30th Jan 2006 07:00
Ocean Power Technologies Inc30 January 2006 NEWS RELEASE Ocean Power Technologies, Inc. 1590 Reed Road Pennington, New Jersey 08534 USAFor Immediate Release OCEAN POWER TECHNOLOGIES ANNOUNCES INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2005 Pennington, NJ, USA, 30 January 2006 - Ocean Power Technologies, Inc ("OPT", orthe "Company") (London Stock Exchange:AIM-OPT), a leading renewable energytechnology company that is commercialising its off-shore wave-powered electricalgeneration systems, announces its interim results for the six months ended 31October 2005 (exchange rate of £1 = $1.80). HIGHLIGHTS •Deployment of PowerBuoysTM at customer sites off Hawaii and New Jersey, USA •Contracts entered into and funding secured: -Additional funding of $2.8 million received from US Navy in connection with Hawaii wave power station -Agreement signed with Total S.A. for a multi-phased project for 2-5 MW OPT wave power station on the west coast of France •Net loss of $4.0 million (£2.2 million) compared to net income of $110,000 (£61,000) in the prior six-month period ended 31 October 2004 •Contract revenues of $1.1 million (£0.6 million), compared to $1.7 million (£0.9 million) in the prior six-month period •$35 million (£19 million) in cash and short-term investments at 31 October 2005 •New key personnel appointed: -Senior Vice President, Engineering of Ocean Power Technologies, Inc. -Business Development Manager of Ocean Power Technologies Limited, UK-based European subsidiary Commenting on the interim results Dr. George W. Taylor, Chief Executive Officerof OPT, said: "OPT has made solid progress in getting its PowerBuoys into theocean. The first Hawaii system is about to be connected to the grid and the NewJersey buoy has withstood the significant wind and wave forces of HurricaneWilma. OPT's PowerBuoys have had considerably more time and successful operationin the ocean than any other offshore wave power system. With our ongoingcommitment of resources to product development, we look forward to leveragingthe technology improvements made last year, and accelerating thecommercialisation of our product throughout 2006. Our revenues reflect delays inthe timing of new contract awards, which will affect the rest of the Company'scurrent financial year ending 30 April 2006. While these revenues are lower thanwere originally expected for this year, we believe they reflect a deferral,rather than the loss of opportunities. In fact, customer interest is higher thanit has ever been in the past, and we are very pleased that our on-going customerrelationships are strong. We are confident that our increased internationalmarketing efforts are positioning OPT for expansion of the Company's business." For further information, please contact: Dr. George W. Taylor, Charles F. Dunleavy,Chief Executive Officer Chief Financial OfficerTelephone: (609) 730-0400 Telephone: (609) 730-0400E-mail: [email protected] E-mail: [email protected] Michael Brennan, Ken Cronin, Evolution Securities Limited Gavin Anderson & CompanyTelephone: +44 207 071 4300 Telephone: +44 207 554 1400 Background Information Ocean Power Technologies, Inc. OPT is the world's first publicly listed wave power company. It iscommercialising its proprietary technology for the generation of electricalpower using the energy of ocean waves. OPT's wave energy systems are based onmodular, buoy-like structures, called PowerBuoysTM, which are "intelligent"systems capable of responding to differing wave conditions. The Company'socean-tested systems have the potential to provide cost competitive, cleanelectrical power on a large scale without the enhancements of tax credits orsubsidies. For further information, see the Company's website:www.oceanpowertechnologies.com. INTERIM RESULTS STATEMENT Product Development Over the six months ended 31 October 2005, the Company has focused resources onadvancing the PowerBuoy technology. This effort has included commercialengineering design for performance and survivability, advanced-power take offdevelopment and enhanced control systems. The central emphasis is on increasedpower-out per PowerBuoy; lowering capital cost (dollars per kilowatt) and energycost (cents per kilowatt hour), as well as development of effective maintenanceprocedures. During this period, the Company has made significant progress in itstechnology, as evidenced by the building and deployment of its PowerBuoys inHawaii and New Jersey. The PB40 design enables operation in worldwide areas ofhigh tidal variation. It also can be utilised in deepwater applications wherepower is consumed in situ. Data collected from system sensors by on-boardcomputers are transmitted by radiofrequency link to shore-based facilities inHawaii and New Jersey, respectively. The data are then transmitted via theinternet to OPT's facility in Pennington, New Jersey for further analysis. OPThas in real time used that information to electronically tune the New Jerseybuoy from its facility in Pennington, New Jersey to achieve maximum performancein various wave conditions. The Company's in-depth experience of designing,building and deploying PowerBuoys since 1997 is now being utilised in OPT's costengineering efforts, and also in developing a comprehensive program forlong-term maintenance. Product development costs incurred during this period also include the Company'sengineering effort related to the PB125 system, rated at 125 kilowatts perPowerBuoy. Design of the system is in progress and initial wave tank tests areplanned for the first quarter of 2006. OPT has expanded its in-house life cycle testing capability. Prior to thedeployment of the Hawaii and New Jersey systems in October 2005, OPT'sengineering personnel designed, built and utilised test rigs for the life cycletesting of assemblies and sub-systems used in these two contracts. During thesix months ended 31 October 2005, OPT filed one new patent application, and onepatent was issued. Business Review European Operations OPT's European business, Ocean Power Technologies Limited ("OPT Ltd'), has madecontinued progress in establishing the Company's presence within Europeanmarkets. As discussed further below, OPT Ltd signed an agreement with Total andIberdrola for the development of a wave power station in France. In addition,OPT Ltd made a formal expression of interest in the use of the "Wave Hub" marineenergy test site located off the north coast of Cornwall, England. The Cornishsite is one potential location being considered by OPT Ltd for a demonstrationwave power plant in the United Kingdom. In that connection, OPT Ltd hasidentified and held meetings with several potential commercial partners. Mark Draper, Chief Executive of OPT Ltd, has, during this period, increased theawareness of OPT Ltd's presence within the UK marketplace. He has participatedin meetings convened by the Parliamentary Marine Committee and the UKgovernment's Marine Bill Group, and has spoken at conferences sponsored bymarine power technology industry organisations. In this period, Paul Jordan joined OPT Ltd as Business Development Manager. Mr.Jordan had previously set up and run the Carbon Trust's Marine Energy Challenge,where his responsibilities included the assessment of marine energytechnologies, and the determination of the cost competitiveness and futuregrowth potential of wave energy. Prior to the Carbon Trust, he worked at RollsRoyce in the development of 5 MW to 150 MW gas turbine and diesel engine powerprojects in the UK and Americas. He also has an MBA from INSEAD, France. Spain - Iberdrola OPT has completed the first phase of its Joint Venture Agreement initiallysigned in 2004 with Iberdrola SA, IDAE, the energy agency of the Government ofSpain, and Sodercan, the industrial development agency of the Spanish region ofCantabria. In June 2005 Total S.A. became an additional partner in the JointVenture Agreement. The Joint Venture is for the phased development, constructionand operation of a 1.25 Megawatt OPT wave power station off the coast of theCantabria region in northern Spain, to be connected into the Spanish nationalpower grid. OPT has invested in this Joint Venture and retains a 10% interest.Under this initial phase, OPT and Iberdrola have selected a wave power stationsite near Santona, identified the path for the undersea power transmissioncable, identified the onshore connection point to the grid, conducted costengineering and received quotations from local and international vendors andsub-contractors for building and installing portions of the OPT system. As notedabove, the first phase has been completed and the project is expected to moveinto the next phase shortly. France - Total S.A. In June 2005, OPT Ltd signed an agreement with a unit of Total S.A. and withIberdrola S.A. for the development of a wave power station in France. As notedabove, Total also became a partner of the on-going OPT wave power project nearSantona, Spain. In the first phase of the new project in France, the partieswill collaborate in identifying potential sites on the western coastline ofFrance and gaining the necessary consents and permits. When a suitable site isidentified with good local acceptance, all authorizations obtained, and theoff-take of electricity is in place, a wave power station with a capacity ofbetween 2 and 5 MW will be installed in the second phase of the project. Thiswill be developed using OPT's patented PowerBuoy technology. To date, thesteering committee of the venture has held several planning and organisationalmeetings and the work programme is being developed. The process of gatheringinitial data regarding potential sites has commenced. North American Operations Hawaii - US Navy Under its contract with the US Navy for delivery of PowerBuoy systems at a USMarine Corps base in Hawaii, OPT completed the redeployment of an improvedPowerBuoy in October 2005. This deployment was completed quickly andefficiently, within one day. The PowerBuoy unit was installed near Kaneohe Bay,having been towed to the site by a standard commercial tugboat. This HawaiiPowerBuoy unit is rated for production of 40 kilowatts of electrical power, andthe system will undergo monitoring and systems integration during in-oceanoperation. While $2.8 million was added to the Hawaii contract value by the USNavy during this period, the Navy's approval cycle for the related scope of workwas not completed until January 2006. Consequently, work on the new phase of thecontract, and therefore revenues for OPT under the contract, commenced laterthan expected. Lockheed Martin The first two contracts OPT was awarded by Lockheed Martin were successfullycompleted by June 2005, and OPT received a letter from Lockheed Martincommending the Company for its satisfactory completion of the contracts withinschedule and budget. The expected next phase is part of a considerably largerprogramme which would include Lockheed Martin and other major defencecontractors. OPT's potential role, while material to its business, is arelatively small part of the programme, and it is dependent on the determinationand timing of work to be performed by Lockheed Martin and the majorsubcontractors. OPT's revenue projections for its financial year ended 30 April2006 had anticipated a significant contribution from its prospective work onthis programme, and the Company had hoped that the on-going discussions amongLockheed Martin and its subcontractors would have been resolved in this period.The Company believes there is extensive commercial potential for the technologyit has developed under the contracts received to date from Lockheed Martin.OPT's innovative system can be used as a renewable power source for a wide rangeof non-utility applications. These include meteorological and oceanographic databuoys, fishing and navigational aids, mariculture, other data samplingapplications and homeland security. OPT is actively pursuing these marketsectors and has submitted proposals for related contract opportunities,including certain ones in partnership with Lockheed Martin. New Jersey - NJ Board of Public Utilities Under its contract with the New Jersey Board of Public Utilities, OPT installedin October 2005 and is now operating one of its PowerBuoy systems off the coastof New Jersey. This system is designed to demonstrate the Company's advancedPowerBuoy PB40 design, which allows for efficient performance in regions of widetidal variation. Reflecting available wave conditions, data is collected in realtime from the on-board sensors, transmitted to shore by radio, and received atOPT's facility via internet connection. This data compares favorably to OPT'spredictive models, and energy produced demonstrates that the power take off andcontrol systems are functioning properly. OPT has also remotely changed certainsoftware and electronics-based control parameters and algorithms resident in thePowerBuoy, via the internet and radio links, for maximising power production.Since deployment, the system has withstood significant wave and wind forcesgenerated by Hurricane Wilma. The New Jersey PowerBuoy will be used formarketing purposes, as well as for on-going enhancement of OPT's innovativetechnology. Financial Review Contract revenues for the six month period ended 31 October 2005 were$1,106,499, compared with $1,690,034 in the six month period ended 31 October2004, a decrease of 35%. The decrease in revenues compared to the same period in2004 reflects delays in the awarding of new contracts. Gross loss from contractrevenues was $400,135 in the six months ended 31 October 2005, compared to aprofit of $68,079 in the six-month period ended 31 October 2004. The decrease ingross profit is primarily due to planned costs associated with the deployment ofthe first PowerBuoy under the Hawaii contract. Company-funded product development costs increased to $1,551,638 in the sixmonths ended 31 October 2005 from $506,146 in the same period in 2004. Aspreviously noted, the Company is making a substantial investment in the on-goingdevelopment and commercialisation of its core PowerBuoy product. Selling,general and administrative costs were $1,434,294 in the six month period ended31 October 2005, compared to $823,517 in the same period of 2004. The increaseresulted primarily from costs associated with increased selling and marketingactivity and the Company's expanded facilities. The six month period ended 31 October 2005 was unfavorably affected by foreignexchange losses of $1,446,790, compared to gains of $772,769 for the comparableperiod in 2004. The foreign exchange gains and losses result from the effect ofexchange rate fluctuations on the Company's sterling and euro-denominatedinvestments. OPT believes that since much of these investments will be used forthe purchase of sterling and euro-denominated goods and services, such foreignexchange gains and losses are afforded a "natural hedge." Interest income for the six month period ended 31 October 2005 was $709,457,compared to $599,453 in the six months ended 31 October 2004, reflecting higherinterest rates on invested balances. OPT's net loss in the six month periodended 31 October 2005 was $4 million, compared to net income of $110,638 in thesix month period ended 31 October 2004. OUTLOOK The Company is accelerating its on-going commitment of resources to thecommercialisation of its PowerBuoy product. John A. Baylouny has joined theCompany as Senior Vice President, Engineering, with prime responsibility for thecommercial roll-out of the PowerBuoy technology. Prior to coming to OPT, heserved as Vice President and General Manager for a division of DRS Technologies,Inc. (a public company specialising in electronic systems, technology-basedproducts and power systems, and generating $1.5 billion in revenues). OPT hasmade significant progress in its technology, and data collected from in-oceanbuoy operations have resulted in enhancements to the efficiency of PowerBuoypower generation. We believe that OPT's core technology advantage issignificantly ahead of where it was one year ago. We are confident that recentengineering achievements and product development work now in progress clearlyposition the Company as a leader within the industry. OPT is conducting an active and broad-based marketing effort to identify andconsummate new contracts. In Europe we are seeking to develop the existingrelationships with Iberdrola and Total and we are actively seeking partners inthe UK, as well as other new opportunities. Key marketing thrusts in NorthAmerica include contracts with the US Navy, utilities serving the West Coast andNew Jersey grids, Lockheed Martin Corp., and applications-driven customers forsmaller PowerBuoys, such as homeland security, ocean data-gathering and watertreatment. Opportunities in Australia and Japan are also being actively pursued.We are pleased that the new and existing business opportunities OPT has beenpursuing remain very active and we are excited about the number of prospectivecustomers who are approaching OPT. Furthermore, we appreciate the continuingstrong support from our existing customers, with whom we maintain frequentcommunications on contract progress. The Company has never been in a betterposition with respect to its business, and we are moving to leverage thatadvantage. Seymour S. Preston III Dr. George W. TaylorChairman Chief Executive Officer OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 6 months 6 months ended ended Year ended 31-Oct 31-Oct 30-Apr 2005 2004 2005 USD USD USD CONTRACT REVENUES $ 1,106,499 $ 1,690,034 $ 5,365,235 COST OF REVENUES 1,506,634 1,621,955 5,170,521 Gross profit (loss) (400,135) 68,079 194,714 PRODUCT DEVELOPMENT COSTS 1,551,638 506,146 904,618 SELLING, GENERAL ANDADMINISTRATIVE COSTS 1,434,294 823,517 2,553,911 Operating loss (3,386,067) (1,261,584) (3,263,815) INTEREST INCOME 709,457 599,453 1,297,156 OTHER INCOME 75,000 - 30,880 FOREIGN EXCHANGE GAINS(LOSSES) (1,446,790) 772,769 1,507,145 NET INCOME (LOSS) $ (4,048,400) $ 110,638 $ (428,634) EARNINGS (LOSS) PER SHARE: BASIC $ (0.08) $ 0.002 $ (0.01) DILUTED $ (0.08) $ 0.002 $ (0.01) OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS 31-Oct 31-Oct 30-Apr 2005 2004 2005 USD USD USDASSETS CURRENT ASSETS:Cash and cash equivalents $ 3,882,319 $ 15,100,012 $ 13,584,814Certificates of deposit 31,311,409 24,375,896 25,202,362Accounts receivable 136,818 113,140 668,424Unbilled receivables 332,976 402,942 822,037Other current assets 330,036 387,936 464,582 Total current assets 35,993,558 40,379,926 40,742,219 EQUIPMENT, Net of accumulated depreciation 537,914 272,934 427,613 PATENTS, Net of accumulated amortization 345,788 285,376 334,809 OTHER ASSETS 88,837 91,435 91,746 TOTAL ASSETS $ 36,966,097 $ 41,029,671 $ 41,596,387 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:Accounts payable $ 404,030 $ 278,700 $ 876,968Accrued expenses 1,596,909 1,280,371 1,891,483Unearned revenues 166,671 327,607 16,788Amounts due to related parties 53,773 53,773 53,773 Total current liabilities 2,221,383 1,940,451 2,839,012 LONG-TERM DEBT 240,357 250,000 245,844 DEFERRED CREDITS 600,000 675,000 675,000 Total liabilities 3,061,740 2,865,451 3,759,856 STOCKHOLDERS' EQUITY:Preferred stock, $.001 par value - 5,000,000sharesauthorized; no shares issued and outstanding - - -Common stock, $.001par value - 105,000,000 sharesauthorized; 51,599,441; 51,487,758; and 51,512,953sharesissued and outstanding as of 31 October 2005 and2004, and30 April 2005, respectively 51,599 51,488 51,513Additional paid-in capital 59,488,709 59,159,854 59,377,593Accumulated deficit (25,633,514) (21,045,842) (21,585,114)Accumulated other comprehensive loss (2,437) (1,280) (7,461) Total stockholders' equity 33,904,357 38,164,220 37,836,531 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 36,966,097 $ 41,029,671 $ 41,596,387 OCEAN POWER TECHNOLOGIES, INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 6 months 6 months Year ended 31-Oct 31-Oct 30-Apr 2005 2004 2005 USD USD USD CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss) $ (4,048,400) $ 110,638 $ (428,634)Adjustments to reconcile net income(loss) to the net cashprovided by or(used in) operating activities:Depreciation and amortization 84,465 50,874 140,984Compensation expense related to stock option grants andcommon stock issuance - - 184,674Changes in working capital:Accounts receivable 531,606 (66,215) (621,499)Unbilled receivables 489,061 150,879 (268,216)Other current assets 137,144 (162,628) (239,274)Accounts payable (472,938) (193,777) 404,491Accrued expenses (294,573) 101,066 708,022Unearned revenues 149,883 63,929 (246,890) Net cash provided by (used in) operating activities (3,423,752) 54,766 (366,342) CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of certificates of deposit (37,194,886) (32,623,212) (58,050,287)Maturities of certificates of deposit 31,085,839 8,972,645 33,573,254Investment in joint ventures and other assets 309 (78,088) (78,399)Realization of deferred credits (75,000) - -Purchase of equipment and patent costs (205,745) (266,680) (560,902) Net cash used in investing activities (6,389,483) (23,995,335) (25,116,334) CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options 111,202 200,560 233,650Repayment of long-term debt (5,487) - - Net cash provided by financing activities 105,715 200,560 233,650 EFFECTS OF EXCHANGE RATES 5,025 (224) (6,405) NET DECREASE IN CASH AND CASH EQUIVALENTS (9,702,495) (23,740,233) (25,255,431) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 13,584,814 38,840,245 38,840,245 CASH AND CASH EQUIVALENTS, END OF YEAR $3,882,319 $15,100,012 $13,584,814 OCEAN POWER TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with generally acceptedaccounting principles for interim financial information and do not include allthe information and footnotes required by generally accepted accountingprinciples for complete financial statements. In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary for afair presentation have been included. Operating results for the interim sixmonth period ended 31 October 2005 are not necessarily indicative of resultsthat may be expected for the year ending 30 April 2006. The financialinformation contained in this interim report does not constitute statutoryaccounts for the Company for the relevant periods. Consolidation - In September 2004, the Company established a wholly ownedsubsidiary in the United Kingdom. The Company has one other subsidiary inAustralia that was established in 2001. In July 2001, the Company sold 11.76% ofthe Australian subsidiary to a subsidiary of Woodside Petroleum, Ltd. Theaccompanying consolidated financial statements include the accounts of theCompany and its subsidiaries. All significant intercompany transactions havebeen eliminated. Use of Estimates - The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates. Revenue Recognition - The Company recognizes revenue on government andcommercial contracts under the percentage-of-completion method. The percentageof completion is determined by relating the costs incurred to date to theestimated total costs. The cumulative effects resulting from revisions ofestimated total contract costs and revenues are recorded in the period in whichthe facts requiring revision become known. When a loss is anticipated on acontract, the full amount thereof is provided currently. Unbilled receivables represent expenditures on contracts, plus profits or lesslosses recorded thereon, not yet billed. Unbilled receivables are billed andcollected within one year. Billings made on contracts are recorded as areduction of unbilled receivables, and to the extent that such billings exceedcosts incurred plus profits or less losses recorded thereon, they are recordedas unearned revenues. Cash Equivalents - Cash equivalents consist of investments in short-termfinancial instruments with maturities of three months or less from the date ofpurchase. Equipment - Equipment is stated at cost, less accumulated depreciation.Depreciation is calculated using the straight-line method over the estimateduseful lives. Expenses for maintenance and repairs are charged to operations asincurred. Foreign Exchange Gains and Losses- The Company has invested in certaincertificates of deposit and cash equivalents that are denominated in Britishpounds sterling. Such positions may result in realized and unrealized foreignexchange gains or losses from exchange rate fluctuations, which are included inthe consolidated results of operations. Patents - External costs related to the filing of patents, including legal andfiling fees, are capitalized. Amortization is calculated using the straight-linemethod over the lives of the patents. Expenses for the development of technologyare charged to operations as incurred. Concentration of Credit Risk - Financial instruments that potentially subjectthe Company to concentration of credit risk consist principally of cashbalances, bank certificates of deposit and trade receivables. However, theCompany invests its excess cash in highly liquid investments (principallyshort-term bank deposits). Other Comprehensive Loss - The functional currency for the Company's foreignoperations is the applicable local currency. The translation from the applicableforeign currencies to U.S. dollars is performed for balance sheet accounts usingthe exchange rates in effect at the balance sheet date and for revenue andexpense accounts using an average exchange rate during the period. Theunrealized gains or losses resulting from such translation are included instockholders' equity. Earnings per share - The basic income and loss per share has been calculated bydividing the income or loss for the period by the average number of commonshares in issue during the period. Diluted income per share is calculated bydividing the income for the period by the average number of common shares inissue during the period, including common stock equivalents. Diluted loss pershare calculations are not shown, as common stock equivalents would beanti-dilutive. 6 months 6 months Year ended ended ended 31 October 31 October 30 April 2005 2004 2005 Net gain (loss) (USD) $ (4,048,400) $ 110,638 $ (428,634) Weighted averagecommon sharesin issue - basic 51,534,868 51,219,425 51,355,495 Weighted averagecommon sharesin issue - diluted 51,534,868 53,068,734 51,355,495 Basic income (loss) per share $ (0.08) $ 0.002 $ (0.01)(USD)Diluted income per share (USD) $ (0.08) $ 0.002 $ (0.01) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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