25th Jan 2005 07:00
Ocean Power Technologies Inc25 January 2005 NEWS RELEASE-------------------------------------------------------------------------------- Ocean Power Technologies,Inc. 1590 Reed Road Pennington, New Jersey 08534 USA OCEAN POWER TECHNOLOGIES ANNOUNCES INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2004 Pennington, NJ, USA, 25 January 2005 - 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, is pleased to announce its interim results for the sixmonths ended 31 October 2004 (exchange rate of £1 = $1.81). HIGHLIGHTS •Additional contracts and funding secured: -Hawaii PowerBuoy(TM) installed, and additional funding of $1.1 million received from US Navy-Joint Venture formed with Iberdrola S.A. for a multi-phased project for 1.25 MW OPT wave power station on the northern coast of Spain-Successful ocean test of PowerBuoy(TM) under Lockheed Martin Corp. contract, and second phase contract worth $1.5 million awarded •Net income of $110,000 (£61,000) compared to loss of $3.6 million (£2.0 million) in the prior period ended 31 October 2003 •Contract revenues of $1.7 million (£0.9 million) down 31% from the corresponding prior period reflecting planned investment and time spent on product development and integration of new personnel •$39.5 million (£21.8 million) in cash and short-term investments at end of period •New senior personnel appointed -President of Ocean Power Technologies, Inc.-Chief Executive of Ocean Power Technologies Limited, UK-based European subsidiary Commenting on the interim results Dr. George W. Taylor, CEO said: "During the first half of this financial year, the Company has concentrated onmaking significant investments in new personnel, as well as in the developmentof our core PowerBuoy product. We have established our presence in the UK andEurope with the formation of Ocean Power Technologies Limited. With newcontracts won in the period we expect to continue our progress in building forfuture growth." For further information, please contact: Dr. George W. Taylor, Charles F. Dunleavy,Chief Executive Officer Chief Financial Officer Telephone: (609) 730-0400 Telephone: (609) 730-0400E-mail: [email protected] E-mail: [email protected] Michael Brennan, Ken Cronin, Evolution Securities Limited Gavin Anderson & Co. Telephone: +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 Business Review--------------- Hawaii - US Navy OPT has continued to make significant progress on its contract with the US Navyfor delivery of PowerBuoy systems at a US Marine Corps base off the Island ofOahu, in Hawaii. The first PowerBuoy unit was installed near Kaneohe Bay, havingbeen towed to the site by a standard commercial tugboat. The deployment wassuccessfully accomplished within three hours, and the straight forward processis expected to facilitate the building of future OPT wave power stations. Thisfirst Hawaii PowerBuoy unit is initially rated for production of 40-50 kilowattsof electrical power, and full-scale testing and upgrades of the system are beingconducted. OPT and the US Navy continue to partner in this project todemonstrate the use of OPT's wave power systems to provide renewable power toHawaii. Further, $1.1 million was added to contract value by the US Navy duringthis period. Spain - Iberdrola In July 2004 OPT signed a Joint Venture Agreement with Iberdrola SA, IDAE, theenergy agency of the Government of Spain, and Sodercan, the industrialdevelopment agency of the Spanish region of Cantabria. The Joint Venture is forthe phased development, construction and operation of a 1.25 Megawatt OPT wavepower station off the coast of the Cantabria region in northern Spain, to beconnected into the Spanish national power grid. OPT has invested in this JointVenture and retains a 10% interest. Iberdrola, which retains a 70% interest inthe joint venture, is one of the largest renewable energy utilities worldwideand also one of the largest electric power utilities in Europe. It has more than2,400 Megawatts of renewable energy generation assets, and plans to increasethat capacity to 4,500 MW by 2008, through an investment of 3.1 billion Euros.As part of the initial phase of the Spanish wave power project, OPT andIberdrola are working on the development of the site, permitting and theidentification of local vendors and sub-contractors for building and installingportions of the OPT system. Lockheed Martin In May 2004, the Company announced its receipt of an award from Lockheed MartinCorp of an initial contract to provide a wave energy generating system to powerunderwater sensing equipment, with applications for oceanographic data sampling.Under this contract, OPT has developed a small-scale wave energy conversionsystem designed to provide continuous, renewable power to Lockheed Martin'ssystems. OPT's technology is expected to improve those systems' performance andreduce total ownership costs. OPT is very pleased to announce that the prototypeversion of its system for Lockheed Martin has been tested in the ocean and hassuccessfully demonstrated in-ocean performance in accord with designspecifications. Total time to design, build and complete testing in the oceanwas accomplished within nine months, and the project was done on a profitablebasis. Furthermore, the Company is pleased to announce that following the successfulocean testing of the prototype Lockheed Martin system, OPT has been awarded a$1.5 million contract from Lockheed for the second phase of the program. Thiscontract is for the Preliminary Design and planning for the System Developmentand Demonstration of initial production quantities of OPT's small-scalePowerBuoy system. New Jersey - NJ Board of Public Utilities OPT continues to make progress on its contract with the New Jersey Board ofPublic Utilities. Under the contract, OPT will install and operate one of itsPowerBuoy systems off the coast of New Jersey. To date, system designs have beenprepared, system performance simulations have been conducted, and extensive wavetank testing has been completed successfully. Personnel Since 31 October 2003, OPT has doubled the size of its staff to 27 employees.The Company has recruited senior management, engineering and administrativepersonnel to help grow its business and enhance its ability to execute underexisting and prospective contracts. In September 2004 Samuel R. Wennberg was appointed to the position of Presidentof Ocean Power Technologies, Inc. Mr. Wennberg has experience in large and smallcompanies and in the successful development and commercialsation oftechnology-based products. He is responsible for the commercial "roll-out" ofOPT's PowerBuoy product. Ocean Power Technologies Limited has been formed as a wholly-owned subsidiary ofOPT. Based in the UK, OPT Limited will establish the Company's presence withinthe UK and European markets. The new company's operations will compriseengineering, sales and marketing, customer contracts, and all activities in theUK and Europe marketplace. Mark R. Draper has been appointed to the position ofChief Executive of OPT Limited. Mr. Draper was previously the managing directorof the UK Generation Business of E.ON (formerly Powergen), with directresponsibility for both renewable and conventional power generation. In connection with the formation of OPT Limited in the UK, Sir Eric Ash has beenelected non-executive Chairman of OPT Limited, while Seymour S. Preston III hasbeen elected non-executive Chairman of OPT. As well as having made key additions to the management team, OPT has doubled thesize of its facility in New Jersey, including a significant addition ofsub-assembly production and test area. We believe this will enhance OPT'sengineering and development capabilities, as well as provide more capacity forproduct testing. Consolidated Results-------------------- Contract revenues for the six month period ended 31 October 2004 were$1,690,034, compared with $2,442,412 in the six month period ended 31 October2003, a decrease of 31%. The decrease in revenues over the same period in 2003reflects the change in focus by directing personnel and other resources totechnology development engineering and to the integration and training of newpersonnel. These investments were identified as part of the use of proceeds ofthe Company's IPO in October 2003. Gross profit from contract revenues was$68,079 in the six months ended 31 October 2004, compared to $308,046 in thesix-month period ended 31 October 2003. The decrease in gross profit margin isprimarily due to planned costs associated with the deployment of the firstPowerBuoy under the Hawaii contract. Company-funded product development costs increased to $506,146 in the six monthsended 31 October 2004 from nil in the same period in 2003. As previously noted,the Company is making a substantial investment in the on-going development andcommercialisation of its core PowerBuoy product. This is in keeping with theexpected use of proceeds received in connection with OPT's Initial PublicOffering in October 2003. Selling, general and administrative costs were$823,517 in the six month period ended 31 October 2004, compared to $433,003 inthe same period of 2003. The increase resulted from costs associated with thehiring and assimilation of new personnel, including senior management,engineering and support staff; selling and marketing activity; the establishmentof a subsidiary based in the UK; expansion of the Company's intellectualproperty base; and administrative costs associated with OPT's status as a listedcompany. OPT's net income in the six month period ended 31 October 2004 was $110,638,compared to a net loss of $3,608,022 in the six month period ended 31 October2003. The 2004 six month period was favorably impacted by interest income of$599,453 and foreign exchange gains of $772,769, while the 2003 six month periodreflected a $3.5 million one-time charge included in other expense for a paymentmade in 2003 as part of the planned use of proceeds from the Company's IPO. The income per share was $0.002 on a fully diluted basis in the currentsix-month period, compared to a loss per share of $0.12 in the six month periodended 31 October 2003. CURRENT OUTLOOK AND TRADING For the balance of OPT's fiscal year ended 30 April 2005, significant effortwill continue in product development and in adding new personnel. We areconfident that these investments will position the Company for future growth,expansion of its international marketing presence and for the continuingcommercialisation of its PowerBuoy product. Seymour S. Preston III Dr. George W. TaylorChairman Chief Executive Officer OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS________________________________________________________________________________ 6 months 6 months ended ended Year ended 31-Oct 31-Oct 30-Apr 2004 2003 2004 USD USD USD CONTRACT REVENUES $1,690,034 $2,442,412 $4,713,202 COST OF REVENUES 1,621,955 2,134,366 4,319,850 ---------- ---------- -------------- Gross profit 68,079 308,046 393,352 PRODUCT DEVELOPMENT COSTS 506,146 - 255,958 SELLING, GENERAL ANDADMINISTRATIVE COSTS 823,517 433,003 1,745,955 ---------- ---------- -------------- Operating loss (1,261,584) (124,957) (1,608,561) INTEREST INCOME 599,453 16,988 555,717 OTHER INCOME - - 118,119 FOREIGN EXCHANGE GAIN 772,769 - 1,585,345 OTHER EXPENSE (1) - (3,500,053) (3,500,096) ---------- ---------- -------------- NET INCOME (LOSS) $110,638 ($3,608,022) ($2,849,476) ========== ========== ============== EARNINGS (LOSS) PER SHARE:BASIC $0.002 ($0.12) ($0.07)DILUTED $0.002 - - (1) See Note 2 to Interim Consolidated Financial Statements OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS________________________________________________________________________________ 31-Oct 31-Oct 30-Apr 2004 2003 2004 USD USD USD ASSETS CURRENT ASSETS:Cash and cash equivalents $15,100,012 $1,125,214 $38,840,245Certificates of deposit 24,375,896 710,000 725,329Accounts receivable 113,140 4,515 46,925Unbilled receivables 402,942 896,286 553,821Stock subscription - 42,500,000 -receivableOther current assets 387,936 43,541 225,308 --------- ------------ ------------- Total current assets 40,379,926 45,279,556 40,391,628 EQUIPMENT, Net ofaccumulated depreciation 272,934 42,493 104,195 PATENTS, Net ofaccumulated amortization 285,376 176,994 238,309 OTHER ASSETS 91,435 13,347 13,347 --------- -------------- ------------- TOTAL ASSETS $41,029,671 $45,512,390 $40,747,479 ========= =============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:Accounts payable $278,700 $691,166 $ 472,477Accrued expenses 1,280,371 9,012,926 1,179,305Unearned revenues 327,607 263,678Amounts due to related 53,773 141,614 53,773parties --------- ------------ ------------- Total current liabilities 1,940,451 9,845,706 1,969,233 --------- ------------ ------------ LONG-TERM DEBT 250,000 250,000 250,000 --------- ------------ ------------- DEFERRED CREDITS 675,000 675,000 675,000 --------- ------------- ------------ STOCKHOLDERS' EQUITY:Preferred stock, $.001 par value - 5,000,000 shares authorized;no shares issued and outstanding - - -Common stock, $.001par value - 105,000,000shares authorized; 51,487,758;50,274,204;and 51,165,758 shares issued andoutstanding as of 31 October 2004 and2003, and 30 April 2004,respectively 51,488 50,274 51,166 Additional paid-in capital 59,159,854 56,607,668 58,959,616Accumulated deficit (21,045,842) (21,915,025) (21,156,480)Accumulated other comprehensive loss (1,280) (1,233) (1,056) --------- ------------- -------- Total stockholders' equity 38,164,220 34,741,684 37,853,246 --------- ------------- -------- --------- ------------- -------- TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY $41,029,671 $45,512,390 $40,747,479 ========= ============= ========= OCEAN POWER TECHNOLOGIES, INC AND SUBSIDIARY UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS________________________________________________________________________________ 6 months 6 months Year ended 31-Oct 31-Oct 30-Apr 2004 2003 2004 USD USD USD CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss) $110,638 $(3,608,022) $(2,849,476)Adjustments to reconcile net income (loss)to the net cash provided by or (used in)operating activities:Depreciation and amortization 50,874 21,810 42,005Compensation expense related to stock option grants and common stock issuance - 80,188 403,374Issuance of shares in connection with the settlement agreementwith AMP Incorporated (now Tyco Electronics) - - 1,500,000 Changes in working capital:Accounts receivable (66,215) (4,515) (46,925)Unbilled receivables 150,879 (553,208) (210,743)Other current assets (162,628) 8,158 (173,610)Accounts payable (193,777) 432,490 213,801Accrued expenses 101,066 3,227,592 116,433Unearned revenues 63,929 - 263,678Amounts due to related parties - - (87,841) -------- ------------- --------- Net cash provided by (used in)operating activities 54,766 (395,507) (829,304) -------- ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of certificates ofdeposit (32,623,212) - (725,329)Maturities of certificates ofdeposit 8,972,645 - 710,000Investment in joint ventureand (78,088) -other assetsPurchase of equipment andpatent (266,680) (16,648) (159,860)costs -------- ------------- ----------- Net cash used in investing activities (23,995,335) (16,648) (175,189) -------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options 200,560 - -Sale of common stock, net ofissuance costs - - 38,307,192 -------- ----------- ----------- Net cash provided by financing activities 200,560 - 38,307,192 -------- ----------- ------------- EFFECTS OF EXCHANGE RATES (224) 1,194 1,371 -------- ------------ ------------ NET DECREASE (INCREASE) INCASH AND CASH EQUIVALENTS (23,740,233) (410,961) 37,304,070 CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 38,840,245 1,536,175 1,536,175 -------- -------------- -------------- CASH AND CASH EQUIVALENTS, ENDOF YEAR $15,100,012 $1,125,214 $38,840,245 ======== ============== =========== SUPPLEMENTAL DISCLOSURE OFNONCASH TRANSACTIONS:Issuance of shares to consultant in connection with initial public offering 178,350Stock subscription receivable 37,777,538 -------- ------------- -------------- Total noncash transactions - 37,777,538 178,350 ======== =============== ========== OCEAN POWER TECHNOLOGIES, INC AND SUBSIDIARY NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS________________________________________________________________________________ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis 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 2004 are not necessarily indicative of resultsthat may be expected for the year ending 30 April 2005. 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 (three to seven years). Expenses for maintenance and repairs arecharged to operations as incurred. Foreign Exchange Gains- The Company has invested in certain certificates ofdeposit, which mature 90 days or less from the date of purchase and aredenominated in British pounds sterling. Such certificates of deposit areincluded in cash and cash equivalents. Additionally, the Company has investmentsin certain certificates of deposit, which mature in 91 days or more from thedate of purchase and are denominated in British pounds sterling. Suchinstruments are included in certificates of deposit. These positions may resultin realized and unrealized foreign exchange gains or losses from exchange ratefluctuations, which are included in the 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 (17 years). Expenses for the development oftechnology are 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 inshareholders' 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 2004 2003 2004 Net income(loss) (USD) $ 110,638 $(3,608,022) $(2,849,476) Weighted averagecommon sharesin issue - basic 51,219,425 31,129,156 41,516,146 Weighted averagecommon sharesin issue - diluted 53,068,734 - - Basic income (loss) pershare (USD) $0.002 ($0.12) ($0.07)Diluted income per share (USD) $0.002 - - 2. OTHER EXPENSE Other expense for the year ended 30 April 2004 and the six-month period ended 31October 2003 includes a total of $3,500,000 expense related to a one-time chargefor a payment due to Tyco Electronics Corporation ("Tyco"). Payment of the $3.5million is part of a 1999 agreement for the buy-back of $5.5 million of OPTpreferred stock and convertible debt held by Tyco, plus release of liens held byTyco on all the assets of OPT. This payment was required in the 1999 agreement,in the event of certain specified transactions such as an IPO, and wasidentified in the use of proceeds from OPT's IPO. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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