| Summary of Significant Accounting Policies | (2)
Summary of Significant Accounting Policies (a)
Basis of Consolidation The
accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries, Marine
Advanced Robotics Inc. (CA), 3dent Technologies LLC (TX), and Ocean Power Technologies Ltd. in the United Kingdom. Also included are
Ocean Power Technologies Pty Ltd. and Victorian Wave Power Pty. Ltd in Australia, which have been dissolved pending final tax
clearance and Reed Sport OPT Wave Park, LLC (OR), which has been dissolved as of the filing of this document. All significant
intercompany balances 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 several 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, valuation consideration
related to business combinations, including contingent consideration, and other assumptions
and estimates used to evaluate the recoverability of long-lived assets, goodwill and other intangible assets. Actual results could differ from those estimates. (c)
Business Combinations The
Company accounts for business combinations in accordance with Financial Accounting and Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) No. 2015-16, Business Combinations (Topic 805). (d)
Revenue Recognition The
Company accounts for revenue in accordance with Accounting Standards Codification 606 (ASC 606) for contracts with customers and Accounting
Standards Codification 842 (ASC 842) for leasing arrangements. In relation to 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 as 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 performance obligation 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. When no observable standalone selling price is available, the
standalone selling price is generally 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 April 30, 2023 or 2022. 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.
During the fiscal year ended April 30, 2023 the Company recognized approximately $ 1.0 1.7 The
Company’s contracts are either cost-plus contracts, 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 revenue, 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 revenue by contract type since this method
best represents the Company’s business. For the fiscal years ended April 30, 2023 and 2022, the majority of the Company’s
contracts were classified as firm fixed-price. The Company’s revenue also includes revenue from certain contracts
which do not fall within the scope of ASC 606, but under the ASC 842. At inception of a contract for those classified under ASC 842, the
Company classifies leases as either operating or financing in accordance with the authoritative accounting guidance contained within ASC
Topic 842, “Leases”. 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, or as agreed upon in-use days are utilized, which is presented in Revenue in the Consolidated
Statement of Operations. The Company also enters into lease arrangements for its PowerBuoys ® ® As
of April 30, 2023, the Company’s total remaining performance obligations, also referred to as contracted backlog, totaled
$ 4.0 97% 3.9 Existing customers are subject
to ongoing credit evaluations based on payment history and other factors. If it is determined that collectability of any portion of the
contract value is not probable, an analysis of variable consideration will be performed using either the most likely amount or expected
value method to determine the amount of revenue that must be constrained until the scenario causing the variability has been resolved. The Company has elected to record
taxes collected from customers on a net basis and does not include tax amounts in revenue or costs of revenue. The Company’s contract assets
and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights
to invoicing and the timing of revenue recognition following completion of performance obligations. The Company’s accounts receivable
balance is made up entirely of customer contract related balances. The below table represents the total revenue recognized under ASC 606 and
ASC 842 fiscal years ended April 30, 2023 and 2022: Schedule of Revenue Recognizes From
Operating Lease Arrangements
Fiscal year ended April 30, 2023 Fiscal year ended April 30, 2022
ASC 606 ASC 842 Total ASC 606 ASC 842 Total
(in thousands) (in thousands)
Product Line:
WAM-V $ 919 $ 667 $ 1,586 $ 401 $ — $ 401
Buoy 269 — 269 379 — 379
Services 877 — 877 979 — 979
Total $ 2,065 $ 667 $ 2,732 $ 1,759 $ — $ 1,759
Region:
North and South America $ 1,812 $ 667 $ 2,479 $ 1,633 $ — $ 1,633
Europe — — — 19 — 19
Asia and Australia 253 — 253 107 — 107
Total $ 2,065 $ 667 $ 2,732 $ 1,759 $ — $ 1,759 (e)
Cash and Cash Equivalents, Restricted Cash, Security Agreements and Investments Cash
and Cash Equivalents The
Company considers all highly liquid investments with an original 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 investments that are held-to-maturity. The following table summarizes
cash and cash equivalents for the years ended April 30, 2023 and 2022: Schedule of Cash and Cash Equivalents and Restricted Cash
April 30, 2023 April 30, 2022
(in thousands)
Checking and savings accounts $ 2,874 $ 1,815
Money market account 4,009 6,070
Cash and
cash equivalents $ 6,883 $ 7,885 Restricted
Cash and Security Agreements The
Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $155,000 is on deposit at Santander
and serves as security for a letter of credit issued by Santander for the lease of warehouse/office space in Monroe Township, New Jersey.
This agreement cannot be extended beyond July 31, 2025 and is cancellable at the discretion of Santander. Santander
also issued one letter of credit to subsidiaries of Enel Green Power (“EGP”) pursuant to the Company’s contracts with
EGP. A letter of credit was issued in the amount of $645,000 and was reduced to $323,000 in August 2020. The letter of credit was further
reduced by an additional $258,000 in January of 2023, when the PB3 and its accompanying systems passed final acceptance testing. The
remaining restricted amount of $65,000 will be released in January of 2024, which is 12 months after the buoy was fully deployed. 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
April 30, 2023 April 30, 2022
(in thousands)
Cash and cash equivalents $ 6,883 $ 7,885
Restricted cash- short term 65 258
Restricted cash- long term 155 219
Cash, cash equivalents,
restricted cash and restricted cash equivalents $ 7,103 $ 8,362 Investments During
fiscal 2022, the Company acquired investment securities through Charles Schwab Bank. As of April 30, 2023 and 2022, their carrying
value was approximately $ 27.8 49.4 122,000 58,000 The
following table summarizes the Company’s short term investments as of April 30, 2023 and 2022: Schedule of Investments and Unrealized Gains/Losses
April 30, 2023 April 30, 2022
Category Amortized Cost Unrealized Gains (Losses) Market Value Amortized Cost Unrealized Gains (Losses) Market Value
(in thousands)
Corporate Bonds $ 14,776 $ 100 $ 14,876 $ 37,777 $ 995 $ 38,772
Government Bonds & Notes $ 9,188 $ 33 $ 9,221 $ 9,076 $ (1,022 ) $ 8,054
Government Agency $ 3,826 $ 25 $ 3,851 $ 2,531 $ (11 ) $ 2,520
Total Short Term Investments $ 27,790 $ 158 $ 27,948 $ 49,384 $ (38 ) $ 49,346 (f) Inventory Inventory
is stated at lower of costs or net realizable value applicable to goods on hand remaining after the matching of absorbed costs with
concurrent revenues. in accordance with ASC 330. The Company has three classes of inventory; raw materials, work in process, and
finished goods. Items remain in inventory until they are shipped to the customer, at which time the costs are transferred on a FIFO
basis to cost of good sold, or moved to leased assets as applicable. (g) Accounts
Receivable Accounts receivable is stated at the amount billed or billable to customers
and are ordinarily due between 30 and 90 days after the issuance of the invoice. Receivables are reserved or written off based on individual
credit evaluation and specific circumstances of the customer. The Company grants credit to its customers, generally without collateral, under normal payment terms (typically 30
to 60 days after invoicing). Generally, invoicing occurs after the related services are performed or control of the product has transferred
to the customer. Accounts receivable represent an unconditional right to consideration arising from the Company’s performance under
contracts with customers. The carrying value of such receivables represents their estimated realizable value. (h)
Property and Equipment Property
and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated using the
straight-line method over the estimated useful lives (three to ten years) of the assets. Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated useful life of the asset or the remaining lease term. Expenses for maintenance
and repairs are charged to operations as incurred. Property and equipment is also reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, then an impairment charge is recognized in
the amount by which the carrying amount of the asset exceeds the fair value of the asset. Schedule of Property, Plant and Equipment, Useful Life
Description Estimated
useful life
Equipment 5 7
years
Computer
equipment & software 3
Office
furniture & fixtures 3 7
Leasehold
improvements Shorter
of the estimated useful life or lease term
Leased
WAM-V assets 10 (i)
Foreign Exchange Gains and Losses The
Company maintains cash accounts that are denominated in British pound sterling. These amounts are included in cash, cash equivalents
and restricted cash on the accompanying Consolidated Balance Sheets. Transactions denominated in a foreign currency may result
in realized and unrealized foreign exchange gains or losses from exchange rate fluctuations, which are included in “Foreign
exchange (loss)/gain” in the accompanying Consolidated Statements of Operations. (j)
Concentration of Credit Risk Financial
instruments that potentially subject the Company to credit risk consist principally of trade accounts receivable, short term investments
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 investment 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 April 30, 2023 was immaterial. As
of the year ended April 30, 2023 and 2022, the Company had two and four customers whose revenue accounted for at least 10% of the Company’s
consolidated revenue, respectively. These revenues accounted for approximately 32 49 (k)
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. Due
to the Company’s net losses, potentially dilutive securities, consisting of options to purchase shares of common stock, warrants
on common stock and unvested restricted stock units 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, warrants on common stock, options to purchase shares
of common stock and unvested restricted stock units issued to employees and non-employee directors, totaling 7,777,026 6,353,422 (l)
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 years ended April 30, 2023 and
2022 was approximately $ 1.5
million and $ 1.2
million, respectively. (m)
Intangibles Intangible
assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value
at the acquisition date (which is regarded as their cost). Intangible assets, including patents, are amortized over the estimated
useful life of the asset on a basis that approximates the pattern of economic benefit. The patents, trade name and customer
relationship intangibles are being amortized over 20, 12 10 Intangible
assets are reviewed for impairment if indicators of potential impairment exist. There was no indication of impairment of intangible assets
for the fiscal years ended April 30, 2023 and April 30, 2022. (n)
Goodwill Goodwill
is assessed for impairment using a qualitative or quantitative approach. Where the Company uses a qualitative analysis it considers factors
that include historical financial performance, macroeconomic and industry conditions, and the legal and regulatory environment. If the
qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
The quantitative assessment requires an analysis of several estimates including future cash flows or income consistent with management’s
strategic business plans, annual sales growth rates and the selection of assumptions underlying a discount rate (weighted average cost
of capital) based on market data available at the time to determine fair value of the Company. If the fair value is less than the carrying
amount an impairment charge for the difference is recorded. The Company acquired goodwill as part of its purchase of MAR. Management
performed a qualitative assessment in fiscal year 2023 and determined that it is more likely than not that no goodwill impairment exists
as of April 30, 2023. (o)
Income Taxes Income
taxes are accounted for under ACS 740 utilizing the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss and tax credit
carry forwards are expected to be recovered, settled or utilized. In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all the deferred tax assets will not be realized. If such event occurs, a
valuation allowance is recorded. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. The
Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon examination.
Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized
tax benefits in interest expense and penalties in selling, general, and administrative expenses, to the extent incurred. Refer to Note
15 for further disclosures around our income taxes. (p)
Accumulated Other Comprehensive Loss The
functional currency for the Company’s foreign operations is the applicable local currency. The translation from the applicable
foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate during the period. The unrealized gains or losses resulting from
such translation are included in Accumulated Other Comprehensive Loss within Shareholders’ Equity. (q) Warranty The Company does not include a right of
return on its products other than rights related to standard warranty provisions that permit repair or replacement of defective goods . (r) Research
and Development Costs related to research and development activities by the Company are expensed as incurred. (s)
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.” This amendment replaces the incurred loss impairment
methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade
receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit
losses. In November 2019, the FASB issued No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging
(Topic 815), and Leases (Topic 842), which deferred the effective date of ASU 2016-13 for Smaller Reporting Companies for fiscal years
beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact
the adoption of ASU 2016-13 will have on its consolidated financial statements. |
