, 2010. This change primarily reflects an increase in product development costs, principally for the PB150 system in Reedsport, and a decrease in gross profit, offset by a reduction in selling, general and administrative costs. Gross loss for the nine months ended January 31, 2011 was negatively impacted by a reduction of $240,000 of revenue due to a change in estimated revenue to be recognized in connection with the Company’s project in Spain. In addition, gross profit for the nine months ended January 31, 2010 included a reversal of a provision for contract losses of approximately $400,000. The decrease in selling, general and administrative costs was largely due to lower compensation and recruiting costs.

Net loss was $15.1 million for the nine months ended January 31, 2011 compared to $12.9 million for the same period in the prior year. This increase in net loss was primarily due to the change in operating loss as noted above and decreases in interest income, other income and foreign exchange gains. Other income for the nine months ended January 31, 2010 included a one-time gain of $549,000 from a favorable settlement of a claim against a supplier of engineering services. During the nine months ended January 31, 2011, OPT recorded a tax benefit of $364,000 in connection with the sale of New Jersey net operating tax losses.

Cash and Investments-

On January 31, 2011, total cash, cash equivalents, restricted cash and marketable securities were $52.8 million. Net cash used in operating activities was $4.6 million and $14.0 million for the three and nine months ended January 31, 2011, respectively. While OPT expects the rate of cash used in the fourth quarter of fiscal 2011 to be consistent with the first three quarters, it expects the rate of its cash outflows to decrease in fiscal 2012, reflecting completion of significant milestones associated with the construction of its two PB150 systems for Oregon and Scotland.

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Additional information may be found in the Company’s Quarterly Report on Form 10-Q that will be filed with the US Securities and Exchange Commission. The Form 10-Q may be accessed at www.sec.gov or at the Company’s website in the Investor Relations tab.

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Webcast Details

OPT will host an audio webcast to review its results on Monday, March 14, 2011 at 10:00 a.m. Eastern Time (2:00 p.m. GMT). Charles F. Dunleavy, Chief Executive Officer, and Brian M. Posner, Chief Financial Officer, will host the webcast. Investors and other interested parties may access the webcast by visiting the Company's website at www.oceanpowertechnologies.com and clicking on the Investor Relations tab, then Webcasts and Presentations. In addition, parties without web access may listen to the presentation by calling: 866.783.2141 (Toll free call in the US) or +1.857.350.1600 (Toll call), passcode: 47703110

Forward-Looking Statements

This release may contain "forward-looking statements" that are within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's current expectations about its future plans and performance, including statements concerning the impact of marketing strategies, new product introductions and innovation, deliveries of product, sales, earnings and margins. These forward-looking statements rely on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties. Actual results could vary materially from those anticipated or expressed in any forward-looking statement made by the Company. Please refer to the Company's most recent Form 10-K for a further discussion of these risks and uncertainties. The Company disclaims any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this release.

About Ocean Power Technologies

Ocean Power Technologies, Inc. (Nasdaq: OPTT) is a pioneer in wave-energy technology that harnesses ocean wave resources to generate reliable and clean and environmentally-beneficial electricity. OPT has a strong track record in the advancement of wave energy. The Company participates in a $150 billion annual power generation equipment market. OPT’s proprietary PowerBuoy® system is based on modular, ocean-going buoys that capture and convert predictable wave energy into clean electricity. The Company is widely recognized as a leading developer of on-grid and autonomous wave-energy generation systems, benefiting from 15 years of in-ocean experience. OPT is headquartered in Pennington, New Jersey with an office in Warwick, UK. More information can be found at www.oceanpowertechnologies.com.

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Consolidated Balance Sheets as of January 31, 2011 and April 30, 2010

    January 31, 2011 April 30, 2010 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,502,624 4,236,597 Marketable securities 25,538,538 32,536,001 Accounts receivable 720,699 1,474,600 Unbilled receivables 649,863 448,686 Other current assets 693,291   1,005,885     Total current assets 37,105,015 39,701,769   Property and equipment, net 543,486 710,563 Patents, net 1,132,542 1,036,881 Restricted cash 1,480,136 1,205,288 Marketable securities 16,324,661 28,865,046 Other noncurrent assets 726,010   1,458,646     TOTAL ASSETS $ 57,311,850   72,978,193     LIABILITIES AND STOCKHOLDERS' EQUITY   CURRENT LIABILITIES: Accounts payable $ 1,126,407 1,843,378 Accrued expenses 3,306,877 4,092,113 Unearned revenues 752,038 1,101,541 Current portion of long-term debt 114,378   95,386     Total current liabilities 5,299,700 7,132,418   Long-term debt 475,000 250,000 Deferred credits 600,000 600,000 Other noncurrent liabilities ― 140,685     Total liabilities 6,374,700   8,123,103     OCEAN POWER TECHNOLOGIES, INC. STOCKHOLDERS' EQUITY: Preferred stock, $0.001 par value; authorized

5,000,000 shares; none issued or outstanding

―

―

Common stock, $0.001 par value; authorized 105,000,000

shares; issued 10,419,183 and 10,390,563 shares,

respectively

10,419

 

10,391

Treasury stock, at cost; 6,673 and 1,072 shares, respectively

(37,302

)

 

(6,443

)

Additional paid-in capital 156,680,382 155,726,672 Accumulated deficit (105,541,701 ) (90,413,098 ) Accumulated other comprehensive loss (202,736 ) (503,322 )   Total Ocean Power Technologies, Inc. stockholders' equity 50,909,062   64,814,200     Noncontrolling interest in Ocean Power Technologies (Australasia) Pty, Ltd 28,088   40,890     Total equity 50,937,150   64,855,090     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,311,850   72,978,193    

Consolidated Statements of Operations

For the three months ended January 31, 2011 and 2010 (Unaudited)

and nine months ended January 31, 2011 and 2010 (Unaudited)

    Three Months Ended January 31, Nine Months Ended January 31, 2011     2010   2011     2010     Revenues $ 1,523,601 856,482 4,762,415 2,749,294 Cost of revenues 1,453,397   691,090   4,818,623   2,243,465     Gross profit (loss) 70,204   165,392   (56,208 ) 505,829     Operating expenses: Product development costs 2,026,336 3,681,118 9,731,592 8,467,866 Selling, general and administrative

costs

1,884,950

 

2,557,931

 

6,060,705

 

6,915,435

    Total operating expenses 3,911,286   6,239,049   15,792,297   15,383,301     Operating loss (3,841,082 ) (6,073,657 ) (15,848,505 ) (14,877,472 )   Interest income, net 148,480 231,683 546,829 764,504 Other income ― 17,668 ― 549,258 Foreign exchange (loss) gain (38,014 ) 172,128   (205,824 ) 674,517   Loss before income taxes (3,730,616 ) (5,652,178 ) (15,507,500 ) (12,889,193 ) Income tax benefit 364,105   ― 364,105   ―   Net loss (3,366,511 ) (5,652,178 ) (15,143,395 ) (12,889,193 )   Less: Net loss (income) attributable

to the noncontrolling interest in

Ocean Power Technologies

(Australasia) Pty, Ltd.

3,693   2,682   14,792   (50,551 )   Net loss attributable to Ocean Power Technologies, Inc.

$

(3,362,818

)

(5,649,496

)

(15,128,603

)

(12,939,744

)

  Basic and diluted net loss per share $ (0.33 ) (0.55 ) (1.48 ) (1.27 )   Weighted average shares used to compute basic and diluted net loss per share

10,248,092

 

10,213,900

 

10,242,528

 

10,211,536

   

Consolidated Statements of Cash Flows

For the nine months ended January 31, 2011 and 2010 (Unaudited)

  Nine Months Ended January 31, CASH FLOWS FROM OPERATING ACTIVITIES: 2011     2010     Net Loss $ (15,143,395 ) (12,889,193 ) Adjustments to reconcile net loss to net cash used in operating activities: Foreign exchange loss (gain) 205,824 (674,517 ) Depreciation and amortization 270,209 274,226 Loss on disposals of property, plant and equipment 933 ― Treasury note premium amortization 57,752 135,325 Compensation expense related to stock option grants and restricted stock 953,738 872,109 Changes in operating assets and liabilities: Accounts receivable 776,316 64,961 Unbilled receivables (192,577 ) 76,224 Other current assets 325,440 12,858 Other noncurrent assets 756,172 (191,505 ) Accounts payable (715,927 ) 423,534 Accrued expenses (787,537 ) (553,942 ) Unearned revenues (351,625 ) 549,983 Other noncurrent liabilities (142,586 ) 133,505     Net cash used in operating activities (13,987,263 ) (11,766,432 )   CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (7,528,436 ) (34,048,490 ) Maturities of marketable securities 27,011,971 41,838,886 Restricted cash (250,000 ) (250,000 ) Purchases of equipment (67,356 ) (199,089 ) Payments of patent costs (190,547 ) (119,017 )   Net cash provided by investing activities 18,975,632   7,222,290     CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 250,000 ― Repayment of debt (6,008 ) (93,398 ) Acquisition of treasury stock (30,859 ) ―   Net cash provided by (used in) financing activities 213,133   (93,398 )   EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 64,525   837,636     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,266,027 (3,799,904 )   CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,236,597   12,267,830     CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,502,624   8,467,926