Filed On 4/10/07 3:51pm ET · SEC File 333-138595 · Accession Number 950123-7-5259
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
4/10/07 Ocean Power Technologies/Inc S-1/A 3:193 Bowne of NY City...01/FA
Pre-Effective Amendment to Registration Statement (General Form) · Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment #4 to Form S-1 HTML 1,087K
2: EX-23.1 Ex-23.1: Consent of Kpmg Llp 1 4K
3: EX-23.2 Ex-23.2: Consent of Deloitte and Touche Llp 1 5K
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- Alternative Formats (RTF, XML, et al.)
- Business
- Capitalization
- Certain Relationships and Related Party Transactions
- Consolidated Balance Sheets, April 30, 2005 and 2006 and January 31, 2007 (Unaudited)
- Consolidated Statements of Cash Flows, Years ended April 30, 2004 (Restated), 2005 (Restated) and 2006 and the nine-month periods ended January 31, 2006 and 2007 (Unaudited)
- Consolidated Statements of Operations, Years ended April 30, 2004, 2005 and 2006 and the nine-month periods ended January 31, 2006 and 2007 (Unaudited)
- Consolidated Statements of Stockholders Equity and Comprehensive Loss, Years ended April 30, 2004, 2005 and 2006 and the nine-month period ended January 31, 2007 (Unaudited)
- Description of Capital Stock
- Dilution
- Dividend Policy
- Experts
- Index to Consolidated Financial Statements
- Legal Matters
- Management
- Management s Discussion and Analysis of Financial Condition and Results of Operations
- Material US Federal Income and Estate Tax Consequences to Non-US Holders
- Notes to Consolidated Financial Statements
- Price Range of Our Common Stock
- Principal and Selling Stockholders
- Prospectus Summary
- Reports of Independent Registered Public Accounting Firms
- Risk Factors
- Selected Consolidated Financial Data
- Shares Eligible for Future Sale
- Special Note Regarding Forward-Looking Statements
- Table of Contents
- Underwriting
- Use of Proceeds
- Where You Can Find More Information
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| " | Table of Contents
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| " | Prospectus Summary
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| " | Risk Factors
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| " | Special Note Regarding Forward-Looking Statements
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| " | Use of Proceeds
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| " | Price Range of Our Common Stock
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| " | Dividend Policy
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| " | Capitalization
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| " | Dilution
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| " | Selected Consolidated Financial Data
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| " | Management s Discussion and Analysis of Financial Condition and Results of Operations
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| " | Business
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| " | Management
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| " | Certain Relationships and Related Party Transactions
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| " | Principal and Selling Stockholders
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| " | Description of Capital Stock
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| " | Shares Eligible for Future Sale
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| " | Material US Federal Income and Estate Tax Consequences to Non-US Holders
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| " | Underwriting
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| " | Legal Matters
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| " | Experts
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| " | Where You Can Find More Information
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| " | Index to Consolidated Financial Statements
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| " | Reports of Independent Registered Public Accounting Firms
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| " | Consolidated Balance Sheets, April 30, 2005 and 2006 and January 31, 2007 (Unaudited)
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| " | Consolidated Statements of Operations, Years ended April 30, 2004, 2005 and 2006 and the nine-month periods ended January 31, 2006 and 2007 (Unaudited)
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| " | Consolidated Statements of Stockholders Equity and Comprehensive Loss, Years ended April 30, 2004, 2005 and 2006 and the nine-month period ended January 31, 2007 (Unaudited)
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| " | Consolidated Statements of Cash Flows, Years ended April 30, 2004 (Restated), 2005 (Restated) and 2006 and the nine-month periods ended January 31, 2006 and 2007 (Unaudited)
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| " | Notes to Consolidated Financial Statements
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This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]
As filed with the Securities and Exchange Commission on
April 10, 2007
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
AMENDMENT NO. 4
TO
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
OCEAN POWER TECHNOLOGIES,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
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New Jersey
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3629
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22-2535818
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code No.)
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(I.R.S. Employer
Identification No.)
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1590 Reed Road
(Address, including zip code,
and telephone number,
including area code, of
registrant’s principal executive offices)
Dr. George W. Taylor
Chief Executive Officer
Ocean Power Technologies, Inc.
1590 Reed Road
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies to:
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Robert A. Schwed, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
399 Park Avenue
New York, New York 10022
(212) 230-8800
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Joseph A. Hall, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
Registration Statement is declared effective.
If any of the securities being registered on this form are
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the
“Securities Act”) please check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
EXPLANATORY
NOTE
This Amendment No. 4 to the Registration Statement on Form S-1
is being filed solely to include the artwork that will appear on
the inside cover of the Prospectus. No other changes have been
made.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting offers to buy these
securities in any state where the offer or sale is not
permitted.
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PRELIMINARY PROSPECTUS
5,000,000 Shares
Common Stock
This is the initial public offering of our common stock in the
United States. We are offering 5,000,000 shares of common stock
offered by this prospectus. We expect the public offering price
to be between $20.00 and $22.00 per share.
We have applied to have our common stock approved for listing on
The Nasdaq Global Market under the symbol “OPTT.”
Our common stock is listed on the AIM market of the London Stock
Exchange plc under the symbol
“OPT.” We will apply to
list the shares of common stock being offered by this prospectus
on the AIM market. The last reported sale price of our common
stock on the AIM market on
April 5, 2007 was
£11.70 per share (as adjusted to give effect to a
one-for-ten reverse stock split to be effected prior to this
offering), or approximately $23.05 per share based on the
noon buying rate for sterling of £1.00 = $1.97 on
April 5, 2007.
Investing in our common stock involves a high degree of risk.
Before buying any shares, you should read the discussion of
material risks of investing in our common stock in “Risk
Factors” beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discounts and
commissions
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$
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$
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Proceeds, before expenses, to us
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$
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The underwriters may also purchase up to an additional
90,000 shares of our common stock from the selling
stockholders identified in this prospectus and up to 660,000
additional shares of common stock from us at the public offering
price, less the underwriting discounts and commissions, to cover
over-allotments, if any, within 30 days from the date of
this prospectus. If the underwriters exercise this option in
full, the total underwriting discounts and commissions will be
$ , and our total proceeds, before
expenses, will be $ . We will not
receive any proceeds from the sale of shares by the selling
stockholders.
The underwriters are offering the common stock as set forth
under “Underwriting.” Delivery of the shares will be
made on or
about ,
2007.
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Banc of America Securities
LLC
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First Albany Capital
,
2007
| POWERBUOY SYSTEM AS DEPLOYED OFF COAST OF NEW JERSEY, USA |
You should rely only on the information contained in this
prospectus. We have not, the selling stockholders have not and
the underwriters have not, authorized anyone to provide you with
additional information or information different from that
contained in this prospectus. We and the selling stockholders
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of shares
of our common stock.
TABLE OF
CONTENTS
PowerBuoy®
is a registered trademark of Ocean Power Technologies, Inc. The
Ocean Power Technologies logo,
CellBuoytm,
Talk on
Watertm
and Making Waves in
Powersm
are trademarks or service marks of Ocean Power Technologies,
Inc. All other trademarks appearing in this prospectus are the
property of their respective holders.
PROSPECTUS
SUMMARY
This summary highlights selected information appearing
elsewhere in this prospectus. While this summary highlights what
we consider to be the most important information about us, you
should carefully read this prospectus and the registration
statement of which this prospectus is a part in their entirety
before investing in our common stock, especially the risks of
investing in our common stock, which we discuss under “Risk
Factors,” and our consolidated financial statements and
related notes beginning on
page F-1.
Our
Company
We develop and are commercializing proprietary systems that
generate electricity by harnessing the renewable energy of ocean
waves. The energy in ocean waves is predictable, and electricity
from wave energy can be produced on a consistent basis at
numerous sites located near major population centers worldwide.
Wave energy is an emerging segment of the renewable energy
market. Based on our proprietary technology, considerable ocean
experience, existing products and expanding commercial
relationships, we believe we are the leading wave energy
company.
We currently offer two products as part of our line of
PowerBuoy®
systems: a utility PowerBuoy system and an autonomous PowerBuoy
system. Our PowerBuoy system is based on modular, ocean-going
buoys, which we have been ocean testing for nearly a decade. The
rising and falling of the waves moves the buoy-like structure
creating mechanical energy that our proprietary technologies
convert into electricity. We have tested and developed wave
power generation and control technology using proven equipment
and processes in novel applications. Our two products are
designed for the following applications:
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Our utility PowerBuoy system is capable of supplying electricity
to a local or regional electric power grid. Our wave power
stations will be comprised of a single PowerBuoy system or an
integrated array of PowerBuoy systems, plus the remaining
components required to deliver electricity to a power grid. We
intend to sell our utility PowerBuoy system to utilities and
other electrical power producers seeking to add electricity
generated by wave energy to their existing electricity supply.
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Our autonomous PowerBuoy system is designed to generate power
for use independently of the power grid in remote locations.
There are a variety of potential applications for this system,
including sonar and radar surveillance, offshore cellular phone
service, tsunami warning, oceanographic data collection,
offshore platforms and offshore aquaculture.
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From October 2005 to October 2006, we operated a demonstration
PowerBuoy system with a maximum peak, or rated, output of 40
kilowatts, or kW, off the coast of New Jersey under a
contract
with the New Jersey Board of Public Utilities. This PowerBuoy
system has been removed from the ocean and is currently
undergoing planned maintenance prior to re-deployment. No other
PowerBuoy systems are currently deployed.
Our current efforts are focused on our goal of increasing the
maximum rated output of our utility PowerBuoy system from the
current 40kW to 150kW in 2007, then to 250kW in 2008 and
ultimately to 500kW in 2010, as well as expanding our key
commercial opportunities for both the utility and the autonomous
PowerBuoy systems. We currently have commercial relationships
with the following:
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Iberdrola S.A., or Iberdrola, which is a large electric utility
company located in Spain and one of the largest renewable energy
producers in the world, Total S.A., or Total, which is one of
the world’s largest oil and gas companies, and two Spanish
governmental agencies for the first phase of the construction of
a 1.39 megawatt, or MW, wave power station off the coast of
Santoña, Spain. We currently plan to deploy an initial 40kW
PowerBuoy system for this project by October 2007.
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Iberdrola and Total to evaluate the development of a wave power
station off the coast of France.
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The United States Navy to develop and build a wave power station
at the US Marine Corps Base in Oahu, Hawaii that we believe will
serve as a prototype wave power station for the installation of
wave power stations at other US Navy bases. One PowerBuoy system
was installed in connection with this
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project for a total of eight months over a two-year period. We
plan to deploy an improved system in April 2007.
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Lockheed Martin Corporation to market cooperatively with us our
autonomous PowerBuoy system for use with Lockheed Martin
equipment. Lockheed Martin successfully completed an ocean test
of an autonomous PowerBuoy system in September 2004.
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As part of our marketing efforts, we use demonstration wave
power stations to establish the feasibility of wave power
generation. In addition to the demonstration PowerBuoy system
operated off the coast of New Jersey, we plan to develop and
operate two additional demonstration wave power stations. Unlike
the New Jersey power system, these demonstration wave power
stations will, if approved and constructed as planned, be
connected to the local power grids. In February 2006, we
received approval from the South West of England Regional
Development Agency to install a 5MW demonstration wave power
station off the coast of Cornwall, England. In February 2007,
the US Federal Energy Regulatory Commission granted us a
preliminary permit to evaluate the feasibility of a location off
the coast of Reedsport, Oregon for the proposed construction and
operation of a wave power station with a maximum rated output of
50MW, of which up to the first 5MW will be a demonstration wave
power station. We plan to generate incremental revenue from the
demonstration wave power stations by selling electricity to
utilities. Also, in March 2007, we were awarded a conditional
grant from the Scottish Ministers’ Wave and Tidal Energy
Support Scheme, managed by the Scottish Executive. This grant is
for the design, manufacture and installation of a 150kW
PowerBuoy system in Orkney, Scotland.
We had revenues of $1.7 million in fiscal 2006 and recorded
a net loss of $7.1 million, compared to revenues of
$5.4 million and a net loss of $0.4 million in fiscal
2005. For the nine months ended
January 31, 2007, we
had revenues of $1.5 million and a net loss of
$5.5 million. As of
January 31, 2007, our accumulated
deficit was $34.1 million.
Our
Market
Global demand for electric power is expected to increase from
14.8 trillion kilowatt hours in 2003 to 30.1 trillion kilowatt
hours by 2030, according to the Energy Information
Administration, or the EIA. To meet this demand, the
International Energy Agency, or the IEA, estimates that
investments in new generating capacity will exceed $4 trillion
in the period from 2003 to 2030, of which $1.6 trillion will be
for new renewable energy generation equipment.
A variety of factors are contributing to the development of
renewable energy systems that capture energy from replenishable
natural resources, including ocean waves, flowing water, wind
and sunlight, and convert it into electricity. These factors
include the rising cost of fossil fuels, dependence on energy
from foreign sources, environmental concerns, government
incentives and infrastructure constraints.
Wave energy systems such as ours compare favorably with many
other renewable energy technologies. Due to the tremendous
energy in ocean waves, wave power stations with high
capacity — 50MW and above — can be installed
in a relatively small area. In addition, the supply of
electricity from wave energy can be forecasted days in advance
and the annual flow of waves at specific sites can be relatively
constant.
Our
Competitive Advantages
We believe that our technology for generating electricity from
wave energy and our commercial relationships give us several
potential competitive advantages in the renewable energy market,
including the following:
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our PowerBuoy system uses an ocean-tested technology to generate
electricity;
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our PowerBuoy system is efficient in harnessing wave energy;
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our PowerBuoy system takes advantage of time-tested and
well-known technology;
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numerous potential sites for our wave power stations are located
near major population centers worldwide;
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we have significant commercial relationships with governmental
and commercial entities active in the development of renewable
energy;
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our PowerBuoy system has the potential to offer cost competitive
renewable energy power generation solutions; and
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our PowerBuoy system is environmentally benign and aesthetically
non-intrusive.
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Our
Business Strategy
Our goal is to strengthen our leadership in developing wave
energy technologies and commercializing wave power stations and
related services. In order to achieve this goal, we are pursuing
the following business strategies:
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concentrate sales and marketing efforts on four geographic
markets: coastal North America, the west coast of Europe, the
coasts of Australia and the east coast of Japan;
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continue to increase PowerBuoy system output;
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construct demonstration wave power stations to encourage market
adoption of our wave power stations;
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leverage customer relationships to enhance the commercial
acceptance of our utility PowerBuoy system;
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expand revenue streams from our autonomous PowerBuoy system; and
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maximize revenue opportunities with existing customers.
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Risks
Associated with Our Business
Our business is subject to numerous risks, as more fully
described in the section entitled “Risk Factors”
immediately following this prospectus summary. We have a history
of operating losses, and we may never achieve or maintain
profitability. Wave energy technology may not gain broad
commercial acceptance, and demand for our PowerBuoy systems may
not develop. The reduction or elimination of subsidies and
incentives for renewable energy sources could prevent demand for
our PowerBuoy systems from developing. Our product development
costs have been increasing and are likely to increase
significantly over the next several years. We have invested, and
will continue to invest, funds in demonstration wave power
stations that generate little or no direct revenue. Our
PowerBuoy systems do not have a long operating history and may
develop performance problems. We may be unable to increase the
power output of our utility PowerBuoy system, and we may not be
able to deploy multiple systems in a large-scale wave power
station or to deploy larger PowerBuoy systems cost effectively
and without damage to the systems. We depend on a small number
of customers for substantially all of our revenues, and the US
Navy currently accounts for a majority of our revenues. Our
relationships with alliance partners may not be successful. We
compete with other renewable energy companies. We are also
subject to risks associated with international operations.
Our
Corporate Information
We were incorporated under the laws of the State of New Jersey
in April 1984 and began commercial operations in 1994. We plan
to reincorporate in Delaware prior to this offering. Our
principal executive offices are located at 1590 Reed Road,
Pennington,
New Jersey 08534, and our telephone number is
(609) 730-0400.
Our
website address is
www.oceanpowertechnologies.com.
The information on our
website is not a part of this prospectus.
3
THE
OFFERING
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Common stock we are offering |
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5,000,000 shares |
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Over-allotment option |
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750,000 shares |
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The underwriters have an option for a period of up to
30 days to purchase up to 90,000 additional shares of
common stock from the selling stockholders and up to
660,000 additional shares of common stock from us to cover
over-allotments. |
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Common stock to be outstanding after this offering |
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10,177,219 shares (10,837,219 shares if the
over-allotment option is exercised in full) |
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Use of proceeds after expenses |
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We estimate that the net proceeds from this offering after
expenses will be approximately $94.8 million, assuming an
initial public offering price of $21.00 per share, the
midpoint of the estimated price range set forth on the cover
page of this prospectus. |
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We intend to use the net proceeds from this offering to
construct demonstration wave power stations and to fund minority
investments in wave station projects to encourage market
adoption of our wave power stations; to fund the continued
development of our PowerBuoy system, including increases in
system output; to expand our international sales and marketing
capabilities; and for working capital and general corporate
purposes, including potential acquisitions of complementary
businesses, products or technologies. See “Use of
Proceeds.” |
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For a sensitivity analysis of the effect of changes in the
public offering price on our net proceeds, see “Use of
Proceeds.” |
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We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders as a result of any
exercise by the underwriters of their over-allotment option. |
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Risk Factors |
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Investing in our common stock involves a high degree of risk.
Before buying any shares, you should read the discussion of
material risks of investing in our common stock in “Risk
Factors” beginning on page 7 of this prospectus. |
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Proposed Nasdaq Global Market symbol |
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OPTT |
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Listing on AIM market |
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Our common stock is listed on the AIM market of the London Stock
Exchange under the symbol “OPT.” We will apply to list
the shares of common stock being offered by this prospectus on
the AIM market. |
The number of shares of our common stock outstanding immediately
after this offering is based on 5,177,219 shares of common
stock outstanding as of
January 31, 2007.
The number of shares of our common stock outstanding immediately
after this offering excludes:
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1,366,574 shares of our common stock issuable upon the
exercise of stock options outstanding as of January 31,
2007 at a weighted average exercise price of $14.25 per
share; and
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803,215 shares of our common stock available for future
grant under our equity compensation plans, including our new
2006 stock incentive plan, as of January 31, 2007.
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Unless otherwise indicated, all information in this prospectus:
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assumes that the underwriters do not exercise their option to
purchase up to 750,000 additional shares of our common stock to
cover over-allotments, if any;
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gives effect to the one-for-ten reverse stock split of our
common stock to be completed prior to this offering;
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gives effect to our reincorporation in Delaware and the adoption
of a new certificate of incorporation and bylaws, which will
become effective prior to this offering; and
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gives effect to the establishment of our 2006 stock incentive
plan, which will become effective upon the effectiveness of the
registration statement for this offering.
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5
SUMMARY
CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data as of and for
the fiscal years ended
April 30, 2004,
2005 and
2006 have
been derived from our audited consolidated financial statements.
We refer to the fiscal year ended
April 30, 2004 as fiscal
2004, the fiscal year ended
April 30, 2005 as fiscal 2005
and the fiscal year ended
April 30, 2006 as fiscal 2006.
The summary consolidated financial data as of
January 31,
2007 and for the nine month periods ended
January 31, 2006
and
2007 have been derived from our unaudited consolidated
financial statements. The unaudited summary consolidated
financial statement data includes, in our opinion, all
adjustments, consisting only of normal recurring adjustments,
that are necessary for a fair presentation of our financial
position and results of operations for these periods. Operating
results for the nine months ended
January 31, 2007 are not
necessarily indicative of the results that may be expected for
the fiscal year ending
April 30, 2007. You should read this
information together with our consolidated financial statements
and the related notes appearing at the end of this prospectus
and the
“Management’s Discussion and Analysis of
Financial Condition and Results of Operations” section of
this prospectus.
The as adjusted balance sheet information gives effect to the
sale by us of 5,000,000 shares of common stock in this
offering at an assumed initial public offering price of
$21.00 per share, the midpoint of the estimated price range
set forth on the cover page of this prospectus, after deducting
underwriting discounts and commissions and estimated offering
expenses payable by us. For a sensitivity analysis of the effect
of changes in the public offering price on our capitalization,
see “Capitalization.”
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Nine Months
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Fiscal Year Ended April 30,
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Ended January 31,
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2004
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2005
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2006
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2006
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2007
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(Unaudited)
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Consolidated Statement of
Operations Data:
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Revenues
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$
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4,713,202
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$
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5,365,235
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$
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1,747,715
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$
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1,467,283
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$
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1,513,631
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Cost of revenues
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4,319,850
|
|
|
|
5,170,521
|
|
|
|
2,059,318
|
|
|
|
1,920,980
|
|
|
|
2,103,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
393,352
|
|
|
|
194,714
|
|
|
|
(311,603
|
)
|
|
|
(453,697
|
)
|
|
|
(589,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development costs
|
|
|
255,958
|
|
|
|
904,618
|
|
|
|
4,224,997
|
|
|
|
2,630,663
|
|
|
|
4,100,418
|
|
|
Selling, general and
administrative costs
|
|
|
1,745,955
|
|
|
|
2,553,911
|
|
|
|
3,190,687
|
|
|
|
2,168,345
|
|
|
|
3,083,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,001,913
|
|
|
|
3,458,529
|
|
|
|
7,415,684
|
|
|
|
4,799,008
|
|
|
|
7,184,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,608,561
|
)
|
|
|
(3,263,815
|
)
|
|
|
(7,727,287
|
)
|
|
|
(5,252,705
|
)
|
|
|
(7,773,516
|
)
|
|
Interest income, net
|
|
|
555,717
|
|
|
|
1,297,156
|
|
|
|
1,408,361
|
|
|
|
1,062,095
|
|
|
|
1,066,823
|
|
|
Other income (expense)(1)
|
|
|
(3,500,096
|
)
|
|
|
1,545
|
|
|
|
74,294
|
|
|
|
75,000
|
|
|
|
13,744
|
|
|
Foreign exchange gain (loss)
|
|
|
1,585,345
|
|
|
|
1,507,145
|
|
|
|
(978,242
|
)
|
|
|
(1,514,630
|
)
|
|
|
1,184,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,967,595
|
)
|
|
|
(457,969
|
)
|
|
|
(7,222,874
|
)
|
|
|
(5,630,240
|
)
|
|
|
(5,508,450
|
)
|
|
Income tax benefit
|
|
|
118,119
|
|
|
|
29,335
|
|
|
|
143,963
|
|
|
|
143,963
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,849,476
|
)
|
|
$
|
(428,634
|
)
|
|
$
|
(7,078,911
|
)
|
|
$
|
(5,486,277
|
)
|
|
$
|
(5,508,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.71
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.06
|
)
|
|
$
|
(1.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average
common shares outstanding
|
|
|
4,037,501
|
|
|
|
5,135,550
|
|
|
|
5,162,340
|
|
|
|
5,158,982
|
|
|
|
5,174,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The $3.5 million expense in fiscal 2004 resulted from a one time
charge incurred at the time of our stock offering on the AIM
market in October 2003 relating to a 1999 agreement between us
and Tyco Electronics Corp. |
| |
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2007
|
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
|
(Unaudited)
|
|
|
Consolidated Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and
certificates of deposit
|
|
$
|
26,657,152
|
|
|
$
|
122,788,581
|
|
|
Working capital
|
|
|
26,224,722
|
|
|
|
120,980,072
|
|
|
Total assets
|
|
|
30,925,630
|
|
|
|
125,106,707
|
|
|
Long-term debt, net of current
portion
|
|
|
233,959
|
|
|
|
233,959
|
|
|
Deferred credits
|
|
|
600,000
|
|
|
|
600,000
|
|
|
Accumulated deficit
|
|
|
(34,140,603
|
)
|
|
|
(34,140,603
|
)
|
|
Total stockholders’ equity
|
|
|
26,577,235
|
|
|
|
121,332,585
|
|
6
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below with all
of the other information included in this prospectus before
deciding to invest in our common stock. If any of the following
risks actually occur, they may materially harm our business and
our financial condition and results of operations. In this
event, the market price of our common stock could decline and
you could lose part or all of your investment.
Risks
Relating to Our Business
We
have a history of operating losses and may never achieve or
maintain profitability.
We have incurred net losses since we began operations in 1994,
including net losses of $2.8 million in fiscal 2004,
$0.4 million in fiscal 2005 and $7.1 million in fiscal
2006. As of
January 31, 2007, we had an accumulated deficit
of approximately $34.1 million. These losses have resulted
primarily from costs incurred in our research and development
programs and from our selling, general and administrative costs.
We expect to increase our operating expenses significantly as we
continue to expand our infrastructure, research and development
programs and commercialization activities. As a result, we will
need to generate significant revenues to cover these costs and
achieve profitability.
We have entered into an agreement for the first phase of
construction of a wave power station off the coast of
Santoña, Spain, as well as an operations and maintenance
contract for the equipment to be installed in this first phase.
Under both
contracts our potential profitability is limited.
Under the construction
contract, our revenues are limited to
reimbursement for our construction costs without any mark-up and
we are required to bear the first €0.5 million of any
cost overruns. Under the operations and maintenance
contract, we
are paid a fixed fee for scheduled maintenance, the profits on
which are required to be refunded to cover any unscheduled
maintenance fees we receive during the term of the agreement.
We do not know whether or when we will become profitable because
of the significant uncertainties with respect to our ability to
successfully commercialize our
PowerBuoy®
systems in the emerging renewable energy market. Even if we do
achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. If we are unable
to achieve and then maintain profitability, the market value of
our common stock may decline.
Wave
energy technology may not gain broad commercial acceptance, and
therefore our revenues may not increase, and we may be unable to
achieve and then sustain profitability.
Wave energy technology is at an early stage of development, and
the extent to which wave energy power generation will be
commercially viable is uncertain. Many factors may affect the
commercial acceptance of wave energy technology, including the
following:
|
|
|
| |
•
|
performance, reliability and cost-effectiveness of wave energy
technology compared to conventional and other renewable energy
sources and products;
|
| |
| |
•
|
developments relating to other renewable energy generation
technologies;
|
| |
| |
•
|
fluctuations in economic and market conditions that affect the
cost or viability of conventional and renewable energy sources,
such as increases or decreases in the prices of oil and other
fossil fuels;
|
| |
| |
•
|
overall growth in the renewable energy equipment market;
|
| |
| |
•
|
availability and terms of government subsidies and incentives to
support the development of renewable energy sources, including
wave energy;
|
| |
| |
•
|
fluctuations in capital expenditures by utilities and
independent power producers, which tend to decrease when the
economy slows and interest rates increase; and
|
| |
| |
•
|
the development of new and profitable applications requiring the
type of remote electric power provided by our autonomous wave
energy systems.
|
If wave energy technology does not gain broad commercial
acceptance, our business will be materially harmed and we may
need to curtail or cease operations.
7
If
sufficient demand for our PowerBuoy systems does not develop or
takes longer to develop than we anticipate, our revenues may
decline, and we may be unable to achieve and then sustain
profitability.
Even if wave energy technology achieves broad commercial
acceptance, our PowerBuoy systems may not prove to be a
commercially viable technology for generating electricity from
ocean waves. We have invested a significant portion of our time
and financial resources since our inception in the development
of our PowerBuoy systems. To date, we have not yet manufactured
and deployed any PowerBuoy systems for commercial use. As we
begin to manufacture, market, sell and deploy our PowerBuoy
systems in greater quantities, unforeseen hurdles may be
encountered that would limit the commercial viability of our
PowerBuoy systems, including unanticipated manufacturing,
deployment, operating, maintenance and other costs. Our target
customers and we may also encounter technical obstacles to
deploying, operating and maintaining PowerBuoy systems in
quantities necessary to generate competitively-priced
electricity.
If demand for our PowerBuoy systems fails to develop
sufficiently, we may be unable to grow our business or generate
sufficient revenues to achieve and then sustain profitability.
In addition, demand for PowerBuoy systems in our presently
targeted markets, including coastal North America, the west
coast of Europe, the coasts of Australia and the east coast of
Japan, may not develop or may develop to a lesser extent than we
anticipate.
If we are not successful in commercializing our PowerBuoy
system, or are significantly delayed in doing so, our business,
financial condition and results of operations could be adversely
affected.
The
reduction or elimination of government subsidies and economic
incentives for renewable energy sources could prevent demand for
our PowerBuoy systems from developing, which in turn would
adversely affect our business, financial condition and results
of operations.
Federal, state and local governmental bodies in many countries,
most notably France, Spain, the United Kingdom, Australia,
Japan and the United States, have provided subsidies in the form
of tariff subsidies, rebates, tax credits and other incentives
to utilities, power generators and distributors using renewable
energy. However, these incentives and subsidies generally
decline over time, and many incentive and subsidy programs have
specific expiration dates. Moreover, because the market for
electricity generated from wave energy is at an early stage of
development, some of the programs may not include wave energy as
a renewable energy source eligible for the incentives and
subsidies.
Currently, the cost of electricity generated from wave energy,
without the benefit of subsidies or other economic incentives,
substantially exceeds the price of electricity in most
significant markets in the world. As a result, the near-term
growth of the market for our utility PowerBuoy systems, which
are designed to feed electricity into a local or regional power
grid, depends significantly on the availability and size of
government incentives and subsidies for wave energy. As
renewable energy becomes more of a competitive threat to
conventional energy providers, companies active in the
conventional energy business may increase their lobbying efforts
in order to encourage governments to stop providing subsidies
for renewable energy, including wave energy. We cannot predict
the level of any such efforts, or how governments may react to
such efforts. The reduction, elimination or expiration of
government incentives and subsidies, or the exclusion of wave
energy technology from those incentives and subsidies, may
result in the diminished competitiveness of wave energy relative
to conventional and non-wave energy renewable sources of energy.
Such diminished competitiveness could materially and adversely
affect the growth of the wave energy industry, which could in
turn adversely affect our business, financial condition and
results of operations.
In 2000, we entered into an agreement with Woodside Sustainable
Energy Solutions Pty. Ltd., or Woodside, under which we received
$0.6 million in exchange for granting Woodside an option to
purchase, at a 30% discount from the then-prevailing market
rate, up to 500,000 metric tons of carbon emission credits we
generate during the years 2008 through 2012. However, if by
December 31, 2012 we do not become entitled under
applicable laws to the full amount of emission credits covered
by the option, we are obligated to return the option fee of
$0.6 million, less the aggregate discount on any emission
credits sold to Woodside prior to such date. If we receive
emission credits under applicable laws and fail to sell to
Woodside the credits up to the full amount of emission credits
covered by the option, Woodside is entitled to liquidated
damages equal to
8
30% of the aggregate market value of the shortfall in emission
credits (subject to a limit on the market price of emission
credits).
Our
product development costs have been steadily increasing and are
likely to increase significantly over the next several
years.
Our product development costs primarily relate to our efforts to
increase the maximum rated output of our current 40kW utility
PowerBuoy system in successive stages to 500kW in 2010. Our
product development costs were $4.1 million in the nine
months ended
January 31, 2007 as compared to
$2.6 million in the same period in 2006, and were
$4.2 million in fiscal 2006 as compared to
$0.9 million in fiscal 2005 and $0.3 million in fiscal
2004. We anticipate that our product development costs related
to the planned increase in the output of our utility PowerBuoy
system will increase significantly over the next several years.
We
have invested, and will continue to invest, funds to construct
demonstration wave power stations that may generate little or no
direct revenue.
We have constructed and plan to construct in the future
demonstration wave power stations to establish the feasibility
of wave energy technology and to encourage the market adoption
of our wave power stations. Demonstration wave power stations
allow potential customers to see first-hand the viability of
wave energy technology as a source of electricity. We incur
significant costs in constructing and maintaining these
demonstration wave power stations, and we may generate little or
no direct revenue from them.
Our
PowerBuoy systems do not have a sufficient operating history to
confirm how they will perform over their estimated
30-year
useful life.
We began developing and testing wave energy technology nearly
10 years ago. However, to date we have only manufactured
eight PowerBuoy systems for use in testing and development. The
longest continuous in-ocean deployment of our PowerBuoy system
has been for 12 months. As a result, our PowerBuoy systems
do not have a sufficient operating history to confirm how they
will perform over their estimated
30-year
useful life. Our technology has not been deployed commercially
and we have not yet demonstrated that our engineering and test
results can be duplicated in commercial production. We have
conducted and plan to continue to conduct practical testing of
our PowerBuoy system. If our PowerBuoy system ultimately proves
ineffective or unfeasible, we may not be able to engage in
commercial production of our products or we may become liable to
our customers for quantities we are obligated but are unable to
produce. If our PowerBuoy systems perform below expectations, we
could lose customers and face substantial repair and replacement
expense which could in turn adversely affect our business,
financial condition and results of operations.
Our
future success depends on our ability to increase the maximum
rated power output of our utility PowerBuoy system. If we are
unable to increase the maximum rated output of our utility
PowerBuoy system, the commercial prospects for our utility
PowerBuoy system would be adversely affected.
One of our goals is to increase the maximum rated output of our
utility PowerBuoy system, which is currently 40kW, to 150kW in
2007, then to 250kW in 2008 and ultimately to 500kW in 2010. Our
success in meeting this objective depends on our ability to
significantly increase the power output of our PowerBuoy system
in a cost-effective and timely manner and our ability to
overcome the engineering and deployment hurdles that we face,
including developing design and construction techniques that
will enable the larger PowerBuoy systems to be deployed cost
effectively and without damage, and developing adjustments to
the mooring system to account for the larger sized PowerBuoy
systems. We have experienced delays in the development and
deployment of our PowerBuoy system in the past, and could
experience similar delays or other difficulties in the future.
If we cannot increase the power output of the PowerBuoy system,
or if it takes us longer to do so than we anticipate, we may be
unable to expand our business, maintain our competitive
position, satisfy our contractual obligations or become
profitable. In addition, if the cost associated with these
development efforts exceeds our projections, our results of
operations will be adversely affected.
If we
do not reach full commercial scale, we may not be able to offer
a cost competitive power station and the commercial prospects of
our utility PowerBuoy system would be adversely
affected.
Unless we reach full commercial scale, which we estimate to be
manufacturing levels of at least 300 units of 500kW
PowerBuoy systems per year, we may not be able to offer an
electricity solution that competes on a
9
non-subsidized basis with today’s price of wholesale
electricity in key markets in the United States, Europe, Japan
and Australia. If we do not reach full commercial scale, the
commercial prospects for our utility PowerBuoy system would be
adversely affected.
We
have not yet deployed a wave power station consisting of an
array of two or more PowerBuoy systems. If we are unable to
deploy a multiple-system wave power station, our revenues may
not increase, and we may be unable to achieve and then maintain
profitability.
We have not yet deployed a wave power station consisting of an
array of two or more PowerBuoy systems. Our success in
developing and deploying a wave power station consisting of an
array of two or more PowerBuoy systems is contingent upon, among
other things, receipt of required governmental permits,
obtaining adequate financing, successful array design
implementation and finally, successful deployment and connection
of the PowerBuoy systems.
We have not conducted ocean testing or otherwise installed in
the ocean a multiple-system wave power station. In particular,
unlike single-system wave power stations, multiple-system wave
power stations require use of an underwater substation to
connect the cables from, and collect the electricity generated
by, each PowerBuoy system in the array. If our underwater
substation does not work as we anticipate, we will need to
design an alternative system, which could delay our business
plans. In addition, unanticipated issues may arise with the
logistics and mechanics of deploying and maintaining multiple
PowerBuoy systems at a single site and the additional equipment
associated with these multiple-system wave power stations.
We may be unsuccessful in accomplishing any of these tasks or
doing so on a timely basis. The development and deployment of an
array of PowerBuoy systems may require us to incur significant
expenses for preliminary engineering, permitting and legal and
other expenses before we can determine whether a project is
feasible, economically attractive or capable of being financed.
If we
are unable to deploy larger PowerBuoy systems cost effectively
and without damage to the systems, we may be unable to compete
effectively.
We will need to build larger buoys in order to increase the
output of our current PowerBuoy systems. The larger buoys will
be more difficult than our current buoys to deploy cost
effectively and without damage. Our current deployment
methodologies, including transportation to the installation site
and the mooring of the PowerBuoy systems, will need to be
revised for PowerBuoy systems with greater output. If we cannot
develop cost effective methodologies for deployment of the
larger PowerBuoy systems, or if it takes us longer to do so than
we anticipate, we may not be able to deploy such systems in the
time we anticipate or at all. Therefore, even if we succeed in
increasing the output of our PowerBuoy systems above 40kW, if we
are unable to deploy these larger PowerBuoy systems or encounter
problems in doing so, we may be unable to expand our business,
maintain our competitive position, satisfy our contractual
obligations or become profitable.
If we
are not successful in completing the development of wave power
stations in Spain or France, it would materially harm our
business, financial condition and results of
operations.
In July 2006, we entered into an agreement for the first phase
of the construction of a wave power station off the coast of
Santoña, Spain, with our customer, Iberdrola Energias
Marinas de Cantabria, S.A., or Iberdrola Cantabria. We refer to
this agreement as the Spain construction agreement. Iberdrola
Cantabria was formed by affiliates of Iberdrola and Total, two
Spanish governmental agencies and us for the purpose of
constructing and operating a wave power station off the coast of
Spain. Under the Spain construction agreement, we have agreed to
manufacture and deploy no later than
December 31, 2009 one
40kW PowerBuoy system and the ocean-based substation and
infrastructure required to connect nine additional 150kW
PowerBuoy systems that together are contemplated to constitute a
1.39MW wave power station. Under the terms of the agreement, our
revenues are limited to reimbursement for our construction costs
without any mark-up. In addition, we are required to bear the
first €0.5 million of any cost overruns. As of
January 31, 2007, we had recognized an anticipated loss of
$0.5 million under the Spain construction agreement.
In addition, because the Spain construction agreement does not
cover the terms for deployment of all ten PowerBuoy units, we
will need to enter into a subsequent
contract with Iberdrola
Cantabria before we complete construction of the full wave power
station. If we are unable to successfully manufacture all ten
PowerBuoy units or meet the terms of the Spain construction
agreement, or if we are not able to successfully
10
negotiate a subsequent
contract with Iberdrola Cantabria for the
deployment of the nine additional PowerBuoy units, we may lose a
material component of our current and anticipated revenue
stream. Iberdrola Cantabria has the right to terminate the
agreement if we interrupt our services for more than
180 days and do not resume within a
30-day
period or if the first phase of construction is not complete by
December 31, 2009 for reasons attributable to us, or for a
serious and repeated breach of a major obligation that is not
cured within a
30-day
period after we receive notice of the breach. If Iberdrola
Cantabria were to terminate the Spain construction agreement for
any of these reasons, we may not be able to find another company
to fund development of the wave power station.
Under our agreement with affiliates of Iberdrola and Total to
study and assess the feasibility of a wave power station off the
coast of France, either of Iberdrola or Total may withdraw. In
addition, in order to proceed with development of the France
wave power station, all three parties must conclude that
development is feasible. If we proceed, Iberdrola, Total and we
will form a new company for the purpose of constructing and
operating the wave power station. If either Iberdrola or Total
withdraws or does not agree that development of the wave power
station is feasible, we may not be able to proceed with
development of the wave power station. In addition, if we
withdraw from the France project, we will remain obligated to
supply and install equipment and provide the new company with
assistance and information so that a new company can operate the
wave power station.
If either of the Spain or France projects were cancelled or
otherwise interrupted, it would adversely affect our business,
financial condition and results of operations.
If we
are unable to successfully negotiate and enter into operations
and maintenance contracts with our customers on terms that are
acceptable to us, our ability to diversify our revenue stream
will be impaired.
An important element of our business strategy is to maximize our
revenue opportunities with our existing and future customers by
seeking to enter into operations and maintenance
contracts with
them under which we would be paid fees for operating and
maintaining wave power stations that they have purchased from
us. Even if customers purchase our PowerBuoy systems, they may
not enter into operations and maintenance
contracts with us. We
may not be able to negotiate operations and maintenance
contracts that provide us with any profit opportunities. Even if
we successfully negotiate and enter into such operations and
maintenance
contracts, our customers may terminate them
prematurely or they may not be profitable for a variety of
reasons, including the presence of unforeseen hurdles or costs.
In addition, our inability to perform adequately under such
operations and maintenance
