OPTT 10-K
Ocean Power Technologies, Inc. (OPTT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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OCEAN POWER TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PowerBuoy®, PB-Vue ®, PowerTower ®, Making Waves in Power ®, Talk on Water ®, Merrows™, WAM-V® and the Ocean Power Technologies logo are trademarks of Ocean Power Technologies, Inc. All other@ trademarks appearing in this annual report are the property of their respective holders.
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Special Note Regarding Forward-Looking Statements
We have made statements in this Annual Report on Form 10-K (the “Annual Report”) in, among other sections, Item 1 - “Business,” Item 1A - “Risk Factors,” Item 3 - “Legal Proceedings,” and Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “may,” “continue,” “estimate,” “intend,” “plan,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.
Any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or unknown risks and uncertainties, including the risks, uncertainties and assumptions described in Item 1A - “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur as contemplated and actual results could differ materially from those anticipated or implied by the forward-looking statements.
You should not unduly rely on these forward-looking statements, which speak only as of the date of this filing. We undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise.
Our fiscal year begins on May 1 and ends on April 30. When we refer to a particular fiscal year, we are referring to the fiscal year ending on April 30 of that year. References to fiscal 2026 are to the fiscal year ended April 30, 2026.
Unless the context indicates otherwise, the terms “Company,” “Ocean Power Technologies,” “OPT,” “we,” “our” or “us” as used herein refers to Ocean Power Technologies, Inc. and its subsidiaries.
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PART I
ITEM 1. BUSINESS
Overview
Ocean Power Technologies, Inc. (“OPT,” “we,” “our,” or “the Company”) is a Maritime Domain Awareness (MDA) company specializing in innovative intelligent maritime solutions. These solutions include a variety of “as a service” systems, including Data as a Service (DaaS), Robotics as a Service (RaaS), and Power as a Service (PaaS). These systems consist of a variety of platforms including the PowerBuoy®, our persistent sensor and power solution, the WAM-V® (Wave Adaptive Modular Vessel), our autonomous unmanned surface vehicle, and Merrows™, our user interface and command and control (C2) system that integrates multiple sensor feeds using software and hardware and enables artificial intelligence and machine learning (AI/ML) integration. We design, manufacture, deploy, and operate these systems for defense, security, subsea infrastructure, offshore oil and gas, offshore energy, marine research, and communication markets. We operate primarily through a combination of direct sales and leases, strategic partnerships, and long-term service agreements. Our business model emphasizes capital-light deployments, recurring revenue from service and maintenance contracts, and high-margin technology sales and leases.
We serve a global customer base, including the U.S. and allied defense agencies, offshore energy operators, and commercial interests. The common thread across these markets is the growing need for a persistent, autonomous, and sustainable offshore presence, a need we are uniquely positioned to fulfill.
The Company holds numerous patents and leverages decades of research including control systems, energy storage, and marine integration. Our headquarters and assembly operations are located in New Jersey, and we maintain an additional manufacturing and robotics development facility in Richmond, CA. In addition, the Company maintains an office at the Association for Uncrewed Vehicle Systems International (AUVSI) headquarters in Washington, D.C., which serves to strengthen our strategic position in the fast-growing uncrewed systems market.
OPT is committed to enabling a smarter, safer ocean economy through innovation in ocean intelligence and power. As we look forward, our strategic priorities include expanding our customer and geographic base, accelerating technology adoption, enhancing recurring revenue, and driving margin growth through platform scalability and supply chain efficiencies.
We were incorporated under the laws of the State of New Jersey in April 1984 and began commercial operations in 1994. On April 23, 2007, we reincorporated in Delaware.
Our Solutions
Maritime Domain Awareness Solution (“MDAS”)
Maritime Domain Awareness refers to the effective understanding of anything associated with the maritime domain that could impact safety, security, economy, or the environment. The “maritime domain” includes all areas and things on, under, related to, adjacent to, or bordering navigable waters, including the seafloor and airspace above.
Our MDAS provides a customizable, integrated surveillance solution designed for persistent, roaming, and real-time ocean monitoring. The system combines high-definition radar, optical and thermal imaging, and vessel Automatic Identification System (AIS) modules with edge processing, secure communications, and cloud-based analytics.
Our customers use and can apply our MDAS for:
| ● | National Security (U.S. and allies): Monitoring territorial waters, preventing smuggling, piracy, and terrorism. |
| ● | Commercial Operations: Securing shipping lanes, port infrastructure, offshore energy assets, data gathering for permitting and more. |
| ● | Environmental Protection: Detecting pollution, illegal fishing, marine mammal activity, and more. |
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MDAS hardware can be deployed on OPT platforms, including PowerBuoy® systems and WAM-V® autonomous vessels, and networked via satellite, Wi-Fi, and cellular links. Our architecture enables multi-platform surveillance, with command-and-control functionality enhanced through proprietary software and third-party system integrations. These networks can incorporate external data sources such as satellite imagery, drones, weather, and bathymetry to form a comprehensive operational picture.
Our MDAS is also designed to provide persistent situational awareness beneath the ocean surface, an area inaccessible to conventional technologies such as radar or the AIS. This capability plays a critical role in supporting national security objectives, enabling autonomous maritime operations, and protecting marine resources and infrastructure. Key system components include:
Sensing and Detection
| ● | Passive Acoustics: Identifies underwater sound signatures from sources such as submarines, divers, and marine life. |
| ● | Active Sonar: Emits and receives sound pulses to locate and track underwater objects and terrain. |
| ● | Magnetometers: Detects metallic anomalies, including submersibles and naval mines. |
| ● | Seismic and Pressure Sensors: Monitors vibrations and pressure changes indicative of movement or underwater disturbances. |
Communications and Networking
| ● | Acoustic Modems: Enables underwater data transmission between sensors and platforms over medium ranges. |
| ● | RF and Satellite Relay: Transmits compressed data from surface nodes to command centers via satellite or terrestrial links. |
| ● | Edge Processing: Utilizes onboard AI and machine learning to analyze data locally, prioritize key findings, and reduce transmission loads. |
Data Fusion and Analysis
| ● | Multi-Domain Correlation: Integrates inputs from undersea, surface, and aerial platforms to generate a unified operational picture. |
Command, Control, and Decision Support
| ● | Automated Alerts: Flags high-priority events, such as unauthorized intrusions, suspicious underwater activity, or infrastructure tampering. |
Representative Applications
| ● | Defense and Security |
| ○ | Detects Submarine and Unmanned Underwater Vehicles (UUV) in contested maritime zones. |
| ○ | Monitors strategic chokepoints and exclusive economic zones (EEZs). |
| ○ | Protects undersea cables and energy infrastructure from sabotage. |
| ● | Critical Infrastructure Protection |
| ○ | Secures offshore oil and gas platforms, wind farms, desalination plants, and seaports. |
| ● | Environmental and Regulatory Compliance |
| ○ | Monitors marine life and supports conservation |
| ○ | Detects illegal fishing, dredging, or resource extraction. |
| ● | Commercial Operations |
| ○ | Enhances situational awareness for offshore energy installations. |
| ○ | Supports navigation and missions for autonomous subsea vehicles. |
Our MDAS solution is a cornerstone of our broader DaaS strategy and reflects our leadership in scalable, autonomous maritime intelligence infrastructure.
Data as a Service (“DaaS”)
Our Data as a Service offering enables persistent, near real-time collection and transmission of maritime domain awareness and environmental intelligence data. Our DaaS platform leverages autonomous uncrewed surface vehicles (USVs), including the WAM-V® platform, and PowerBuoy® systems, both of which integrate a range of environmental and security-focused sensors.
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The DaaS offering is used to support operational needs in several high-impact domains, including:
| ● | Maritime Border and Coastal Security: Monitoring unauthorized vessel activity, trafficking, and maritime incursions. |
| ● | Offshore Asset Surveillance: Enhancing situational awareness around oil platforms, wind farms, and port infrastructure. |
| ● | Illegal, Unreported, and Unregulated (IUU) Fishing: Enabling remote detection and interdiction support. |
| ● | Aquaculture and Environmental Monitoring: Gathering data to support aquaculture health, pollution tracking, and marine ecosystem compliance. |
| ● | Permitting and Infrastructure Inspection: Supporting regulatory approvals through data-enabled insights on site conditions. |
Our WAM-V® USV platform supports modular payload integration and is engineered for operational stability in variable marine conditions. It has been deployed in a range of commercial and governmental missions, including high-resolution sonar surveys, subsea infrastructure assessments, berth clearance, dredging operations, and offshore renewable energy site characterization.
We have completed multiple DaaS deployments with both government agencies and commercial customers. These engagements have provided validation of our systems’ performance, interoperability, and mission relevance.
Robotics as a Service (“RaaS”)
Our Robotics as a Service offering provides customers with subscription-based access to our WAM-V® (Wave Adaptive Modular Vessel) autonomous surface vehicles. Under this model, customers lease WAM-V® units pursuant to time-bound agreements or based on a defined number of usage days. These agreements frequently include minimum usage thresholds and bundled operational support services. Oftentimes these agreements also include OPT providing the training and operations for the vehicle. As an AUVSI Trusted Operator, (AUVSI is the world’s largest nonprofit organization dedicated to advancing the use of autonomous systems and robotics across air, land, and sea domains). OPT’s RaaS “pilots” are well suited to deliver value for our customers.
Through the RaaS model, OPT retains ownership of the deployed assets and is responsible for all system maintenance, repairs, and upgrades. This arrangement offers customers a lower upfront capital expenditure compared to outright equipment purchase, while enabling scalable access to autonomous capabilities that can be aligned with peak mission windows or surge requirements.
Our RaaS contracts have been utilized by both government and commercial customers for applications including port security, maritime surveying, infrastructure inspection, and environmental monitoring. This model has allowed customers to accelerate access to autonomous maritime solutions while preserving operational flexibility.
We believe that our RaaS model supports our strategic goals of increasing recurring revenue, improving asset utilization, broadening our customer base and expanding customer lifetime value. As RaaS involves OPT-owned systems deployed in customer-controlled environments, we evaluate associated risks related to asset recoverability, service delivery logistics, and liability exposure. Based on these assessments, we implement appropriate contractual protections, insurance coverage, and operational safeguards to mitigate such risks and ensure continuity of service and asset security
Power as a Service (“PaaS”)
Our Power as a Service offering provides customers with subscription-based access to our PowerBuoy® systems. Under this model, customers lease PowerBuoy® platforms pursuant to time-bound agreements, enabling flexible deployment without the need for upfront capital investment. These leases are structured to accommodate both steady-state operations and surge requirements, offering a scalable energy solution for offshore missions.
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The PowerBuoy® delivers autonomous, renewable energy via OPT-managed infrastructure. This reduces the need for traditional power delivery methods such as subsea cabling, fuel-based generators, or periodic manual battery replacement. Our modular PowerBuoy® configurations can include solar-only systems, wave energy converters, and optional wind turbine integrations to support varying power loads across different marine environments.
The PaaS offering is available for defense, offshore energy, and environmental monitoring applications. The PaaS model aligns with our broader strategy to offer end-to-end maritime infrastructure services, complementing our DaaS and RaaS offerings. This integrated approach is designed to support recurring revenue growth, enhance customer retention, and differentiate OPT from competitors that focus exclusively on hardware or one-time equipment sales.
While we believe this model strengthens our customer relationships and operational resilience, there can be no assurance of continued customer uptake or contract renewals. We also evaluate ongoing risks associated with offshore service delivery, environmental exposure, and asset maintenance and implement mitigation strategies including enhanced monitoring protocols, environmental hardening of equipment, and service-level agreements with local partners
Autonomous Vehicles (“WAM-V®”)
Our Autonomous Vehicles business centers around our patented WAM-V® (Wave Adaptive Modular Vessel) platform, a class of modular USVs engineered to support autonomous maritime operations in inshore, nearshore, and offshore environments. The WAM-V® platform is designed to enable scalable, real-time data acquisition and payload customization based on mission requirements.
WAM-V® vessels are manufactured in three standard sizes, 8, 16, and 22 feet, and are built on a modular framework. This design allows interoperability across propulsion types (electric and/or liquid-fuel) and supports rapid integration of third-party sensors and mission systems. These features make the platform suitable for a wide range of operational use cases, including underwater, survey, scientific research, port security, subsea infrastructure inspection, and defense surveillance.
WAM-V® platforms have been deployed across the Middle East, Europe, Asia, Oceania, and the Americas. These deployments are conducted through both direct sales and our RaaS offering, which provides subscription-based access to WAM-V® units and associated operational support as described above.
Our Autonomous Vehicles segment complements our strategic focus on persistent maritime awareness and autonomy. In particular, WAM-V® systems are increasingly integrated with our Merrows™ MDA suite, enabling mobile MDA operations to consolidate surface, subsea, and environmental data in real time. This integration expands our service capabilities and supports recurring revenue growth from both government and commercial customers.
We expect continued demand for WAM-V® platforms driven by factors including increased investment in autonomous marine systems, cost advantages over crewed vessels, global regulatory mandates for maritime monitoring, and defense modernization initiatives. However, actual adoption rates may be affected by procurement cycles, governmental budgetary constraints, and competitive offerings.
PowerBuoy®
Our PowerBuoy® is a renewable energy-powered autonomous offshore platform designed to deliver continuous electrical power and real-time data connectivity in remote maritime environments. The PowerBuoy® converts any combination of wave motion, solar, and wind into energy and includes onboard energy storage to maintain system availability during low-sea-state, cloudy, or still conditions. The platform enables persistent operations without reliance on liquid fuel-based power systems or crewed support vessels.
PowerBuoy® deployments reduce operational costs and carbon emissions by replacing diesel generators and minimizing vessel-based maintenance. The system is designed for compact deployment, rapid installation, and long-duration missions, with remote diagnostics and limited on-site service requirements. Depending on the mission profile, a single PowerBuoy® unit can operate autonomously for several months or longer. PowerBuoy® platforms support a variety of payloads, including surveillance cameras, acoustic and environmental sensors, weather stations, radar, AIS, and communication nodes. These features enable use cases in maritime security and intelligence, surveillance, and reconnaissance (“ISR”); offshore wind and oil infrastructure monitoring; and oceanographic data collection.
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PowerBuoy® units have been integrated into operational deployments for both government and commercial customers.
The PowerBuoy® represents a core technology component across multiple OPT offerings, including DaaS and PaaS. These integrated offerings are intended to support long-term growth in recurring revenue and platform utilization. We believe the PowerBuoy® is well suited to serve emerging demand for autonomous, low-emission offshore infrastructure.
Merrows
Merrows™ is our integrated user interface and C2 platform that consolidates and enhances the capabilities of our PowerBuoy®, WAM-V®, and sensor payload systems into a unified maritime surveillance and data processing solution. It is designed to address the operational complexity of MDA, which involves monitoring, detecting, and analyzing activity on, under, adjacent to, or bordering navigable waters.
The Merrows™ architecture incorporates elements of Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance (C5ISR) into a flexible and modular system. It leverages both mobile (WAM-V®) and stationary (PowerBuoy®) platforms to enable persistent situational awareness across mission-critical maritime zones. As a result, Merrows™ is well-positioned to meet the operational needs of defense, intelligence, and homeland security customers seeking scalable, multi-mission capability. By embedding C5ISR, OPT moves beyond being a “vehicle provider” to offering full-spectrum mission solutions.
Merrows™ facilitates the collection, processing, and secure transmission of multi-modal sensor data including radar, acoustic, visual, weather, and geospatial inputs. The platform supports real-time and historical data analysis and integrates artificial intelligence and machine learning to support operational decision-making, anomaly detection, and system automation.
Merrows™ has been deployed in multiple instances and is integrated within several OPT service offerings, including DaaS and RaaS. Merrows™ is offered as part of comprehensive system deployments and is not currently marketed as a standalone product.
We believe the Merrows™ system enhances the value proposition of our broader portfolio by enabling cross-platform interoperability and improving the operational efficiency and data fidelity of autonomous maritime missions.
Recent Technological Advancements
During fiscal year 2026 and through the date of this filing, we achieved several notable milestones related to the continued development and operational deployment of our autonomous maritime systems. These developments reflect our investment in platform capability enhancement, strategic partnerships, and customer-oriented service infrastructure:
| ● | Demonstrated the operational maturity of its Merrows™-equipped PowerBuoy® platform through a successful deployment supporting U.S. Coast Guard maritime domain awareness operations under a Department of Homeland Security award. The system generated approximately 0.5 MWh of renewable energy while maintaining reliable offshore performance, validating the Company’s ability to deploy and sustain persistent maritime intelligence infrastructure. The deployment also demonstrated integration with Anduril Industries’ Lattice AI-enabled command and control platform, further enhancing autonomous maritime domain awareness capabilities. Additionally, the Company continued implementing operational technologies and digital tools to improve scalability, execution, and lifecycle support across its growing portfolio of autonomous maritime systems. |
| ● | Advanced its offshore autonomy capabilities through the successful demonstration of autonomous docking, charging, and redeployment of its WAM-V® autonomous surface vehicle. The technology enables maritime drones to recharge and return to operation without human intervention, extending mission duration and reducing operational costs. The Company also progressed development of offshore charging capabilities for integration with its PowerBuoy® platform, supporting the creation of distributed offshore charging infrastructure for autonomous maritime systems. In addition, OPT advanced its next-generation WAM-V® system architecture to improve platform resilience, endurance, payload compatibility, and upgradeability, further enhancing its ability to support persistent autonomous operations across defense and commercial markets. |
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| ● | Entered into a strategic partnership with Mythos AI to integrate advanced AI-driven autonomy software across its WAM-V® autonomous surface vehicles and PowerBuoy® platforms. The collaboration is intended to enhance autonomous maritime operations through real-time edge processing, multi-sensor fusion, adaptive learning, obstacle avoidance, and multi-vehicle coordination capabilities. | |
| The integration of Mythos AI’s autonomy framework expands OPT’s ability to deliver intelligent, modular maritime solutions that combine power generation, communications, and autonomous operations. This advancement supports the Company’s strategy to provide more capable, scalable, and persistent maritime systems for defense, security, and commercial applications. |
| ● | Entered into a strategic partnership with Gradient Marine to enhance the digital engineering capabilities of its PowerBuoy® and WAM-V® platforms through the development of digital twin and simulation technologies. By integrating Gradient Marine’s Virtual Maritime Picture (VMP) software, the Company expanded its ability to perform virtual mission rehearsal, lifecycle testing, and operational simulations prior to deployment. These capabilities are intended to accelerate product development, reduce operational risk, improve mission planning, and support customer training across defense, security, offshore infrastructure, and commercial applications. The initiative further advances OPT’s strategy of combining autonomous maritime systems with advanced digital engineering tools to improve operational effectiveness and customer outcomes. |
These developments are consistent with our strategic priorities of expanding platform capability, increasing global market reach, and enhancing customer value through integrated offerings. While we believe these achievements strengthen our market position, future revenue impact remains dependent on follow-on orders, contract conversions, and customer retention. See Item 1A, “Risk Factors,” for a discussion of operational and adoption risks
Strategy and Marketing
We are focused on delivering integrated, autonomous ocean infrastructure solutions. Our strategy centers on unifying renewable energy powered systems (PowerBuoy®), autonomous vehicles (WAM-V®), and data-driven command and control platforms (Merrows™) into a cohesive, interoperable ecosystem. This multi-domain architecture is designed to support operations across surface, subsea, and airborne environments, offering utility in both government and commercial missions.
ISR is a critical function in military and security operations that involves the collection, processing, and dissemination of information to support decision-making, targeting, and situational awareness. and is central to OPT’s strategic positioning as a provider of autonomous, intelligent, and scalable maritime mission systems, enabling it to serve both national security and commercial maritime markets through recurring services and full-stack platform offerings. ISR is a core enabler of our strategy, driving value across defense, homeland security, and international maritime markets. ISR capability is not only a product feature, but a strategic differentiator woven into OPT’s platform design, autonomy stack, and service delivery models.
We believe our platform-centric approach for ISR aligns OPT with three primary global trends:
| ● | Maritime Security Modernization: Continued investment by defense and security agencies in unmanned systems and ISR. |
| ● | Offshore Sector Digitalization and Decarbonization: Expansion of remote, low-emission monitoring for wind, oil & gas, and shipping operations. |
| ● | Ocean Data Infrastructure Growth: Rising demand for AI-enabled environmental and security intelligence solutions. |
Market Trends and Tailwinds
Defense and Environmental Monitoring Demand
The defense sector continues to prioritize autonomous and AI-enabled systems to enhance maritime domain awareness, situational awareness, decision-making, and operational cost-efficiency. Customers increasingly seek solutions capable of collecting, integrating, and analyzing data from distributed sensors to support real-time operational decisions with reduced human intervention. Regulatory initiatives and funding priorities within the U.S. Department of War, the Intelligence Community, the Department of Homeland Security, allied governments, and other international defense organizations continue to support investments in autonomous maritime capabilities and advanced sensing technologies. OPT believes these trends align well with its integrated portfolio of autonomous surface vehicles, PowerBuoy® platforms, maritime communications, and the Merrows™ AI-enabled maritime domain awareness platform. The Company continues to align its product development and commercial strategy with evolving customer requirements while pursuing opportunities with defense prime contractors, government agencies, and allied foreign ministries.
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Simultaneously, the environmental monitoring market is expanding due to regulatory compliance pressures and increased investment in ocean science. Our solutions are engineered to address use cases such as coastal zone management, hydrographic surveying, and habitat monitoring.
Competitive Positioning and Global Demand
The rising global focus on unmanned maritime systems is expanding OPT’s addressable market across multiple sectors and geographies. Our platforms are being evaluated or deployed for use in:
| ● | Defense and Security Missions: In alignment with the Department of Homeland Security’s (“DHS”) Maritime Domain Awareness goals and the U.S. Coast Guard’s Unmanned Systems Strategic Plan. |
| ● | Infrastructure Protection: Including remote surveillance of undersea cables, pipelines, and offshore installations. |
| ● | Commercial Operations: Such as offshore wind development, subsea exploration, permit obtainment and port monitoring. |
Our modular platforms, specifically the PowerBuoy® and WAM-V®, are designed to support autonomous missions with minimal human intervention, and offer value in shallow-water, nearshore, and offshore environments.
Growth Priorities and Target Markets
OPT’s commercial and public-sector focus is directed toward high-value, mission-critical domains where autonomous maritime infrastructure delivers operational or strategic benefit. Our key markets include:
| ● | U.S. Defense and Intelligence agencies |
| ● | Allied foreign defense ministries (NATO, Indo-Pacific, Latin America, Middle East). These ministries seek advanced capabilities in surveillance, reconnaissance, and persistent maritime operations, aligned with U.S. defense cooperation and interoperability standards |
| ● | Strategic partners and commercial customers |
Product Development Focus
Autonomy Advancement (Level 3 and Beyond)
We have expanded our internal autonomy engineering team with the addition of full-time specialists in control systems and software integration. This investment supports the development of autonomous capabilities across OPT’s vehicle platforms, with a focus on reliable, adaptive, and scalable mission execution. Our autonomous systems are designed to execute missions with minimal operator involvement while continuously adapting to changing environmental conditions such as waves, wind, vessel traffic, and other dynamic operating factors. At the same time, a human operator remains able to monitor operations and intervene whenever necessary, providing an additional layer of safety and operational oversight. These investments strengthen OPT’s ability to deliver increasingly capable autonomous maritime solutions for defense, security, and commercial customers while supporting safe, reliable, and persistent operations in complex maritime environments.
Docking and Charging Systems
OPT continues to refine and improve its at-sea docking and charging system that integrates a PowerBuoy® with a WAM-V® platform. This system is designed to extend the duration of autonomous missions by enabling unmanned surface vehicles to recharge autonomously in the field. Test data and user feedback informs subsequent design iterations and validation protocols.
These initiatives support our objective of offering persistent, autonomous systems that reduce lifecycle cost and increase mission resilience in both government and commercial deployments.
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Competition and Competitive Positioning
We operate in the converging sectors of USVs, ocean sensing and surveillance platforms, and offshore renewable energy systems. Our competitors include companies that offer:
| ● | Standalone USV systems for inshore, nearshore, or offshore environments; |
| ● | MDA software and data platforms; |
| ● | Legacy power infrastructure (e.g., subsea cabling, diesel generators); and |
| ● | Integrated surveillance and ocean infrastructure solutions, including manned systems, offered by divisions of large defense contractors or venture-backed maritime technology firms. |
The unmanned surface vessel (“USV”) sector remains dynamic. In June 2024, the U.S. Navy awarded multiple indefinite-delivery/indefinite-quantity contracts to 49 vendors to support its current and future USV Family of Systems and subsystems. The contracts have an aggregate ceiling value of approximately $982.1 million and cover platforms, payloads, sensors, autonomy and vehicle-control systems, communications, integration and sustainment services. During fiscal 2026, the Navy continued to fund unmanned maritime programs and activities. In June 2025, the Navy awarded HII Unmanned Systems, Inc. an indefinite-delivery/indefinite-quantity contract with a ceiling value of approximately $85.7 million for engineering support services for the MK 18 Unmanned Underwater Vehicle Family of Systems. The Navy’s fiscal 2026 budget request also included approximately $49 million for the Large Unmanned Surface Vessel program. In August 2025, the Navy exercised a $7.7 million option for continued operations and sustainment of the Sea Hunter and Seahawk Medium Unmanned Surface Vessels, with $2.5 million obligated at the time of award. In addition, the Navy advanced its Modular Attack Surface Craft acquisition initiative for modular, commercially derived unmanned surface vessels. These developments reflect continued U.S. government investment in unmanned maritime systems and increasing competition among established defense contractors and emerging maritime-technology companies.
The autonomous buoy segment remains comparatively early-stage and fragmented. It is generally divided between grid-connected solutions and smaller-scale autonomous systems. OPT remains focused on the non-grid segment. To our knowledge, few competitors currently offer fully commercialized, continuously deployed platforms with persistent, renewable power generation. This reflects the nascency of the market, which continues to evolve through research and development programs, demonstration projects, and limited initial deployments.
Competitive Differentiators
Despite the presence of larger industry participants, OPT seeks to differentiate through a combination of vertically integrated products, operational deployment history, and business model flexibility. Our competitive positioning is based on the following characteristics:
| ● | Integrated, Autonomous Maritime Infrastructure |
OPT offers a suite of interoperable platforms—PowerBuoy®, WAM-V® USVs, and the Merrows™ data system, designed to function as a cohesive ocean intelligence network. This integration may reduce logistical complexity and improve system interoperability for customers compared to point-solution providers.
| ● | Renewable, Persistent Power Delivery |
The PowerBuoy® platform generates renewable energy from any combination of wave motion, solar, and wind and includes battery storage to enable continuous power for sensors, communications systems, and mission payloads in remote ocean areas. This reduces or eliminates reliance on fossil fuel-based power systems or vessel-based servicing, materially reducing customer costs.
| ● | Modular and Scalable Design |
Our WAM-V® and PowerBuoy® product lines are designed for payload modularity and field customization. This architecture supports multiple mission types and promotes asset reuse across use cases and customers.
| ● | Field-Proven Performance |
As of April 30, 2026, OPT has deployed over 100 WAM-V® platforms globally and completed multiple operational deployments of PowerBuoy® systems in varying marine conditions. These deployments contribute to our operational validation record, though additional deployments and independent assessments are ongoing.
| ● | Lifecycle Cost Efficiency |
OPT’s systems are intended to reduce lifecycle operating costs by minimizing the need for crewed vessels, fuel logistics, and routine on-site maintenance. Our service-based business models RaaS, Daas, and PaaS may further lower customer acquisition barriers and enhance revenue predictability.
| ● | Alignment with National and Allied Security Priorities |
Our solutions are designed to align with stated U.S. government objectives, including the Department of Homeland Security’s National MDA Plan and the U.S. Coast Guard’s Unmanned Systems Strategy. Areas of application include persistent surveillance, Exclusive Economic Zone (EEZ) enforcement, and offshore infrastructure monitoring.
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Agility and Customer Responsiveness
OPT’s organizational structure and scale may provide an advantage in prototyping, iteration, and customer collaboration. Because OPT has an agile, lean organizational structure and smaller scale, it can more rapidly develop, test, and modify prototypes and incorporate customer feedback into new iterations. This speed is crucial when customers need a solution tailored to a specific mission, threat, or environment. In addition, this customer intimacy fosters trust and can lead to long-term relationships, especially in environments like NATO, UN, or U.S.-led coalitions where interoperability and mission alignment are key.
Recent Contracts and Commercial Developments
During fiscal 2026 and fiscal 2027 to date, OPT executed several commercial transactions that expanded our international presence and supported strategic positioning in defense and commercial maritime sectors:
| ● | Expanded its international maritime security engagements across Europe through customer training and autonomous maritime system handover activities in Italy and Greece, supporting the deployment and operation of its maritime drone platforms by international customers. The Company also participated in the 11th National Maritime Security Forum in Warsaw, Poland, where it engaged with government, military, and industry leaders regarding maritime critical infrastructure protection and Baltic security. These activities reflect the Company’s continued expansion of its international commercial presence and support its strategy of growing relationships with allied governments, defense organizations, and strategic partners in the autonomous maritime and maritime security markets. |
| ● | During fiscal 2026, the Company continued its engagement with the U.S. Navy’s Portfolio Acquisition Executive – Robotics and Autonomous Systems (PAE RAS) organization to support the evaluation of its autonomous maritime capabilities for potential future defense applications. These activities do not constitute a contract award or procurement decision. |
| ● | The Company received notification from the U.S. Government that its WAM-V® unmanned surface vehicle platform had been selected for further technical engagement following a competitive capability assessment. While the notification did not constitute a contract award or procurement decision, it provides an opportunity for continued engagement with the U.S. Government as agencies evaluate autonomous maritime technologies for potential future applications. The Company cannot provide assurance that this assessment will result in future contract awards or additional business opportunities. |
| ● | Recognized by the Association for Uncrewed Vehicle Systems International (AUVSI) as a Certified Trusted Uncrewed Maritime Systems (UMS) Operator Training Provider. This certification enables the Company to deliver industry-recognized operator training and certification programs using its WAM-V® autonomous surface vehicle platform. The designation supports the professionalization of autonomous maritime operations by promoting standardized training, operational proficiency, and safety practices. The program enhances workforce readiness for autonomous maritime systems and further strengthens OPT’s position within the growing maritime autonomy ecosystem. |
| ● | Awarded a contract to deploy and operate four Merrows®-equipped PowerBuoy® systems in support of a U.S. Department of Homeland Security and U.S. Coast Guard maritime domain awareness program. The deployment demonstrated the Company’s ability to provide persistent, renewable-powered offshore surveillance infrastructure capable of long-duration operations with minimal maintenance requirements. The systems were designed to integrate with Anduril Industries’ Lattice command-and-control platform and surveillance network, enabling unified sensor fusion, enhanced situational awareness, and real-time decision support. This deployment further validated the interoperability, scalability, and operational effectiveness of OPT’s autonomous maritime monitoring solutions for national security applications. |
| ● | Expanded the deployment of its WAM-V® autonomous surface vehicle platform through a contract with a Nordic underwater research customer for a fully integrated system. The deployment highlights the adaptability of the WAM-V® platform for autonomous survey, inspection, and research applications and demonstrates continued international adoption of the Company’s autonomous maritime technologies. The contract further validated the scalability and commercial readiness of OPT’s integrated autonomous solutions across a growing range of defense, security, scientific, and offshore monitoring applications. |
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Backlog
As of April 30, 2026, our contract backlog was approximately $20.1 million, compared to $12.5 million as of April 30, 2025. The backlog represents the value of unfulfilled, purchase orders and agreements with commercial and governmental customers. If any of our contracts were to be terminated, our backlog would be reduced by the expected value of the remaining terms of such contract.
Backlog figures do not necessarily reflect future revenue, as orders may be adjusted, delayed, or canceled, and our recognition of associated revenue is subject to the terms of the underlying agreements. The size of our backlog may also fluctuate materially based on the timing of new awards, contract renewals, or the conclusion of long-term engagements. Consequently, while we view backlog as a useful performance indicator, it should not be relied upon as a predictor of future results.
Product and Solution Development
OPT continues to prioritize the development and commercialization of modular, autonomous solutions for offshore energy, data acquisition, and maritime domain awareness. Our development strategy is informed by customer use cases, operational field data, and regulatory trends, and is focused on delivering scalable capabilities that support persistent and intelligent ocean infrastructure.
Our approach emphasizes disciplined capital allocation, with a focus on near-term commercial viability and alignment with long-term Company strategy and platform goals. As of April 30, 2026, our product development activities primarily support enhancements to existing systems. However, we expect to expand these efforts to include new platform capabilities, advanced autonomy features, and mission-specific configurations in response to evolving customer requirements and emerging market opportunities
Product Roadmap and Innovation Focus
Our product development roadmap is driven by three primary inputs:
| 1. | Customer Feedback and Operational Data | |
| Insights from deployments inform feature prioritization, systems hardening, and performance optimization. |
| 2. | Strategic Technology Integration | |
| We are evaluating opportunities to incorporate adjacent technologies, such as aerial drones, autonomous underwater vehicles (AUVs), and remote sensing modules, into our platform suite through partner collaboration and joint development efforts. |
| 3. | Long-Term AI/ML and Data Strategy | |
| As part of our innovation roadmap, we are developing artificial intelligence and machine learning applications for mission automation, anomaly detection, and data prioritization. We are also assessing requirements for secure, cloud-enabled data environments to support multi-platform information sharing and operational analytics. |
Intellectual Property
We maintain an intellectual property (IP) portfolio that supports our operations across autonomous maritime systems, wave energy conversion, and integrated ocean intelligence solutions. Our IP strategy is designed to protect proprietary technology, promote long-term product differentiation, and support commercial growth in both U.S. and international markets.
As of April 30, 2026, OPT held approximately 82 issued U.S. patents covering innovations in the following categories:
| ● | Buoy system architecture, including energy conversion, battery charging systems, power take-off mechanisms, and control circuitry; |
| ● | Wave energy control systems and thermal/wave hybrid power conversion; |
| ● | Mooring and anchoring systems, including subsea cabling and marine connectors; |
| ● | Multi-unit wave energy farm network configurations; |
| ● | Autonomous charging interfaces for USVs; |
| ● | WAM-V® platform technologies, including modular propulsion and control systems; and |
| ● | Buoy-based communications infrastructure using LTE, satellite, and mesh technologies. |
Our patents have staggered expiration dates, extending through fiscal year 2041. No individual patent is considered material to our business. However, the collective breadth and interconnectivity of the portfolio provide meaningful protection for our core systems and solutions.
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In addition to patents, we rely on trade secrets, proprietary engineering processes, and non-public technical documentation. Certain technologies were developed under government-funded programs and may be subject to U.S. federal government use rights under the Bayh-Dole Act and related provisions.
OPT also holds and maintains registered U.S. trademarks critical to brand identity and market differentiation, including PowerBuoy®, WAM-V®, and Merrows™.
Our intellectual property portfolio is reviewed periodically to assess enforceability, alignment with strategic product roadmaps, and licensing opportunities. We may pursue additional filings or commercial partnerships to expand our IP base and enter new applications or jurisdictions.
Regulatory Environment
OPT’s operations are subject to a range of domestic and international laws, regulations, and technical standards that affect product design, deployment, data handling, and defense-related contracting. Our ability to operate effectively in key markets depends in part on maintaining compliance across multiple regulatory regimes.
Facility Security Clearance
OPT currently holds an FCL from the U.S. Department of War, which allows our company to access and perform work on contracts involving classified information at the “Secret” level. This clearance supports our eligibility to participate in certain U.S. government programs, particularly in the defense and intelligence sectors.
To maintain this clearance, OPT is required to comply with a range of ongoing security and operational requirements under the National Industrial Security Program. These requirements include:
| ● | Personnel Screening: Key management personnel and employees who access classified information must hold active U.S. government security clearances. |
| ● | Facility Safeguards: Classified information must be stored, handled, and transmitted in secure areas using approved security systems and procedures. |
| ● | Designated Security Officer: We are required to designate a trained Facility Security Officer who manages our industrial security program and coordinates with government agencies. |
| ● | Insider Threat Program: OPT must operate a formal insider threat detection and reporting program, including employee training and risk mitigation practices. |
| ● | Export and Foreign Ownership Compliance: If foreign ownership or influence is present, OPT must disclose this to the U.S. government and implement approved safeguards to mitigate potential risks. |
| ● | Security Training: All cleared personnel must complete initial and annual security training, including awareness of insider threats and reporting obligations. |
| ● | Ongoing Oversight: The company is subject to periodic inspections and reviews by the Defense Counterintelligence and Security Agency, which oversees compliance with federal security regulations. |
Failure to comply with these requirements could result in the suspension or revocation of our security clearance, which may impact our ability to perform on classified contracts or bid on certain U.S. government opportunities.
Export Control and Trade Compliance
We are subject to U.S. export control laws, including the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (“EAR”). Certain technologies, components, and technical data integrated into OPT systems may require U.S. government authorization for export, re-export, or third-party access. OPT maintains internal compliance protocols to support adherence to applicable export control requirements and customer-specific licensing obligations.
Maritime and Offshore Operations
Our PowerBuoy® and WAM-V® platforms operate in offshore and nearshore environments and may be subject to regulation by the U.S. Coast Guard, Bureau of Ocean Energy Management, and other federal or local agencies. For international deployments, we work with country-specific maritime authorities to obtain operational approvals and ensure environmental and navigational compliance.
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Telecommunications and Data Transmission
Several OPT platforms transmit real-time operational data via satellite, LTE/5G, or other secure communications channels. These activities are subject to domestic and international telecommunications regulation, including oversight by the FCC and analogous bodies abroad. OPT maintains policies to ensure frequency band licensing, data privacy compliance, and secure communications protocols are met.
Government Contracting and Compliance
As a contractor and supplier to U.S. government agencies—including the Department of War (DoW), Department of Energy (DOE), and National Oceanic and Atmospheric Administration (NOAA)—we are subject to the FAR, Defense Federal Acquisition Regulation Supplement, and other federal procurement standards. These frameworks govern cybersecurity, ethics, cost allowability, and reporting obligations. We are also subject to the terms of government funding agreements that may impose IP licensing restrictions or data rights limitations.
Environmental and Safety Regulation
OPT systems are engineered to operate with low emissions and minimal environmental impact. However, we are subject to regulations governing offshore noise, emissions, marine habitat protection, and operational safety. Our compliance posture is evaluated on a jurisdiction-by-jurisdiction basis, and we continuously monitor evolving sustainability mandates across key markets.
Assembly Facilities and Operations
OPT conducts in-house assembly and integration activities at two primary U.S.-based locations:
| ● | Monroe Township, New Jersey: Our headquarters facility includes approximately 56,000 square feet of combined manufacturing, assembly, engineering, and administrative space. This site supports the production and integration of our PowerBuoy®, WAM-V®, and Merrows™ platform components and serves as our principal site for final system testing and quality assurance. The facility includes configurable production areas that can be scaled to accommodate increased manufacturing volumes. |
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Richmond, California: Our West Coast facility supports prototyping, on-water testing, final integration, and mission readiness activities for deployments in the Pacific region. This location also provides additional surge manufacturing capacity to support variable customer demand and lead-time-sensitive programs.
The Company also has a lease for warehouse space located in Richmond, California. The lease commenced in June of 2025 and will continue for 24 months. The lease is classified as an operating lease and is included in right-of-use assets, right-of-use liabilities- current and right-of-use liabilities- long-term on the Company’s Consolidated Balance Sheets. |
Together, these facilities support OPT’s ability to meet current production requirements, provide geographic flexibility for field operations, and maintain lead-time responsiveness for government and commercial projects.
We believe our existing facilities are adequate for our near production needs. We continuously monitor demand forecasts and contract volume to assess whether further investment or expansion will be required. If customer demand materially increases, we may consider expanding our footprint, increasing shifts, or utilizing contract manufacturing partnerships.
Human Capital Management
We recognize that our workforce is central to our innovation, operational performance, and long-term business success. As of April 30, 2026, OPT employed 65 full-time employees, all located in the United States. We believe our ability to attract, develop, and retain a skilled workforce is critical to the execution of our strategic and technical objectives.
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Workplace Culture and Inclusion
OPT is an equal opportunity employer. Employment decisions are made without regard to race, gender, age, disability, veteran status, or other characteristics protected by applicable law. We are committed to fostering an inclusive, respectful, and diverse work environment and continue to evaluate ways to improve equity across our workforce and talent pipeline.
Quality, Health, Safety, and Environmental
Quality, Health, Safety, and Environmental (QHSE) performance is a core value of OPT and is integrated into our operational and business processes. We maintain an integrated QHSE Management System designed to support product quality, employee health and safety, environmental stewardship, risk management, regulatory compliance, and continuous improvement across our operations.
Our primary manufacturing and research & development facilities in Monroe Township, New Jersey and Richmond, California are certified to ISO 45001, the international standard for occupational health and safety management systems. Both sites are also certified to ISO 9001, the international standard for quality management systems. These certifications reflect our commitment to maintaining structured management processes that support consistent product quality, safe operations, and continuous improvement.
Key elements of our integrated QHSE Management System include:
| ● | Employee stop-work authority and proactive hazard identification practices; | |
| ● | Monitoring and evaluation of leading and lagging performance indicators; | |
| ● | Structured incident investigation and root cause analysis processes; | |
| ● | Ongoing employee training, competency development, and engagement, and | |
| ● | Management system reviews and continuous improvement initiatives. |
Through our integrated ISO 9001 and ISO 45001-certified management systems, we seek to maintain high standards of quality, health, safety, and environmental performance while supporting operational effectiveness and regulatory compliance.
Operational Sustainability and Product Risk Review
Based on external review and regulatory agency feedback (including from NOAA and the U.S. Army Corps of Engineers), PowerBuoy® platforms have been determined to pose no material harm to marine ecosystems. Key safety features include:
| ● | Absence of rare earth or toxic metals in batteries; |
| ● | Minimal fire or explosion risk; and |
| ● | Remote energy discharge capability for emergency shutdown. |
We are currently assessing the WAM-V® platform for materials safety and its impact on sensitive marine habitats.
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Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available free of charge through the Investor Relations section of the Company’s website (www.oceanpowertechnologies.com) as soon as practicable after such material is electronically filed with, or furnished to, the SEC. Material contained on our website is not incorporated by reference in this report. Our executive offices are located at 28 Engelhard Drive, Suite B, Monroe Township, New Jersey, 08831, and our telephone number is (609) 730-0400. Since June 2021, our common stock has traded on the NYSE American exchange under the symbol “OPTT”, and previously, it traded on Nasdaq under the same symbol. The public may also read and copy any materials that we file with the Securities and Exchange Commission (“SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov.
ITEM 1A. RISK FACTORS
You should carefully consider the following risk factors together with the other information contained in this Annual Report, and in prior periodic and current reports. If any of the following risks 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 your investment could be lost.
Risks Related to Our Financial Condition
We have a history of operating losses and may not achieve or maintain profitability and positive cash flow.
We have incurred net losses since we began operations in 1994, including net losses of $48.9 million and $24.5 million in fiscal 2026 and 2025, respectively. As of April 30, 2026, we had an accumulated deficit of $381.0 million. Our losses to date have resulted primarily from costs incurred in our research and development programs and from our selling, general and administrative costs. As we continue to develop our proprietary technologies, we expect to continue to have a net loss and use of cash from operating activities unless or until we achieve positive cash flow from the commercialization of our products and services.
We do not know whether we will be able to successfully commercialize our products and services or whether we can achieve profitability. There is significant uncertainty about our ability to successfully commercialize our products in our target markets. Even if we do achieve commercialization of our products and services and become profitable, we may not be able to achieve or, if achieved, sustain profitability on a quarterly or annual basis.
Loss of U.S. Government security clearances could harm our business
We maintain a FCL at the Secret level, which enables us to perform on U.S. government contracts that involve access to classified information. Our eligibility to maintain this clearance is subject to the requirements of the National Industrial Security Program, administered by the Defense Counterintelligence and Security Agency (DCSA). If we fail to comply with these requirements, such as through deficiencies in our security protocols, loss of cleared personnel and inability to replace these people in key roles, or failure to report material organizational changes, our FCL may be suspended or revoked. If FCL is suspended or revoked, OPT will no longer be able to participate or bid on contracts that involve classified information.
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In addition, any foreign ownership, control, or influence (FOCI), whether through investment, merger, or acquisition, must be mitigated to DCSA’s satisfaction through an approved security agreement. Failure to properly mitigate FOCI or to obtain required pre-clearance from DCSA could jeopardize our clearance status. Loss of our FCL would prevent us from bidding on or performing contracts requiring classified access and could result in the termination of existing classified work, adversely impacting our financial performance and long-term strategic positioning in the defense and intelligence markets.
We may require additional capital to fund our operations, and if such capital is unavailable on acceptable terms, our business, financial condition and ability to continue executing our strategic plan could be materially adversely affected and we may not be able to continue to operate our business
Historically, we have funded our business operations through sales of equity and debt securities. We have raised approximately $28.7 million during fiscal 2026, and had an unrestricted cash balance of $8.7 million as of April 30, 2026. We do not know whether we will be able to secure additional funding if needed in the future or, if secured, whether the terms will be favorable to us or our investors. Our ability to obtain additional funding will be subject to several factors, including market conditions, our operating performance, litigation and investor sentiment. These factors may make additional funding unavailable, or the timing, dollar amount, and terms and conditions of additional funding unattractive.
Our future capital requirements will depend on numerous factors, including the timing and extent of customer sales and deployments, collections from customers, expenditures related to product development and commercialization, compliance obligations associated with government contracts, and general market conditions. There can be no assurance that we will be able to obtain additional financing when needed or on terms acceptable to us.
If we issue additional securities to raise capital, our existing shareholders could experience dilution or may be subordinated to any rights, preferences or privileges granted to the new security holders. Any new securities issued could have rights senior to those associated with our common stock and could contain covenants that could restrict our operations. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected.
Our business could be affected by macroeconomic risks.
Our ability to obtain, maintain and renew facility and personnel security clearances depends upon continued compliance with evolving government security requirements. Increased scrutiny of contractors supporting defense, intelligence and critical infrastructure programs may increase compliance costs and administrative burdens. Any delay in obtaining or renewing required clearances could adversely affect our ability to compete for, win or perform government contracts. The Company’s operations and performance depend significantly on global and regional economic conditions. Macroeconomic conditions, including inflation, slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations can materially and adversely affect demand for the Company’s products and services. In addition, confidence and spending can be materially adversely affected in response to financial market volatility, negative financial news, declines in income or asset values, energy market dislocations and cost increases, labor and healthcare costs and other economic factors. An adverse impact on demand for the Company’s products, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on the Company’s suppliers and other partners. Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency. We cannot predict the timing or scale of these various macroeconomic conditions, but they could have a material adverse effect on our business, results of operations and financial condition.
Changes to U.S. tariff and import/export regulations may have a negative effect on us.
There have been significant changes to United States trade policies, treaties and tariffs, and in the future there may be additional significant changes. These and any future developments, and continued uncertainty surrounding trade policies, treaties and tariffs, may have a material adverse effect on global economic conditions, inflation and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers, increase our supply-chain costs and expenses and could have material adverse effects on our business, financial condition and results of operations.
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A significant portion of our current and anticipated business depends upon government customers and government-funded programs.
Government contracts are subject to appropriations, budget priorities, procurement delays, audits, investigations, termination rights, and political considerations that are beyond our control. Changes in defense spending priorities, shifts in agency missions, reductions in appropriations, government shutdowns, continuing resolutions, procurement protests, or changes in administration priorities may delay or reduce contract awards and funding. Government contracts also typically permit termination for convenience and may subject us to audits and other oversight activities. Any reduction, delay, termination or adverse audit finding could materially adversely affect our business, financial condition and results of operations.
Delays or difficulties in converting backlog into revenue could adversely affect our results of operations.
As of April 30, 2026, our backlog was $20.1 million, a significant increase compared to the prior year. While backlog represents business under contract that we expect to recognize as revenue, the timing of conversion is uncertain and may be delayed due to changes in customer schedules, contract modifications, regulatory approvals, or other factors beyond our control. If we are unable to convert backlog into revenue as anticipated, our results of operations and cash flows could be negatively affected.
There are doubts about our ability to continue as a going concern.
Our current cash balance may not be sufficient to fund our planned expenditures through twelve months from the filing date of this Form 10-K. These conditions raise substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon our operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The accompanying consolidated financial statements have been prepared on a basis which assumes we are a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to our ability to continue as a going concern. Such adjustments could be material. There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources, such as debt or equity financing or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations, or to raise capital from external sources would have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on our existing stockholders.
Any current or future indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to any indebtedness could adversely affect our liquidity and financial condition.
We have $10.4 million in convertible notes to investors outstanding Our debt level and the need to meet related covenants can have negative consequences. We may incur more debt in the future, and there can be no assurance that our cost of funding will not substantially increase. The convertible notes also impose certain restrictions on us, including financial covenants and events of default. Upon an event of default, for example, the lenders can get an increased rate of return and force a redemption, which could adversely affect our liquidity and financial condition. The conversion provisions of the convertible notes may also create significant dilution and downward pressure on the market price of our common stock. In addition, holders of the notes may engage in hedging or other market activities that could increase volatility in our common stock. The existence of the notes may also make it more difficult for us to raise additional equity capital on favorable terms.
Any failure to meet our debt obligations could damage our business.
Our ability to meet our obligations under our convertible notes will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. If we are unable to remain profitable, or if we use more cash than we generate in the future, our level of indebtedness at such time could adversely affect our operations by limiting or prohibiting our ability to obtain financing for additional capital expenditures, acquisitions and general corporate purposes. In addition, if we are unable to make payments as required under the convertible notes, we would be in default, which could seriously harm our business. If we incur more debt, this could intensify the risks described above.
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition, or results of operations.
We currently maintain cash balances in accounts at U.S. financial institutions that we believe are high quality. These accounts are in non-interest-bearing and interest-bearing operating accounts and may, from time to time, exceed the Federal Deposit Insurance Corporation. (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held more than such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, our third-party vendors and counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our business, financial condition, results of operations and liquidity.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs, and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire future financing or access to capital on acceptable terms or at all. As the ability to access capital has historically been, and is expected to continue to be, one of our primary sources of liquidity, any adverse impacts on our ability to access such credit and liquidity sources as a result of adverse developments affecting the financial services industry could adversely affect our business, financial condition, results of operations.
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Currency transaction risk may adversely affect our business, financial condition and results of operations.
Our reporting currency is the U.S. dollar, however sometimes we incur costs in the local currency of countries in which our customers and suppliers are located. As a result, we are subject to currency transaction risk. A percentage of our revenue has historically been generated outside the U.S. and can be denominated in foreign currencies of our customers. Changes in exchange rates between foreign currencies and the U.S. dollar could affect our revenue and cost of revenue and could result in exchange losses. We cannot accurately predict the impact of future exchange rate fluctuations on the results of our operations. Currently, we do not engage in any exchange rate hedging activities and, as a result, any volatility in currency exchange rates may have an immediate adverse effect on our business, financial condition and results of operations.
Risks Related to Growth of Our Business
If sufficient demand for our solutions and services or new products does not develop or takes longer to develop than we anticipate, our revenue generation will be limited, and it is unlikely that we will be able to achieve and, if achieved, then sustain profitability.
Even if wave energy and maritime domain awareness technology achieve broad commercial acceptance, our products, including our MDAS offering, PowerBuoys® B and WAM-V® autonomous surface vessels may not prove to be commercially viable technologies. We have invested a significant portion of our time and financial resources since our inception in the development of our PowerBuoys® but have not yet achieved successful large scale or profitable commercialization of our PowerBuoys®. We have also added the WAM-V® product line, but we have not achieved profitability with this product line. As we seek to manufacture, market, sell and deploy our PowerBuoys® and WAM-Vs® in greater quantities, we may encounter unforeseen hurdles that would limit the commercial viability of these products, including unanticipated manufacturing, deployment, operating, maintenance and other costs. We may also encounter technical obstacles to deploying, operating and maintaining PowerBuoys®, WAM-Vs®, or other products.
If demand for our solutions and products fails to develop sufficiently, it is unlikely that we will be able to grow our business or generate sufficient revenue.
In addition, if we are not successful in commercializing our new solutions and products, or are significantly delayed in doing so, our business, financial condition and results of operations will be adversely affected.
If we are unable to attract and retain management and other qualified personnel, we may not be able to achieve our business objectives.
Our success depends on the skills, experience and efforts of our management and other key product development, manufacturing, and sales and marketing employees. We cannot be certain that we will be able to attract, retain and motivate such employees. The loss of the services of one or more of these employees could have a material adverse effect on our business. There is a risk that we will not be able to retain or replace these key employees. Implementation of our business plans will be highly dependent upon our ability to hire and retain senior executives as well as talented staff in various fields of expertise.
Changes in senior management are inherently disruptive, and efforts to implement any new strategic or operating goals may not succeed in the absence of a long-term management team. Changes to strategic or operating goals stemming from the appointment of new executives may themselves prove to be disruptive. Periods of transition in senior management leadership are often difficult as new executives gain detailed knowledge of our operations. Cultural differences may also impact changes in strategy and style. Without consistent and experienced leadership, customers, employees, suppliers, creditors, shareholders and others may lose confidence in us.
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To be successful, we need to attract and retain key personnel. Qualified individuals, including engineers, software developers, project managers and sales leadership, are in high demand, and we may incur significant costs to attract and retain them. All our employees are at-will employees, which means they can terminate their employment relationship with us at any time, and their knowledge of our business and industry would be difficult to replace. If we lose key personnel, or do not hire or retain other personnel for key positions, this could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Our non-U.S. sales and operations are subject to risks inherent in conducting business outside the U.S., many of which are beyond our control including:
| ● | political and social attitudes, laws, rules, regulations, and policies within countries that favor local companies over U.S. companies, including government-supported efforts to promote local competitors; |
| ● | new and expanded U.S. tariffs enacted in 2025 on imported components, particularly from China, have the potential to increase the cost of materials used in our PowerBuoy®, WAM-V®, and Merrows™ platforms. These tariffs may also lead to supply chain delays, reduced margins, and increased pricing pressure. If we cannot mitigate these impacts through sourcing alternatives or operational efficiencies, our business and financial performance could be adversely affected; |
| ● | Changes in government budget priorities, appropriations delays, continuing resolutions, government shutdowns, or reductions in defense or homeland security spending may delay procurement decisions, contract awards, funding, customer acceptance activities, or payments under existing contracts, which could adversely affect our revenues, operating results, and cash flows. |
| ● | differing legal systems and standards of trade which may not honor our intellectual property rights, and which may place us at a competitive disadvantage; |
| ● | pressures from foreign customers and foreign governments for us to increase our operations in the foreign country, which may necessitate the sharing of sensitive information and intellectual property rights; |
| ● | multiple conflicting and changing governmental laws and regulations, including varying labor laws and tax regulations; |
| ● | reliance on various information systems and information technology to conduct our business, making us vulnerable to cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in business disruptions, loss of or damage to our intellectual property and confidential information (and that of our customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse consequences; |
| ● | regional or global economic downturns or recessions, varying foreign government support, unstable political environments, and other changes in foreign economic conditions; |
| ● | difficulties in managing a global enterprise, including staffing, managing distributors and representatives, and repatriating cash; |
| ● | longer sales cycles and difficulties in collecting accounts receivable; and |
| ● | different customs and ways of doing business. |
| ● | geopolitical conflicts, military actions, terrorism, civil unrest, or escalating international tensions may disrupt global supply chains, increase costs, delay the availability of critical components, affect customer procurement schedules, and increase cybersecurity threats. While heightened geopolitical tensions may increase government investment in maritime security, autonomous systems, and critical infrastructure protection, there can be no assurance that any resulting opportunities will offset the operational, financial, or supply chain risks arising from such events. |
To date, our operations have not been materially adversely affected by global conflicts including Russia’s invasion of Ukraine, the current Israel/Palestine conflict, the conflict in Iran, or the recent attacks on merchant ships in the Red Sea. However, further escalation of these or other conflicts could result in, among other negative consequences, a disruption to the global economy and supply chain leading to a shortage of parts, materials and services needed to manufacture and timely deliver our products. Any such shortages could negatively impact our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand. These challenges, together with other challenges associated with operating an international business, may adversely affect our ability to recognize revenue and our other operating results.
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If we are unable to effectively manage our growth, our business and operations could be adversely affected.
Our operations have expanded in recent years through increased commercial activity, international customer engagements, and the continued development of our autonomous maritime systems, software, and services. As our business grows, we must successfully manage increasing operational complexity, including manufacturing, supply chain management, engineering, product development, project execution, cybersecurity, regulatory compliance, customer support, and the recruitment, retention, and development of qualified personnel. Our current personnel, facilities, systems, internal controls, and business processes may not be sufficient to support future growth. If we are unable to effectively scale our operations, integrate new technologies, manage an expanding supplier base, or execute customer programs on schedule and within budget, we may fail to meet customer expectations or contractual requirements, experience cost overruns or operational inefficiencies, lose business opportunities, or damage our reputation. In addition, our growth strategy may include strategic partnerships, international expansion, and other commercial initiatives that could increase organizational complexity and require additional investments. Any failure to effectively manage these challenges could materially and adversely affect our business, financial condition, and results of operations.
If we are unable to successfully negotiate and enter into service contracts with our customers on terms that are acceptable to us, our ability to diversify our revenue stream will be impacted.
An important element of our business strategy is to enter into service contracts with our customers under which we would be paid fees for services related to the maintenance and operation of our products purchased from us. In addition, we may offer to lease our products, sell power generated by our products or sell data gathered by sensors on our products. Even if customers purchase or lease our products, they may not enter into service contracts with us. We may not be able to negotiate services or other contracts that provide us with any additional profit opportunities. Even if we successfully negotiate and enter into such service 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, if we were unable to perform adequately under such service contracts, our efforts to successfully market our products could be impaired. Any one of these outcomes could have an adverse effect on our business, financial condition and results of operations.
Actions of activist shareholders could be disruptive and costly and the possibility that activist shareholders may gain representation on or control of our board of directors could adversely affect our results of operations, financial condition, or share price.
While we strive to maintain constructive communications with our shareholders, we have been, and may in the future be, subject to actions initiated by activist shareholders. While the Company has successfully defended against these lawsuits, these efforts resulted in significant expense and management distraction. Any activist campaign against OPT that contests, conflicts with, or seeks to change, our board composition, leadership, strategic direction, or business mix could have an adverse effect on us because: (i) responding to actions by activist shareholders could disrupt our operations, be costly or time-consuming, or divert the attention of our board of directors and senior management from their regular duties, which could adversely affect our results of operations or financial condition; (ii) perceived uncertainties, including as a result of possible changes to the composition of our board, as to our future direction may lead to the perception of a change in the direction of the business or lack of continuity, any of which may be exploited by our competitors, cause concern to our customers and/or employees and result in the loss of potential business opportunities, or make it more difficult to attract and retain qualified personnel and business partners, and may affect our relationships with vendors, customers and other third parties; (iii) these types of actions could cause significant fluctuations in our share price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and (iv) if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our shareholders.
Failure by third parties to supply or manufacture components of our products or to deploy our systems timely or properly could adversely affect our business, financial condition, and results of operation.
We have been, and expect to continue to be, highly dependent on third parties to supply or manufacture components for our products, including for pre-fabrication elements. If, for any reason, our third-party manufacturers or vendors are not willing or able to provide us with components or supplies in a timely fashion, or at all, our ability to manufacture and sell many of our products could be impaired. Specifically, we have concerns about the delivery of semiconductors and specialty metals, which are necessary to produce our products, as well as our ability to find vendors for pre-fabrication elements of our products. Other global supply chain issues have caused our vendors to delay orders, or to request increased pricing that we may not always be able to pass on to our customers.
We do not have long-term contracts with our third-party manufacturers or vendors. If we do not develop ongoing relationships with vendors located in different regions, we may not be successful at controlling unit costs as our manufacturing volume increases. Additionally, we may not be able to negotiate new arrangements with these third parties on acceptable terms, or at all.
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In addition, we rely on third parties, under our oversight, for the deployment and mooring for products. We have utilized several different deployment methods, including towing our products to the deployment location and transporting our products to the deployment location by barge or offshore workboat. If these third parties do not properly deploy our systems, cannot effectively deploy the products on a large, commercial scale, or otherwise do not perform adequately, or if we fail to recruit and retain third parties to deploy our systems in particular geographic areas, our business, financial condition, and results of operations could be adversely affected.
Our targeted markets are competitive and highly complex. We compete against incumbent solutions already being utilized by our customers and potential customers. If we are unable to compete effectively, we may be unable to increase our revenue and achieve or maintain profitability.
Our principal targeted markets include defense and security, offshore oil and gas, science and research, marine charter, and offshore wind. In our targeted markets, which are highly competitive, we compete against incumbent power and maritime domain awareness solutions already being utilized by our customers and potential customers. If we are unable to demonstrate to our customers and our potential customers that our products and services are competitive and reliable to alternative solutions, 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, continue to commercialize our products, or become profitable. In addition, if the cost associated with these development efforts exceeds our projections, our results of operations could be materially and adversely affected.
In addition, competition may arise from other companies manufacturing similar products, developing different products that produce energy more efficiently than our products, or developing autonomous vehicles that perform better or have other characteristics that customers prefer, could make our products less attractive or render them obsolete. If we are not successful in manufacturing systems and solutions required for the application, we may not be able to respond effectively to competitive pressures from competing technologies or improvements to existing technologies. If we are unable to respond effectively to such competitive forces, our business, financial condition and results of operations could be adversely affected. Our targeted markets are subject to their own inherent risks, and if those risks should materialize, then our business, financial condition and results of operations could be adversely affected.
Participation in international defense and security projects exposes us to heightened regulatory, political, and operational risks.
During fiscal 2025 and the first quarter of fiscal 2026, we increased our international sales and partnerships, including in the Middle East and Latin America. These markets can present unique risks, including complex export control requirements, compliance with the U.S. Foreign Corrupt Practices Act and similar laws, exposure to geopolitical instability, sudden changes in government procurement priorities, and logistical challenges in delivery and support. Any of these factors could result in contract delays, cancellations, increased costs, or reputational harm, all of which could have an adverse effect on our business, financial condition and results of operations.
Our results of operations and financial conditions may be adversely affected by the financial soundness of our customers, distributors, and suppliers.
Our operational results and financial condition are closely linked to the financial health of our customers, distributors, and suppliers. If any of these parties experience a deterioration in their financial performance or encounter difficulties with scheduled payments or credit, it could have several adverse effects on our business.
For instance, if our customers are unable to pay or delay payment on accounts receivable, this would negatively impact our cash flow. Similarly, if our suppliers face financial challenges, they may restrict credit, impose more stringent payment terms, reduce or cease production of essential components, or even stop operations entirely. Such disruptions could directly affect our ability to procure necessary materials and maintain consistent product supply. The combined effect of these potential challenges could significantly influence our business, financial condition and results of operations.
We market and plan to market our services and products in multiple international regions. If we are unable to manage our international operations effectively, our business, financial condition and results of operations could be adversely affected.
We market and plan to market our services and products in multiple global regions, including parts of North and South America, Europe, Sub-Saharan Africa, Middle East, and Asia, and we are therefore subject to risks associated with having international operations. Revenue from customers who are based outside of the U.S. accounted for 67% of our revenue in fiscal 2026 and 60% of our revenue in fiscal 2025. Risks inherent in international operations include, but are not limited to, the following:
| ● | changes in general economic and political conditions in the countries in which we operate; |
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| ● | unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to renewable energy, environmental protection, permitting, export duties and quotas; |
| ● | trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; |
| ● | fluctuations in exchange rates that may affect demand for our products and may adversely affect our profitability in U.S. dollars to the extent the price of our products and cost of raw materials and labor are denominated in a foreign currency; |
| ● | difficulty with staffing and managing widespread operations, including managing the complexity of international labor laws as we send staff and hire consultants to support our international deployments; |
| ● | complexity of, and costs relating to compliance with, the different commercial and legal requirements of the overseas markets in which we offer and sell our products; |
| ● | inability to obtain, maintain or enforce intellectual property rights; and |
| ● | difficulty in enforcing agreements in foreign legal systems. |
Our business in foreign markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, on our ability to succeed in differing legal, regulatory, economic, social, and political conditions. We may not be able to develop and implement policies and strategies that will be effective in each location where we do business, which in turn could adversely affect our business, financial condition, and results of operations. The current economic environment may increase these risks.
Failure of our information systems or those of third parties or breaches of data security could cause significant harm to our business.
Our systems and processes involve the storage and transmission of proprietary information and sensitive or confidential data, including personal information of employees, and possibly customers and others. In addition, we rely on information systems controlled by third parties. Information system failures, network disruptions, and system and data security breaches, manipulation, destruction, ransom, or leakage, whether intentional or accidental, could impair our ability to provide services to our customers or otherwise harm our ability to conduct our business, including delays in execution of classified work or revocation of our FCL. Any such failures, disruptions or breaches could also impede the development, manufacture or shipment of products, interrupt or delay processing of transactions and reporting financial results, result in theft or misuse of our intellectual property or other assets, or result in the unintentional disclosure of personal, proprietary, sensitive, or confidential information of employees, customers, and others. Our development and use of our MDAS platforms, cloud-based offerings, as well as our evolution toward DaaS, PaaS and RaaS models, require us to host increasing amounts of our own data as well as customer data, and increases the risk that our and our customers’ data and financial and proprietary information could be more susceptible to such failures and data breaches.
Cyber-security breaches of our systems and information technology could adversely impact our ability to operate or meet contractual obligations.
The increasing use of artificial intelligence technologies by threat actors may increase the sophistication, frequency and effectiveness of cyberattacks directed at the Company, its employees, customers, suppliers and business partners. In addition, the Company’s use of third-party software, cloud services, artificial intelligence tools and connected devices may introduce vulnerabilities that are outside of its direct control. We utilize, develop, install and maintain a number of information technology systems. Various privacy and security laws require us to protect sensitive and confidential information from disclosure. In addition, we are bound by our customers and other contracts, as well as our own business practices, to protect confidential and proprietary information (whether it be ours or a third party’s information entrusted to us) from disclosure. Our computer systems, as well as those of our customers, contractors and other vendors, face the threat of unauthorized access, computer hackers, viruses, malicious code, cyber-attacks, phishing and other security incursions and system disruptions, including attempts to improperly access our confidential and proprietary information, as well as the confidential and proprietary information of our customers and other business partners. Industry-accepted security measures and technology to secure computer systems, and the information stored by cloud vendors on these systems are subject to threats. For example, as we plan to receive projects from the DoW and DHS, we will have to meet their framework for establishing cyber security standards and best practices, what they call Cybersecurity Maturity Model Certification at various levels as we grow our business with DoW and DHS. There can be no assurance that our efforts will prevent these threats, or that we will be able to secure appropriate certifications in this area. Further, as these security threats continue to evolve, we may be required to devote additional resources to protect, prevent, detect and respond against such threats. A party who circumvents our security measures, or those of our customers, contractors or other vendors, could misappropriate confidential or proprietary information, improperly manipulate data, or cause damage or interruptions to systems. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our security processes and procedures and our compliance with applicable laws and regulations, including evolving government cyber security requirements for government contractors. Any of these events could damage our reputation, result in litigation and regulatory fines and penalties, or have a material adverse effect on our business, financial condition, results of operations or cash flows.
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As part of our broader cyber defense strategy, we actively participate in the Federal Bureau of Investigation’s InfraGard program and related cyber threat intelligence initiatives. These programs enhance our access to real-time threat indicators and best practices for protecting critical infrastructure. While such participation underscores our commitment to proactive risk mitigation and national security collaboration, it may also elevate scrutiny of our cybersecurity protocols, increase compliance obligations, and expose us to additional reputational and regulatory risks in the event of a breach or lapse.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited.
We have federal net operating loss (“NOL”) carryforwards that are available to offset future taxable income. We may recognize additional NOLs in the future. Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limitation on the amount of taxable income that may be offset by a corporation’s NOLs if the corporation experiences an “ownership change” as defined in Section 382 of the Code. An ownership change occurs when our “five-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership in OPT by more than 50 percentage points (by value) over a rolling three-year period. Additionally, various states have similar limitations on the use of state NOLs following an ownership change.
If an ownership change occurs, the amount of the taxable income for any post-change year that may be offset by a pre-change loss is subject to an annual limitation that is cumulative to the extent it is not all utilized in a year. This limitation is derived by multiplying the fair market value of our stock as of the ownership change by the applicable federal long-term tax-exempt rate. To the extent that a company has a net unrealized built-in gain at the time of an ownership change, which is realized or deemed recognized during the five-year period following the ownership change, there is an increase in the annual limitation for each of the first five-years that is cumulative to the extent it is not all utilized in a year. If an ownership change should occur in the future, our ability to use the NOL carryforwards to offset future taxable income will be subject to an annual limitation and will depend on the amount of taxable income generated by us in future periods. There is no assurance that we will be able to fully utilize the NOL carryforwards and we may be required to record an additional valuation allowance related to the amount of the NOL that may not be realized, which could impact the results of our operations.
As noted, we believe that these NOL carryforwards are a valuable asset for us. Consequently, we have a Section 382 Tax Benefits Preservation Plan in place, to protect our NOLs and NOL carryforwards during the effective period of the rights plan. Although the Tax Benefits Preservation Plan is intended to reduce the likelihood of an “ownership change” that could adversely affect us, there is no assurance that the restrictions on transferability in the rights plan will prevent all transfers that could result in such an “ownership change”. The Tax Benefits Preservation Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, us or a large block of our common stock. A third party that acquires 4.9% or more of our common stock could suffer substantial dilution of its ownership interest under the terms of the Tax Benefits Preservation Plan through the issuance of common stock or common stock equivalents to all shareholders other than the acquiring person. The foregoing provisions may adversely affect the marketability of our common stock by discouraging potential investors from acquiring our stock. In addition, these provisions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our shareholders. Pursuant to the terms of the Tax Benefits Preservation Plan, the Board of Directors has authority to grant an exception to the 4.9% ownership threshold which could potentially limit the utilization of our NOL carryforwards.
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Risks Related to Product Development and Commercialization
We have only manufactured a limited number of PowerBuoys®, and to date, we have not produced these products in any significant quantity for commercial production. These products do not have a sufficient operating history to accurately predict how they will perform over their estimated useful life.
To date, we have only manufactured a limited number of PowerBuoys®. As a result, our products may not have a sufficient operating history to confirm how they will perform over their estimated useful life. Our technology may not yet have demonstrated that our engineering and test results can be duplicated in volume or in commercial production. If our products are ultimately proven ineffective or unfeasible, we may not be able to expand the commercial production of our products or we may become liable to our customers for quantities we are obligated to produce but are unable to produce. If our products perform below expectations, we could lose customers and face substantial repair and replacement expenses which could in turn adversely affect our business, financial condition and results of operations.
We face the possibility of a range of potential accident and safety risks and hazards, including hazards associated with extreme weather, wind and other environmental conditions, which are inherent in offshore operations.
Portions of our operations are subject to hazards and risks inherent in the building, testing, deploying and maintenance of our products, particularly offshore operations. These hazards and risks could result in personal injuries or loss of life. The unintentional release of a PowerBuoy® product from its mooring, for example, due to extreme environmental conditions and related damage caused by its drifting could result in injury to persons, property damage (including to third-party vessels or infrastructure), environmental harm, and potential regulatory or legal liabilities, as well as reputational damage and increased insurance costs. Other damages may include damage to our properties, including our products, and the properties of others, or other consequential damages. Certain weather events could increase in frequency or severity requiring potential design changes or limiting the windows available for offshore operations.
Our autonomous vessels could cause other types of damage, including collisions with other vessels, property of others, or even swimmers or other persons or property utilizing a body of water where the WAM-V® is operating. This could also lead to the suspension of certain of our operations, large damage claims, damage to our safety reputation and a loss of business. Some of these risks may be uninsurable, and some claims may exceed our insurance coverage. Therefore, the occurrence of a significant accident or other risk event or hazard that is not fully covered by insurance could materially and adversely affect our business and financial results and, even if fully covered by insurance, could materially and adversely affect our business due to the impact on our reputation for safety.
Our relationships with our strategic partners may not be successful, and we may not be successful in establishing additional relationships, either of which could adversely affect our ability to commercialize our products and services.
We have a number of critical relationships with strategic partners, specifically our software development partners. Generally, these types of relationships obligate a party to provide certain services or perform certain tasks in connection with the relationship with the alliance partner, and we are generally responsible for paying the costs we incur relating to such services or tasks. These relationships generally are not expected to provide us with any revenue or sources of financing. If we are unable to reach agreements with additional suitable alliance partners, we may fail to meet our business objectives for the commercialization of our products. We may face significant competition in seeking appropriate alliance partners. Moreover, these development agreements and strategic alliances are complex to negotiate and time consuming to document. We may not be successful in our efforts to establish additional strategic relationships or other alternative arrangements. The terms of any additional strategic relationships or other arrangements that we establish may not be favorable to us. Furthermore, even if we can find, negotiate and enter these relationships, such arrangements may be conditional upon our receipt of additional funding. There can be no assurance that we will receive such additional funding. In addition, strategic relationships may not be successful, and we may be unable to sell and market our products to these companies, their affiliates and customers in the future, or growth opportunities may not materialize.
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We have limited manufacturing, deployment and internal software development experience. If we are unable to increase our software development and manufacturing capacity in a cost-effective manner, our business may be materially harmed.
Many components used in our products are sourced from specialized suppliers with limited alternative sources. Disruptions resulting from geopolitical events, trade restrictions, tariffs, transportation delays, labor shortages, natural disasters, cybersecurity incidents, supplier financial distress or other events could adversely affect our ability to obtain critical components on acceptable terms or at all.
We manufacture key components of our products, while outsourcing manufacturing for other components of our products. We have only manufactured our products in limited quantities for use in development and testing and have limited commercial manufacturing and deployment experience. Our future success depends on our ability to significantly increase both our manufacturing capacity and production, develop vendor alternatives and service throughput in a cost-effective and efficient manner, and to manage multiple vendors with several orders that have specific deadlines. In order to meet our growth objectives, we will need to increase our engineering, contract management, and manufacturing staff. There is intense competition for hiring qualified technical and engineering personnel. Therefore, we may not be able to hire a sufficient number of qualified personnel to allow us to meet our growth objectives.
We may be unable to develop efficient, low-cost manufacturing capabilities and processes that enable us to meet the quality, price, engineering, design and production standards or production volumes necessary to successfully commercialize our products. If we cannot do so, we may be unable to expand our business, satisfy our contractual obligations or become profitable. Even if we are successful in developing our manufacturing capabilities and processes, we may not be able to do so in time to meet our commercialization schedule or satisfy the requirements of our customers.
In addition, historically we have outsourced the majority of our software development activities. We may be unable to hire appropriate outsourced resources to enable us to meet the software development needs of our products and solutions. If we cannot do so, we may be unable to expand our business and become profitable or do so in time to meet the needs of our customers.
Problems with the quality or performance of our products would adversely affect our business, financial condition and results of operations.
Our agreements with customers will generally include warranties with respect to the quality and performance of our products. Because of the limited operating history of our products, we have been required to make analytical assumptions regarding the durability, reliability and performance of the systems, and we may not be able to predict whether and to what extent we may be required to perform under the warranties that we expect to give our customers. Our assumptions could prove to be materially different from the actual performance of our products, causing us to incur substantial expense to repair or replace defective systems in the future. We could bear the risk of claims long after we have sold our products and recognized revenue. Moreover, any widespread product failures could adversely affect our business, financial condition and results of operations.
We must continually improve existing services and products, design and sell new products and improve reliability in order to compete effectively.
The regulatory framework governing autonomous and remotely operated marine systems continues to evolve. New laws, regulations, permitting requirements or operational restrictions may increase compliance costs, limit deployment opportunities or expose us to additional liability. Incidents involving autonomous systems, whether caused by software defects, communications failures, operator error, cyber intrusion or environmental conditions, could result in significant legal, regulatory, reputational and financial consequences.
The markets for our services and products are characterized by rapid technological change, evolving industry standards and continuous improvements of products. Due to constant changes in our markets, our future success depends on our ability to develop new technologies, products, processes and product applications. New product development and commercialization efforts, including efforts to enter markets or product categories in which we have limited, or no prior experience, have inherent risks. These risks include the costs involved, such as development and commercialization, product development or launch delays, and the failure of new products and line extensions to achieve anticipated levels of market acceptance or growth in sales or operating income. We also face the risk that our competitors will introduce innovative new products that compete with our products. If new product development and commercialization efforts are not successful, our financial results could be adversely affected. Our financial condition and results of operations may be materially and adversely affected if:
| ● | Product improvements are not completed on a timely basis; |
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| ● | New products are not introduced on a timely basis or do not achieve sufficient market penetration; or |
| ● | New products experience reliability or quality problems, or otherwise do not meet customer preferences or requirements. |
Risks Related to Intellectual Property
If we are unable to obtain or maintain intellectual property rights relating to our technology and products, the commercial value of our technology and products may be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.
Our success and ability to compete depends in part upon our ability to obtain protection in the U.S. and other countries for our products by establishing and maintaining intellectual property rights relating to or incorporated into our technology and products. We own a variety of patents and patent applications in the U.S. and corresponding patents and patent applications in several foreign jurisdictions. However, we have not obtained patent protection in each market in which we plan to compete. In addition, we do not know how successful we would be should we choose to assert our patents against suspected infringement, and we do not know what the cost to do so would be. Our pending and future patent applications may not be issued as patents or, if issued, may not be issued in a form that will be advantageous to us. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection, which could in turn adversely affect our business, financial condition and results of operations.
If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.
In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how, particularly with respect to our PowerBuoy® control and electricity generating systems and our WAM-V® systems. We generally seek to protect this information in part by confidentiality agreements with our employees, consultants and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.
Foreign laws may not afford us sufficient protections for our intellectual property, and we may not be able to obtain patent protection outside of the U.S.
Intellectual property rights protection continues to present significant challenges to U.S. companies operating around the world. The body of law is often relatively undeveloped compared to the commercial law in the U.S. and only limited protection of intellectual property may be available in those jurisdictions. Although we have taken precautions to protect our intellectual property, any local design or manufacture of products that we undertake in a foreign jurisdiction could subject us to an increased risk that unauthorized parties will be able to copy or otherwise obtain or use our intellectual property, which could harm our business. We may also have limited legal recourse in the event we encounter patent or trademark infringement. If we are unable to manage our intellectual property rights, our business and operating results may be seriously harmed.
If we infringe or are alleged to have infringed upon intellectual property rights of third parties, our business, financial condition and results of operations could be adversely affected.
Our products or use of our trademarks may infringe, or be claimed to infringe, upon patents, patent applications or trademarks under which we do not hold licenses or other rights. Third parties may own or control these patents, patent applications or trademarks in the U.S. and abroad. Third parties could bring claims against us that would cause us to incur substantial expenses and, if successfully asserted against us, could cause us to pay substantial damages. Further, if a patent or trademark infringement suit were brought against us, we could be forced to stop or delay manufacturing or sales of the product or component that is the subject of the suit.
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As a result of patent or trademark infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from a third party and be required to pay license fees, royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be forced to cease some aspect of our business operations if, as a result of actual or threatened patent or trademark infringement claims, we are unable to enter into licenses on acceptable terms. This could significantly and adversely affect our business, financial condition and results of operations.
In addition to infringement claims against us, we may become a party to other types of patent or trademark litigation and other proceedings, including proceedings declared by the U.S. Patent and Trademark Office and proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent or trademark litigation or other proceeding, even if resolved in our favor, could be substantial. In addition, if we were to license our intellectual property to others, we may be required to indemnify our licensee if the licensed intellectual property is found to be infringing on a third party’s rights. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.
Our contracts with governmental entities could negatively affect our intellectual property rights, and our ability to commercialize our products could be impaired.
Our prior agreements with government agencies in large part funded the research and development of our PowerBuoy®. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, technical data and software, generally including, at a minimum, a non-exclusive license authorizing the government to use the invention, technical data or software for non-commercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights. March-in rights refer to the right of the U.S. government to require us to grant a license to the technology to a responsible applicant or, if we refuse, the government may grant the license itself. U.S. government-funded inventions must be reported to the government and U.S. government funding must be disclosed in any resulting patent applications; our rights in such inventions will normally be subject to government license rights, periodic post-contract utilization reporting, foreign manufacturing restrictions and march-in rights.
The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the technology or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. Our government-sponsored research contracts are subject to audit and require that we provide regular written technical updates on a monthly, quarterly or annual basis, and, at the conclusion of the research contract, a final report on the results of our technical research. Because these reports are generally available to the public, third parties may obtain some aspects of our sensitive confidential information. Moreover, if we fail to provide these reports or to provide accurate or complete reports, the government may obtain rights to any intellectual property arising from the related research. Funding from government contracts may also limit when and how we can deploy our technology developed under those contracts. Foreign governments with which we contract to provide funding for our research and development may seek similar rights.
Risks Related to Regulatory and Compliance Matters
If we are unable to obtain all necessary regulatory permits and approvals, it is possible that we will not be able to implement our planned projects or business plan.
The offshore deployment of our products is heavily regulated. Each of our deployments is subject to multiple permitting and approval requirements. We and our customers are dependent on state, federal and regional government agencies for such permits and approvals. Due to the unique nature of in-ocean power generation and the associated potential for environmental hazards stemming from deployment of our products, we expect our projects to receive a higher level of scrutiny by permitting agencies, approval authorities and the public, which could result in substantial delay in the permitting process. New regulations surrounding the deployment of autonomous vessels could restrict or limit our ability to deploy WAM-Vs® in certain jurisdictions. Successful challenges by parties opposed to our deployments could result in increased costs, or in the denial of necessary permits and approvals.
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If we or our clients are unable to obtain necessary permits and approvals in connection with any or all our projects, those projects would not be implemented, and our business, financial condition and results of operations would be adversely affected. If we violate or fail to comply with these permits and approvals, we could be fined or otherwise sanctioned by regulators.
Our products, software, technical data and services may be subject to U.S. export control laws, including the EAR, ITAR and economic sanctions programs administered by the Office of Foreign Assets Control. Violations of these laws could result in significant civil or criminal penalties, loss of export privileges, contract terminations and reputational harm. Compliance obligations may increase as we expand internationally and pursue additional defense and security opportunities.
In the event we are unable to satisfy regulatory requirements relating to internal control over financial reporting, or if our internal controls are not effective, our business, reputation and financial results may suffer.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent fraud. Pursuant to the Sarbanes-Oxley Act of 2002, we are required to furnish a report by management on internal control over financial reporting, including management’s assessment of the effectiveness of such control. Internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure to implement new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could also be a material adverse effect on our stock price.
Environmental and other regulation of our business, including potential climate change regulation, could adversely impact us by increasing our production cost or restricting our ability to deliver products to our customers.
Climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our business operations. Moreover, there has been a broad range of proposed and promulgated state, national and international regulation aimed at reducing the effects of climate change. In the U.S., there is a significant possibility that some form of regulation will be enacted at the federal level to address the effects of climate change. Such regulation could take several forms that could result in additional costs in the form of taxes, consultant costs, the restriction of output, investments of capital to maintain compliance with laws and regulations or required acquisition or trading of emission allowances. Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation.
A portion of products we acquire from our suppliers are manufactured in foreign countries, making the price and availability of these products subject to international trade risks and other international conditions.
A portion of our parts for our products are sourced from foreign countries, some of which in the future are, or could become subject to trade restrictions, including increased tariffs or quotas, embargoes and customs restrictions, which would increase the cost or could reduce the supply of products available to us, and could have a material adverse effect on our business, financial condition and results of operations. Tariffs on imports from foreign countries, as well as changes in tax and trade policies, such as a border adjustment tax or disallowance of certain tax deductions for imported product, could materially increase our manufacturing costs, the costs of our imported products or our income tax expense, which would have a material adverse effect on our financial condition and results of operations. Tariffs imposed by foreign countries on imports of our products could also adversely affect our international sales. Any increase in manufacturing costs, the cost of our products or limitation on the amount of products we can purchase, could have a material adverse effect on our financial condition and results of operations.
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Our business involves the use of hazardous materials, which require compliance with environmental and occupational safety laws regulating the use of such materials. If we violate these laws, we could be subject to significant fines, liabilities or other adverse consequences.
Our manufacturing operations, particularly some of the activities undertaken by our third-party suppliers and manufacturers, involve the controlled use of hazardous materials. These include batteries, as well as various lubricants and oils. Accordingly, our third-party contractors and we are subject to foreign, federal, state and local laws governing the protection of the environment and human health and safety, including those relating to the use, handling and disposal of these materials. We cannot eliminate the risk of accidental contamination or injury from these hazardous materials. In the event of an accident or failure to comply with environmental or health and safety laws and regulations, we could be held liable for resulting damages, including damages to natural resources, fines and penalties, and any such liability could adversely affect our business, financial condition and results of operations.
Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. While we have planned for future capital and operating expenditures to maintain compliance, we cannot assure you that environmental laws and regulations will not change or become more stringent in the future. Therefore, we cannot assure you that our costs of complying with current and future environmental and health and safety laws, and any liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, financial condition or results of operations.
If we are not able to comply with the applicable continued listing requirements or standards of the NYSE American, our common stock could be delisted from the NYSE American.
In order to maintain this listing, we must maintain a certain share price, and financial and share distribution targets, including maintaining a minimum amount of stockholders’ equity and a minimum number of public stockholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s securities sell at what the NYSE American considers a “low selling price” which the exchange generally considers $0.10 per share, the NYSE American may suspend trading of our common stock, until the issuer corrects this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which makes continued listing on the NYSE American, in its opinion, inadvisable.
Furthermore, the NYSE American has proposed a rule to amend Section 1003(f)(v) of the NYSE American LLC Company Guide to provide that if a security’s closing price is less than $0.25 (the “Minimum Trading Price”) on any trading day, the NYSE American will immediately suspend trading and commence delisting proceedings. Issuers will not be entitled to submit a plan to regain compliance, however, all issuers will retain the right to appeal a delisting decision. In addition, under the proposed rule NYSE American may suspend trading in a security that “has experienced a precipitous decline” and is not likely to recover even if not trading below the Minimum Trading Price. Although effectiveness of this rule has been delayed into 2027, the Company is monitoring its trading price carefully and may seek to obtain approval and implement a reverse split. Approval of a reverse split requires the majority of voting power of our outstanding common stock and, because our board of directors and management own limited shares of common stock, approval will depend on the vote of our unaffiliated stockholders. There are no assurances how the market price of our common stock will be impacted in future periods as a result of the general uncertainties in the capital markets and any specific impact on our Company as a result of the recent volatility in the capital markets.
Risks Related to Litigation
Litigation is costly and time-consuming to defend, and if decided against us, could require us to pay substantial judgments or settlements. We may be the subject of future securities or other litigation, which could adversely affect our company, our business and our liquidity.
Any litigation is costly, and time consuming to defend and may distract our management from the daily operations of our business. We may be the subject of additional future litigation, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Although we maintain insurance coverage, we cannot assure you that this insurance coverage will be sufficient to cover the substantial fees of lawyers and other professional advisors relating to these pending lawsuits or any future litigation, our obligations to indemnify our officers and directors who may become parties to such pending and future actions, or the amount of any judgments or settlements that we may be obligated to pay in connection with these lawsuits. In addition, prior judgements and settlements have caused our insurance premiums and retention amounts to increase, and we may be subject to additional increases in the future or be subjected to other changes in our insurance coverage. Further, given the volatility of the market price of our common stock, we may be subject to future class action securities and other litigation. Accordingly, we have incurred and may continue to incur substantial legal expenses, judgments and/or settlements relating to pending and future litigation and our management’s time and attention may be diverted from the operation of our business, which could materially and adversely affect the Company.
We may become the target of securities litigation, which is costly and time-consuming to defend.
In the past, companies that experienced significant volatility in the market price of their publicly traded securities have become subject to class action securities litigation. Our stock price has been volatile, and class action securities litigation and derivative lawsuits have been filed against us, and it is possible that additional lawsuits could be brought against us in the future. The results of complex legal proceedings are difficult to predict. These lawsuits assert types of claims that, if resolved against us, could give rise to substantial damages, and an unfavorable outcome or settlement of these lawsuits, or any future lawsuits, could have a material adverse effect on our business, financial condition, results of operations and/or stock price. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be material to our business and our operations. Moreover, these lawsuits may divert our management’s attention from the operation of our business. For more information on our legal proceedings, see Item 3 “Legal Proceedings” of this Annual Report and Note 14 “Commitments and Contingencies in the accompanying consolidated financial statements for the fiscal year ended April 30, 2026.
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Risks Related to Our Common Stock
If we issue additional shares of our equity securities in the future, our shareholders may experience substantial dilution in the value of their investment or their ownership interest.
Our certificate of incorporation currently authorizes us to issue up to 400,000,000 shares of our common stock and to issue and designate the rights of, without shareholder approval, up to 5,000,000 shares of preferred stock. In the future, if we were required to raise additional capital, we may offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share paid by other investors, and dilution to our shareholders in the value of their investment and their ownership and voting interest in the Company could result. We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by existing investors, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders.
In addition, we have a significant number of stock options and restricted stock units outstanding. To the extent that outstanding stock options, warrants or restricted stock units have been or may be exercised or other shares issued, current shareholders and future investors who have purchased our common stock will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we issue new securities or raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders or result in downward pressure on the price of our common stock.
On April 1, 2026 the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors pursuant to which the Company issued and sold senior convertible notes (the “Notes”) in an aggregate principal amount of $10.0 million. Beginning on the closing date, the Notes are subject to quarterly cash amortization payments through maturity. The Notes rank senior to the Company’s unsecured indebtedness, subject to certain exceptions, and contain customary affirmative and negative covenants, including restrictions on indebtedness, liens, restricted payments, asset transfers, changes in business, and affiliate transactions. The Notes also contain customary events of default. The conversion of these notes into equity may occur at times and under pricing mechanisms that could lead to a substantial number of shares being issued, potentially at prices below prevailing market prices.
In June 2026 Company entered into a Securities Purchase Agreement with certain institutional accredited investors pursuant to which the Company agreed to issue and sell an aggregate of 25,000,000 shares of its common stock, together with warrants to purchase up to an aggregate of 25,000,000 additional shares of common stock (the “Warrants”). The Warrants become exercisable on the six-month anniversary of the date of issuance and have an exercise price of $0.40 per share, subject to customary anti-dilution adjustments.
The issuance of shares upon conversion of the Notes and Warrants noted above could dilute the ownership interests of existing stockholders, and the sales of such shares into the public market (or the perception that such sales may occur) could place significant downward pressure on the trading price of our common stock. If our share price declines, it may result in more shares being issued upon conversion of the notes, further diluting existing stockholders.
Historically, our stock price has been volatile, and this is likely to continue; purchasers of our common stock could incur substantial losses as a result.
Historically, the market price of our common stock has fluctuated significantly, and we expect that this will continue. Purchasers of our common stock could incur substantial losses relating to their investment in our stock as a result. Also, the stock market, particularly microcap stocks, experiences volatility that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations could result in fluctuations in the price of our common stock, which could cause purchasers of our common stock to incur substantial losses. The market price for our common stock may be influenced by many factors, including the items identified within these Risk Factors and the other information included within this annual report. In addition, the interests of the convertible noteholders may not align with those of our common shareholders, particularly if the noteholders are primarily motivated to convert and sell shares quickly. This misalignment may result in pressure to make near-term decisions that are not accretive to long-term shareholder value.
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Provisions in our corporate charter documents and under Delaware law may delay or prevent attempts by our shareholders to change our management or our Board of Directors and hinder efforts to acquire a controlling interest in us.
As a result of our reincorporation in Delaware in April 2007, provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which our shareholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. These provisions include:
| ● | advance notice requirements for shareholder proposals and nominations; |
| ● | the inability of shareholders to act by written consent or to call special meetings; and |
| ● | the ability of our Board of Directors to designate the terms of and issue new series of preferred stock without shareholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors. |
In June 2023 (and amended and restated in June 2026), our Board of Directors adopted a Section 382 Tax Benefits Preservation Plan in an effort to diminish the risk that the Company’s ability to utilize its net operating loss carryovers to reduce potential future federal income tax obligations may become substantially limited. The Section 382 Tax Benefits Preservation Plan is also intended to act as a deterrent to any person or group acquiring beneficial ownership of 4.99% or more of the outstanding common stock without the approval of our Board of Directors. In June 2026, our Board of Directors adopted an amended and restated Section 382 Tax Benefits Preservation Plan for the same purposes.
In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested shareholder, which is generally a person who together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our company.
If securities or industry analysts fail to cover us, or do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline.
Currently we do not have significant analyst coverage, however, the trading market for our common stock could be influenced by the research and reports that industry or securities analysts may publish about us, our business, or our industry from time to time. If no analyst covers us, or ultimately one or more of these analysts cease coverage or fail to publish reports on the Company regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our common stock to decline.
We have never paid cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
We have not paid any cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. Also, there can be no assurance that the Company will have the liquidity necessary to pay dividends in the future if we want to do so. As a result, prospective investors and shareholders should make or maintain an investment in our common stock solely on the basis that potential future capital appreciation, if any, of our common stock will be the only source of gain for our shareholders for the foreseeable future and there can be no assurance that any such future capital appreciation will occur.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
We employ a layered cybersecurity approach aligned with industry standards. Our strategy includes preventive and detective technical controls (e.g., endpoint protection, intrusion detection, access control, and network segmentation), employee training, vendor diligence, and third-party audits. We maintain a combination of on-premise and cloud-based infrastructure with multi-factor authentication and routine patch management.
We also work with managed cybersecurity service providers to support real-time threat monitoring and incident response capabilities. Penetration testing and vulnerability scanning are performed periodically, and findings are reviewed with senior leadership.
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Cybersecurity risks are considered in connection with strategic planning, vendor selection, product development (particularly in embedded control systems), and compliance with regulatory obligations, including export control and data privacy laws.
To date, we have not experienced any material cybersecurity incidents that have had a significant impact on our financial condition, results of operations, or reputation. However, we recognize that the threat landscape continues to evolve, and we remain vigilant in adapting our security posture to mitigate emerging risks.
Our Incident Response Plan outlines steps to investigate, contain, report, and recover from cybersecurity events. We have established internal procedures to investigate, contain, report, and recover from cybersecurity incidents. These procedures are designed to enable a prompt and coordinated response to potential threats. In the event of an incident determined to be material under SEC guidelines, we are prepared to make timely disclosures through current reports (Form 8-K) as required.
During
the fiscal years ended April 30, 2026 and 2025, we did
While no material incidents have occurred, we cannot guarantee that future incidents will not materially affect our company, especially as we expand digital product features, enter new geographic markets, and integrate with third-party systems.
Additional information about cybersecurity risks we face is discussed in Item 1A of Part I, “Risk Factors,” under the headings “Failure of our information systems or those of third parties or breaches of data security could cause significant harm to our business” and “Cybersecurity breaches of our systems and information technology could adversely impact our ability to operate or meet contractual obligations,” which should be read in conjunction with the information above.
ITEM 2. PROPERTIES
Our headquarters are currently located in Monroe Township, New Jersey, where we occupy approximately 56,000 square feet under a lease expiring on April 30, 2026. We use this facility for administration, research and development, as well as manufacturing, assembly and testing of our products.
Additionally, we have a property located in Richmond, California where we occupy approximately 11,500 square feet under a lease expiring on June 18, 2028. We have an additional property also located in Richmond, California where we occupy approximately 2,300 square feet under a lease which began on May 12, 2025 and expiring on May 31, 2027. We believe that our facilities are sufficient for our current needs and are in good condition in all material respects.
The Company also has a lease for warehouse space located in Richmond, California. The lease commenced in June of 2025 and will continue for 24 months. The lease is classified as an operating lease and is included in right-of-use assets, right-of-use liabilities- current and right-of-use liabilities- long-term on the Company’s Consolidated Balance Sheets.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in legal proceedings, claims, investigations, and regulatory matters arising in the ordinary course of business. While the outcome of such matters cannot be predicted with certainty, management does not believe that any currently pending matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. The Company records liabilities for legal contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If a loss contingency is reasonably possible but not probable, or if the amount of loss cannot be reasonably estimated, the nature of the contingency is disclosed when required by applicable accounting standards. Litigation and other legal matters are inherently uncertain, and adverse outcomes could occur that may have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows in a future period.
Item 4. MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shareholders
Our common stock was listed on the Nasdaq Capital Market, under the symbol “OPTT” until June 2021 when the listing was transferred to the NYSE American under the same symbol. As of July 22, 2025, there were 116 holders of record for shares of our common stock. Since a portion of our common stock is held in “street” or nominee name, we are unable to determine the exact number of beneficial holders.
We adopted a Section 382 Tax Benefits Preservation Plan on June 29, 2023 (and amended and restated in June 2026) to diminish the risk we could experience an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, which could substantially limit or permanently eliminate our ability to utilize its net operating loss carryovers to reduce potential future income tax obligations. Under this plan, a person who acquires, without the approval of our Board of Directors, beneficial ownership of 4.99% or more of the outstanding common stock could be subject to significant dilution. See Note 13 to the consolidated financial statements included herein for more.
Dividend Policy
We have never declared or paid any cash dividends on our common stock, and we do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. At this time, we intend to retain all of our future earnings, if any, to finance the growth and development of our business. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors, and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants, and other factors that our Board of Directors may deem relevant.
Transfer Agent Information
Our transfer agent is Computershare Trust Company, N.A. Computershare is located at 250 Royall Street, Canton, MA 02021-1011. Its contact information is: U.S. and Canada: (800) 662 - 7232, International (781) 575–4238, and its website is located at www.computershare.com.
Purchases of Equity Securities by the Issuer
There were no purchases of equity securities by the Company for the year ended April 30, 2026.
Equity Compensation Plan Information
The following table sets forth the indicated information as of April 30, 2026, with respect to our equity compensation plans:
| Plan Category | Number of Shares to be Issued Upon Exercise of Outstanding Options and Restricted Stock | Weighted-Average Exercise Price of Outstanding Options | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in First Column) | |||||||||
| Equity compensation plans approved by shareholders: | ||||||||||||
| Stock Options | 396,179 | $ | 1.83 | — | (1) | |||||||
| Restricted Stock Units | 23,275,173 | N/A | — | (1) | ||||||||
| Equity compensation plans not approved by shareholders: | ||||||||||||
| Stock Options | — | — | — | |||||||||
| Restricted Stock Units | 687,500 | N/A | 1,151,487 | (2) | ||||||||
(1) Consists of shares of our common stock available for issuance under the 2015 Omnibus Incentive Plan.
(2) Consists of shares of our common stock available for issuance under the 2018 Employee Inducement Incentive Award Plan.
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Our equity compensation plans consist of a 2006 Stock Incentive Plan and a 2015 Omnibus Incentive Plan which were approved by our shareholders. Once the 2015 Omnibus Incentive Plan was approved by the shareholders on October 22, 2015, no further stock options or other awards were awarded under the 2006 Stock Incentive Plan and it was terminated. Shares that are forfeited under the 2006 Stock Incentive Plan on or after October 22, 2015, will become available for issuance under the 2015 Omnibus Incentive Plan.
The equity compensation plan that has not been approved by our shareholders is our 2018 Employee Inducement Incentive Award Plan, as amended.
Unregistered Sales of Equity Securities and Use of Proceeds
Not Applicable.
ITEM 6. [Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Annual Report, and elsewhere in this report, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year ends on April 30. References to fiscal 2024 are to the fiscal year ended April 30, 2026.
Business Overview
Ocean Power Technologies, Inc. (“OPT,” “we,” “our,” or “the Company”) is a Maritime Domain Awareness (MDA) company specializing in innovative intelligent maritime solutions. These solutions include a variety of “as a service” systems, including Data as a Service (DAAS), Robotics as a Service (RAAS), and Power as a Service (PAAS). These systems consist of a variety of platforms including the PowerBuoy®, our persistent sensor and power solution, the WAM-V® (Wave Adaptive Modular Vessel), our autonomous unmanned surface vehicle, and Merrows™, our user interface and command and control (C2) system that integrates multiple sensor feeds using software and hardware and enables artificial intelligence and machine learning (AI/ML) integration. We design, manufacture, deploy, and operate these systems for defense, security, subsea infrastructure, offshore oil and gas, offshore energy, marine research, and communication markets. We operate primarily through a combination of direct sales and leases, strategic partnerships, and long-term service agreements. Our business model emphasizes capital-light deployments, recurring revenue from service and maintenance contracts, and high-margin technology sales and leases.
We serve a global customer base, including the U.S. and allied defense agencies, offshore energy operators, and commercial interests. The common thread across these markets is the growing need for persistent, autonomous, and sustainable offshore presence, a need we are uniquely positioned to fulfill.
The Company holds numerous patents and leverages decades of research including control systems, energy storage, and marine integration. Our headquarters and assembly operations are located in New Jersey, and we maintain an additional manufacturing and robotics development facility in Richmond, CA.
OPT is committed to enabling a smarter, safer ocean economy through innovation in ocean intelligence and power. As we look forward, our strategic priorities include expanding our customer base and geographic footprint, accelerating technology adoption, enhancing recurring revenue, and driving margin growth through platform scalability and supply chain efficiencies.
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We were incorporated under the laws of the State of New Jersey in April 1984 and began commercial operations in 1994. On April 23, 2007, we reincorporated in Delaware.
Business Update Regarding Macroeconomic Condition
During fiscal year 2026, our macroeconomic business environment was affected by geopolitical instability, persistent inflationary pressures, global supply chain constraints, tightening monetary policy, and recent shifts in international trade and tariff regimes. While our long-term demand outlook remains strong, these conditions could present operational and financial challenges, particularly in procurement, logistics, and cost control.
We continue to monitor federal budget developments, appropriations activity, agency guidance, and broader geopolitical events to assess downstream effects on pipeline conversion and resource allocation. During fiscal 2026, the U.S. Government operated under two continuing resolutions, experienced two temporary government shutdowns, and faced delays in the enactment of a full-year defense appropriation. In addition, heightened geopolitical tensions, including the conflict involving Iran, contributed to shifting government priorities and procurement timing across portions of the defense market. These factors resulted in delays in certain customer procurement activities, contract awards, and program funding decisions. While the timing of these opportunities remains uncertain, we believe our active positioning in mission-critical domains, including persistent maritime surveillance, energy resilience, and multi-domain autonomy, positions us well to compete for these opportunities as procurement activity resumes. However, additional political disruptions, appropriations delays, geopolitical instability, or changes in government priorities could further delay customer decisions and adversely affect our operating results, cash flows, and the timing of future contract awards.
Inflationary pressures may impact the cost of key inputs used in products. To partially offset these pressures, we have implemented cost optimization measures, adjusted pricing on new contracts, and re-evaluated supplier agreements.
Despite these headwinds, our diversified contract base, including U.S. federal government agencies, strategic defense contractors, and energy developers, provides a foundation for future revenue generation.
Looking ahead, we are monitoring global trade developments, interest rate policy, and energy infrastructure spending trends closely, and will adjust our operating and capital planning assumptions accordingly. Our proactive supply chain and pricing strategies are designed to support margin preservation and competitive positioning in a shifting economic landscape.
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Capital Raises
During fiscal years 2025, 2026 and subsequently, we undertook various capital raising activities to support our strategic initiatives and operational needs.
At-the-Market Offering Agreement
On March 21, 2024, the Company entered into an At-the-Market Offering Agreement with an aggregate offering price of up to $7.0 million (the “2023 ATM Facility”). On August 30, 2024 the aggregate offering price under the 2023 ATM Facility was increased to approximately $16.0 million. It was then reduced to approximately $2.9 million in September 2024 and increased again to approximately $60.0 million in December 2024. The Company received proceeds of approximately $18.0 million under this facility prior to termination of the facility effective August 8, 2025.
On August 8, 2025, the Company entered into an At Market Issuance Sales Agreement with Ladenburg Thalmann &Co. Inc., under which the Company may, from time to time, offer and sell shares of its common stock having an aggregate gross sales price of up to $40.0 million. The shares will be offered pursuant to the Company’s shelf registration statement on Form S-3, including the related prospectus supplement filed with the SEC on August 8, 2025.
Sales, if any, will be made in transactions deemed to be “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act, directly on or through the NYSE American or in negotiated transactions as otherwise permitted under the Sales Agreement. The Company is not obligated to sell any shares under the Ladenburg sales agreement and may suspend or terminate the offering at any time.
A total of 16,192,137 shares were sold under the Ladenburg sales agreement during the year ended April 30, 2026 totaling proceeds of $7.4 million.
Convertible Debt Issuance
In May 2025 we issued $10.0 million in aggregate principal amount of convertible notes with a 24-month maturity to new institutional investors with net proceeds of $9.7 million. The notes are convertible into shares of our common stock under specific terms outlined in the Securities Purchase Agreement and Indenture. This financing was aimed at providing us with additional liquidity, supporting the commercialization of our systems, and advancing our autonomous maritime solutions. On October 7, 2025, we issued and sold to the investors $6.5 million of additional notes. On April 1, 2026, the Company issued and sold a new class of senior convertible notes (the “Notes”) in an aggregate principal amount of $10.0 million. These notes replaced all outstanding balances then outstanding under the May 2025 and October 2025 convertible note issuances. The Notes bear interest at a rate of 4.5% per annum and mature eighteen months from issuance unless earlier converted or repaid. Upon an event of default, the interest rate increases to 13.0% per annum. At maturity, the Notes are payable at 113% of their principal amount. The Notes are convertible, in whole or in part, into shares of the Company’s common stock at a conversion price of $0.40 per share, subject to customary anti-dilution adjustments. A holder may not convert any portion of a Note to the extent such conversion would cause the holder to beneficially own more than 4.99% of the Company’s outstanding common stock. Beginning on the closing date, the Notes are subject to quarterly cash amortization payments through maturity. The Notes rank senior to the Company’s unsecured indebtedness, subject to certain exceptions, and contain customary affirmative and negative covenants, including restrictions on indebtedness, liens, restricted payments, asset transfers, changes in business, and affiliate transactions. The Notes also contain customary events of default. With exception to the ATM proceeds, at the discretion of the lender, the Company may be required to reserve up to 30% of the net proceeds related to future capital raises to repay this note.
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June 2026 Common Stock and Warrant Issuance
In June 2026 Company entered into a Securities Purchase Agreement with certain institutional accredited investors pursuant to which the Company agreed to issue and sell an aggregate of 25,000,000 shares of its common stock, together with warrants to purchase up to an aggregate of 25,000,000 additional shares of common stock (the “Warrants”). The combined purchase price for each share of common stock and accompanying Warrant was $0.40. The Warrants become exercisable on the six-month anniversary of the date of issuance and have an exercise price of $0.40 per share, subject to customary anti-dilution adjustments. This agreement resulted in $7.1 million in net proceeds to the Company. The Warrants expire on the sixth anniversary of the initial exercise date.
The sale of additional equity and convertible debt under new facilities could result in dilution to our shareholders. If additional funds are raised through the issuance of debt securities or preferred stock, these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. The Company cannot be certain that additional equity and/or debt financing will be available to the Company as needed on acceptable terms, or at all. If we are unable to obtain required financing when needed, we may be required to reduce the scope of our operations, including our planned incremental product development and marketing efforts, which could materially and adversely affect our financial condition and operating results. If we are unable to secure additional financing, we may be forced to cease our operations.
Backlog
As of April 30, 2026 and 2025, the Company’s backlog was $20.1 million and $12.5 million, respectively. The backlog represents the value of unfulfilled, purchase orders and agreements with commercial and governmental customers. If any of our contracts were to be terminated, our backlog would be reduced by the expected value of the remaining terms of such contract.
Backlog figures do not necessarily reflect future revenue, as orders may be adjusted, delayed, or canceled, and our recognition of associated revenue is subject to the terms of the underlying agreements. The size of our backlog may also fluctuate materially based on the timing of new awards, contract renewals, or the conclusion of long-term engagements. Consequently, while we view backlog as a useful performance indicator, it should not be relied upon as a predictor of future results.
Critical Accounting Policies and Estimates
To understand our financial statements, it is important to understand our critical accounting policies and estimates. We prepare our financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe the following accounting policy requires significant judgment and estimates by us in the preparation of our consolidated financial statements.
Revenue recognition
The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers (“ASC 606”) for contracts with customers and ASC Topic 842 - Leases (“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 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.
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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. Estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on the assessment of legal enforceability, performance, and any other information (historical, current, and forecasted) that is reasonably available to us. There was no variable consideration recognized in revenue for the years ended April 30, 2026 or 2025. 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 (e.g., upon shipment, upon delivery, as services are rendered, or upon completion of service), including when performance obligations are satisfied in a bill-and-hold arrangement. 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 or labor hours incurred 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. For the quarter ended January 31, 2026 the Company recorded one-time losses associated with two contracts in strategically important markets. The expenses associated with these projects are now substantially complete, although they will continue to generate revenue over the next several months. Importantly, our core programs and commercial pipeline continue to demonstrate improving margin quality and operating leverage. 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 projections 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, 2026 the Company recognized approximately $2.4 million in revenue related to performance obligations satisfied at a point in time and approximately $0.7 million in revenue related to performance obligations satisfied over time as compared to $4.9 million in revenue related to performance obligations satisfied at a point in time and $1.0 million in revenue related to performance obligations satisfied over time revenue for the fiscal year ended April 30, 2025.
The Company’s contracts are either cost-plus contracts, fixed-price contracts, time and material agreements, lease agreements or service agreements. Under cost-plus contracts, customers are billed for actual costs incurred plus an agreed-upon fee. Under fixed-price contracts, customers are billed based on contractually agreed pricing for specified deliverables or services. Under time-and-materials agreements, customers are billed based on negotiated labor rates for hours worked and the cost of materials, equipment, subcontractors, and other reimbursable expenses incurred in performing the work.
The Company has one type of fixed-price contract, firm fixed-price. 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. For the fiscal years ended April 30, 2026 and 2025, the majority of the Company’s fixed price contracts were classified as firm fixed-price.
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 Company’s revenue also includes revenue from certain contracts which do not fall within the scope of ASC 606, but under the scope of ASC 842, “Leases.” 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 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a financing 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 Revenues in the Consolidated Statement of Operations. 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®, WAM-V®, 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 with an option to extend the lease term or purchase the leased buoy or WAM-V® at some point during and/or at the end of the lease term.
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.
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Financial Operations Overview
In each of the years ended April 30, 2026 and 2025, the Company had four customers whose revenue accounted for at least 10% of the Company’s consolidated revenue. These customers accounted for approximately 62% and 53% of the Company’s total revenue for 2026 and 2025, respectively.
We currently focus our sales efforts in key global markets in North America, South America, Europe and Asia. In fiscal 2026, we made significant progress in diversifying our customer and geographic base. Our strategic efforts to expand into defense, energy, and environmental monitoring markets in Europe, the Middle East, and Africa (EMEA) resulted in a substantial increase in EMEA-sourced revenue. This geographic expansion reflects the increasing global relevance of our autonomous maritime systems, particularly among government and industrial customers. It also demonstrates the early success of our international channel development initiatives, which we intend to further scale in fiscal 2026 through targeted partnerships, regional deployments, and export-driven offerings.
The following table shows the percentage of our revenue by geographical location of our customers headquarters for fiscal 2026 and 2025:
| Fiscal year ended April 30, | ||||||||
| Customer Location | 2026 | 2025 | ||||||
| North America & South America | 33 | % | 66 | % | ||||
| EMEA | 48 | % | 32 | % | ||||
| Asia and Australia | 19 | % | 2 | % | ||||
| Total | 100 | % | 100 | % | ||||
Cost of revenue
Our cost of revenue consists primarily of subcontracts, materials incurred, labor and manufacturing overhead expenses, such as engineering expenses, equipment depreciation, maintenance, and facility related expenses, and includes the cost of equipment to customize the PowerBuoy®, WAM-V® and our other products supplied by third-party suppliers. Cost of revenue also includes PowerBuoy® and other product system delivery and deployment expenses and may include losses recorded at the time a loss is forecasted to be incurred on a contract.
Operating Expenses
Engineering and product enhancement costs
Our engineering and product enhancement costs consist of salaries and other personnel-related costs and the costs of products, materials and outside services used in our product enhancement and unfunded research activities. Our product enhancement costs relate primarily to our efforts to increase the power output and reliability of our PowerBuoy® system and other products, to enhance and optimize data monitoring and controls systems, and the development of new products, product applications and complementary technologies. We expense all of these costs as incurred.
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Selling, general and administrative costs
Our selling, general and administrative costs consist primarily of professional fees, salaries, share-based compensation and other personnel-related costs for employees and consultants engaged in sales and marketing of our products, and costs for executive, accounting and administrative personnel, professional fees and other general corporate expenses.
Interest income, net
Interest income, net consists of interest received on cash, cash equivalents, and short-term investments and interest paid on certain obligations to third parties as well as amortization expense related to the premiums on the purchase of short-term investments.
Foreign exchange gain (loss)
We transact business in various countries and have exposure to fluctuations in foreign currency exchange rates. Since we conduct our business in U.S. dollars and our functional currency is the U.S. dollar, our main foreign exchange exposure, if any, results from changes in the exchange rate between the U.S. dollar and transactions settled in foreign currencies.
The Company completed the process of winding down its Australian subsidiary during fiscal 2024 and its UK subsidiary during fiscal 2025. The unrealized gains or losses resulting from foreign currency balances translation are included in Accumulated Other Comprehensive Loss within Shareholders’ Equity. Foreign currency transaction gains and losses are recognized within our Consolidated Statements of Operations.
We currently do not hedge our exchange rate exposure. However, we assess the anticipated foreign currency working capital requirements and capital asset acquisitions of our foreign operations and assess the need and cost to utilize financial instruments to hedge currency exposures on an ongoing basis and may hedge against exchange rate exposure in the future.
Results of Operations
This section should be read in conjunction with the discussion below under “Liquidity Outlook”.
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Fiscal Years Ended April 30, 2026 and 2025
The following table contains selected Consolidated Statements of Operations information, which serves as the basis of the discussion of our results of operations for the fiscal years ended April 30, 2026 and 2025:
| Fiscal years ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Revenue | $ | 3,737 | $ | 5,861 | ||||
| Cost of revenue | 9,658 | 4,201 | ||||||
| Gross margin | (5,921 | ) | 1,660 | |||||
| Operating expenses | 32,442 | 23,346 | ||||||
| Operating loss | (38,363 | ) | (21,686 | ) | ||||
| Interest income/(expense), net | (2,785 | ) | 47 | |||||
| Other (expense)/income | (878 | ) | (22 | ) | ||||
| Change in fair value of financial instruments | (5,690 | ) | (2,956 | ) | ||||
| Loss on extinguishment of debt | (1,186 | ) | (838 | ) | ||||
| Foreign exchange loss | (13 | ) | (45 | ) | ||||
| Loss before income taxes | (48,915 | ) | (25,500 | ) | ||||
| Income tax benefit | — | 1,034 | ||||||
| Net loss | $ | (48,915 | ) | $ | (24,466 | ) | ||
Revenue
Revenue for the fiscal years ended April 30, 2026 decrease of approximately $2.1 million related to the timing of deliveries on current year projects versus the prior year contracts of WAM-Vs.
Cost of revenues
Cost of revenues for the fiscal years ended April 30, 2026 increase of approximately $5.5 million is related primarily to the recognition of one-time losses associated with contracts in strategically important markets, including $0.7 million related to revenue and cost of goods sold at no margin to the Company for change orders on existing contract. The expenses and revenues associated with these projects will continue over the next several months.
Operating Expenses
Operating expenses for the fiscal years ended April 30, 2026 increased of approximately $9.1 million was primarily the result of the significant increases in share-based compensation of $4.9 million, increases in employee-related expenses of $1.5 million, an increase in professional fees of $0.9 million, and increases in credit loss expense of $0.8 million.
Interest income/(expense), net
Interest (expense)/income for the fiscal years ended April 30, 2026 and 2025 was ($2.8) million and $47,000, respectively, with the change primarily related to interest expenses associated with the May 2025, October 2025 and April 2026 convertible notes.
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Other expense
Other (expense) income, net for the fiscal years ended April 30, 2026 increase of $0.8 million is primarily related to impairment expense for fixed assets of $0.8 million and a litigation settlement of $0.2 million, offset by insurance proceeds of $0.2 million in the current year.
Change in fair value of financial instruments
The change in the fair value of derivatives for the fiscal years ended April 30, 2026 and 2025 was $5.7 million and $3.0 million, respectively. The increase is a result of the fair value of the current years financial instruments in association with the convertible debt issued in May and October of 2025 and April 2026 in fiscal 2026 and the convertible debt issued in December 2024 for fiscal 2025.
Loss on extinguishment of debt
The loss on extinguishment of debt of $1.2 million as of April 30, 2026 relates to convertible notes that were issued in May and October 2025 and were repaid in full in April 2026. The loss on extinguishment of debt of $0.8 million as of April 30, 2025 relates to convertible notes that were issued in December 2024 and were converted to common stock in December 2024 loss on disposition of assets.
Income tax benefit
Income tax benefit reflects the sale by the Company of New Jersey State net operating losses and research development credits under the New Jersey Economic Development Authority Tax Transfer programs, resulting in $1.3 million of tax benefit related to the fiscal year ended April 30, 2025. The Company did not sell any net operating losses in the fiscal year ended April 30, 2026.
Net cash used in operating activities
During the fiscal year ended April 30, 2026, net cash flows used in operating activities was $20.8 million, an increase of $2.1 million compared to net cash used in operating activities during the fiscal year ended April 30, 2025 of 18.6 million. This primarily reflects an increase in net loss of $24.4 million, prepaid expenses, and inventory on hand, partially offset an increase in accounts payable, contract liabilities, and equity compensation and decreases in accounts receivable in the current year versus the prior year.
Net cash used in in investing activities
Net cash used in investing activities during the fiscal year ended April 30, 2026 was $4.0 million, compared to $0.5 million during the fiscal year ended April 30, 2025, a change of $3.5 million. The net cash used in investing activities during fiscal year ended April 30, 2026 was due to the purchase of property, plant and equipment.
Net cash provided by financing activities
Net cash provided by financing activities during the fiscal year ended April 30, 2026 was approximately $26.8 million compared to net cash used in financing activities during the fiscal year ended April 30, 2025 of $22.7 million. The current year activity was driven by proceeds from the issuance of the May 2025, October 2025, and April 2026 convertible notes of $26.5 million and ATM proceeds of $7.6 million, and the prior year activity was related primarily to ATM proceeds of $17.7 million, $3.2 million in proceeds from convertible debt issued in December 2024, and proceeds from other capital raises of $2.5 million discussed above under “Liquidity”.
Effect of exchange rates on cash and cash equivalents
The effect of exchange rates on cash and cash equivalents was not material during fiscal 2026 or fiscal 2026.
Liquidity Outlook
Since our inception, our operating cash flows have not been sufficient to fund our operations and provide the capital resources for our business. For the two-year period ended April 30, 2026 our aggregate revenue was $9.6 million, our aggregate net losses were $73.4 million and our aggregate net cash used in operating activities was $39.4 million.
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We expect to devote substantial resources to continue our enhancement efforts for our products and to expand our sales, marketing and manufacturing programs associated with the continued commercialization of our products. Our future capital requirements will depend on several factors, including but not limited to:
| ● | our ability to improve, market and commercialize our products, and achieve and sustain profitability; |
| ● | our continued improvement of our proprietary technologies, and expected continued use of cash from operating activities unless or until we achieve positive cash flow from the commercialization of our products and services; |
| ● | changes in current legislation, regulations and economic conditions regarding Federal governmental tariffs, and the potential that this affects the demand for, or restricts the use of, our products and services; |
| ● | our ability to obtain additional funding, as and if needed, which will be subject to several factors, including market conditions, our financial condition and our operating performance; |
| ● | our ability to comply with the covenants and other obligations under our convertible notes; |
| ● | our ability to do business with properly qualified customers that have good credit ratings and pay their obligation on a timely basis; |
| ● | the ability to continue as a going concern; |
| ● | our history of operating losses, which we expect to continue for at least the short-term and possibly longer; |
| ● | our ability to manage challenges and expenses associated with communications and disputes with activist shareholders, including litigation; |
| ● | our ability to manage and mitigate risks associated with our internal cyber security protocols and protection of the data we collect and distribute; |
| ● | our ability to protect our intellectual property portfolio; |
| ● | the impact of potential inflation related to the U.S. dollar on our business, operations, customers, suppliers, manufacturers, and personnel; |
| ● | our ability to meet product enhancement, manufacturing and customer delivery deadlines and the potential impact due to disruptions to our supply chain or our ability to identify vendors that can assist with the prefabrication elements of our products, as a result of, among other things, staff shortages, order delays, and increased pricing from vendors and manufacturers; |
| ● | our forecasts and estimates regarding future expenses, revenue, gross margin, cash flow and capital requirements; |
| ● | our ability to identify and penetrate markets for our products, services, and solutions; |
| ● | our ability to effectively respond to competition in our targeted markets; |
| ● | our ability to establish relationships with our existing and future strategic partners which may not be successful; |
| ● | our ability to maintain the listing of our common stock on the NYSE American; |
| ● | the reliability and continuous improvement of our technology, products and solutions; |
| ● | our ability to increase or more efficiently utilize the synergies available from our product lines: |
| ● | our ability to expand markets across geographic boundaries; |
| ● | our ability to be successful with Federal government work which is complex due to various statutes and regulations applicable to doing business with the Federal government; |
| ● | our ability to be successful doing business internationally which requires strict compliance with applicable statutes and regulations; |
| ● | the current geopolitical world uncertainty, including tariffs, Russia’s invasion of Ukraine, the Israel/Palestine conflict and previous attacks on merchant ships in the Red Sea; |
| ● | the potential impact that new foreign country tariffs may have on our ability (i) to source and procure necessary raw materials for the manufacture and provision of our products and services; and (ii) to deliver our products to such foreign countries; |
| ● | our ability to hire and retain key personnel, including senior management, to achieve our business objectives; and |
| ● | our ability to establish and maintain consistent commercial profit margins. |
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Our business is capital intensive, and through April 30, 2026, we have been funding our business principally through sales of our securities. As of April 30, 2026, our cash and cash equivalents and long-term restricted cash balance was $8.9 million and we expect to fund our business with this amount, future financings such as the June 2026 registered direct offering of common stock and warrants and, to a lesser extent, with our cash flow generated from operations. Management believes the Company’s current cash and cash equivalents may not be sufficient to fund its planned expenditures through twelve months from the filing date of the Form 10-K. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company’s operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The accompanying consolidated financial statements have been prepared on a basis which assumes the Company is a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to the Company’s ability to continue as a going concern.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet financing activities.
Recent Accounting Pronouncements
The Company does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.
Recently Issued Accounting Standards
In recent periods, the Financial Accounting Standards Board (“FASB”) issued certain Accounting Standards Updates (“ASUs”) that may be relevant to the Company’s operations and financial reporting. We are currently evaluating the potential impact of these ASUs and adopting them when applicable based on their effective dates.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ASU 2023-09, which improves the transparency of income tax disclosures by requiring companies to (1) disclose consistent categories and greater disaggregation of information in the effective rate reconciliation and (2) provide information on income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, although early adoption is permitted. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. The Company has adopted this ASU 2023-09 on our consolidated financial statements and disclosures for the annual period ending April 30, 2026 on a prospective basis.
In November 2024, the FASB issued ASU No. 2024-3, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU improves the disclosures about a public business entity’s expenses and addresses requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating what the potential impact of adopting this ASU 2024-03 could have on our consolidated financial statements and disclosures
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ASU 2025-05. ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after March 17, 2026, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. We are currently evaluating the potential impact of adopting ASU 2025-05 on our consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes certain aspects of the accounting for, and disclosure of, internal-use software costs. The ASU removes all references to software development project stages so that the guidance is neutral to different software development methods and clarifies the threshold entities apply to begin capitalizing costs. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) which is intended to streamline the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on the Company’s consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are listed in Item 15 - “Exhibits and Financial Statement Schedules” of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On July 6, 2026, Terence J. Cryan, then Chairman of the Board, terminated his Rule 10b5-1 trading arrangement which had been adopted as of October 15, 2025.
No other director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 105-1 trading arrangements as each term is defined in Item 408(a) of Regulation S-K.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls based upon the framework presented in “Internal Control-Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of April 30, 2026.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that the Company had an entity level material weakness in the application of the COSO framework which led to the following material weaknesses:
| ● | The Company did not design and maintain effective controls over the identification, evaluation, valuation and accounting for complex and/or non-routine transactions, including transactions related to revenue recognition and convertible debt agreements. Specifically, the Company did not design and maintain effective controls to ensure that complex and/or non-routine transactions were appropriately identified, evaluated, valued and accounted for in accordance with generally accepted accounting principles in the United States. | |
| ● | The Company did not design and maintain effective controls over the completeness and accuracy of key data elements and system-generated reports derived from our inventory management system used in financial reporting. Specifically, the Company did not design and maintain effective controls related to inventory movements to validate inventory aging, and consequently, there were insufficient controls over the completeness and accuracy of key data elements used in evaluating the appropriateness of the valuation of inventory. |
When the deficiencies identified within each of the above areas are considered in the aggregate, these deficiencies rise to the level of material weaknesses. These material weaknesses did not result in a material misstatement to our annual or interim financial statements. As the business grows, new processes and procedures will need to be implemented. We are continuing our remediation plan and are in the process of implementing measures designed to improve internal control over financial reporting to remediate the control deficiencies that led to our material weaknesses. This includes, among other things, reviewing the need for additional resources as well as ensuring personnel possess or obtain appropriate expertise to perform specific reviews of technical areas, and designing and implementing improved processes.
Notwithstanding the identified material weaknesses, management believes that the financial statements and related financial information included in this Form 10-K fairly present, in all material respects, our balance sheets, statements of operations, statements of changes in stockholders’ equity (deficit) and statements of cash flows as of and for the periods presented.
Remediation of the Material Weaknesses in Internal Control over Financial Reporting
We are committed to establishing and maintaining a strong internal control environment. We will continue to assess the effectiveness of our internal control over financial reporting and implement measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated as soon as possible. In light of the identified material weaknesses in internal control over financial reporting, management intends to enhance its controls period-end close processes, including identification of complex, non-routine transactions. These enhancements will include strengthening review procedures, increasing the level of precision applied in account analyses, and ensuring timely preparation and review of technical accounting memorandums by experienced members of the accounting team, including senior leadership.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended April 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
Our Board is currently composed of five highly qualified and experienced directors, three of whom are independent. All of the directors bring to our Board of Directors executive leadership experience from their service as executives and/or directors of our Company and/or other entities. Collectively, our directors possess a broad and diverse set of skills and experiences, including in the energy, maritime, marine data acquisition and government sectors as well as the areas of engineering design, manufacturing, operations, government contracting and procurement, information technology, cybersecurity, environment and sustainability, finance, governance, mergers and acquisitions, capital markets, capital allocation, capital structure, risk management, and strategic planning. On July 20, 2026, Terence J. Cryan notified our Board of Directors of his decision to retire from our Board of Directors, effective immediately. The Board and the Company are grateful for Mr. Cryan’s dedication and contributions to the Company during his 14 year tenure as Chairman of the Board and a director.
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The biography of each director contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes, and skills that caused the Nominating and Corporate Governance Committee and our Board of Directors to determine that the person should serve as a director, given our business and structure.
| Name | Age | Position(s) with the Company | Served
as Director From | |||
| Joseph A. “Digger” DiGuardo, Jr. | 58 | Acting Chairman of the Board | 2026 | |||
| Philipp Stratmann | 47 | President, Chief Executive Officer, and Director | 2021 | |||
| Clyde W. Hewlett | 71 | Independent Director | 2020 | |||
| Corliss J. Montesi | 62 | Independent Director | 2026 | |||
| Jim Thompson | 71 | Independent Director | 2026 |
Joseph A. “Digger” DiGuardo, Jr. has been a member of our Board of Directors and Acting Chairman since July 2026. Mr. DiGuardo is a highly accomplished senior executive leader with over three decades of distinguished service in national security, counterterrorism, and counter-proliferation. As a retired Rear Admiral in the U.S. Navy, Mr. DiGuardo culminated his military career leading the Navy Expeditionary Combat Command (NECC), overseeing 20,000 active and reserve personnel and a budget of $2.1B annually. His leadership spanned complex, high-risk operations, including special operations to Counter Weapons of Mass Destruction (CWMD) mission, Counter Terrorism, Navy Expeditionary Operations and Fleet support worldwide. Prior to that he was the Director, U.S. Special Operations Command (USSOCOM J10) Countering Weapons of Mass Destruction (CWMD) Directorate and the DoD CWMD Coordinating Authority with responsibility to plan, assess, and recommend global CWMD priorities aligned to National Defense Strategy and coordinate with U.S. Government and Foreign Agencies to disrupt state and non- state proliferation and terrorism.
Currently, Mr. DiGuardo is the Principal of DiggerWorks Consulting, where he advises clients and Boards of Directors on National Security Strategy and Policy, Unmanned Systems, Technology Integration, Counter WMD, Counter Proliferation/Non Proliferation and U.S. Government priorities. He is an Executive Director at the Nevada National Security Sites (NNSS), a National Laboratory under the Department of Energy. He also serves as a Fellow at the American College of National Security Leaders (ACNSL), responding to questions directly from the National Security Council (NSC) and is the Warfare Chair of the Undersea Warfare Academic Group at the Naval Postgraduate School, further contributing to national security thought leadership and academia.
Philipp Stratmann has served as our President, Chief Executive Officer, and a member of our Board of Directors since June 2021. Prior to this, Mr. Stratmann served as Vice President – Global Business Development of the Company since 2019. Prior to that, he was Vice President, Biofuels for Velocys, which he joined in 2015 as Business Development Director. He previously served as General Manager Global Development and West Africa for InterMoor and has held leadership positions with Acteon Group and Ernst & Young, in addition to experience with VT Group and Shell. He is a graduate of the United Kingdom’s University of Southampton, where he received his Engineering Doctorate and his Master of Engineering degree in Ship Science. He also served in the German Navy in 2001 and 2002, in roles including as an instructor in naval engineering. We believe Mr. Stratmann’s significant leadership experience in the energy and maritime industries qualifies him to serve on our Board of Directors.
Clyde W. Hewlett has served on the Board of Directors since December 2020. Mr. Hewlett has over 40 years of experience in offshore engineering design, manufacturing, and operations. Mr. Hewlett has served on the Board of Directors of Seismic City, Inc. since April 2000. From 2015 until 2019, Mr. Hewlett served as Chief Operating Officer (COO) of Oceaneering International, Inc., a global provider of engineered services and products to the offshore energy industry as well as the defense, entertainment, and aerospace industries. Prior to his service as COO, Mr. Hewlett was the Senior Vice President for Projects (from 2007 to 2015) and a Vice President and Project Manager (1988 to 2007) with Oceaneering International, Inc. Prior to joining Oceaneering, Mr. Hewlett worked as in various project engineering and project management roles with Vetco Gray, Inc. (from 1987 to 1988), with Hughes Offshore (from 1985 to 1987), with CanOcean Resources, Ltd. (from 1979 to 1984) and with Esso Canada (from 1978 to 1979). Mr. Hewlett obtained his Bachelor of Engineering in Mechanical Engineering from Memorial University of Newfoundland, Canada in 1978. We believe that Mr. Hewlett’s significant engineering, manufacturing and operational experience in the offshore environment qualifies him to serve on our Board of Directors.
Corliss J. Montesi has served as a member of the Board of Directors since January 2026. She brings more than 35 years of experience in accounting, finance, audit, risk management, and corporate governance across leading aerospace, defense, and industrial companies. Ms. Montesi is a certified public accountant (inactive) and qualified financial expert and has held senior leadership positions including Principal Accounting Officer and Chief Audit Executive of L3Harris Technologies, Chief Audit Executive of United Technologies Corporation, and Chief Financial Officer of Sikorsky Aerospace Services, a $2.5 billion business unit. She has more than 24 years of experience serving in finance vice president roles within Fortune 250 companies. In addition, Ms. Montesi has extensive public company governance experience, including more than 15 years advising audit committees on financial reporting, internal controls, enterprise risk management, cybersecurity oversight, and regulatory compliance. She has also led strategic acquisitions, divestitures, post-merger integrations, and large-scale business transformation initiatives. Ms. Montesi holds an M.B.A. in Finance from the University of Bridgeport and a B.S. in Accounting from the University of Connecticut. She is a member of the University of Connecticut School of Business Hall of Fame. The Board believes Ms. Montesi’s extensive financial leadership, accounting expertise, and governance experience qualify her to serve as a director of the Company.
Jim Thompson has served as a member of the Board of Directors since January 2026. He brings more than 20 years of executive leadership experience in the global energy sector, including senior roles with Fortune 500 multinational companies operating across energy, power, and renewable energy markets. Mr. Thompson currently serves as a partner in an executive search firm, where he specializes in recruiting senior executives and board members for companies in the energy and natural resources, infrastructure, manufacturing, transportation and logistics, and renewable and clean technology sectors. Through this work, he has developed extensive insight into leadership development, talent strategy, and corporate governance. Mr. Thompson holds a Bachelor of Engineering in Electrical Engineering from Texas A&M University. The Board believes Mr. Thompson’s extensive experience in the international energy industry, renewable energy markets, executive leadership, and talent management qualifies him to serve as a director of the Company.
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Executive Officers
We have two executive officers who are not directors:
| Name | Age | Position(s) with the Company | ||
| Robert Powers | 55 | Senior Vice President & Chief Financial Officer | ||
| Tracy Pagliara | 63 | Senior Vice President General Counsel & Corporate Secretary |
Robert Powers joined OPT in December 2021 with more than 25 years of experience providing domestic and international leadership to entrepreneurial, privately owned, and founder-led companies, as well as SEC registrants and private equity backed companies. Prior to OPT, Bob was CFO of Constellation Advisors, a private equity-owned provider of outsourced back-office operations and compliance services. He has held financial leadership roles with Sterling Talent Solutions, Wood Group PPS – a division of Wood Group, GTE, SABIC Innovative Plastics, and Plug Power. He has also provided financial consulting services to various companies. Bob began his career at PricewaterhouseCoopers, LLP. He received a Bachelor of Science in Accounting degree from Fordham University and an MBA in Business Administration from Rensselaer Polytechnic Institute and he is a Certified Public Accountant.
Tracy D. Pagliara was appointed Senior Vice President, General Counsel and Corporate Secretary in January 2025. Prior to joining OPT, he served as President and CEO of Williams Industrial Services Group Inc. (formerly known as Global Power Equipment Group, Inc.), a publicly traded provider of construction and maintenance services to power, energy and industrial customers. He also served as Senior Vice President, Administration (2017-2018) and as General Counsel, Secretary and Vice President, Business Development (2010-2017) at Williams Industrial Group. Prior to joining Williams, Mr. Pagliara served as the Chief Legal Officer of Gardner Denver, Inc., a leading publicly traded global manufacturer of highly engineered compressors, blowers, pumps and other fluid transfer equipment. He also had responsibility for other roles during his tenure with Gardner Denver, including Executive Vice President of Administration, Chief Compliance Officer, and Corporate Secretary. Prior to joining Gardner Denver, Mr. Pagliara held positions of increasing responsibility in the legal departments of Verizon Communications/GTE Corporation and Kellwood Company, ultimately serving in the role of Assistant General Counsel for each company. Mr. Pagliara has a B.S. in Accounting and a J.D. from the University of Illinois. He is a member of the Missouri and Illinois State Bars and a Certified Public Accountant.
Audit Committee
At April 30, 2026, the members of our Audit Committee were Corliss J. Montesi, Jim Thompson, and Terence Cryan. Ms. Montesi is the chair of the Audit Committee. The Board of Directors has determined that Ms. Montesi is an “audit committee financial expert” within the meaning of the regulations of the Securities and Exchange Commission (the “SEC”). The Audit Committee met 5 times in fiscal 2026. Our Board has also determined that all Audit Committee members meet the independence requirements contemplated by 303A.02 of the NYSE American Rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Our Audit Committee assists our Board of Directors in its oversight of the integrity of our consolidated financial statements, our independent registered public accounting firm’s qualifications, independence, and performance.
Our Audit Committee’s responsibilities include: appointing, approving the compensation of, and assessing the independence of, our independent registered public accounting firm; overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from our independent registered public accounting firm; reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly consolidated financial statements and related disclosures; recommending to the Board whether the Company’s audited financial statements be included in our Annual Report on Form 10-K; monitoring our internal controls over financial reporting, disclosure controls and procedures and corporate code of business conduct and ethics; establishing procedures for the receipt and retention of accounting related complaints and concerns; reviewing related party transaction; ratifying the charter of our disclosure controls committee; reviewing and assessing management risk assessment and risk management; meeting independently with our independent registered public accounting firm, our internal audit services firm, and management; and preparing the Audit Committee report required by SEC regulations.
Corporate Governance
Our Board of Directors believes that good corporate governance is important to ensure that the Company is managed for the long-term benefit of our shareholders. Complete copies of our corporate governance guidelines, committee charters and corporate code of business conduct and ethics are available on the corporate governance section of our website, www.oceanpowertechnologies.com. Alternatively, you can request a copy of any of these documents by writing to our Secretary at 28 Engelhard Drive, Suite B, Monroe Township, NJ 08831.
Code of Ethics
We have adopted a corporate code of business conduct and ethics that applies to our employees, officers (including our principal executive officer and principal financial officer) and independent directors. The corporate code of business conduct and ethics is posted on our corporate website at Corporate Governance | Ocean Power Technologies and can also be obtained free of charge by sending a request to our Secretary at 28 Engelhard Drive, Suite B, Monroe Township, NJ 08831. Any changes to or waivers under the corporate code of business conduct and ethics as it relates to our chief executive officer, chief financial officer, chief commercial officer, controller, or persons performing similar functions must be approved by our Board of Directors and will be disclosed in a Current Report on Form 8-K within four business days of the change or waiver.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder, our executive officers and directors are required to file with the SEC reports of ownership and changes in ownership of Common Stock. Copies of such reports are required to be furnished to us. Based solely on a review of the copies of such reports furnished to us, or written representations that no other reports were required, we believe that all required reports were filed in a timely manner during the year ended April 30, 2026.
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DIRECTOR COMPENSATION
We have structured our Board compensation to have an equity component to align the interests of our directors with the interests of our shareholders. For Board service during fiscal year 2026, the Board of Directors approved, for each non-employee director, an annual base compensation consisting of a cash payment of $70,000 and restricted share units (RSU) representing a value of $75,000. Each non-employee director also receives a per annum supplement ranging from $8,000 to $30,000 in cash for each committee that they belong to or chair and an additional RSU grant based upon committee membership. In addition, the Chairman of the Board annually receives an additional $75,000 in cash. Finally, for fiscal year 2026 each non-employee director received a one-time RSU grant. See the table below for a summary of total cash and equity compensation for fiscal 2026.
We reimburse each non-employee director for out-of-pocket expenses incurred in connection with attending our Board and Board committee meetings. Compensation for our directors, including cash and equity compensation, is determined, and remains subject to adjustment, by the Nominating and Corporate Governance Committee of our Board of Directors.
The following table summarizes compensation paid to each of our non-employee directors who served during fiscal year 2026.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Stock Awards (#) | Option Awards ($) | Total ($) | |||||||||||||||
| Terence J. Cryan (Former) | $ | 202,000 | $ | 181,427 | 377,973 | $ | — | $ | 383,427 | |||||||||||
| Clyde W. Hewlett | $ | 92,634 | $ | 72,571 | 151,189 | $ | — | $ | 165,205 | |||||||||||
| Corliss J. Montesi | $ | 28,452 | $ | 72,571 | 151,189 | $ | — | $ | 101,023 | |||||||||||
| Jim Thompson | $ | 23,710 | $ | 72,571 | 151,189 | $ | — | $ | 96,281 | |||||||||||
| Diana G. Purcel (Former) | $ | 85,753 | $ | — | — | $ | — | $ | 85,753 | |||||||||||
| Peter E. Slaiby (Former) | $ | 81,317 | $ | — | — | $ | — | $ | 81,317 | |||||||||||
ITEM 11. EXECUTIVE COMPENSATION
Our Compensation Committee is responsible for overseeing the compensation of our named executive officers (NEOs), including the design, review, approval, and implementation of all compensation programs. The goal of the Compensation Committee is to ensure that our compensation practices are aligned with our business strategies and objectives and that the total compensation paid to each of our named executive officers is fair, reasonable, and competitive. During fiscal year 2026 our Company had four NEOs: (1) the President and CEO; (2) the Senior Vice President and CFO, (3) the Secretary and General Counsel, and (4) the Chief Commercial Officer (no longer employed as of June 2025).
The Compensation Committee is composed entirely of independent, non-management members of the Board. Each member of the Compensation Committee is both a “non-employee director” within the meaning of Rule 16b3 of the Exchange Act, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code. No Compensation Committee member participates in any of the Company’s employee compensation programs. Each year the Company reviews any and all relationships that each director has with the Company, and the Board subsequently reviews these findings. The responsibilities of the Compensation Committee, as stated in its charter, include the following:
| ● | review and make such recommendations to the Board as the Compensation Committee deems advisable with regard to all incentive-based compensation plans and equity-based plans; |
| ● | review and approve the corporate goals and objectives that may be relevant to the compensation of NEOs; |
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| ● | evaluate the performance of the NEOs in light of the goals and objectives that were set and determine and approve the compensation of the NEOs based on such evaluation; and |
| ● | review and approve the recommendations of the CEO with regard to the compensation of all officers of the Company other than the CEO. |
The full Board of Directors also conducts an annual evaluation of the CEO, which is designed to help assess the CEO’s performance against established goals and objectives and provide additional feedback for the Compensation Committee.
Stock Ownership and Holding Guidelines Policy
At the recommendation of the Nominating and Corporate Governance Committee, during fiscal 2024, the Board amended its stock ownership and holding guidelines for all NEOs and all independent directors. The guidelines are designed to increase stock ownership over time and thereby align their interests with the interests of shareholders. For the CEO, the guidelines now provide for the achievement of stock ownership of 5 times base salary over a period of 5 years. For the CFO and SVP General Counsel, the guidelines now provide for the achievement of stock ownership of 3 times base salary over a period of 5 years. For the independent directors, the guidelines now provide for the achievement of stock ownership of one times the annual cash retainer for each full year of service over a period of 5 years.
Compensation Clawback Policy
In 2023, the Board adopted a Compensation Clawback Policy which is compliant with the requirements of the NYSE American and the SEC. Under the policy, if OPT is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, OPT could determine to recover from any current or former executive officers incentive-based compensation that was erroneously awarded during the three years preceding the date such a restatement was required. The recoverable amount is the amount of incentive-based compensation received in excess of the amount that otherwise would have been received had it been determined based on the restated financial measure. This would apply even if the executive officer did not engage in any misconduct or had no responsibility for the errors. The Compensation Committee has the full and final authority to make all determinations under this policy.
Compensation Objectives and Philosophy
The Company’s compensation program is centered around a philosophy that focuses on aligning the interests of our management with those of our shareholders, retention of key personnel, and pay-for-performance compensation. The Company believes this philosophy allows the Company to compensate its executive officers competitively, while simultaneously ensuring support of its strategy and continued development and achievement of key business goals. The Compensation Committee firmly believes that a pay-for-performance philosophy should recognize both short- and long-term performance and should include both cash and equity compensation arrangements that are supported by strong corporate governance, including active and effective oversight by the Compensation Committee.
Our compensation programs are intended to reward executives for the achievement of specified predetermined quantitative and qualitative goals aligned with the interests of shareholders and designed to increase shareholder value. Our compensation programs are also designed to attract and retain qualified executives and reward them for attaining superior short-term and long-term performance.
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Total Compensation Program Elements and Relationship to Performance
Key elements of these programs include:
| ● | Base salary that is fixed cash compensation designed to reward annual achievements, with consideration given to the executive’s qualifications, scope of responsibility, leadership abilities and management experience and effectiveness; |
| ● | Short-term incentive (STI) programs that provide yearly cash bonus awards, where warranted, designed to incentivize, and reward executives for executing against predetermined business objectives with demonstrated performance; and |
| ● | Long-term incentive (LTI) programs that provide equity-based incentive compensation, over a multi-year period, which further align executive and shareholder interests. Grants prior to and including fiscal year 2022 had been primarily in the form of Non-qualified Stock Options (NQSOs). Beginning with fiscal year 2023, NEOs have received equity grants in the form of Restricted, Stock Units (RSUs) instead of NQSOs. For fiscal year 2026 and beyond, our intention is for NEOs to continue to receive equity grants in the form of RSUs. The value of LTI compensation is based upon the market value of our common stock that requires continued service, with the majority of the vesting criteria tied to the attainment of certain performance goals. |
Determining and Setting Executive Compensation
The Compensation Committee works closely with key members of management to set the compensation for the Company’s non-NEO executives. Under direction by, and oversight from, the Compensation Committee, management develops recommendations for the Company’s compensation plans by utilizing market data sourced from publicly available compensation sources. This includes reputable on-line compensation surveys for comparable executive positions that review a broad selection of national and regional companies, which the Company believes it may compete with for executive talent. These companies are considered to be comparable to the Company in terms of public ownership, organizational structure, size, and stage of development. The Compensation Committee reviews the results of any compensation analyses, and recommendations by management are reviewed with and approved by the Compensation Committee annually; however, if the Company becomes aware within the year that a market adjustment is required based on market or other data, the Compensation Committee can make changes as necessary. The Compensation Committee targets compensation for our executives within a competitive range, generally at the market 50th percentile. Other considerations, including the unique nature of our business, the experience level of an executive, performance, tenure, and other market and/or relevant factors may dictate variations to this general target.
In addition to traditional benchmarking metrics, such as product sales, revenue and profits, the additional factors the Compensation Committee typically considers when determining the STI and LTI compensation of our NEOs’ compensation include:
| ● | key product and solution development initiatives; | |
| ● | technology advancements; | |
| ● | achievement of commercial milestones; | |
| ● | establishment and maintenance of key strategic relationships; | |
| ● | implementation of appropriate financing strategies; | |
| ● | financial and operation performance; | |
| ● | safety performance; and | |
| ● | compliance with international quality and operational standards, including ISO certification and audits. |
Results of Recent Annual Meeting Votes on Executive Compensation
The results of the voting on the executive compensation proposals at our last three Annual Meetings of Shareholders is presented in the following table.
| For | Against | Abstain | ||||||||||
| 2025 Annual Meeting | 74 | % | 23 | % | 3 | % | ||||||
| 2024 Annual Meeting | 86 | % | 12 | % | 3 | % | ||||||
| 2023 Annual Meeting | 63 | % | 31 | % | 6 | % | ||||||
The Board and Compensation Committee continue to focus on driving NEO performance against specific goals and ensuring that the interests of management and shareholders are aligned properly. Accordingly, as part of our governance processes, we continually review our incentive programs, including equity vehicles that better align with our shareholders, in addition to our governance policies.
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LTI Goals
Beginning in January 2022, the Company revised its LTI program under which executive officers, vice presidents, and certain other senior employees received restricted stock units (“RSUs”), while other employees received non-qualified stock options (“NQSOs”). The RSUs were subject to both time-based and performance-based vesting, with performance measured using absolute and relative total shareholder return (“TSR”) metrics. The NQSOs generally vested based on continued service.
Effective January 2024, the Compensation Committee approved a revised LTI program under which employees receive RSUs that combine time-based vesting with performance-based vesting. The performance-based component is tied to the achievement of strategic operational objectives established by the Compensation Committee, including specified operational milestones and contracted bookings goals, and also includes an opportunity to earn a supplemental equity award based on the achievement of positive annual TSR. The Compensation Committee reviews and certifies the achievement of the applicable performance objectives in accordance with the terms of the program.
In January 2025 the Company granted RSUs to all employees subject to the following vesting criteria and continued employment on the applicable vesting dates:
| i. | One-third of the RSUs shall vest equally over time |
| ii. | One-third of the RSUs shall vest over time based upon achieving and maintaining ISO certification. Progress will be determined by OPT’s Compensation Committee. |
| iii. | One-third of the RSUs shall vest over time based upon the achievement of cumulative contracted bookings and progress will be determined by OPT’s Compensation Committee. |
| iv. | Bonus: Upon achieving positive TSR for the fiscal years ending January 31, 2026, 2027, and 2028, respectively, an additional 10% of the shares initially awarded on January 16, 2025, will be granted. The assessment will be conducted annually, with shares vesting immediately upon such determination. The cumulative total award is capped at 30% of the shares initially granted. |
In January 2026 the Company granted RSUs to all employees subject to the following vesting criteria and continued employment on the applicable vesting dates:
| i. | One-third of the RSUs shall vest equally over time |
| ii. | One-sixth of the RSUs shall vest over time based upon achieving and maintaining ISO certification. Progress will be determined by OPT’s Compensation Committee. |
iii. |
One-sixth of the RSUs shall vest over time based upon the achievement of Executive Reliability Index and progress will be determined by OPT’s Compensation Committee. |
| iv. | One-third of the RSUs shall vest over time based upon the achievement of cumulative contracted bookings and progress will be determined by OPT’s Compensation Committee. |
| v. | Bonus: Upon achieving positive TSR for the fiscal years ending January 31, 2026, 2027, and 2028, respectively, an additional 10% of the shares initially awarded on January 16, 2025, will be granted. The assessment will be conducted annually, with shares vesting immediately upon such determination. The cumulative total award is capped at 30% of the shares initially granted. |
STI Goals for Fiscal Year 2025
In its July 2024 meeting, the Compensation Committee developed objectives for the STI plan for’ the NEOs for fiscal year 2025. The Compensation Committee established objectives across two main categories; financial performance and safety and quality performance as reflected in the following table. Management also identified specific measurement criteria which was approved by the Compensation Committee.
| Category | Metric | Measurement | Target Points | |||||
| Financial | New Bookings | $18M new bookings = 100% of target points. No points awarded <$13.5M | 30 | |||||
| Financial | Revenue | $12.5M = 100% of target points. No points awarded <$9.38M | 40 | |||||
| Financial | Adjusted Operating Income | $10M operating loss = 100% of target points. No points awarded if operating loss >$12.5M | 15 | |||||
| Safety and Quality | Proactive Measures Implementation | 5 | ||||||
| Safety and Quality | Total Recordable Incident Rate | 10 | ||||||
| Total | 100 | |||||||
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STI Goals for Fiscal Year 2026
In its May 2025 meeting, the Compensation Committee also developed objectives for the STI plan for the NEOs for fiscal year 2026. The Compensation Committee established objectives across two main categories; financial performance and safety and quality performance as reflected in the following table. Management also identified specific measurement criteria which was approved by the Compensation Committee.
| Category | Metric | Measurement | Target Points | |||||
| Finance | New Bookings | $24M new bookings = 100% of target points. | 25 | |||||
| Finance | Revenues | $24M revenues = 100% of target points. | 20 | |||||
| Finance | Adjusted* EBITDA | $(7)M = 100% of target points | 15 | |||||
| Development | Advanced Autonomy and Resiliency | 15 | ||||||
| Development | Docking and Charging | 10 | ||||||
| Safety and Quality | Proactive Measures Implementation | 5 | ||||||
| TRIR | 10 | |||||||
| Total Points | 100 | |||||||
Compensation Considerations and Decisions for Fiscal Year 2026/2027
In May and July 2026, the Compensation Committee held meetings to address management’s recommendation for fiscal year 2027 in terms of salary changes and the fiscal year 2026 STI bonus pool. The Compensation Committee assessment included a review of the Company’s scorecard for the fiscal year 2026. The Compensation Committee determined that the overall performance of the Company in terms of meeting the targets for the fiscal year included in the scorecard had resulted in the attainment of 82 points out of a total 100 possible points. Accordingly, based upon the formula noted above, the business portion of the bonus was earned at the rate of 64% of target bonus for the majority of the Company’s eligible employees. A small number of employees received 100% of their target bonus based upon outstanding performance.
Considering the overall performance of the Company for the fiscal year, and particularly the performance reviews of high performing individuals within the staff, the Compensation Committee approved management’s recommendation for the STI pool for the fiscal year, and the STI pool resulted in a total of approximately $1,060,000 in bonus awards across the Company. Non-NEO employees received pay increases averaging approximately 3.5% for fiscal 2027.
In terms of NEOs compensation and STI bonus, the Compensation Committee approved that the NEOs receive 64% of their respective target bonuses for fiscal year 2026, and pay increases of 0% would be granted for fiscal year 20267
STI Goals for Fiscal Year 2027
In its May 2026 meeting, the Compensation Committee also developed objectives for the STI plan for the NEOs for fiscal year 2027. The Compensation Committee established objectives across two main categories; financial performance and safety and quality performance as reflected in the following table. Management also identified specific measurement criteria which was approved by the Compensation Committee.
| Category | Metric | Measurement | Target Points | |||||
| Finance | New Bookings | $35M new bookings = 100% of target points. | 25 | |||||
| Finance | Revenues | $18M revenues = 100% of target points. | 20 | |||||
| Development | Docking and charging available for sale | 20 | ||||||
| Development | Propulsion and Endurance enhancements | |||||||
| Development | Buoy Battery and Power System | |||||||
| Operations | MRE 22 available for sale | 20 | ||||||
| Operations | Manufacturing Scalability | |||||||
| Operations | Diverless Mooring System | |||||||
| Safety and Quality | Proactive Measures Implementation | 5 | ||||||
| TRIR | 10 | |||||||
| Total Points | 100 | |||||||
| 51 |
Summary Compensation Table
The following table sets forth the compensation awarded to, earned by, or paid by us during the fiscal years ended April 30, 2026, and 2025 to our named executive officers.
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Option Awards ($) (4) | All Other Compensation ($) (5) | Total ($) | |||||||||||||||||||||
| Philipp Stratmann | 2026 | $ | 385,491 | $ | 144,615 | $ | 1,508,727 | $ | — | $ | 17,325 | $ | 2,056,158 | |||||||||||||||
| President and Chief Executive Officer | 2025 | $ | 374,291 | $ | 125,753 | $ | 5,437,530 | $ | — | $ | 16,831 | $ | 5,954,405 | |||||||||||||||
| Robert Powers | 2026 | $ | 311,820 | $ | 77,985 | $ | 800,180 | $ | — | $ | 18,685 | $ | 1,208,670 | |||||||||||||||
| Senior Vice President and Chief Financial Officer | 2025 | $ | 306,551 | $ | 67,813 | $ | 2,409,089 | $ | — | $ | 18,153 | $ | 2,801,606 | |||||||||||||||
| Tracy Pagliara | 2026 | $ | 300,000 | $ | 75,000 | $ | 850,340 | — | $ | 3,923 | $ | 1,229,263 | ||||||||||||||||
| Senior Vice President, General Counsel, & Corporate Secretary | 2025 | $ | 86,539 | $ | 33,750 | $ | 2,611,106 | — | $ | — | $ | 2,731,395 | ||||||||||||||||
(1) Salary represents actual salary earned during each fiscal year. The amounts in this column may be different from the amounts listed below under description of employment agreements due to increases in salary levels and mid-year hire dates.
(2) This amount represents bonuses earned by the named executive officers for fiscal years 2026 and 2025. For fiscal year 2026 and 2025 the Compensation Committee awarded bonuses in accordance with performance results.
(3) The amounts in the “Stock Awards” column are subject to the vesting criteria described above and reflect the aggregate grant date fair value of restricted stock units granted during the year computed in accordance with the provisions of ASC No. 718, “Compensation- Stock Compensation.” The assumptions used in calculating these amounts are incorporated by reference to Note 11 to the financial statements.
(4) The amounts in the “Option Awards” column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the provisions of Accounting Standards Codification (ASC) No. 718, “Compensation- Stock Compensation.” The assumptions used in calculating these amounts are incorporated by reference to Note 11 to the financial statements.
(5) All amounts in fiscal 2026 and 2025 were related to the Company’s matching contributions to the 401(K) Plan.
| 52 |
Employment Agreements
Philipp Stratmann – President, Chief Executive Officer, and Director
Effective June 18, 2021, in connection with his appointment as Chief Executive Officer and President, Mr. Stratmann entered into an Employment Agreement with the Company. Pursuant to the Employment Agreement Mr. Stratmann is eligible for an annual, discretionary, performance-based bonus targeted at 75% of base salary on such terms and conditions as may be determined by the Board or its Compensation Committee, and is eligible to receive long-term incentive equity based awards, pursuant to the Company’s 2015 Omnibus Incentive Plan, as amended (the “2015 Plan”), subject to such terms and conditions as may be determined by the Board or its Compensation Committee. Mr. Stratmann will receive an annual base salary of $385,641 for fiscal year 2026.
If he is terminated other than for cause, he will receive 12 months of salary as severance. Mr. Stratmann is also subject to covenants regarding non-competition, non-solicitation, and confidentiality.
Robert Powers - Senior Vice President and Chief Financial Officer
Effective December 13, 2021, in connection with his appointment as Senior Vice President and Chief Financial Officer, Mr. Powers entered into an Employment Agreement with the Company. Pursuant to the Employment Agreement, Mr. Powers is eligible for an annual, discretionary, performance-based bonus targeted at 50% of base salary on such terms and conditions as may be determined by the Board or its Compensation Committee, and is eligible to receive long-term incentive equity-based awards, pursuant to the 2015 Plan, subject to such terms and conditions as may be determined by the Board or its Compensation Committee. Mr. Powers will receive an annual base salary of $311,941 for fiscal 2026.
If Mr. Powers is terminated other than for cause (or Mr. Powers quits for good reason), he will receive six months of salary as severance. Mr. Powers is also subject to covenants regarding non-competition, non-solicitation, and confidentiality.
Tracy Pagliara – Senior Vice President General Counsel & Corporate Secretary
Effective January 16, 2025, in connection with his appointment as Senior Vice President, General Counsel & Corporate Secretary, Mr. Pagliara entered into an Employment Agreement with the Company. Pursuant to the Employment Agreement, Mr. Pagliara will receive an annual base salary of $300,000, is eligible for an annual, discretionary, performance-based bonus targeted at 50% of base salary on such terms and conditions as may be determined by the Board or the Compensation Committee, and is eligible to receive long-term incentive equity based awards, pursuant to the 2015 Plan, subject to such terms and conditions as may be determined by the Board or its Compensation Committee. At the time of signing the Employment Agreement, he received a one-time grant of 75,000 restricted stock units under the 2015 Plan that vest, if at all, over two years, 1/4 on each of the first and second anniversary of the date of grant, and 1/4 in each year based on achievement of certain performance targets.
If Mr. Pagliara is terminated other than for cause (or Mr. Pagliara quits for good reason), he will receive three months of salary as severance if that occurs prior to January 2026 and then six months thereafter. He is also entitled to certain other severance payments in connection with a change of control or non-renewal of the Employment Agreement. Mr. Pagliara is also subject to covenants regarding non-competition, non-solicitation and confidentiality.
We do not include employment agreement information for Mr. Burdyny as he is not currently employed by the Company.
| 53 |
2026 Outstanding Equity Awards at Fiscal Year End Table
The following table contains certain information regarding equity awards held by the named executive officers as of April 30, 2026:
| Option Awards | Stock Awards | |||||||||||||||||||||||
Name and Principal Position | Numbers of Shares Underlying Unexercised Options (#) Exercisable | Numbers of Shares Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number
of Shares | Market
Value of | ||||||||||||||||||
| Philipp Stratmann | 9,333 | — | $ | 2.93 | 1/14/2031 | (1) | ||||||||||||||||||
| President and Chief Executive Officer | 7,369,616 | (2) | $ | 2,662,642 | ||||||||||||||||||||
| Robert Powers | — | — | — | — | 3,568,469 | (3) | $ | 1,289,288 | ||||||||||||||||
| Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||
| Tracy Pagliara | — | — | — | — | 3,539,599 | (4) | $ | 1,278,857 | ||||||||||||||||
| Senior Vice President, General Counsel, & Corporate Secretary | ||||||||||||||||||||||||
(1) Represents stock options granted January 14, 2021 relating to an aggregate of 9,333 shares which vest over a two-year period based on service requirements.
(2) Represents restricted stock units, with market based conditions, (A) granted on February 1, 2024 relating to an aggregate 300,483 shares which vest over a three-year period when certain market price and performance targets are met, (B) granted on January 16, 2025 relating to an aggregate 3,925,951 shares which vest over a three-year period when certain market price and performance targets are met, and (C) granted on January 31, 2026 relating to an aggregate 3,143,182 shares which vest over a three-year period when certain market price and performance targets are met.
(3) Represents restricted stock units, with market based conditions, (A) granted on February 1, 2024 relating to an aggregate 162,040 shares which vest over a three-year period when certain market price and performance targets are met, (B) granted on January 16, 2025 relating to an aggregate 1,739,387 shares which vest over a three-year period when certain market price and performance targets are met, and (C) granted on January 31, 2026 relating to an aggregate 1,667,042 shares which vest over a three-year period when certain market price and performance targets are met.
| 54 |
(4) Represents restricted stock units, with market based conditions, (A) granted on December 1, 2025 relating to an aggregate 37,500 shares which vest over a three-year period when certain market price and performance targets are met, (B) granted on January 16, 2025 relating to an aggregate 1,885,245 shares which vest over a three-year period when certain market price and performance targets are met, and (C) granted on January 31, 2026 relating to an aggregate 1,616,854 shares which vest over a three-year period when certain market price and performance targets are met.
Potential Payments upon Termination of Employment or Change in Control
The following information sets forth the terms of potential payments to each of our named executive officers in the event of a termination of employment. The terms cause, good reason and change of control have the meanings given such terms in the executive’s employment agreement. We do not include information regarding Mr. DiPietro or Mr. Burdyny as neither of them is currently employed by the Company.
Termination by Company without Cause; Termination by Executive for Good Reason. Our employment agreement with each of Messer’s. Stratmann, Powers and Pagliara provide, upon the termination of employment other than for cause, or if terminated for good reason, that they have the right to receive severance payments of twelve months of base salary (for Mr. Stratmann) or six months of base salary (for Mr. Powers and Mr. Pagliara).
Termination by Company for Cause; Termination by Executive without Good Reason. Neither Messrs. Stratmann Pagliara nor Powers are entitled to any benefits in the event of a termination by the Company for cause or by the executive without good reason.
Change in Control. The agreements for Mr. Stratmann, Mr. Powers, and Mr. Pagliara include a double trigger severance clause. In the event of a termination by the Company in connection with a change of control, or by the executive within 90 days of a change of control, the employment agreements for Mr. Stratmann, Mr. Powers, and Mr. Pagliara provide for a payment of twelve, three, and three months, respectively, of base salary. The restricted stock unit agreement provides for accelerated stock vesting upon a change in control.
Termination upon Failure to Renew by the Company. In the event that the Company elects not to renew the employment agreement, and the executive terminates their employment within 30 days of notice of non-renewal, the employment agreements for Mr. Stratmann, and Messs. Powers and Pagliara, provide for a payment of twelve, three and three months, respectively, of base salary.
Qualifying retirement. Under our restricted stock unit agreements with the named executive officers, upon a Qualifying Retirement, 50% of unvested restricted shares will vest immediately. A “Qualifying Retirement” means retirement by the recipient after satisfaction of the conditions in either clause (A) or clause (B): (A) the recipient has both (1) attained the age of 55 and (2) completed at least ten years of employment with the Company; or (B) the sum of the recipient’s age plus the number of years he or she has been employed by the Company equals or exceeds 75 years. In addition, the agreements of Messrs. Stratmann, Powers and Pagliara extend the exercisability of vested options to 90 days after any termination event.
| 55 |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of August 18, 2026, by (a) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (b) each executive officer (c) each director, and (d) all executive officers and directors as a group.
The percentage of common stock beneficially owned is based on 270,138,823 shares of our common stock outstanding as of August 18, 2026. For purposes of the table below, and in accordance with the rules of the SEC, we deem shares of common stock subject to options that are currently exercisable or exercisable within sixty days of August 18, 2026 to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any person. Except as otherwise noted, each of the persons or entities in this table has sole voting and investing power with respect to all of the shares of common stock beneficially owned by such person, subject to community property laws, where applicable. The street address of each beneficial owner shown in the table below is c/o Ocean Power Technologies, Inc., 28 Engelhard Drive, Suite B, Monroe Township, NJ 08831.
| Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | ||||||
| Philipp Stratmann (1) | 1,392,036 | * | ||||||
Joseph A. DiGuardo, Jr. | 87,209 | * | ||||||
| Clyde W. Hewlett (2) | 981,886 | * | ||||||
| Corliss J. Montesi | — | * | ||||||
| Jim Thompson | — | * | ||||||
| Robert Powers (3) | 628,163 | * | ||||||
| Tracy Pagliara (4) | 443,764 | * | ||||||
| All director and executive officers as a group (7 individuals) | 3,553,058 | 1.3 | % | |||||
* Represents a beneficial ownership of less than one percent of our outstanding common stock
(1) Beneficial ownership includes 1,382,703 shares of our Common Stock, and 9,333 shares issuable upon the exercise of options that are currently exercisable or exercisable within sixty days of August 18, 2026.
(2) Beneficial ownership includes 962,757 shares of our Common Stock,, and 19,129 shares issuable upon the exercise of options that are currently exercisable or exercisable within sixty days of August 18, 2026.
(3) Beneficial ownership includes 628,163 shares of our Common Stock as of August 18, 2026.
(4) Beneficial ownership includes 443,764 shares of Common Stock as of August 18, 2026.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Board Determination of Independence
Under applicable NYSE American rules, a director will only qualify as an “independent director” if they are not an executive officer or employee of the Company, and, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our Board has determined that all of our current directors are “independent directors” within the meaning of the applicable listing standards of the NYSE American, except for Philipp Stratmann who is our President and Chief Executive Officer.
| 56 |
Certain Relationship and Related Person Transaction
Review and Approval of Related Person Transactions
The Audit Committee is charged with the responsibility of reviewing and approving all related person transactions (as defined in SEC regulations), and periodically reassessing any related person transaction entered into by the Company to ensure continued appropriateness. This responsibility is set forth in our Audit Committee charter. A related party transaction will only be approved if the members of the Audit Committee determine that the transaction is in the best interests of the Company. If a director is involved in the transaction, he or she will recuse himself or herself from all decisions regarding the transaction.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Fees of Independent Registered Public Accounting Firm
The Audit Committee, on and effective as of August 19, 2024, appointed Moss Adams LLP (“Moss Adams”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ended April 30, 2026.
Effective June 2, 2025, Moss Adams LLP, our independent registered public accounting firm for the fiscal year ended April 30, 2026, completed its merger with Baker Tilly US, LLP (“Baker Tilly”). As a result of this transaction, Baker Tilly succeeded the audit practice of Moss Adams, and the professionals responsible for our fiscal year 2025 audit have become part of Baker Tilly. In accordance with the rules of the Public Company Accounting Oversight Board (PCAOB) and the SEC, Baker Tilly is deemed to be our successor independent registered public accounting firm. Baker Tilly’s PCAOB firm ID is 23.
The audit committee of our board of directors was informed of the pending merger and concurred that Baker Tilly, as the legal successor to Moss Adams, may continue to serve as our independent registered public accounting firm without the need for re-engagement or a new audit committee approval, in accordance with SEC and PCAOB guidance on firm succession.
The following table summarizes the fees of Baker Tilly billed to us for each of the last two fiscal years.
| Fiscal Year 2026 | Fiscal Year 2025 | |||||||
| Audit Fees (1) | $ | 408,165 | $ | 350,625 | ||||
| Audit-Related Fees | — | — | ||||||
| Tax Fees (2) | 22,324 | — | ||||||
| All Other Fees | — | — | ||||||
| Total Fees | $ | 430,489 | $ | 350,625 | ||||
(1) Audit Fees consist of fees for the audit and quarterly reviews of our consolidated financial statements and other professional services provided in connection with the statutory and regulatory filings or engagements.
(2) Tax Fees include fees for tax consulting and tax return preparation assistance and review for the Company.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is that all audit services and all non-audit services to be provided to us by our independent registered public accounting firm must be approved in advance by our Audit Committee. The Audit Committee’s approval procedures include the review and approval of a description of the services that documents the fees for all audit services and non-audit services, primarily tax advice and tax return preparation and review.
All audit services and all non-audit services in fiscal years 2026 and 2025 were pre-approved by the Audit Committee. The Audit Committee has determined that the provision of the non-audit services for which these fees were rendered is compatible with maintaining the independent auditor’s independence.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements: See Index to Consolidated Financial Statements on page F-1.
(3) Exhibits: See Exhibit Index on pages 59 to 61.
ITEM 16. FORM 10-K SUMMARY
None.
| 57 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OCEAN POWER TECHNOLOGIES, INC. | ||
| Date: August 19, 2026 | ||
| /s/ Philipp Stratmann | ||
| By: | Philipp Stratmann | |
| President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| SIGNATURE | TITLE | DATE | ||
| /s/ Philipp Stratmann | President, Chief Executive Officer and Director | August 19, 2026 | ||
| Philipp Stratmann | (Principal Executive Officer) | |||
| /s/ Robert Powers | Senior Vice President and Chief Financial Officer | August 19, 2026 | ||
| Robert Powers | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Joseph A. DiGuardo, Jr. | Acting Chairman of the Board and Director | August 19, 2026 | ||
| Joseph A. DiGuardo Jr. | ||||
| /s/ Clyde W. Hewlett | Director | August 19, 2026 | ||
| Clyde W. Hewlett | ||||
| /s/ Corliss J. Montesi | Director | August 19, 2026 | ||
| Corliss J. Montesi | ||||
| /s/ Jim Thompson | Director | August 19, 2026 | ||
| Jim Thompson |
| 58 |
Exhibits Index
| 59 |
| 60 |
+ Indicates that confidential treatment has been requested for this exhibit.
++ Filed herewith.
* Management contract or compensatory plan or arrangement.
** As provided in Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed to be “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability under those sections.
*** As provided in Rule 406T of Regulation S-T, this exhibit shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability under those sections.
| 61 |
OCEAN POWER TECHNOLOGIES, INC., AND SUBSIDIARIES
Index to Consolidated Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Ocean Power Technologies, Inc.
Opinion on the Financial Statements
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(b) to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(b). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
Critical Audit Matter Description
As disclosed in Note 2 to the consolidated financial statements, the Company’s accounts for its revenue arrangements in accordance with ASC Topic 606 – Revenue from Contracts with Customer for contracts with customers and ASC Topic 842 – Leases for leasing arrangements. The revenue arrangements often include various combinations of products and services. For contracts with customers, this requires evaluation of whether there is a single performance obligation or multiple performance obligations and for leasing arrangements whether there are non-lease components, requiring allocation between the lease and non-lease elements. A significant portion of the Company’s revenue is generated pursuant to differentiated written contractual arrangements to develop and/or manufacture products and to provide related services. Because of the uniqueness of the terms and conditions in the revenue arrangements, there is significant analysis, and at times significant judgments, that are made by management when evaluating the contracts for proper revenue recognition. Revenue arrangements may also be modified from time to time as the Company delivers products or services to a customer. As disclosed by management, a material weakness existed during the year related to this matter.
We identified revenue recognition pertaining to both contracts with customers and leasing arrangements as a critical audit matter as there are significant judgments exercised by management in determining revenue recognition. Given the high degree of management judgment involved in analyzing the terms and conditions of the Company’s contractual arrangements, the audit effort required to evaluate management’s judgments in determining revenue recognition for the Company’s revenue arrangements was extensive and required a high degree of auditor judgment.
| F-2 |
How We Addressed the Matter in Our Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to revenue arrangements included the following, among other procedures:
| ● | Evaluated management’s accounting practices, including the reasonableness of management’s judgments and assumptions related to the revenue recognition for its revenue arrangements | |
| ● | For a selection of contracts with customers and leasing arrangements, performing the following audit procedures: | |
| ● | Obtained customer contract, related invoices, shipping documents, evidence of cash receipt and management revenue recognition analysis for each testing selection, if applicable, to evaluate if relevant contractual terms were appropriately considered by management and conclusions on revenue recognition method were in accordance with the relevant accounting guidance. | |
| ● | Utilized personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of the Company’s application of relevant accounting guidance for revenue recognition. |
Valuation of Inventory – Net Realizable Value
Critical Audit Matter Description
As disclosed in Notes 2 and 4 to the consolidated financial statements, the inventory balance as of December 31, 2025 was $3.19 million. The Company accounts for its inventory at the lower of cost or net realizable value. The Company evaluates the carrying value of its inventories taking into consideration such factors as anticipated usage and inventory age. The Company recorded write-downs of inventory totaling $744,785 during the year ended April 30, 2026. As disclosed by management, a material weakness existed during the year related to this matter.
We identified the Company’s evaluation of the net realizable value of inventory as a critical audit matter. The principal considerations for our determination include (i) the significant judgment by management when developing the provision for excess or obsolete inventories, including determining the anticipated usage and age of inventory items within their inventory management system due to the material weakness identified by management, and (ii) a high degree of auditor judgment, subjectivity, and extent of audit effort in performing procedures to evaluate management’s significant judgements related to anticipated usage and inventory age.
How We Addressed the Matter in Our Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the net realizable value of inventory included the following, among other procedures:
| ● | Evaluated management’s accounting policies and practices, including the reasonableness of management’s judgments and assumptions related to anticipated usage and age of inventory items to estimate net realizable value. | |
| ● | Obtained management’s evaluation of excess and/or obsolete inventory, including specific identification of aged inventory products. Compared the aged inventory product listing to historical usage and held discussions with personnel outside the accounting function to assess the reasonableness of anticipated future usage. | |
| ● | Performed procedures to evaluate the reasonableness of the inventory movements during the year including: | |
| ● | Compared inventory reports as of April 30, 2026 to April 30, 2025 to identify inventory product that did not change during the year and assessed the reasonableness of anticipated future usage. | |
| ● | Utilized support obtained for our inventory price testing selections, evaluated whether the inventory movements were appropriately reflected movement during the year. | |
| ● | For a selection items of inventory transferred to property, plant and equipment (leased assets), agreed part numbers of transferred items to engineering drawings of the related asset to verify proper inventory movement and recording as property, plant and equipment. |
/s/
August 19, 2026
We have served as the Company’s auditor since 2024.
| F-3 |
Ocean Power Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
| April 30, 2026 | April 30, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash, short-term | ||||||||
| Accounts receivable, net | ||||||||
| Contract assets | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Property and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Right-of-use assets, net | ||||||||
| Restricted cash, long-term | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Earn out payable | ||||||||
| Convertible notes payable (Note 13) | ||||||||
| Accrued expenses | ||||||||
| Contract liabilities, current | ||||||||
| Right-of-use liabilities, current portion | ||||||||
| Total current liabilities | $ | $ | ||||||
| Deferred tax liability | ||||||||
| Right-of-use liabilities, less current portion | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 15) | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, $ par value; authorized shares, issued or outstanding | $ | $ | ||||||
| Common stock, $ par value; authorized and shares, respectively, issued and shares, respectively, and outstanding and shares, respectively | ||||||||
| Treasury stock, at cost; and shares, respectively | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| F-4 |
Ocean Power Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
| Fiscal year ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| Product & service revenue | $ | $ | ||||||
| Lease revenue | ||||||||
| Total revenue | ||||||||
| Cost of revenue | ||||||||
| Gross margin | ( | ) | ||||||
| Operating expenses | ||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | ||
| Interest (expense)/income, net | ( | ) | ||||||
| Other expense | ( | ) | ( | ) | ||||
| Change in fair value of financial instrument | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ||||
| Foreign exchange loss | ( | ) | ( | ) | ||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Income tax benefit | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
| Weighted average shares used to compute basic and diluted net loss per share | ||||||||
See accompanying notes to consolidated financial statements.
| F-5 |
OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
| Common Shares | Treasury Shares | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||
| Balances at April 30, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||
| Common stock issued related to bonus and earnout payments | — | |||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | |||||||||||||||||||||||||||||||
| Issuance of common stock - At The Market offering, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Issuance of common stock – Capital Raise, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Issuance of common stock - Convertible Debt, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Shares withheld for tax withholdings | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign exchange loss | — | — | ||||||||||||||||||||||||||||||
| Balances at April 30, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted shares | — | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock –At The Market Offering, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Issuance of common stock - Convertible Debt, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Shares withheld for tax withholdings | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balances, April 30, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
See accompanying notes to consolidated financial statements
| F-6 |
OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
| Fiscal year ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Foreign exchange loss | ||||||||
| Depreciation of fixed assets | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of right-of-use assets | ||||||||
| Amortization of debt issuance costs | ||||||||
| Share-based compensation | ||||||||
| Change in fair value of financial instrument | ||||||||
| Loss on extinguishment of debt | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Non-cash interest settled through share conversions | ||||||||
| Impairment of fixed assets | ||||||||
| Credit loss expense | ||||||||
| Inventory net realizable value adjustment | ||||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Contract assets | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Earn out payable | ( | ) | ( | ) | ||||
| Right-of-use liabilities | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from financing activities: | ||||||||
| Cash paid for tax withholding related to shares withheld | $ | ( | ) | $ | ( | ) | ||
| Payment of debt issuance costs | ( | ) | ||||||
| Proceeds from convertible notes | ||||||||
| Payment on convertible notes | ( | ) | ||||||
| Proceeds from issuance of common stock - At The Market offering, net of issuance costs | ||||||||
| Proceeds from issuance of common stock - Capital Raise, net of issuance costs | ||||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net increase in cash, cash equivalents and restricted cash | $ | $ | ||||||
| Cash, cash equivalents and restricted cash, beginning of year | ||||||||
| Cash, cash equivalents and restricted cash, end of year | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Common stock issued related to bonus and earnout payments | $ | $ | ||||||
| Common stock issued related to conversion of convertible debt | ||||||||
| Operating right of use asset obtained in exchange for operating lease liability | $ | $ | ||||||
See accompanying notes to the consolidated financial statements
| F-7 |
OCEAN POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Background and Liquidity
(a) Background
Ocean Power Technologies, Inc. (“OPT,” “we,” “our,” or “the Company”) is a maritime domain awareness (“MDA”) company specializing in innovative intelligent maritime solutions. These solutions include a variety of “as a service” systems, including DaaS, RaaS, and PaaS. These systems consist of a variety of platforms including the PowerBuoy®, our persistent sensor and power solution, the WAM-V®, our autonomous unmanned surface vehicle, and Merrows™, our user interface and command and control system that integrates multiple sensor feeds using software and hardware and enables AI/ML integration. We design, manufacture, deploy, and operate these systems for defense, security, subsea infrastructure, offshore oil and gas, offshore energy, marine research, and communication markets. We operate primarily through a combination of direct sales and leases, strategic partnerships, and long-term service agreements. Our business model emphasizes capital-light deployments, recurring revenue from service and maintenance contracts, and high-margin technology sales and leases.
We serve a global customer base, including the U.S. and allied defense agencies, offshore energy operators, and commercial interests. The common thread across these markets is the growing need for a persistent, autonomous, and sustainable offshore presence, a need we believe we are uniquely positioned to fulfill.
The Company holds numerous patents and leverages decades of research including control systems, energy storage, and marine integration. Our headquarters and assembly operations are located in New Jersey, and we maintain an additional manufacturing and robotics development facility in Richmond, CA. In addition, the Company maintains an office at the AUVSI headquarters in Washington, D.C., which serves to strengthen our strategic position in the fast-growing uncrewed systems market.
OPT is committed to enabling a smarter, safer ocean economy through innovation in ocean intelligence and power. As we look forward, our strategic priorities include expanding our customer and geographic base, accelerating technology adoption, enhancing recurring revenue, and driving margin growth through platform scalability and supply chain efficiencies.
We were incorporated under the laws of the State of New Jersey in April 1984 and began commercial operations in 1994. On April 23, 2007, we reincorporated in Delaware.
(b) Going Concern
During
the year ended April 30, 2026, the Company incurred a net loss of approximately $
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company’s operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The accompanying consolidated financial statements have been prepared on a basis which assumes the Company is a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to the Company’s ability to continue as a going concern. Such adjustments could be material.
| F-8 |
(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), referred to herein as MAR, Oregon Wave Energy Partners I LLC (DE), and ReedSport OPT WavePark, LLC (OR). Ocean Power Technologies Ltd. in the United Kingdom was dissolved on April 22, 2025. ReedSport OPT WavePark, LLC (OR) and Oregon Wave Energy Partners I, LLC (DE) were dissolved during the first quarter of fiscal 2024. All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States (“US GAAP”) 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 revenue and expenses during the period. Significant items subject to such estimates and assumptions include, among other items, share-based compensation based on the likelihood of meeting performance obligations, over time revenue recognition, valuation consideration related to business combinations, including contingent consideration based on actual and projected revenues, in addition to discount rates and present values, valuation of embedded derivatives, evaluation of net realizable value of inventory, 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 FASBASC Topic 805 – Business Combinations (“ASC 805”). The Company allocates the fair value of consideration transferred in a business combination to the estimated fair value at the acquisition date of the tangible and intangible assets acquired as well as the liabilities assumed. Acquisition costs are expensed as incurred. Any excess consideration transferred is recorded as goodwill and in instances where the fair value of consideration transferred is less than the estimated fair value of tangible and intangible assets acquired less liabilities assumed, such amounts are recorded as a gain on the bargain purchase.
(d) Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606 – Revenue from Contracts with Customers (“ASC 606”) for contracts with customers and ASC Topic 842 – Leases (“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 a performance obligation as either: a) a good or service (or a bundle of goods and/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.
| F-9 |
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. Estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on the 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, 2026 or 2025. 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 (e.g., upon shipment, upon
delivery, as services are rendered, or upon completion of service), including when performance obligations are satisfied in a bill-and-hold
arrangement. 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 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 projections 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, 2026 the Company recognized
approximately $
The Company’s contracts are either cost-plus contracts, fixed-price contracts, time and material agreements, lease agreements 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. There
is $
Certain product sales are made under Ex Works (“EXW”) shipping terms. For these arrangements, the Company’s performance obligation is satisfied, and revenue is recognized at a point in time when the product has been completed, is available for customer pickup at the Company’s designated facility, and control transfers to the customer. Control is considered to transfer when the customer has the present right to direct the use of, and obtain substantially all of the remaining benefits from, the product, including legal title and risk of loss in accordance with the contractual shipping terms. Under EXW arrangements, the customer is responsible for transportation, export and import clearance, freight costs, insurance, and all risks associated with the shipment after pickup. Shipping and handling activities performed by the Company after control transfers, if any, are accounted for as fulfillment activities and do not represent separate performance obligations.
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 Company’s revenue also includes revenue from certain contracts which do not fall within the scope of ASC 606, but under the scope of ASC 842, “Leases.” 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 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a financing 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 Revenues in the Consolidated Statement of Operations. 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®, WAM-V®, 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 with an option to extend the lease term or purchase the leased buoy or WAM-V® at some point during and/or at the end of the lease term.
| F-10 |
As
of April 30, 2026, the Company’s remaining performance obligations totaled $
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 below table represents the total revenue recognized under ASC 606 and ASC 842 fiscal years ended April 30, 2026 and 2025:
| Fiscal year ended April 30, 2026 | Fiscal year ended April 30, 2025 | |||||||||||||||||||||||
| ASC 606 | ASC 842 | Total | ASC 606 | ASC 842 | Total | |||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||
| Product Line: | ||||||||||||||||||||||||
| WAM-V | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Buoy | ||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Region: | ||||||||||||||||||||||||
| North and South America | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| EMEA | ||||||||||||||||||||||||
| Asia and Australia | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Revenue by geographic region is presented based on the location of the customer’s corporate headquarters (or principal place of business), which management uses to determine the geographic region for financial reporting purposes. Accordingly, the geographic classification of revenue may differ from the ultimate destination of the products delivered or the location where services are performed or equipment is deployed.
(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 Company had cash
and cash equivalents of approximately $
Restricted Cash and Security Agreements
The
Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $
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.
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash- short-term | ||||||||
| Restricted cash- long-term | ||||||||
| $ | $ | |||||||
(f) Inventory
In
accordance with ASC 330 - Inventory, inventory is stated at the lower of cost or net realizable value applicable to goods on
hand. As of April 30, 2026 the Company had an inventory reserve recognized of $
| F-11 |
(g) Accounts Receivable
Accounts
receivable, net are stated at the net amount expected to be collected. Amounts are usually due between 30 and 90 days after the invoice
issuance. The Company is exposed to credit losses primarily on accounts receivable and contract assets related to sales to customers.
If applicable, an allowance for credit losses is established to provide for the expected lifetime credit losses by evaluating factors
such as customer creditworthiness, historical payment and loss experiences, current economic conditions (including geographic and political
risk), and the age and status of outstanding receivables. During the year ended April 30, 2026, the Company increased its allowance for
credit losses primarily in connection with two specific customers whose outstanding balance exhibited extended aging and increased collection
uncertainty. As a result of this customer-specific evaluation, the allowance for credit losses was approximately $
The Company grants credit to its customers, generally, without collateral, under normal payment terms. Generally, invoicing occurs after the services are performed or control of the product has transferred to the customer. Accounts receivable represents an unconditional right to consideration arising from the Company’s performance under contracts with customers.
(h) Property and Equipment, net
Property
and equipment, net is 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
| Description | Estimated useful life | |
| Equipment | ||
| Computer equipment & software | ||
| Office furniture & fixtures | ||
| Leasehold improvements | ||
| Leased Power Buoy assets | ||
| Leased WAM-V assets |
(i) Foreign Exchange Gains and Losses
Transactions denominated in a foreign currency may result in realized and unrealized foreign exchange gains or losses from exchange rate fluctuations, which, if applicable, are included in “Foreign exchange loss” in the accompanying Consolidated Statements of Operations.
| F-12 |
(j) Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of trade accounts receivable and cash equivalents. The Company believes that its credit risk is limited because the Company’s current contracts are with entities with a reliable payment history. The Company performs a credit evaluation of new customers prior to extending credit terms and monitors existing customers for changes in credit quality. The Company invests its excess cash in a money market fund and does not believe that it is exposed to any significant risks related to its cash accounts or money market funds.
As
of the year ended April 30, 2026 and 2025, the Company had four and three customers, respectively, whose revenue accounted for at least
10% of the Company’s consolidated revenue, respectively. These customers accounted for approximately
As
of the year ended April 30, 2026 and 2025, the Company had four and four customers, respectively, whose total receivable balance accounted
for at least 10% of the Company’s consolidated receivables. These receivables accounted for approximately
In
addition, we have fully reserved one receivable balance from one customer that represented
Basic and diluted net loss per common 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, and unvested RSUs 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, options to purchase shares of common stock and unvested RSUs issued to employees and non-employee directors, totaling and for the years ended April 30, 2026 and 2025, respectively, were excluded from each of the computations as the effect would have been anti-dilutive due to the net loss for the periods. Share purchase rights, which include a contingency, are not included in the calculation until the contingency is resolved.
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, 2026 and 2025 was approximately $ million and $ million, respectively. The Company’s policy is to account for forfeitures of share-based compensation as they occur.
Additionally, upon vesting of Restricted Stock Units (“RSU”) that were granted to an employee, the employee is given the option to either pay the taxes themselves, or have enough shares of their RSU award withheld by the Company to cover the taxes incurred by the employee. In the event the employee elects to surrender shares to cover the tax obligation on, the Company maintains those shares in the Company’s treasury stock account. Shares held in the Company’s treasury stock account are not available for future RSU grants.
(m) Intangibles, net
Separately
identifiable intangible assets acquired in a business combination are recognized apart from goodwill and are initially recognized at
their fair value at the acquisition date. 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
Intangible assets are reviewed for impairment if indicators of potential impairment exist. There was no indication of impairment of intangible assets for the fiscal year ended April 30, 2026.
| F-13 |
(n) Goodwill
Goodwill is assessed for impairment using a qualitative or quantitative approach. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual impairment tests. There were no indications of potential impairment of goodwill identified for the year ended April 30, 2026 and 2025. 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 also 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 amounts, an impairment charge for the difference is recorded. The Company acquired goodwill as part of its purchase of MAR. Management performed its annual qualitative assessment in the last quarter of fiscal year 2026 and 2025 and determined that it is more likely than not that no goodwill impairment existed as of April 30, 2026 and 2025.
(o) Income Taxes
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon examination. Management must believe there is at lease a 50% chance of a tax position being sustained for its maximum realizable value for it to be recognized. 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 14 for additional disclosure.
In order to monetize their attributes, the Company has historically sold the Net Operating Losses (NOL’s) generated in New Jersey. The Company has elected to recognize the gain on the sale as a component of tax expense at the time of the sale. Prior to the time of sale, the Company has elected to not factor the expected sales when assessing the realizability of the related deferred tax assets.
(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 (Income) Loss within Shareholders’ Equity. For the year ended April 30, 2026 and 2025, there were no amounts recorded to other comprehensive (income) loss due to no longer having any foreign subsidiaries as of April 30, 2026 or 2025.
(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. Warranty expense incurred to date has not been material.
(r) Product development
Costs
related to research and development activities by the Company are expensed as incurred. The Company had approximately $
| F-14 |
(s) Recent Accounting Standards
In recent periods, the FASB issued certain ASUs that may be relevant to the Company’s operations and financial reporting. We are currently evaluating the potential impact of these ASUs and adopting them when applicable based on their effective dates.
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ASU 2023-09, which improves the transparency of income tax disclosures by requiring companies to (1) disclose consistent categories and greater disaggregation of information in the effective rate reconciliation and (2) provide information on income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, although early adoption is permitted. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. The Company has adopted this ASU 2023-09 on our consolidated financial statements and disclosures for the annual period ending April 30, 2026 on a prospective basis.
In November 2024, the FASB issued ASU No. 2024-3, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses This ASU improves the disclosures about a public business entity’s expenses and addresses requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating what the potential impact of adopting this ASU 2024-03 could have on our consolidated financial statements and disclosures
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. We are currently evaluating the potential impact of adopting ASU 2025-05 on our consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes certain aspects of the accounting for, and disclosure of, internal-use software costs. The ASU removes all references to software development project stages so that the guidance is neutral to different software development methods and clarifies the threshold entities apply to begin capitalizing costs. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) which is intended to streamline the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on the Company’s consolidated financial statements.
(t) Reclassifications
Certain amounts may have been reclassified to conform to the current period’s presentation related to the segment reporting (Note 16). This reclassification had no impact on the previously reported net loss or comprehensive loss.
| F-15 |
(3) Account Receivable, Contract Assets, and Contract Liabilities
Accounts Receivable
The following provides further details on the balance sheet accounts of accounts receivable, contract assets and contract liabilities from contracts with customers:
| Fiscal year ended April 30, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| (in thousands) | ||||||||||||
| Accounts receivable | $ | $ | $ | |||||||||
| Contract assets | ||||||||||||
| Contract liabilities | ||||||||||||
Contract Assets
Contract assets include unbilled amounts typically resulting from arrangements whereby the right to payment is conditional on completing additional tasks or services for a performance obligation. The decrease in contract assets from year end is primarily a result of being able to contractually bill on active projects for which revenue was recognized in the prior period but was not yet been billed as of the beginning of the period. No impairments to contract assets were incurred during the year ended April 30, 2026 and 2025.
Significant changes in the contract assets balances during the period are as follows:
| Fiscal year ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Transferred to receivables from contract assets recognized | $ | ( | ) | $ | ( | ) | ||
| Revenue recognized and not billed | ||||||||
| Net change in contract assets | $ | ( | ) | $ | ||||
Contract Liabilities
Contract liabilities consist of amounts invoiced to customers in excess of revenue recognized. The increase in contract liabilities from year end is primarily due to collecting payments for jobs we cannot contractually recognize revenue on the current year.
Significant changes in the contract liabilities balances during the period are as follows:
| Fiscal year ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Revenue recognized | $ | ( | ) | $ | ( | ) | ||
| Payments collected for which revenue has not been recognized | ||||||||
| Net change in contract liabilities | $ | $ | ( | ) | ||||
(4) Inventory
The Company holds inventory related to the production of its WAM-V® and PowerBuoy® products.
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Raw Materials | $ | $ | ||||||
| Work in Process | ||||||||
| Finished Goods | ||||||||
| $ | $ | |||||||
The Company’s raw materials balance represents the majority of the inventory as the Company orders parts in quantity to fill orders. Work in process and finished products typically represent smaller portions of inventory as the Company does not historically hold finished products with the exception of assets transferred to property, plant, and equipment once transitioned to the lease fleet. The Company typically ships finished products as they are completed.
| F-16 |
(5) Other Current Assets
Other current assets consist of the following at April 30, 2026 and 2025:
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid software & licenses | ||||||||
| Prepaid sales & marketing | ||||||||
| Prepaid project costs | ||||||||
| Prepaid inventory materials | ||||||||
| Net investment in lease | ||||||||
| Prepaid expenses- other | ||||||||
| $ | $ | |||||||
The
Company recognizes prepaid project costs for when the Company has incurred costs for customer contracts but for which the Company has
not yet achieved and delivered related milestones or complete performance obligations under that contract. Prepaid project costs are
classified within other current asset based on when management estimates the revenue will be recognized. As of April 30, 2026, the Company
has net prepaid project costs of $
(6) Property and Equipment
The components of property and equipment as of April 30, 2026 and 2025 consisted of the following:
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Equipment | $ | $ | ||||||
| Computer equipment & software | ||||||||
| Office furniture & equipment | ||||||||
| Leasehold improvements | ||||||||
| Leased WAM-V’s | ||||||||
| Leased Buoys | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Leased WAM-V’s and buoys represent fixed assets that are associated with underlying operating leases with customers or for customer demonstration as discussed in the revenue recognition section related to ASC 842.
Depreciation
expense was approximately $
| F-17 |
(7) Intangible Assets
The components of intangible assets, net as of April 30, 2026 and 2025 consisted of the following:
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Patents | $ | $ | ||||||
| Trademarks | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization
expense was approximately $
(8) Goodwill
Goodwill
in the amount of $
(9) Leases
Lessor Information
As
of April 30, 2026 and 2025, the Company had four and three WAM-V’s, respectively, and had three and zero buoys, respectfully,
leased to customers which have been classified as operating leases per accounting guidance contained within ASC 842. The remaining
term on these operating leases is less than
Lessee Information
Right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, the Company uses the incremental borrowing rate based on the information available at the effective date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The renewal options have not been included in the lease term as they are not reasonably certain of exercise. The Company’s operating leases consist of leases for office facilities and warehouse space. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term and consists of interest on the lease liability and the amortization of the right of use asset.
The Company has a lease for its facility located in Monroe Township, New Jersey that is used as warehouse/production space and the Company’s principal offices and corporate headquarters. In August 2025, the Company extended the lease for its main headquarters in Monroe, NJ to October 31, 2027 and it was executed and recorded as an additional right of use asset and liability. The lease is classified as an operating lease and is included in right-of-use assets, right-of-use liabilities – current, and right-of-use liabilities- long-term on the Company’s Consolidated Balance Sheets.
The
Company also has a lease for office space located in Richmond, California.
The Company also has a lease for warehouse space located in Richmond, California. The lease commenced in June of 2025 and will continue for 24 months. The lease is classified as an operating lease and is included in right-of-use assets, right-of-use liabilities- current and right-of-use liabilities- long-term on the Company’s Consolidated Balance Sheets.
| F-18 |
Variable
lease expenses, if any, are recorded as incurred. The operating lease expense in the Consolidated Statement of Operations was $
The components of lease expense in the Consolidated Statement of Operations for the fiscal year ended April 30, 2026 and 2025 was as follows:
| Fiscal year ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
Information related to the Company’s right-of use assets and lease liabilities as of April 30, 2026 is as follows:
| April 30, 2026 | ||||
| (in thousands) | ||||
| Operating lease: | ||||
| Operating right-of-use assets, net | $ | |||
| Right-of-use liabilities- current | ||||
| Right-of-use liabilities- long-term | ||||
| Total lease liabilities | $ | |||
| Weighted average remaining lease term- operating leases | ||||
| Weighted average discount rate- operating leases | % | |||
Total remaining lease payments under the Company’s operating leases are as follows:
| April 30, 2026 | ||||
| (in thousands) | ||||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total future minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ | |||
| F-19 |
(10) Accrued Expenses
Accrued expenses consisted of the following at April 30, 2026 and 2025:
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Employee incentive payments | $ | $ | ||||||
| Accrued salary and benefits | ||||||||
| Accrued project costs | ||||||||
| Accrued interest expense | ||||||||
| Other | ||||||||
| $ | $ | |||||||
In 2015, upon approval by the Company’s shareholders, the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”) became effective. A total of shares were authorized for issuance under the 2015 Omnibus Incentive Plan, including shares available for awards under the 2006 Stock Incentive Plan remaining at the time that plan terminated, or that were subject to awards under the 2006 Stock Incentive Plan that thereafter terminated by reason of expiration, forfeiture, cancellation or otherwise. If any award under the 2006 Stock Incentive Plan or 2015 Plan expires, is cancelled, terminates unexercised or is forfeited, those shares become again available for grant under the 2015 Plan. Most recently in January 2026, the shareholders approved an amendment and restatement of the 2015 Plan to, among other things, provide an aggregate increase to the 2015 Plan of shares resulting in total shares authorized for issuance of as of April 30, 2026, based on available before the amendment. The 2015 Plan will now terminate in January 2035, but is subject to earlier termination as provided in the 2015 Plan.
On January 18, 2018, the Company’s Board of Directors adopted the Company’s Employment Inducement Incentive Award Plan (the “2018 Inducement Plan”) pursuant to which the Company reserved shares of common stock for issuance under the Inducement Plan in accordance with Rule 711(a) of the NYSE American Company Guide. On February 9, 2022, the 2018 Inducement Plan was amended to increase the authorized shares by to . On June 3, 2025, the 2018 Inducement Plan was further amended to increase the authorized shares by to . On January 27, 2026, the 2018 Inducement Plan was further amended to increase the authorized shares by to .
Stock Options
The Company estimates the fair value of each stock option award granted with service-based vesting requirements, using the Black-Scholes option pricing model, assuming no dividends, and using weighted average valuation assumptions. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant commensurate with the expected life of the award. The expected life (estimated period of time outstanding) of the stock options granted was estimated using the “simplified” method as permitted by the SEC’s Staff Accounting Bulletin No. 110, Share-Based Payment. Expected volatility is based on the Company’s historical volatility over a period equal to the expected life of the stock option granted. The Company did not grant any stock options during the periods ended April 30, 2026 and 2025, respectively.
Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) | ||||||||||
| Outstanding as of April 30, 2025 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | $ | |||||||||||
| Cancelled/forfeited | ( | ) | $ | |||||||||
| Outstanding as of April 30, 2026 | $ | |||||||||||
| Exercisable as of April 30, 2026 | $ | |||||||||||
| F-20 |
As of April 30, 2026, the total intrinsic value of outstanding and exercisable options was . As of April 30, 2026, no options were unvested. The outstanding options had an intrinsic value of zero and a weighted average remaining contractual term of years. There was approximately $ and $ of total recognized compensation cost related to stock options during each of the fiscal year ended April 30, 2026 and 2025, respectively. As of April 30, 2026, there was no unrecognized compensation cost related to non-vested stock options granted under the plans.
Performance Stock Options
| Number of Shares | Weighted Average Price per Share | |||||||
| Outstanding at April 30, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested and issued | $ | |||||||
| Cancelled/forfeited | $ | |||||||
| Unvested at April 30, 2026 | $ | |||||||
There was approximately $ and of total recognized compensation cost related to PSUs for the years ended April 30, 2026 and 2025, respectively. As of April 30, 2026, there was approximately $ of unrecognized compensation cost remaining related to unvested PSUs. This cost is expected to be recognized over a weighted-average period of years.
Restricted Stock Units
Compensation expense for RSUs is generally recorded based on the market value on the date of grant and recognized ratably over the associated service and performance period. During the years ended April 30, 2026 and 2025, the Company granted and shares, respectively, subject to service-based, performance, and market condition vesting requirements.
Number of Shares | Weighted Average Price per Share | |||||||
| Issued and unvested at April 30, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested and issued | ( | ) | ||||||
| Cancelled/forfeited | ( | ) | $ | |||||
| Issued and unvested at April 30, 2026 | $ | |||||||
There was approximately $ million and $ million of total recognized compensation cost related to restricted stock units for the years ended April 30, 2026 and 2025, respectively. As of April 30, 2026, there was $ million of unrecognized compensation cost remaining related to unvested restricted stock granted under our plans. This cost is expected to be recognized over a weighted-average period of years.
| F-21 |
(12) Fair Value Measurements
ASC 820 - Fair Value Measurements (“ASC 820”) states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable input and minimizes the use of unobservable inputs. The following is a description of the three hierarchy levels.
| Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
| Level 2 | Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly. |
| Level 3 | Inputs that are unobservable for the asset or liability. |
ASC 825 – Financial Instruments (“ASC 825”) allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (the fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date.
Disclosure of Fair Values
The Company’s financial instruments that are not re-measured at fair value include cash, cash equivalents, restricted cash, accounts receivable, other assets, contract assets and liabilities, deposits, accounts payable, and accrued expenses. The carrying value is equal to their fair value due to the short-term nature of these accounts.
The following tables sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (amounts in thousands):
| Derivative Liability | Convertible Notes – Fair Value Option |
|||||||
| Derivative liability – May issuance | $ | |||||||
| Derivative liability – October issuance | ||||||||
| Change due to fair value adjustment of derivative liability | ||||||||
| Change due to conversion of notes and note repayment | ( | ) | ||||||
| Convertible note – April issuance | ||||||||
Change due to fair value adjustment of convertible notes | ||||||||
| Convertible note fair value - April 30, 2026 | $ | |||||||
| Level | April 30, 2026 | April 30, 2025 | ||||||||||
| April 2026 Convertible Note | 3 | $ | $ | |||||||||
The derivative liability related to our May 2025 and October 2025 convertible notes (refer to Note 13 for further discussion) was determined using inputs including the Company’s common stock price, the volume-weighted average price of the Company’s common stock upon conversion, and the probability of conversion methodology based on historical experience and the likelihood of attaining certain common stock share price levels. There were no financial instruments that were measured at fair value on a recurring basis as of April 30, 2025. During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value. Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any hierarchy levels during either of the years ended April 30, 2026 and 2025.
The
Company elected the fair value option for the April 2026 convertible note issuances. Management determined that the fair value
option would be elected for these convertible notes as they are required to be measured at fair value as part of the determination
of the extinguishment of the previously issued convertible notes. At April 30, 2026, the fair value of these convertibles notes was
$
| F-22 |
(13) Equity
At-the-Market Offering Agreement
On
March 21, 2024, the Company entered into an At-the-Market Offering Agreement with an aggregate offering price of up to $
On
August 8, 2025, the Company entered into an At Market Issuance Sales Agreement with Ladenburg Thalmann &Co. Inc., under which the
Company may, from time to time, offer and sell shares of its common stock having an aggregate gross sales price of up to $
Sales, if any, will be made in transactions deemed to be “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act, directly on or through the NYSE American or in negotiated transactions as otherwise permitted under the Sales Agreement. The Company is not obligated to sell any shares under the Ladenburg sales agreement and may suspend or terminate the offering at any time.
A
total of shares were sold under the Ladenburg sales agreement during the year ended April 30, 2026 totaling proceeds of $
Convertible Debt Issuance
In
May 2025, the Company issued $
In
April 2026, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain
institutional investors pursuant to which the Company issued and sold senior convertible notes (the “Notes”) in an
aggregate principal amount of $
Subsequent to April 30, 2026, the Company did not timely file its Annual Report on Form 10-K as required under the reporting covenants of the Notes. As a result, the Company was technically not in compliance with this covenant as of the date of issuance of these consolidated financial statements. No notice of default has been received by the Company from its lenders.
As of April 30, 2026, the Notes could potentially be converted into shares. These shares are not included in the calculation of earnings per share as the impact of these conversions would be anti-dilutive. The conversions are at the election of the Note holders to be converted in shares but may also be repaid through cash payments.
Absent conversions, the total remaining debt maturity cash payments under the Company’s convertible debt are as follows:
| April 30, 2026 | ||||
| (in thousands) | ||||
| Fiscal year 2027 | $ | |||
| Fiscal year 2028 | ||||
| Total future minimum debt payments | ||||
| F-23 |
(14) Income Taxes
Loss before income taxes for the years ended April 30, 2026 and 2025 consisted of the following components:
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Domestic | $ | ( | ) | $ | ( | ) | ||
| Foreign | ||||||||
| Total loss before income taxes | $ | ( | ) | $ | ( | ) | ||
The
income tax benefit for the years ended April 30, 2026 and 2025 consisted of
Tax Rate Reconciliation
The effective income tax rate differed from the percentages computed by applying the U.S. federal income tax rate for the periods ended April 30, 2026 and 2025 to loss before income taxes as a result of the following:
| April 30, 2026 | |||||||
| Amount (in thousands) |
Percentage | ||||||
| $ | ( |
) | ( | )% | |||
| Increase (reduction) in income taxes resulting from: | |||||||
| State income taxes, net of federal benefit (a) | % | ||||||
| Expiration of tax credits | % | ||||||
| Change in valuation allowance | % | ||||||
| Non-deductible/non-taxable items: | |||||||
| Stock compensation | % | ||||||
| Change in fair value of derivative | % | ||||||
| Other non-deductible expenses | % | ||||||
| Other Adjustments | |||||||
| Deferred true-up | % | ||||||
| Expiration of net operating loss | % | ||||||
| Income tax (benefit) | % | ||||||
| (a) |
| ● | New Jersey |
As previously disclosed for the years ended April 30, 2025, prior to the adoption of ASU 2023-09, the table below is a reconciliation of the components that caused the Company’s (provision) benefit for income taxes to differ from amounts computed by applying the U.S. federal statutory rate:
| April 30, 2025 | ||||
| Computed expected tax benefit | ( | )% | ||
| Increase (reduction) in income taxes resulting from: | ||||
| State income taxes, net of federal benefit | ( | )% | ||
| Federal research and development tax credits | % | |||
| Foreign rate differential | % | |||
| Other non-deductible expenses | ( | )% | ||
| Proceeds of sale of New Jersey tax benefits | ( | )% | ||
| Expiration of net operating loss due to dissolution of subsidiary | % | |||
| Other expiration of net operating loss | % | |||
| Increase in valuation allowance | % | |||
| Income tax (benefit) | ( | )% | ||
Significant Components of Deferred Taxes
The tax effects of temporary differences and carry forwards that give rise to the Company’s deferred tax assets and deferred tax liabilities are presented below.
| April 30, 2026 | April 30, 2025 | |||||||
| (in thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Federal net operating loss carryforwards | $ | $ | ||||||
| Foreign net operating loss carryforwards | ||||||||
| State operating loss carryforwards | ||||||||
| Federal and New Jersey research and development tax credits | ||||||||
| Stock compensation | ||||||||
| Accrued expenses | ||||||||
| Research and experimentation expenses | ||||||||
| Other | ||||||||
| Net deferred tax assets before valuation allowance | $ | $ | ||||||
| Valuation allowance | $ | ( | ) | $ | ( | ) | ||
| Deferred tax assets | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Intangibles | $ | ( | ) | $ | ( | ) | ||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net deferred tax liabilities | $ | ( | ) | $ | ( | ) | ||
| F-24 |
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. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences and carry forwards become deductible or are utilized. As of April
30, 2026 and 2025, based upon the level of historical taxable losses, valuation allowances of $
On July 4, 2025,
the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal
tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including
expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic
research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021
for businesses with gross receipts of less than $
As
of April 30, 2026, the Company had net operating loss carryforwards for federal income tax purposes of approximately $
In
addition, as of April 30, 2026, the Company had state net operating loss carry forwards of approximately $
Income Tax Benefit
The
Company has sold New Jersey State net operating losses and research development credits under the New Jersey Economic Development Authority
Tax Transfer programs, which has resulted in
Uncertain Tax Positions
The Company applies the guidance issued by the FASB for the accounting and reporting of uncertain tax positions. The guidance requires the Company to recognize in its consolidated financial statements the impact of a tax position if that position is more likely than not to be sustained upon examination, based on the technical merits of the position. At April 30, 2026 and 2025, the Company had no other unrecognized tax positions. The Company does not expect any material increase or decrease in its income tax expense in the next fiscal year, related to examinations or uncertain tax positions. Net operating loss and credit carry forwards since inception remain open to examination by taxing authorities and will continue to remain open for a period after utilization.
The Company does not have any interest or penalties accrued related to uncertain tax positions as it does not have any unrecognized tax benefits.
(15) Commitments and Contingencies
General Legal Matters
From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.
Onerous Contract
The Company has one contract with a customer that
has been determined to be an onerous contract, where the expected costs exceed the expected revenue. The total value of this contract
is $
| F-25 |
(16) Operating Segments and Geographic Information
The
Company operates as
| Year Ended April 30, 2026 | ||||||||||||||||
| North & South America | Europe | Asia and Australia | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Right-of-use assets, net | ||||||||||||||||
| Long-lived assets | ||||||||||||||||
| Total assets | ||||||||||||||||
| Year Ended April 30, 2025 | ||||||||||||||||
| North & South America | Europe | Asia and Australia | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Operating (loss) income | ( | ) | ( | ) | ||||||||||||
| Right-of-use assets, net | ||||||||||||||||
| Long-lived assets | ||||||||||||||||
| Total assets | ||||||||||||||||
The following table presents selected financial information with respect to the Company’s single operating segment and its significant segment expenses for the years ended April 30, 2026 and 2025:
| Fiscal years ended April 30, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Revenue | $ | $ | ||||||
| Less: | ||||||||
| Cost of sales | ||||||||
| Product development costs | ||||||||
| Employee-related costs | ||||||||
| Professional, consulting and contractor fees | ||||||||
| General and administrative costs | ||||||||
| Facilities costs | ||||||||
| Share-based compensation | ||||||||
| Depreciation and amortization expense | ||||||||
| Other expense, net | ||||||||
| Interest expense/(income), net | ( | ) | ||||||
| Credit loss expense | ||||||||
| Change in fair value of derivatives | ||||||||
| Loss on extinguishment of debt | ||||||||
| Income tax benefit | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| F-26 |
(17) Employee Benefits
401(k) Savings & Retirement Plan
The
Company offers a 401(k) Savings & Retirement Plan to eligible employees meeting certain age and service requirements. This plan permits
participants to contribute
The
Company matches employee contributions dollar for dollar up to the first
The Company may also provide for a voluntary contribution to the plan which is approved by the Company’s Board of Directors on an annual basis. All participants immediately vest on the date of distribution.
(18) Revision of Prior Period Financial Statements
During fiscal 2026, the Company identified errors related to the accounting for certain convertible debt conversion transactions that occurred during fiscal 2025. The Company assessed the materiality of these changes in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections are not material to any previously presented consolidated financial statements. The corrections had no impact on the Consolidated Statement of Cash Flows or notes to these consolidated financial statements, for any previously presented interim or annual consolidated financial statements. Accordingly, the Company corrected the previously reported immaterial errors for the year ended April 30, 2025 in this Annual Report on Form 10-K.
Materiality Assessment and Reliance
The Company evaluated the errors considering both quantitative and qualitative factors and determined that the effects of the errors were not material, individually or in the aggregate, to any previously issued interim or annual financial statements. However, the Company determined that recording the cumulative effect of correcting the errors as an out-of-period adjustment in the current period would have been material to the Company’s results of operations for the fiscal year ended April 30, 2026. Accordingly, the Company revised the applicable prior period amounts.
A summary of the immaterial corrections to the Company’s previously reported audited consolidated financial statements follows:
Year Ended April 30, 2025
| As Previously Reported | Adjustment | As Revised | ||||||||||
| Balance Sheet | (in thousands) | |||||||||||
| Additional paid-in capital | $ | $ | $ | |||||||||
| Statement of Operations | ||||||||||||
| Change in fair value of financial instrument | $ | $ | ||||||||||
| F-27 |
(19) Subsequent Events
Common Stock and Warrant Issuance
In
June 2026 the Company entered into a Securities Purchase Agreement with certain institutional accredited investors pursuant to which
the Company agreed to issue and sell an aggregate of shares of its common stock, together with warrants to purchase up to
an aggregate of
CPower Acquisition
On
July 22, 2026, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Columbia Power
Technologies, Inc. (the “Seller”) pursuant to which the Company acquired from the Seller certain of its intellectual property
assets. Seller is an ocean power company, tapping the ocean to supply cost-effective, dependable, and predictable energy generation systems
for its customers. In consideration for the purchase, the Company issued shares of its common stock to the Seller with an agreed
value of $
| F-28 |