# Ocean Power Technologies (OPTT) 10-Q SEC filing - Q3 FY2026
- Filed: Mar 17, 2026, 12:00 AM EDT
- Fiscal quarter: Q3 FY2026
- Calendar quarter: Q1 2026
- Accession: 0001493152-26-010556
- OpenCapital page: https://www.opencapital.sh/filings/0001493152-26-010556
- Markdown URL: https://www.opencapital.sh/filings/0001493152-26-010556.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/1378140/0001493152-26-010556-index.htm
## Filing documents
- [10-Q (form10-q.htm)](https://www.sec.gov/Archives/edgar/data/1378140/000149315226010556/form10-q.htm)
---
## 10-Q
SEC source: [form10-q.htm](https://www.sec.gov/Archives/edgar/data/1378140/000149315226010556/form10-q.htm)
**UNITED
STATES**
**SECURITIES
AND EXCHANGE COMMISSION**
**Washington,
D.C. 20549**
**Form10-Q**
(Mark
One)
☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For
the Quarterly Period Ended January 31, 2026**
**Or**
☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For
the Transition Period From ______to______**
**Commission
file number: 001-33417**
**OCEAN
POWER TECHNOLOGIES, INC.**
*(Exact
Name of Registrant as Specified in Its Charter)*
**Delaware** **22-2535818**
*(State or Other Jurisdiction of*
*Incorporation or Organization)* *(I.R.S. Employer*
*Identification No.)*
**28
ENGELHARD DRIVE, SUITE B, MONROE TOWNSHIP, NJ 08831**
*(Address
of Principal Executive Offices, Including Zip Code)*
**(609) 730-0400**
*(Registrant’s
Telephone Number, Including Area Code)*
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock $0.001 par value OPTT NYSE American
Series A Preferred Stock Purchase Rights N/A NYSE American
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As
of March 13, 2026, the number of outstanding shares of common stock of the registrant was 228,023,439.
**OCEAN
POWER TECHNOLOGIES, INC.**
**INDEX
TO FORM 10-Q**
| | **Page**
**Number** |
| --- | --- |
| **[PART I — FINANCIAL INFORMATION](#sq_012)** | |
| [Item 1. Financial Statements:](#sq_013) | |
| [Consolidated Balance Sheets as of January 31, 2026 (unaudited) and April 30, 2025](#sq_014) | 3 |
| [Unaudited Consolidated Statements of Operations for the three and nine months ended January 31, 2026 and 2025](#sq_015) | 4 |
| [Unaudited Consolidated Statement of Shareholders’ Equity for the three and nine months ended January 31, 2026 and 2025](#sq_016) | 5 |
| [Unaudited Consolidated Statements of Cash Flows for the three and nine months ended January 31, 2026 and 2025](#sq_017) | 7 |
| [Notes to Unaudited Consolidated Financial Statements](#sq_018) | 8 |
| [Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations](#sq_001) | 23 |
| [Item 3. Quantitative and Qualitative Disclosures About Market Risk](#sq_002) | 31 |
| [Item 4. Controls and Procedures](#sq_003) | 31 |
| **[PART II — OTHER INFORMATION](#sq_004)** | |
| [Item 1. Legal Proceedings](#sq_005) | 32 |
| [Item 1A. Risk Factors](#sq_006) | 32 |
| [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](#sq_007) | 32 |
| [Item 3. Defaults Upon Senior Securities](#sq_008) | 32 |
| [Item 4. Mine Safety Disclosures](#sq_009) | 32 |
| [Item 5. Other Information](#sq_010) | 33 |
| [Item 6. Exhibits](#sq_011) | 33 |
**PART
I — FINANCIAL INFORMATION**
**Item
1. Financial Statements**
**Ocean Power Technologies, Inc. and Subsidiaries**
### Consolidated Balance Sheets
_(in $000’s, except share data)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| | (Unaudited) | |
| ASSETS | | |
| Current assets: | | |
| Cash and cash equivalents | $7,056 | $6,715 |
| Accounts receivable, net | 6,132 | 1,191 |
| Contract assets | 725 | 1,088 |
| Inventory | 5,237 | 4,222 |
| Other current assets | 1,957 | 400 |
| Total current assets | 21,107 | 13,616 |
| Property and equipment, net | 5,797 | 3,444 |
| Intangibles, net | 3,390 | 3,490 |
| Right-of-use assets, net | 2,153 | 1,552 |
| Restricted cash, long-term | 154 | 154 |
| Goodwill | 8,537 | 8,537 |
| Total assets | $41,138 | $30,793 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | |
| Current liabilities: | | |
| Accounts payable | $1,543 | $568 |
| Earnout payable | 150 | 300 |
| Convertible notes payable (Note 13) | 6,234 | — |
| Derivative liability (Note 13) | 2,180 | — |
| Accrued expenses | 3,047 | 1,271 |
| Right-of-use liabilities, current portion | 1,171 | 1,150 |
| Contract liabilities | 5,372 | — |
| Total current liabilities | 19,697 | 3,289 |
| Deferred tax liability | 203 | 203 |
| Right-of-use liabilities, less current portion | 1,150 | 649 |
| Total liabilities | 21,050 | 4,141 |
| Commitments and contingencies (Note 14) | - | - |
| Shareholders’ Equity: | | |
| Preferred stock, $0.001 par value; authorized 5,000,000 shares, none issued or outstanding; 100,000 designated as Series A | — | — |
| Common stock, $0.001 par value; authorized 300,000,000 shares, issued 218,789,721 shares and 172,050,563 shares, respectively; outstanding 216,107,328 shares and 171,263,086 shares, respectively | 219 | 172 |
| Treasury stock, at cost; 2,682,393 and 787,477 shares, respectively | (1,823) | (1,018) |
| Additional paid-in capital | 380,360 | 356,588 |
| Accumulated deficit | (358,668) | (329,090) |
| Accumulated other comprehensive loss | — | — |
| Total shareholders’ equity | 20,088 | 26,652 |
| Total liabilities and shareholders’ equity | $41,138 | $30,793 |
See
accompanying notes to unaudited consolidated financial statements.
**Ocean Power Technologies, Inc. and Subsidiaries**
### Consolidated Statements of Operations
_(in $000’s, except per share data) · Unaudited_
| Line item | 2026 / Three months ended January 31, | 2025 / Three months ended January 31, | 2026 / Nine months ended January 31, | 2025 / Nine months ended January 31, |
| --- | --- | --- | --- | --- |
| Revenues | $513 | $825 | $2,119 | $4,545 |
| Cost of revenues | 1,268 | 628 | 4,277 | 3,106 |
| Gross margin | (755) | 197 | (2,158) | 1,439 |
| Operating expenses | 8,363 | 6,072 | 24,160 | 15,702 |
| Operating loss | (9,118) | (5,875) | (26,318) | (14,263) |
| Interest income/(expense), net | (726) | 6 | (1,600) | 13 |
| Other income/(expense) | 96 | (13) | (32) | 4 |
| Change in fair value of derivative | (1,617) | — | (1,617) | — |
| Loss on extinguishment of debt | — | (838) | — | (838) |
| Foreign exchange loss | (1) | — | (11) | (1) |
| Loss before income taxes | (11,366) | (6,720) | (29,578) | (15,085) |
| Income tax benefit | — | — | — | — |
| Net loss | (11,366) | (6,720) | (29,578) | (15,085) |
| Basic and diluted net loss per share | $(0.06) | $(0.04) | $(0.16) | $(0.13) |
| Weighted average shares used to compute basic and diluted net loss per common share | 195,499,846 | 147,543,452 | 184,009,438 | 112,630,443 |
See
accompanying notes to unaudited consolidated financial statements.
**Ocean
Power Technologies, Inc. and Subsidiaries**
**Consolidated
Statements of Shareholders’ Equity**
**(in
$000’s, except share data)**
**Unaudited**
_Nine months Ended January 31, 2026_
| Line item | Shares / Common Shares | Amount / Common Shares | Shares / Treasury Shares | Amount / Treasury Shares | Capital / Additional Paid-In | Deficit / Accumulated | Loss / Accumulated Other Comprehensive | Equity / Total Stockholders’ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at May 1, 2025 | 172,050,563 | $172 | (787,477) | $(1,018) | $356,588 | $(329,090) | — | 26,652 |
| Net loss | — | — | — | — | — | (29,578) | — | (29,578) |
| Share-based compensation | — | — | — | — | 7,791 | — | — | 7,791 |
| Common stock issued upon vesting of restricted stock units | 7,670,221 | 8 | — | — | (8) | — | — | — |
| Issuance of common stock – At The Market Offering, net of issuance costs | 10,812,551 | 11 | — | — | 5,169 | — | — | 5,180 |
| Issuance of common stock - Convertible Debt, net of issuance costs | 28,256,386 | 28 | — | — | 10,820 | — | — | 10,848 |
| Shares withheld for tax withholdings | — | — | (1,894,916) | (805) | — | — | — | (805) |
| Balances at January 31, 2026 | 218,789,721 | $219 | (2,682,393) | $(1,823) | $380,360 | $(358,668) | — | $20,088 |
_Nine months Ended January 31, 2025_
| Line item | Common Shares / Shares | Common Shares / Amount | Treasury Shares / Shares | Treasury Shares / Amount | Additional Paid-In / Capital | Accumulated / Deficit | Accumulated Other Comprehensive / Loss | Total Stockholders’ / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at May 1, 2024 | 61,352,731 | $61 | (88,017) | $(369) | $327,276 | $(307,579) | $(45) | 19,344 |
| Net loss | — | — | — | — | — | (15,085) | — | (15,085) |
| Share-based compensation | — | — | — | — | 1,331 | — | — | 1,331 |
| Common stock issued related to bonus and earnout payments | 2,864,808 | 3 | — | — | 627 | — | — | 630 |
| Common stock issued upon vesting of restricted shares | 2,964,209 | 2 | — | — | — | — | — | 2 |
| Issuance of common stock – AGP At The Market Offering, net of issuance costs | 66,720,451 | 67 | — | — | 16,812 | — | — | 16,879 |
| Issuance of common stock – Capital Raise, net of issuance costs | 21,446,079 | 22 | — | — | 2,429 | — | — | 2,451 |
| Issuance of common stock - Convertible Debt, net of issuance costs | 15,442,429 | 15 | — | — | 3,993 | — | — | 4,008 |
| Shares withheld for tax withholdings | — | — | (699,460 | (649) | — | — | — | (649) |
| Balances at January 31, 2025 | 170,790,707 | $170 | (787,477) | $(1,018) | $352,468 | $(322,664) | $(45) | $28,911 |
_Three Months Ended January 31, 2026_
| Line item | Common Shares / Shares | Common Shares / Amount | Treasury Shares / Shares | Treasury Shares / Amount | Additional Paid-In / Capital | Accumulated / Deficit | Accumulated Other Comprehensive / Loss | Total Stockholders’ / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at November 1, 2025 | 189,777,377 | $190 | (787,477) | $(1,018) | $370,429 | $(347,302) | — | 22,299 |
| Net loss | — | — | — | — | — | (11,366) | — | (11,366) |
| Share-based compensation | — | — | — | — | 2,600 | — | — | 2,600 |
| Common stock issued upon vesting of restricted stock units | 7,626,221 | 8 | — | — | (8) | — | — | — |
| Issuance of common stock –At The Market Offering, net of issuance costs | 5,188,349 | 5 | — | — | 2,221 | — | — | 2,226 |
| Issuance of common stock - Convertible Debt, net of issuance costs | 16,197,774 | 16 | — | — | 5,118 | — | — | 5,134 |
| Shares withheld for tax withholdings | — | — | (1,894,916) | (805) | — | — | — | (805) |
| Balances at January 31, 2026 | 218,789,721 | $219 | (2,682,393) | $(1,823) | $380,360 | $(358,668) | — | $20,088 |
_Three Months Ended January 31, 2025_
| Line item | Common Shares / Shares | Common Shares / Amount | Treasury Shares / Shares | Treasury Shares / Amount | Additional Paid-In / Capital | Accumulated / Deficit | Accumulated Other Comprehensive / Loss | Total Stockholders’ / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at November 1, 2024 | 124,683,555 | $125 | (88,017) | $(369) | $338,352 | $(315,944) | $(45) | 22,119 |
| Balance | 124,683,555 | $125 | (88,017) | $(369) | $338,352 | $(315,944) | $(45) | 22,119 |
| Net loss | — | — | — | — | — | (6,720) | — | (6,720) |
| Share-based compensation | — | — | — | — | 780 | — | — | 780 |
| Common stock issued related to bonus and earnout payments | — | — | — | — | — | — | — | — |
| Common stock issued upon vesting of restricted shares | 2,954,209 | 2 | — | — | — | — | — | 2 |
| Issuance of common stock – AGP At The Market Offering, net of issuance costs | 27,710,514 | 28 | — | — | 9,343 | — | — | 9,371 |
| Issuance of common stock – Capital Raise, net of issuance costs | 15,442,429 | 15 | — | — | 3,993 | — | — | 4,008 |
| Issuance of common stock – Capital Raise, net of issuance costs | — | — | (699,460) | (649) | — | — | — | (649) |
| Balances at January 31, 2025 | 170,790,707 | $170 | (787,477) | $(1,018) | $352,468 | $(322,664) | $(45) | $28,911 |
| Balances | 170,790,707 | $170 | (787,477) | $(1,018) | $352,468 | $(322,664) | $(45) | $28,911 |
See
accompanying notes to unaudited consolidated financial statements.
**Ocean Power Technologies, Inc. and Subsidiaries**
### Consolidated Statements of Cash Flows
_(in $000’s) · Unaudited_
| Line item | 2026 / Nine months ended January 31, | 2025 / Nine months ended January 31, |
| --- | --- | --- |
| Cash flows from operating activities: | | |
| Net loss | $(29,578) | $(15,085) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Depreciation of fixed assets | 632 | 610 |
| Foreign exchange loss | - | (1) |
| Loss on disposal of property and equipment | - | 111 |
| Amortization of intangible assets | 99 | 99 |
| Amortization of right of use asset | 675 | 633 |
| Share-based compensation | 7,791 | 1,331 |
| Change in fair value of derivative | 1,617 | — |
| Loss on disposition of assets | — | 838 |
| Changes in operating assets and liabilities: | | |
| Accounts receivable | (4,941) | (830) |
| Contract assets | 363 | (460) |
| Inventory | (2,246) | 366 |
| Other assets | (1,557) | 996 |
| Accounts payable | 978 | (2,731) |
| Earnout payable | (150) | (150) |
| Accrued expenses | 1,776 | 453 |
| Right-of-use liabilities | (755) | (506) |
| Contract liabilities | 5,372 | (302) |
| Net cash used in operating activities | $(19,924) | $(14,628) |
| Cash flows from investing activities: | | |
| Purchases of property and equipment | (1,754) | (350) |
| Net cash used in investing activities | $(1,754) | $(350) |
| Cash flows from financing activities: | | |
| Cash paid for tax withholding related to shares withheld | $(806) | (649) |
| Proceeds from convertible notes | 17,645 | 3,171 |
| Proceeds from issuance of common stock - Capital Raise, net of issuance costs | — | 2,451 |
| Proceeds from issuance of common stock - At The Market offering, net of issuance costs | 5,180 | $16,880 |
| Net cash provided by financing activities | $22,019 | $21,853 |
| Net increase in cash, cash equivalents and restricted cash | $341 | $6,875 |
| Cash, cash equivalents and restricted cash, beginning of period | $6,869 | $3,305 |
| Cash, cash equivalents and restricted cash, end of period | $7,210 | $10,180 |
| Supplemental disclosure of noncash investing and financing activities: | | |
| Common stock issued related to bonus and earnout payments | — | $630 |
| Common stock issued related to conversion of convertible debt | 10,248 | 15 |
| Operating right of use asset obtained in exchange for operating lease liability | 1,276 | — |
See
accompanying notes to unaudited consolidated financial statements.
**Ocean
Power Technologies, Inc. and Subsidiaries**
**Notes
to Unaudited Consolidated Financial Statements**
**(1)Background, Basis of Presentation 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 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.
***(b)
Basis of Presentation***
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) and for interim financial information in accordance with the Securities and Exchange
Commission (“SEC”), instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been included. The interim operating results are not necessarily
indicative of the results for a full year or for any other interim period. Further information on potential factors that could affect
the Company’s financial results can be found in the Company’s Annual Report on Form 10-K for the year ended April 30, 2025,
as filed with the SEC and elsewhere in subsequent Exchange Act filings, including this Form 10-Q.
***(c)
Going Concern***
During
the nine months ended January 31, 2026, the Company incurred a net loss of approximately $29.6 million and used cash in operations of
approximately $19.9 million. The Company’s future results of operations involve significant risks and uncertainties. Factors that
could affect the Company’s future operating results and could cause actual results to vary materially from expectations include,
but are not limited to, performance of its products, its ability to market and commercialize its products and new products that it may
develop, access to capital, technology development, scalability of technology and production, ability to attract and retain key personnel,
concentration of customers and suppliers, pending or threatened litigation and deployment risks and integration of acquisitions.
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.
**(2)Summary of Significant Accounting Policies**
***(a)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 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,
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)Cash, Cash Equivalents, Restricted Cash and Security Agreements***
*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. The Company had cash and cash equivalents of approximately $7.1 million and
$6.7 million as of January 31, 2026 and April 30, 2025, respectively.
*Restricted
Cash and Security Agreements*
The
Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $154,000 is on deposit at Santander
and serves as security for a letter of credit issued by Santander for the lease of warehouse/office space in Monroe Township, New Jersey.
The
following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets
that total to the same amounts shown in the Consolidated Statements of Cash Flows.
Schedule of Cash, Cash Equivalents and Restricted Cash
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Cash and cash equivalents | $7,056 | $6,715 |
| Restricted cash, long-term | 154 | 154 |
| Cash, cash equivalents, restricted cash and restricted cash equivalents | $7,210 | $6,869 |
***(d)Inventory***
In
accordance with Accounting Standards Codification 330 (ASC 330), inventory is stated at the lower of cost or net realizable value applicable
to goods on hand. Items remain in inventory until they are shipped to the customer, at which time the costs are transferred on a first
in first out ( FIFO) basis to cost of revenues, or moved to leased assets as applicable, following the matching principle where costs
and revenues are recognized in the same period. The Company has three classes of inventory; raw materials, work in process, and finished
goods.
***(e)Accounts Receivable, net***
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 nine months ended January 31, 2026, the Company increased its allowance
for credit losses primarily in connection with a specific customer 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 $560,000 at January
31, 2026, compared to $100,000 at April 30, 2025. Expected credit losses are written off in the period in which the underlying financial
assets are determined to be uncollectible.
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, net represents an unconditional
right to consideration arising from the Company’s performance under contracts with customers.
***(f)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 ten years) of the assets. Leasehold improvements are amortized using
the straight-line method over the shorter of the estimated useful life of the asset or the remaining lease term. Expenses for maintenance
and repairs are charged to operations as incurred. Property and equipment, net is also reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, then an impairment charge is recognized in
the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Schedule
of Property and Equipment Estimated Useful Life
| Description | Estimated depreciable life |
| --- | --- |
| Equipment | 5-7 years |
| Computer equipment & software | 3 years |
| Office furniture & fixtures | 3-7 years |
| Leasehold improvements | Shorter of the estimated useful life or lease term |
| Leased Power Buoy assets | 10 years |
| Leased WAM-V assets | 10 years |
***(g)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.
***(h)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.
For
each of the nine months ended January 31, 2026 and 2025, the Company had five and four customers, respectively, whose revenues accounted
for at least 10% of the Company’s consolidated revenues. These revenues accounted for approximately 81% and 73% of the Company’s
total revenues for the respective periods. For the three months ended January 31, 2026 and 2025, the Company had two and three customers,
respectively, whose revenues accounted for at least 10% of the Company’s consolidated revenues. These revenues accounted for approximately73% and 95% of the Company’s total revenues for the respective periods.
As
of January 31, 2026 and 2025, the Company had one and four customers, respectively, whose total receivable balance accounted for at least
10% of the Company’s consolidated receivables. These receivables accounted for approximately 76% and 95% of the Company’s
total receivables for the respective periods.
As
of January 31, 2026, one commercial customer represented about 5% of our accounts receivable balance. As part of that contract, we granted
extended payment terms that are not typical for the Company, which increases our credit exposure. We continue to monitor this receivable
closely, and while we have not recorded an allowance because we believe collectability is probable, we acknowledge that these terms carry
additional risk if the customer’s financial condition changes. In addition, we have fully reserved one other receivable balance
from one customer that represented 6% of the total gross accounts receivable balance, recognizing a loss of $373,000 for the fiscal year.
***(i)Share-Based Compensation***
Costs
resulting from all share-based payment transactions are recognized in the consolidated financial statements at their fair values. The
aggregate share-based compensation expense recorded in the Consolidated Statements of Operations for the nine months ended January 31,
2026 and 2025 was approximately $7.8 million and $1.3 million, respectively. The aggregate share-based compensation expense recorded
in the Consolidated Statements of Operations for the three months ended January 31, 2026 and 2025 was approximately $2.6 million and
$0.8 million, respectively. The Company’s policy is to account for forfeitures of share-based compensation awards 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 implication, 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.
***(j)Revenue Recognition***
The
Company accounts for revenue in accordance with Accounting Standards Codification 606 (ASC 606) for contracts with customers and
Accounting Standards Codification 842 (ASC 842) for leasing arrangements. In relation to ASC 606, which states that a performance
obligation is the unit of account for revenue recognition, the Company assesses the goods or services promised in a contract with a
customer and identifies a performance obligation as either: a) a good or service (or a bundle of goods or services) that is
distinct; or b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to
the customer. A contract may contain a single performance obligation or multiple performance obligations. For contracts with
multiple performance obligations, the Company allocates the contracted transaction price to each performance obligation based upon
the relative standalone selling price, which represents the price the Company would sell a promised good or service separately to a
customer. The Company determines the standalone selling price based upon the facts and circumstances of each obligated good or
service. When no observable standalone selling price is available, the standalone selling price is generally estimated based upon
the Company’s forecast of the total cost to satisfy the performance obligation plus an appropriate profit margin.
The
nature of the Company’s contracts may give rise to several types of variable consideration, including unpriced change orders, liquidated
damages and penalties. Variable consideration can also arise from modifications to the scope of services. Variable consideration is included
in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur once
the uncertainty associated with the variable consideration is resolved. 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 January
31, 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 nine-month period ended January 31, 2026, the Company recognized
approximately $1.7 million in revenue related to performance obligations satisfied at a point in time and approximately $0.4 million
in revenue related to performance obligations satisfied over time. During the nine-month period ended January 31, 2025, the Company recognized
approximately $4.0 million in revenue related to performance obligations satisfied at a point in time and approximately $0.5 million
in revenue related to performance obligations satisfied over time. During the three-month period ended January 31, 2026, the Company
recognized approximately $0.4 million in revenue related to performance obligations satisfied at a point in time and approximately $0.1 million in revenue related to performance obligations satisfied over time. During the three-month period ended January 31, 2025, the
Company recognized approximately $0.4 million in revenue related to performance obligations satisfied at a point in time and approximately
$0.4 million in revenue related to performance obligations satisfied over time.
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. The Company reports its disaggregation
of revenue by contract type since this method best represents the Company’s business. For each of the three-month periods ended
January 31, 2026 and 2025, the majority of the Company’s contracts were classified as firm fixed-price and the remainder were cost-sharing.
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.
The
table below represents the total revenue recognized under ASC 606 and ASC 842 for the three and nine months ended January 31, 2026 and
2025.
Schedule of Revenue Recognized Under ASC 606 and ASC 842
_(in thousands) · (in thousands)_
| Line item | ASC 606 / Three months ended January 31, 2026 | ASC 842 / Three months ended January 31, 2026 | Total / Three months ended January 31, 2026 | ASC 606 / Three months ended January 31, 2025 | ASC 842 / Three months ended January 31, 2025 | Total / Three months ended January 31, 2025 |
| --- | --- | --- | --- | --- | --- | --- |
| Product Line: | | | | | | |
| WAM-V | $58 | $64 | $122 | $580 | $74 | $654 |
| Buoy | 25 | 37 | 62 | 171 | — | 171 |
| Services | 329 | — | 329 | — | — | — |
| Total | $412 | $101 | $513 | $751 | $74 | $825 |
| Region: | | | | | | |
| North and South America | $45 | $37 | $82 | $326 | — | $326 |
| EMEA | 72 | 64 | 136 | 425 | 74 | 499 |
| Asia and Australia | 295 | — | 295 | — | — | — |
| Total | $412 | $101 | $513 | $751 | $74 | $825 |
| Revenues | $412 | $101 | $513 | $751 | $74 | $825 |
_(in thousands) · (in thousands)_
| Line item | ASC 606 / Nine months ended January 31, 2026 | ASC 842 / Nine months ended January 31, 2026 | Total / Nine months ended January 31, 2026 | ASC 606 / Nine months ended January 31, 2025 | ASC 842 / Nine months ended January 31, 2025 | Total / Nine months ended January 31, 2025 |
| --- | --- | --- | --- | --- | --- | --- |
| Product Line: | | | | | | |
| WAM-V | $1,182 | $203 | $1,385 | $3,996 | $206 | $4,202 |
| Buoy | 123 | 84 | 207 | 343 | — | 343 |
| Services | 527 | — | 527 | — | — | — |
| Total | $1,832 | $287 | $2,119 | $4,339 | $206 | $4,545 |
| Region: | | | | | | |
| North and South America | $270 | $84 | $354 | $3,046 | — | $3,046 |
| Europe | 1,089 | 203 | 1,292 | 1,291 | 206 | 1,497 |
| Asia and Australia | 473 | — | 473 | 2 | — | 2 |
| Total | $1,832 | $287 | $2,119 | $4,339 | $206 | $4,545 |
| Revenues | $1,832 | $287 | $2,119 | $4,339 | $206 | $4,545 |
***(k)Net Loss per Common Share***
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 common 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 25,920,609 and 20,835,027 for the nine months ended January 31,
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.
***(l)Intangibles, net***
Intangible
assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at
the acquisition date (which is regarded as their cost). Intangible assets, including patents, are amortized over the estimated useful
life of the asset on a basis that approximates the pattern of economic benefit. The patents, trade name and customer relationship intangibles
are being amortized over 20, 12 and 10 years respectively, which is consistent with the estimated pattern of economic benefit of the
assets. The trademark is not subject to amortization.
Intangible
assets are reviewed for impairment if indicators of potential impairment exist. There were no indications of potential impairment of
intangible assets for either the nine months ended January 31, 2026 or 2025.
***(m)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. Management performed its annual
qualitative assessment in fiscal year 2025 and determined that it is more likely than not that no goodwill impairment existed as of April
30, 2025. There were no indications of potential impairment of goodwill identified for the nine months ended January 31, 2026. When 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 revenue 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
the fair value of the Company. If the fair value is less than the carrying amounts, an impairment charge for the difference is recorded.
***(n)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.
Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized
tax benefits in interest expense and penalties in selling, general, and administrative expenses, to the extent incurred. Refer to Note
15 for 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.
***(o)Accumulated Other Comprehensive Loss***
The
functional currency for the Company’s foreign operations is the applicable local currency. The translation from the applicable
foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate during the period. The unrealized gains or losses resulting from
such translation are included in Accumulated Other Comprehensive Loss within Shareholders’ Equity. For each of the nine months
ended January 31, 2026 and 2025, there were no amounts recorded to other comprehensive loss due to limited foreign operations.
***(p)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.
***(q)Product Development***
Costs
related to product development activities by the Company are expensed as incurred. The Company had approximately $1.1 million and $1.4 million in product development expense for the nine months ended January 31, 2026 and 2025, respectively. The Company had approximately
$0.6 million and $0.7 million in product development expense for the three months ended January 31, 2026 and 2025, respectively.
***(r)Derivative Financial Instruments***
The
Company evaluates all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.
Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment
of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded
derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period.
***(s)Recently Issued Accounting Standards***
In
recent periods, the 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 Financial Accounting Standards Board (“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. We are currently evaluating the impact of adopting this ASU 2023-09 on our
consolidated financial statements and disclosures for the annual period ending April 30, 2026.
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 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.
**(3)Accounts Receivable, Contract Assets and Contract Liabilities**
The
following provides further details on the balance sheet accounts of accounts receivable, contract assets and contract liabilities from
contracts with customers:
Schedule of Accounts Receivable, Contract Assets and Contract Liabilities
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 | April 30, 2024 |
| --- | --- | --- | --- |
| Accounts receivable | $6,132 | $1,191 | $796 |
| Contract assets | $725 | $1,088 | $18 |
| Contract liabilities | $5,372 | — | $302 |
*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 nine months ended January 31, 2026 and 2025.
Significant
changes in the contract assets balances during the period were as follows:
Schedule of Significant Changes in Contract Assets
_(in thousands)_
| Line item | Nine months ended January 31, 2026 | Nine months ended January 31, 2025 |
| --- | --- | --- |
| Transferred to receivables from contract assets recognized | $(1,260) | $(600) |
| Revenue recognized and not billed | 897 | 1,060 |
| Net change in contract assets | $(363) | $460 |
*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:
Schedule of Significant Changes in Contract Liabilities
_(in thousands)_
| Line item | Nine months ended January 31, 2026 | Nine months ended January 31, 2025 |
| --- | --- | --- |
| Revenue recognized | $(262) | $(1,830) |
| Payments billed or collected for which revenue has not been recognized | 5,634 | 1,528 |
| Net change in contract liabilities | $5,372 | $(302) |
**(4)Inventory**
The
Company holds inventory related to the production of its WAM-V® and PowerBuoy® products.
Schedule of Inventory
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Raw Materials | $2,681 | $3,586 |
| Work in Process | 2,556 | 636 |
| Finished Products | — | — |
| Inventory | $5,237 | $4,222 |
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 transitioning to the lease fleet. The Company typically ships finished products as they are completed.
**(5)Other Current Assets**
Other
current assets consisted of the following at January 31, 2026 and April 30, 2025:
Schedule of Other Current Assets
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Prepaid insurance | $252 | $80 |
| Prepaid software & licenses | 139 | 68 |
| Prepaid sales & marketing | 117 | 90 |
| Prepaid project costs | 478 | 36 |
| Prepaid inventory | 849 | — |
| Prepaid expenses- other | 122 | 126 |
| Total other current assets | $1,957 | $400 |
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 is classified
within other current asset based on when management estimates the revenue will be recognized. As of January 31, 2026, the Company has
net prepaid project costs of $478,000. The amount recorded will be recognized as cost of goods sold if and when the Company achieves
and delivers the milestones under the terms of the agreement.
**(6)Property and Equipment, net**
The
components of property and equipment, net as of January 31, 2026 and April 30, 2025 consisted of the following:
Schedule
of Components of Property and Equipment, Net
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Equipment | $2,208 | $1,569 |
| Computer equipment & software | 637 | 620 |
| Office furniture & equipment | 425 | 425 |
| Leasehold improvements | 683 | 683 |
| Leased WAM-V’s | 2,378 | 1,735 |
| Leased Buoys | 2,634 | 949 |
| Property and equipment, gross | 8,965 | 5,981 |
| Less: accumulated depreciation | (3,168) | (2,537) |
| Property and equipment, net | $5,797 | $3,444 |
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 $632,000 and $610,000 for the nine-month periods ended January 31, 2026 and 2025, respectively. Depreciation
expense was approximately $234,000 and $155,000 for the three-month periods ended January 31, 2026 and 2025, respectively.
**(7)Intangible Assets**
The
components of intangible assets, net as of January 31, 2026 and April 30, 2025 consisted of the following:
Schedule of Components of Intangible Assets
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Patents | $2,729 | $2,729 |
| Trademarks | 2,769 | 2,769 |
| Intangible assets, gross | 5,498 | 5,498 |
| Accumulated amortization | (2,108) | (2,008) |
| Intangible assets, net | $3,390 | $3,490 |
Amortization
expense was approximately $99,000 and $99,000 for the nine-month periods ended January 31, 2026 and 2025, respectively. Amortization
expense was approximately $33,000 and $33,000 for the three-month periods ended January 31, 2026 and 2025, respectively.
**(8)Goodwill**
Goodwill
in the amount of $8.5 million was recognized in November 2021 related to the acquisition of MAR. There have been no additions to, or
any impairment of, goodwill during the three- or nine-month periods ended January 31, 2026 and 2025.
**(9)Leases**
*Lessor
Information*
As
of January 31, 2026 and April 30, 2025, the Company had four and three WAM-V’s leased to customers which have been classified as
operating leases per accounting guidance contained within ASC Topic 842, “Leases”, respectively. The remaining term on these
operating leases is less than 2 years.
*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 January 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. This lease commenced in April of 2023 and will continue for
62 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.
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.
Variable
lease expenses, if any, are recorded as incurred. The operating lease cash flow payments for the nine months ended January 31, 2026 and
2025 were $957,000 and $679,000, respectively. The operating lease cash flow payments for the three months ended January 31, 2026 and
2025 were $326,000 and $314,000, respectively.
The
components of lease expense which are included in our operating expenses in the Consolidated Statement of Operations for the three and
nine months ended January 31, 2026 and 2025 were as follows:
Schedule
of Operating Lease Costs
_(in thousands) · (in thousands)_
| Line item | 2025 / Three months ended January 31, 2026 | 2025 / Three months ended January 31, | 2025 / Nine months ended January 31, 2026 | 2025 / Nine months ended January 31, |
| --- | --- | --- | --- | --- |
| Operating lease cost | $312 | $260 | $877 | $782 |
| Short-term lease cost | — | 8 | — | 24 |
| Total lease cost | $312 | $268 | $877 | $806 |
Information
related to the Company’s right-of use assets and lease liabilities as of January 31, 2026 was as follows:
Schedule
of Right-of use Assets and Lease Liabilities
_January 31, 2026 · (in thousands)_
| Operating lease: | |
| --- | --- |
| Operating right-of-use assets, net | $2,153 |
| Right-of-use liabilities- current | $1,171 |
| Right-of-use liabilities- long term | 1,150 |
| Total lease liabilities | $2,321 |
| Weighted average remaining lease term- operating leases | 1.96 years |
| Weighted average discount rate- operating leases | 8.5% |
Total
remaining lease payments under the Company’s operating leases are as follows:
Schedule of Future Minimum Lease Payments Under Operating Lease
_January 31, 2026 · (in thousands)_
| | |
| --- | --- |
| Remainder of fiscal year 2026 | $327 |
| 2027 | 1,317 |
| 2028 | 821 |
| 2029 | 28 |
| 2030 | — |
| thereafter | — |
| Total future minimum lease payments | $2,493 |
| Less imputed interest | (172) |
| Total | $2,321 |
**(10)Accrued Expenses**
Accrued
expenses consisted of the following at January 31, 2026 and April 30, 2025:
Schedule of Accrued Expenses
_(in thousands)_
| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Employee incentive payments | $1,331 | $759 |
| Accrued salary and benefits | 1,147 | 417 |
| Professional fees | 15 | — |
| Accrued project costs | 436 | — |
| Accrued interest expense | 57 | — |
| Other | 61 | 95 |
| Accrued expenses total | $3,047 | $1,271 |
**(11)Share-Based Compensation**
In
2015, upon approval by the Company’s shareholders, the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”)
became effective. A total of 1,332,036 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 2025, the shareholders approved an amendment and restatement of the 2015 Plan
to, among other things, provide an aggregate increase to the 2015 Plan of 20,000,000 shares resulting in total shares authorized for
issuance of 27,282,036 as of January 31, 2026, based on 7,282,036 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 25,000 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 250,000 to 275,000. On June 3, 2025, the 2018 Inducement Plan was further amended to increase the authorized
shares by 715,000 to 990,000. On January 27, 2026, the 2018 Inducement Plan was further amended to increase the authorized shares by1,000,000 to 1,990,000.
*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 the expected life of the stock option granted. The Company did not grant any stock options during the nine months ended
January 31, 2026 and 2025, respectively.
A
summary of stock options under the stock incentive plans is detailed in the following table.
Schedule of Stock Option Activity
| Line item | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) |
| --- | --- | --- | --- |
| Outstanding as of April 30, 2025 | 483,342 | $2.59 | 6.3 |
| Granted | — | — | |
| Exercised | — | — | |
| Cancelled/forfeited | (81,467) | $6.87 | |
| Outstanding as of January 31, 2026 | 401,875 | $1.82 | 5.8 |
| Exercisable as of January 31, 2026 | 401,875 | $1.82 | 5.8 |
As
of January 31, 2026, the total intrinsic value of outstanding and exercisable options was approximately zero.
As of January 31, 2026, no options were unvested. The outstanding options had an intrinsic value of zero and a weighted average remaining contractual term of 5.8 years. There was approximately $22,000 and $38,000 of total recognized compensation cost related to stock options during the nine months ended January 31, 2026 and 2025, respectively.
There was approximately $6,000 and $12,000 of total recognized compensation cost related to stock options during the three months ended January 31, 2026 and 2025,
respectively. As of January 31, 2026, there was no unrecognized compensation cost related to unvested stock options granted under the plans.
*Performance
Stock Units*
A
summary of performance stock units (“PSUs”) under our Stock Incentive Plans is detailed in the following table.
Schedule of Performance Stock Units
| Outstanding at April 30, 2025 | Number of Shares / — | Weighted Average Price per Share / — |
| --- | --- | --- |
| Granted | 150,000 | $0.56 |
| Vested and issued | — | $— |
| Cancelled/forfeited | — | $— |
| Unvested at January 31, 2026 | 150,000 | $0.56 |
There
was approximately $41,000 and zero of total recognized compensation cost related to PSUs for the nine months ended January 31, 2026 and
2025, respectively. There was approximately $16,000 and zero of total recognized compensation cost related to PSUs for the three months
ended January 31, 2026 and 2025, respectively. As of January 31, 2026, there was approximately $44,000 of unrecognized compensation cost
remaining related to unvested PSUs. This cost is expected to be recognized over a weighted-average period of 1.4 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 three months ended January 31, 2026 and 2025, the Company granted approximately 12,573,401 and 21,903,000 shares, respectively, that were subject to both service-based and market-based vesting requirements.
Additionally,
as part of the Section 220 shareholder demand, the Company cancelled 631,829 RSU awards issue under the Omnibus Plan and reissued
under the amended Omnibus Plan with exact same vesting terms. The cancellations and reissuance occurred simultaneously and there was
no affect on the unaudited consolidated financial statements as a result of these cancellations and reissuances.
A
summary of unvested RSU’s under the Stock Incentive Plans is as follows:
Schedule of Non-vested Restricted Stock Activity
| Line item | Number of Shares | Weighted Average Price per Share |
| --- | --- | --- |
| Unvested at April 30, 2025 | 22.461,633 | $0.79 |
| Granted | 12,573,401 | $0.74 |
| Vested and issued | (7,670,221) | $0.99 |
| Cancelled/forfeited | (1,996,079) | $0.74 |
| Unvested at January 31, 2026 | 25,368,734 | $0.58 |
There
was approximately $7,728,000 and $1,293,000 of total recognized compensation cost related to RSUs for the nine months ended January 31,
2026 and 2025, respectively. There was approximately $2,578,000 and $768,000 of total recognized compensation cost related to RSUs for
the three months ended January 31, 2026 and 2025, respectively. As of January 31, 2026, there was approximately $6,647,000 of unrecognized
compensation cost remaining related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of 1.8 years.
**(12)Fair Value Measurements**
ASC
Topic 820, “*Fair Value Measurements”* 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.
*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):
Schedule
of Fair Value Assets on Recurring Basis
| Line item | Fair Value |
| --- | --- |
| Derivative liability – May issuance | $699 |
| Change due to conversion of notes | (129) |
| Derivative liability - July 31, 2025 | 570 |
| Derivative liability – October issuance | 489 |
| Change due to conversion of notes | (179) |
| Derivative liability - October 31, 2025 | 881 |
| Derivative liability - issuance | 881 |
| Change due to conversion of notes | (318) |
| Change due to revaluation of derivatives | 1,617 |
| Derivative liability - January 31, 2026 | $2,180 |
| Derivative liability | $2,180 |
| Line item | Level | January 31, 2026 | April 30, 2025 |
| --- | --- | --- | --- |
| Derivative liability | 3 | $2,180 | — |
The
derivative liability related to our 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 January 31, 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 three and nine months ended January 31, 2026 and 2025, respectively.
**(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 $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 10,117,602 shares were sold under the Ladenburg sales agreement during the nine months ended January 31, 2026 totaling proceeds of $4.9 million. Subsequent to January 31, 2026, through filing, there were an additional 5,646,239 shares were sold under the Ladenburg
sales agreement, totaling proceeds of $2.4 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. The convertible debt structure offers the potential for conversion into
equity, which may result in dilution to existing shareholders upon conversion. On October 7, 2025, we issued and sold to the investors
$6.5 million of additional notes. We can draw an additional $8.5 million of notes under the purchase agreement. Principal and interest
conversion during the three and nine months ended January 31, 2026 was approximately $4.6 million and $9.7 million, respectively.
The
convertible debt has a conversion feature that was determined to be an embedded derivative that requires bifurcation and separate accounting
from the host instrument. At inception, the fair value of the derivative liability was approximately $699,000 for the May issuance and
$489,000 for the October issuance.
The
sale of additional equity 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. Subsequent to January 31, 2026, through filing, there were additional conversions of 6,269,872 shares, reducing the
principal balance convertible debt by approximately $1.5 million.
**(14)Commitments and Contingencies**
*Litigation
with Paragon Technologies, Inc.*
On
October 10, 2023, Paragon Technologies, Inc. filed a complaint in the Court of Chancery of the State of Delaware against the
Company, and the members of its Board of Directors, claiming certain breaches of their fiduciary duties. In an August 12, 2024 Press
Release and its Form 10-Q report for the second quarter of 2024, Paragon announced that it was no longer pursuing litigation against
the Company. Pursuant to a Court order dated January 9, 2025, Paragon was required “to file a status report within 30 days.
Otherwise, the case will be dismissed under Rule 41(e).” Paragon did not file a status report, and in March 2026, the Court
confirmed that it had dismissed the case due to failure to prosecute under Rule 41(e).
*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.
**(15)Income Taxes**
*Uncertain
Tax Positions*
The
Company accounts for income taxes in accordance with ASC 740, Income Taxes. 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. The Company has no current or deferred tax due to current and projected losses for the year.
At
January 31, 2026, the Company had no uncertain tax positions. The Company does not expect any material increases or decreases in its
income tax expense or benefit in the next twelve months, related to examinations or uncertain tax positions. Net operating losses and
credit carryforwards since inception remain open to examination by taxing authorities and will continue to remain open for a period of
time after utilization.
*Tax
Preservation Plan*
In
June 2023, in order to protect the Company’s valuable tax assets related to its net operating losses from being limited or lost
under Section 382 of the Internal Revenue Code, the Company adopted a Tax Benefits Preservation Plan (the “Plan”). Pursuant
to the Plan, the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share
of common stock of the Company. The dividend was distributed to stockholders of record as of the close of business on July 11, 2023.
The Plan substantially diminishes 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 Plan is 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 approval by potentially subjecting any such person
or group to significant dilution. The Plan was approved by shareholders by a non-binding advisory vote at the Company’s Annual
Meeting held on February 28, 2024.
The
Company determined the grant date fair value of the Rights using an option-pricing model. The amount was immaterial to the consolidated
financial statements and deemed to be de minimis, and accordingly was not recorded to the financial statements.
*Impact
of the One Big Beautiful Act -*
On
July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law, introducing various changes to U.S. federal
income tax provisions, including modifications to bonus depreciation, interest expense limitations, research and development expense
treatment, and international tax rules. Under ASC 740, the effects of changes in tax law are required to be recognized in the period
that includes the enactment date.
The
Company has evaluated the provisions of the OBBBA and determined that the enactment of the legislation did not have a material impact
on its income tax provision, deferred tax assets or liabilities, or estimated annual effective tax rate for the quarter ended January
31, 2026. The Company will continue to monitor the potential future impacts of the OBBBA, including provisions that become effective
in subsequent periods, and will reflect any material changes in its financial statements as appropriate.
**(16)Operating Segments and Geographic Information**
The
Company operates as one operating segment. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive
Officer, who reviews financial information on a consolidated basis and utilizes net loss for purposes of making operating decisions,
assessing financial performance of the consolidated Company, and making resource allocation decisions. The CODM also reviews total assets.
While assets may move throughout the world to support our revenue projects, for reporting purposes they are included in North America
total assets. Revenue and expenses are generally attributed to the operating unit that bills the customers.
The
following table presents selected financial information with respect to the Company’s single operating segment and its significant
segment expenses for the three and nine months ended January 31, 2026 and 2025, respectively:
Schedule
of Operating Segment Expenses
_(in thousands)_
| Line item | 2026 / Three month ended January 31, | 2025 / Three month ended January 31, |
| --- | --- | --- |
| Revenue | $513 | $825 |
| Less: | | |
| Cost of sales | 1,268 | 628 |
| Product development costs | 641 | 711 |
| Employee-related costs | 2,385 | 1,928 |
| Professional, consulting and contractor fees | 1,172 | 1,159 |
| General and administrative costs | 849 | 789 |
| Facilities costs | 449 | 415 |
| Share-based compensation | 2,600 | 782 |
| Depreciation and amortization expense | 267 | 188 |
| Other expense (income) | (95) | 13 |
| Interest (income)/expense, net | 726 | (6) |
| Credit loss expense | — | 100 |
| Change in fair value of derivatives | 1,617 | — |
| Loss on extinguishment of debt | — | 838 |
| Net loss | $(11,366) | $(6,720) |
_(in thousands)_
| Line item | 2026 / Nine month ended January 31, | 2025 / Nine month ended January 31, |
| --- | --- | --- |
| Revenue | $2,119 | $4,545 |
| Less: | | |
| Cost of sales | 4,277 | 3,106 |
| Product development costs | 1,063 | 1,431 |
| Employee-related costs | 7,066 | 5,557 |
| Professional, consulting and contractor fees | 3,627 | 3,443 |
| General and administrative costs | 2,175 | 1,941 |
| Facilities costs | 1,246 | 1,188 |
| Share-based compensation | 7,791 | 1,331 |
| Depreciation and amortization expense | 731 | 711 |
| Other expense (income) | 43 | (3) |
| Interest (income)/expense, net | 1,600 | (13) |
| Credit loss expense | 461 | 100 |
| Change in fair value of derivatives | 1,617 | — |
| Loss on extinguishment of debt | — | 838 |
| Net loss | $(29,578) | $(15,085) |
**Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
**Special
Note Regarding Forward-Looking Statements**
We
have made statements in this Quarterly Report on Form 10-Q that are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements convey our current expectations or forecasts of future events. Forward-looking
statements include statements regarding our future financial position, business strategy, pending, threatened, and current litigation,
liquidity, budgets, projected revenue and 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.
The
forward-looking statements contained in or incorporated by reference are largely based on our expectations, which reflect estimates and
assumptions made by management. These estimates and assumptions reflect our best judgment based on currently known market conditions
and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve several
risks and uncertainties that are beyond our control, including:
- 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;
- 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;
- our failure to apply technology, data analytics and artificial intelligence effectively in driving value for our customers through technology-based solutions, or failure to gain internal efficiencies and effective internal controls through the application of technology and related tools;
- 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, the conflict between the United States, Israel and Iran, 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.
Any
or all of our forward-looking statements in this report may turn out to be inaccurate. We have based these forward-looking statements
largely 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”
of our Annual Report on Form 10-K for the year ended April 30, 2025, and in our subsequent reports under the Exchange Act. In light of
these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur as contemplated
and actual results could differ materially from those anticipated or implied by the forward-looking statements.
Many
of these factors are beyond our ability to control or predict. These factors are not intended to represent a complete list of the general
or specific factors that may affect us. You should not unduly rely on these forward-looking statements, which speak only as of the date
of this filing. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect
new information or future events or otherwise.
The
following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and
related notes included in this Quarterly Report on Form 10-Q. Some of the information contained in this management’s discussion
and analysis is set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business,
pending and threatened litigation and our liquidity, includes forward-looking statements that involve risks and uncertainties. You should
review the “Risk Factors” section of our Annual Report on Form 10-K for the year ended April 30, 2025 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. References to a fiscal year in this Form 10-Q refer to the year ended
April 30 of that year (e.g., fiscal 2025 refers to the year ended April 30, 2025). References to “we,” “us,”
“our,” and “OPT” refer to Ocean Power Technologies, Inc. and its subsidiaries, as applicable.
**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.
There
have been no material changes to the Company’s business description from that disclosed in our Annual Report on Form 10-K for the
year ended April 30, 2025, filed with the SEC on July 24, 2025, and our Quarterly Report on Form 10-Q for the quarter ended July 31,
2025, filed with the SEC on September 15, 2025, except as noted below.
During
the quarter and as described in more detail below, we issued an additional $6.5 million of convertible notes to institutional investors,
and increased our backlog from comparable prior year period.
**Liquidity**
During
the nine months ended January 31, 2026, the Company incurred a net loss of approximately $29.6 million and used cash in operations of
approximately $19.9 million. The Company’s future results of operations involve significant risks and uncertainties. Factors that
could affect the Company’s future operating results and could cause actual results to vary materially from expectations include,
but are not limited to, performance of its products, its ability to market and commercialize its products and new products that it may
develop, access to capital, technology development, scalability of technology and production, ability to attract and retain key personnel,
concentration of customers and suppliers, pending or threatened litigation and deployment risks and integration of acquisitions.
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.
**At-the-Market
Offering Program**
On
August 8, 2025, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Ladenburg Thalmann &
Co. Inc. under which we may offer and sell, from time to time, shares of our common stock having an aggregate gross sales price of up
to $40.0 million. We intend to use any net proceeds for general corporate purposes, including sales and marketing, product development,
working capital, capital expenditures, repayment or refinancing of indebtedness, repurchases or redemptions of securities, and potential
acquisitions.
This
facility replaced our prior ATM program, which was terminated effective August 8, 2025.
**Convertible
Notes**
In
May 2025, we issued $10.0 million aggregate principal amount of convertible notes with a 24-month maturity, receiving net proceeds of
$9.7 million. The notes are convertible into shares of our common stock under specified terms, and conversion could result in dilution
to existing shareholders. On October 7, 2025, the Company issued and sold to the investors $6.5 million of additional notes. There are
$8.5 million of additional notes available under the purchase agreement with the investors.
**Backlog**
As
of January 31, 2026, backlog was $19.9 million, compared to $7.5 million at January 31, 2025. Backlog represents unfulfilled purchase
orders and agreements with commercial and governmental customers. The Company expects to convert all current backlog within the next
12 to 36 months. The amount and timing of backlog conversion to revenue is subject to change.
**Critical
Accounting Policies and Estimates**
There
have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K
for the year ended April 30, 2025.
**Recently
Issued Accounting Standards**
In
recent periods, the 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 Financial Accounting Standards Board (“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. We are currently evaluating the impact of adopting this ASU 2023-09 on our
consolidated financial statements and disclosures for the annual period ending April 30, 2026.
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 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.
**Financial
Operations Overview**
The
following describes certain line items in our Statements of Operations and some of the factors that affect our operating results.
We
currently focus our sales efforts in key global markets in North America, South America, Europe and Asia. The following table shows the
percentage of our revenues by geographical location of our customers for the three and three months ended January 31, 2026 and 2025.
| Customer Location* | Three months ended January 31, 2026 | Three months ended January 31, 2025 | Nine months ended January 31, 2026 | Nine months ended January 31, 2025 |
| --- | --- | --- | --- | --- |
| North America & South America | 16% | 39% | 17% | 67% |
| EMEA | 26% | 61% | 61% | 33% |
| Asia & Australia | 58% | — | 22% | — |
| | 100% | 100% | 100% | 100% |
*
For U.S. Government contracts, the revenue is classified as North American however, location of operations may differ.
*Cost
of revenue*
Our
cost of revenue consists primarily of subcontracts, incurred materials, 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 development 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.
*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 and Capital Resources.”
***Three
months ended January 31, 2026 compared to the three months ended January 31, 2025***
The
following table contains selected statement of operations information, which serves as the basis of the discussion of our results of
operations for the three months ended January 31, 2026 and 2025.
| Line item | Three months ended January 31, 2026 | Three months ended January 31, 2025 |
| --- | --- | --- |
| Revenues | $513 | $825 |
| Cost of revenues | 1,268 | 628 |
| Gross margin | (755) | 197 |
| Operating expenses | 8,363 | 6,072 |
| Operating loss | (9,118) | (5,875) |
| Interest (expense) income, net | (726) | 6 |
| Other expense, net | 96 | (13) |
| Change in fair value of derivatives | (1,617) | — |
| Loss on extinguishment of debt | — | (838) |
| Foreign exchange loss | (1) | — |
| Loss before income taxes | (11,366) | (6,720) |
| Income tax benefit | — | — |
| Net loss | $(11,366) | (6,720) |
*Revenues*
Revenues
for the three months ended January 31, 2026 and 2025 were approximately $0.5 million and $0.8 million, respectively. The year-over-year
decline in revenue was largely driven by timing impacts associated with the U.S. federal government shutdown. These disruptions shifted
a number of OPT deliverables and development activities into subsequent quarters, which reduced our revenue.
*Cost
of revenues*
Cost
of revenues for the three months ended January 31, 2026 and 2025 increased to $1.3 million from $0.6 million, respectively. The year-over-year
increase is related primarily to full recognition of losses associated with 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.
*Operating
expenses*
Operating
expenses for the three months ended January 31, 2026 and 2025 were $8.4 million and $6.1 million, respectively. The increase of approximately
$2.3 million was primarily the result of the significant increases in share-based compensation of $1.8 million and increases in employee
related expenses of $0.5 million compared to prior year.
*Interest
(expense)/income*
Interest
(expense)/income for the three months ended January 31, 2026 and 2025 was $(726,000) and $6,000, respectively, with the change primarily
related to interest expenses associated with the May and October 2025 convertible notes.
*Other
expense, net*
Other
expense, net for the three months ended January 31, 2026 and 2025 was $96,000 and (13,000), respectively. This change is due to insurance
proceeds in the current year, whereas the prior year expense was related to realized foreign exchange loss.
*Change
in fair value of derivatives*
The
change in the fair value of derivatives for the three months ended January 31, 2026 and 2025 was $1.6 million and zero respectively.
The increase is a result of the fair value of the current years derivative in association with the convertible debt issued in May and
October of 2025.
*Loss
on extinguishment of debt*
The
loss on extinguishment of debt of $0.8 million for the period ended January 31, 2025 relates to convertible notes issued in December
2024 that were converted to common stock in December 2024. There was no similar loss in the comparable current year period.
***Nine
months ended January 31, 2026 compared to the nine months ended January 31, 2025***
The
following table contains selected statement of operations information, which serves as the basis of the discussion of our results of
operations for the nine months ended January 31, 2026 and 2025.
| Line item | Nine months ended January 31, 2026 | Nine months ended January 31, 2025 |
| --- | --- | --- |
| Revenues | $2,119 | $4,545 |
| Cost of revenues | 4,277 | 3,106 |
| Gross margin | (2,158) | 1,439 |
| Operating expenses | 24,160 | 15,702 |
| Operating loss | (26,318) | (14,263) |
| Interest (expense) income, net | (1,600) | 13 |
| Other (expense) Income, net | (32) | 4 |
| Change in fair value of derivatives | (1,617) | — |
| Loss on extinguishment of debt | — | (838) |
| Foreign exchange gain | (11) | (1) |
| Loss before income taxes | (29,578) | (15,085) |
| Income tax benefit | — | — |
| Net loss | $(29,578) | (15,085) |
*Revenues*
Revenues
for the nine months ended January 31, 2026 and 2025 were approximately $2.1 million and $4.5 million, respectively. The year-over-year
decrease is primarily 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 nine months ended January 31, 2026 and 2025 increased to $4.3 million from $3.1 million, respectively. The year-over-year
increase is related primarily to full recognition of one-time losses associated with 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.
*Operating
expenses*
Operating
expenses for the nine months ended January 31, 2026 and 2025 were $24.2 million and $15.7 million, respectively. The increase of approximately
$8.5 million was primarily the result of the significant increases in share-based compensation of $6.5 million, increases in employee-related
expenses of $1.5 million, an increase in product development costs of $0.5 million, and increases in general and administrative fees
of $0.5 million, offset partially by decreases in professional fees of $0.5 million.
*Interest
(expense)/income*
Interest
(expense)/income for the nine months ended January 31, 2026 and 2025 was ($1.6) million and $13,000, respectively, with the change primarily
related to interest expenses associated with the May and October 2025 convertible notes.
*Other
(expense) income, net*
Other
(expense) income, net for the nine months ended January 31, 2026 and 2025 was $(32,000) and 4,000, respectively, with the change primarily
related to a litigation settlement of $195,000, offset by insurance proceeds of $163,000 in the current year.
*Change
in fair value of derivatives*
The
change in the fair value of derivatives for the nine months ended January 31, 2026 and 2025 was $1.6 million and zero respectively. The
increase is a result of the fair value of the current years derivative in association with the convertible debt issued in May and October
of 2025.
*Loss
on extinguishment of debt*
The
loss on extinguishment of debt of $0.8 million as of January 31, 2025 relates to convertible notes issued in December 2024 that were
converted to common stock in December 2024.
**Liquidity
and Capital Resources**
Our
cash requirements relate primarily to working capital needed to operate and grow our business including funding operating expenses. We
have experienced and continue to experience negative cash flows from operations and net losses. The Company incurred net losses of $29.6
million and $15.1 million for the nine months ended January 31, 2026 and 2025, respectively. Refer to “Liquidity Outlook”
below for additional information.
**Net
cash used in operating activities**
During
the nine months ended January 31, 2026, net cash used in operating activities was $19.9 million, an increase of of $5.3 million compared
to net cash used in operating activities during the nine months ended January 31, 2025 of $14.6 million. This primarily reflects an increase
in net loss of $13.8 million, account receivable, and inventory on hand, partially offset an increase in accounts payable, contract liabilities,
and equity compensation in the current year versus the prior year.
**Net
cash used in investing activities**
Net
cash used in investing activities during the nine months ended January 31, 2026 was $1.8 million, compared to $0.4 million during the
nine months ended January 31, 2025, a change of $1.4 million. The net cash used in investing activities during the nine months ended
January 31, 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 nine months ended January 31, 2026 and January 31, 2025 was $22.0 million and $21.9
million, respectively. The current year activity was driven by the proceeds raised related to the issuance of the May and October 2025
convertible notes of $17.6 million and ATM proceeds of $5.2 million, and the prior year activity was related primarily to ATM proceeds
of $16.8 million, $3.2 million in proceeds related to convertible debt issued in December 2024, and proceeds from other capital rases
of $2.5 million discussed above under “Liquidity”.
**Effect
of exchange rates on cash and cash equivalents**
There
was no material effect of exchange rates on cash and cash equivalents during either the three or nine months ended January 31, 2026 and
January 31, 2025.
**Liquidity
Outlook**
Since
our inception, the cash flows from customer revenues have not been sufficient to fund our operations and provide the capital resources
for our business. As of January 31, 2026, our year-to-date revenues were $2.1 million, our year-to-date net losses were $29.6 million,
and our year-to-date net cash used in operating activities was $19.9 million.
We
expect to continue to devote substantial resources 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 restrict 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;
- our failure to apply technology, data analytics and artificial intelligence effectively in driving value for our customers through technology-based solutions, or failure to gain internal efficiencies and effective internal controls through the application of technology and related tools;
- 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, the conflict between the United States, Israel and Iran, 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.
Our
business is capital intensive, and through January 31, 2026, we have been funding our business principally through sales of our securities.
As of January 31, 2026, our cash and cash equivalents and long-term restricted cash balance was $7.2 million and we expect to fund our
business with this amount and, to a lesser extent, with our cash flow generated from operations. Management believes the Company’s
current cash and cash equivalents, and short term investments, may not be sufficient to fund its planned expenditures through March 2027.
These
conditions and events raise substantial doubt about the Company’s ability to continue as a going concern for at least a period
of one year from the issuance of these consolidated financial statements. 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.
**Off-Balance
Sheet Arrangements**
Since
inception, we have not engaged in any off-balance sheet financing activities.
**Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
Not
applicable.
**Item
4. 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 on that evaluation, our CEO and CFO concluded that these disclosure controls and procedures were effective
as of January 31, 2026.
*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 nine months ended January 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
**PART
II — OTHER INFORMATION**
**Item
1. *LEGAL PROCEEDINGS***
As
part of our normal business activities, we are party to a number of legal proceedings and other matters in various stages of development.
Management periodically assesses our liabilities and contingencies in connection with these matters based upon the latest information
available. We disclose material pending legal proceedings pursuant to SEC rules and other pending matters as we may determine to be appropriate.
For
information on matters in dispute, see Note 14 to the Consolidated Financial Statements under Part I, Item 1 of this report.
**Item
1A. *RISK FACTORS***
The
discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on
Form 10-K for the year ended April 30, 2025 and set forth below in this Quarterly Report on Form 10-Q. These risk factors describe various
risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business,
financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. Except as noted below,
there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on
July 24, 2025.
***Our
ability to adopt and use artificial intelligence could have a material impact on our business.***
The
development, adoption and use of artificial intelligence (“AI”) technologies are rapidly transforming our industry, enabling
faster data analysis and automation through machine learning and predictive modeling. Many of our competitors are investing heavily in
AI-driven capabilities to enhance customer acquisition, personalization, pricing optimization, supply chain efficiency, product development,
and marketing effectiveness. If we are unable to adopt and deploy AI effectively as quickly as our competitors, it may cause us to be
relatively less productive or innovative, adversely impacting our competitiveness, our ability to effectively execute our strategic transformation
and requiring additional investments that increase our costs. Laws and regulations regarding AI are rapidly evolving as well, including
in the areas of data privacy, cybersecurity, intellectual property, and data protections. Compliance with new or changing laws, regulations,
or industry standards relating to AI may impose significant operational and financial burdens and may limit our ability to develop, deploy,
or use AI in our business.
***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-Q.
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
financings 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.
***Delays
or difficulties in converting backlog into revenue could adversely affect our results of operations.***
As
of January 31, 2026, our backlog was $19.9 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.
**Item
2. *UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS***
None.
**Item
3. *DEFAULTS UPON SENIOR SECURITIES***
None.
**Item
4. *MINE SAFETY DISCLOSURES***
Not
applicable.
**Item
5. *OTHER INFORMATION***
## Item 6. Exhibits Item
6. *EXHIBIT INDEX***
| 10.1 | Third Amendment to Ocean Power Technologies, Inc. Employment Inducement Incentive Award Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 28, 2026). |
| --- | --- |
| 10.2 | First Amendment to Amended & Restated 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A filed on December 4, 2025). |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101 | The following financial information from Ocean Power Technologies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2026, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets – January 31, 2026 (unaudited) and April 30, 2025, (ii) Consolidated Statements of Operations (unaudited) – three and three months ended January 31, 2026 and 2023, (iii) Consolidated Statements of Comprehensive Loss (unaudited) – three and three months ended January 31, 2026 and 2021, (iv) Consolidated Statement of Shareholders’ Equity (unaudited) – three and three months ended January 31, 2026 and 2023 (v) Consolidated Statements of Cash Flows (unaudited) –three months ended January 31, 2026 and 2023, (vi) Notes to Consolidated Financial Statements.** |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| | 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. |
| | As permitted by Regulation S-K, Item 601(b)(10)(iv) of the Securities Exchange Act of 1934, as amended, certain confidential portions of this exhibit have been redacted from the publicly filed document. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request. |
**SIGNATURES**
Pursuant
to the requirements 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.**
*(Registrant)*
Date: March 17, 2026 */s/ Philipp Stratmann*
By: Philipp Stratmann
*President and Chief Executive Officer*
Date: March 17, 2026 */s/ Robert Powers*
By: Robert Powers
*Senior Vice President and Chief Financial Officer*
34