| Summary of Significant Accounting Policies | (2)
Summary of Significant Accounting Policies (a)
Consolidation The
accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries, Ocean Power Technologies
Ltd. in the United Kingdom, and Ocean Power Technologies (Australasia) Pty Ltd. in Australia (“OPT-A”). OPT-A is in the process
of being liquidated due to inactivity. All documents have been filed with the Australian Tax Organization and the Company expects this
to be completed in the current fiscal year. All significant intercompany accounts and transactions have been eliminated in consolidation. (b)
Use of Estimates The
preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions
relating to the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the period. Significant items subject to such estimates and assumptions include, among other items, stock-based
compensation, valuations, purchase price allocations and contingent consideration related to business combinations, expected future cash
flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability
of long-lived assets, goodwill and other intangible assets and the related amortization methods and periods, estimated hours and costs
to complete customer contracts for purposes of revenue recognition. Actual results could differ from those estimates. (c)
Cash, Cash Equivalents, Restricted Cash and Security Agreements and Marketable Securities Cash
and Cash Equivalents The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company
invests excess cash in a money market account or in short term held-to-maturity marketable securities. The Company had cash and cash
equivalents $ 10.0 7.9 Restricted
Cash and Security Agreements The
Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $ 154,000 Santander
also issued a letter of credit to subsidiaries of Enel Green Power (“EGP”) pursuant to the Company’s contracts with
EGP. This letter of credit was originally issued in the amount of $ 645,000 323,000 258,000 65,000 The
following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets
that total to the same amounts shown in the Consolidated Statements of Cash Flows. Schedule of Cash and Cash Equivalents and Restricted Cash
October
31, April
30,
(in thousands)
Cash and cash equivalents $ 10,030 $ 7,885
Restricted cash- short term 258 258
Restricted cash- long
term 219 219
Cash, cash equivalents,
restricted cash and restricted cash equivalents $ 10,507 $ 8,362 Marketable
Securities During
fiscal 2022, the Company acquired investment securities through Charles Schwab Bank. As of October 31, 2022 and April 30, 2022, their
value was approximately $ 35.9 49.4 0.2 zero 0.3 zero The
following table summarizes the Company’s marketable securities as of October 31, 2022: Schedule of Investments and Unrealized Gains/Losses
Category Amortized
Cost Unrealized Gains
(Losses) Market
Value
Corporate Bonds $ 27,364 $ (23 ) $ 27,341
Government Bonds & Notes 5,008 $ — 5,008
Government Agency 3,496 $ (5 ) 3,491
Total Marketable Securities $ 35,868 $ (28 ) $ 35,840 (d)
Concentration of Credit Risk Financial
instruments that potentially subject the Company to credit risk consist principally of trade accounts receivable, marketable securities
and cash. The Company believes that its credit risk is limited because the Company’s current contracts are with companies with
a reliable payment history. The Company invests its excess cash in a money market fund and short term held-to maturity investments and
does not believe that it is exposed to any significant risks related to its cash accounts, money market fund, or held-to maturity investments.
Cash is also maintained at foreign financial institutions. Cash in foreign financial institutions as of October 31, 2022 was approximately
$ 5,000 For
the six months ended October 31, 2022 and 2021, the Company had four and three customers whose revenues accounted for at least 10% of
the Company’s consolidated revenues, respectively. These revenues accounted for approximately 69 73 80 76 (e)
Share-Based Compensation Costs
resulting from all share-based payment transactions are recognized in the consolidated financial statements at their fair values.
The aggregate share-based compensation expense recorded in the Consolidated Statements of Operations for the six months ended
October 31, 2022 and 2021 was approximately $ 0.6 0.5 0.3 0.2 (f)
Revenue Recognition The
Company accounts for revenues in accordance with Accounting Standards Codification 606 (ASC 606) which states that a performance obligation
is the unit of account for revenue recognition. The Company assesses the goods or services promised in a contract with a customer and
identifies as a performance obligation either: a) a good or service (or a bundle of goods or services) that is distinct; or b) a series
of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. A contract
may contain a single or multiple performance obligations. For contracts with multiple performance obligations, the Company allocates
the contracted transaction price to each performance obligation based upon the relative standalone selling price, which represents the
price the Company would sell a promised good or service separately to a customer. The Company determines the standalone selling price
based upon the facts and circumstances of each obligated good or service. The majority of the Company’s contracts have no observable
standalone selling price since the associated products and services are customized to customer specifications. As such, the standalone
selling price generally is estimated based upon the Company’s forecast of the total cost to satisfy the performance obligation
plus an appropriate profit margin. The
nature of the Company’s contracts may give rise to several types of variable consideration, including unpriced change orders,
liquidated damages and penalties. Variable consideration can also arise from modifications to the scope of services. Variable consideration
is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
occur once the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination
of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, performance,
and any other information (historical, current, and forecasted) that is reasonably available to us. There was no variable consideration
as of October 31, 2022 or 2021. The Company presents shipping and handling costs, that occur after control of the promised goods or services
transfer to the customer, as fulfillment costs in costs of goods sold and regular shipping and handling activities charged to operating
expenses. The
Company recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either (1)
at a point in time or (2) over time. A good or service is transferred when or as the customer obtains control. The evaluation of whether
control of each performance obligation is transferred at a point in time or over time is made at contract inception. Input measures such
as costs incurred are utilized to assess progress against specific contractual performance obligations for the Company’s services.
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be
provided. For the Company, the input method using costs incurred or labor hours best represents the measure of progress against the performance
obligations incorporated within the contractual agreements. If estimated total costs on any contract project a loss, the Company charges
the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated
costs to complete contracts, including penalties, change orders, claims, anticipated losses, and others are recorded in the accounting
period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed
for each subsequent reporting period until the project is complete. Such revisions could occur at any time and the effects may be material. The
Company’s contracts are either cost-plus, fixed-price contracts, time and material agreements, lease or service agreements. Under
cost plus contracts, customers are billed for actual expenses incurred plus an agreed-upon fee. The
Company has two types of fixed-price contracts, firm fixed-price and cost-sharing. Under firm fixed-price contracts, the Company receives
an agreed-upon amount for providing products and services specified in the contract, and a profit or loss is recognized depending on
whether actual costs are more or less than the agreed upon amount. Under cost-sharing contracts, the fixed amount agreed upon with the
customer is only intended to fund a portion of the costs on a specific project. Under cost sharing contracts, an amount corresponding
to the revenue is recorded in cost of revenues, resulting in gross profit on these contracts of zero. The Company’s share of the
costs is recorded as product development expense. The Company reports its disaggregation of revenues by contract type since this method
best represents the Company’s business. For the six-month periods ended October 31, 2022 and 2021, all of the Company’s contracts
were classified as firm fixed-price. The
Company at times enters into agreements with government agencies through SBIR contract agreements. These are typically fixed-priced
agreements where the Company retains ownership of the data and grants the government a license with unlimited rights to use, disclose,
reproduce, prepare derivative works and publicly distribute the data. Time
and materials agreements are billed based solely on the cost of time spent working on the contract and the material used. As
of October 31, 2022, the Company’s total remaining performance obligations, also referred to as backlog, totaled $ 2.4 77% 1.8 The
Company also enters into lease arrangements for its PowerBuoys and Wave Adaptive Modular Vessels (“WAM-V®”) with certain
customers. Revenue related to multiple-element arrangements is allocated to lease and non-lease elements based on their relative standalone
selling prices or expected cost plus a margin approach. Lease elements generally include a PowerBuoy and components, while non-lease
elements, which the Company expects to become more prevalent, generally include engineering, monitoring and support services. In the
lease arrangement, the customer may be provided an option to extend the lease term or purchase the leased PB3 or WAM-V® at some point
during and/or at the end of the lease term. The
Company classifies leases as either operating or financing in accordance with the authoritative accounting guidance contained within
ASC Topic 842, “Leases”. At inception of the contract, the Company evaluates the lease against the lease classification criteria
within ASC Topic 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a finance
lease. All others are treated as operating leases. The
Company recognizes revenue from operating lease arrangements generally on a straight-line basis over the lease term which is presented
in Revenues in the Consolidated Statement of Operations. Lease revenues were de minimus for the three and six months ended October 31,
2022 and 2021. (g)
Other Income – Employee Retention Credit The
Coronavirus Aid, Relief and Economic Security (“CARES”) Act provides an employee retention credit (“CARES ERC”),
which is a refundable tax credit against certain employment taxes of up to $ 5,000 50 10,000 70 10,000 During
the three-month period ended October 31, 2022, the Company claimed CARES ERC’s of approximately $ 612,000 590,000 1,202,000 In
November 2022 the company received approximately $ 200,000 (h)
Net Loss per Common Share Basic
and diluted net loss per share for all periods presented is computed by dividing net loss by the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. The pre-funded warrants (Note 11) were determined to be common
stock equivalents and were included in the weighted average number of shares outstanding for calculation of the basic earnings per share
number before being exercised. Due
to the Company’s net losses, potentially dilutive securities, consisting of options to purchase shares of common stock, potential
exercises of warrants on common stock and unvested restricted stock issued to employees and non-employee directors, were excluded from
the diluted loss per share calculation due to their anti-dilutive effect. In
computing diluted net loss per share on the Consolidated Statement of Operations, potential exercises of warrants on common stock, options
to purchase shares of common stock and non-vested restricted stock issued to employees and non-employee directors, totaling 6,242,465 4,928,474 (i)
Recently Issued Accounting Standards In
June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “ Financial Instruments Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Financial Instruments—Credit Losses (Topic 326),
Derivatives and Hedging (Topic 815), and Leases (Topic 842) |
