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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended October 31, 2023

 

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 Right   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 December 11, 2023, the number of outstanding shares of common stock of the registrant was 58,788,718.

 

 

 

 

 

 

OCEAN POWER TECHNOLOGIES, INC.

INDEX TO FORM 10-Q

 

   

Page

Number

PART I — FINANCIAL INFORMATION    
Item 1. Financial Statements:    
Consolidated Balance Sheets as of October 31, 2023 (unaudited) and April 30, 2023   4
Unaudited Consolidated Statements of Operations for the three and six months ended October 31, 2023 and 2022   5
Unaudited Consolidated Statements of Comprehensive Loss for the three and six months ended October 31, 2023 and 2022   6
Unaudited Consolidated Statement of Shareholders’ Equity for the three and six months ended October 31, 2023 and 2022   7
Unaudited Consolidated Statements of Cash Flows for the six months ended October 31, 2023 and 2022   8
Notes to Unaudited Consolidated Financial Statements   9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   27
Item 3. Quantitative and Qualitative Disclosures About Market Risk   44
Item 4. Controls and Procedures   44
PART II — OTHER INFORMATION   45
Item 1. Legal Proceedings   45
Item 1A. Risk Factors   45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   46
Item 3. Defaults Upon Senior Securities   46
Item 4. Mine Safety Disclosures   46
Item 5. Other Information   46
Item 6. Exhibits   47

 

 2 

 

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 develop, market and commercialize our products, and achieve and sustain profitability;
our continued development 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;
our ability to obtain additional funding, as and if needed, which will be subject to several factors, including market conditions, and our operating performance;
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 inflation related to the U.S. dollar on our business, operations, customers, suppliers and manufacturers and personnel;
our ability to meet product development, manufacturing and customer delivery deadlines and the potential impact due to disruptions to our supply chain, as a result of, among other things, staff shortages, order delays, and increased pricing from vendors and manufacturers;
our acquisitions and our ability to integrate them into our operations which may be unsuccessful or expose us to unforeseen liabilities, and may use significant resources;
our estimates regarding future expenses, revenues, 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 of our technology, products and solutions;
our ability to increase or more efficiently utilize the power available from our product lines:
changes in current legislation, regulations and economic conditions that affect the demand for, or restrict the use of our products;
the risks related to the actions of Paragon Technologies, Inc. in connection with its threatened proxy contest against us and the related litigation brought against us, including the amount of related costs incurred by us and the disruption caused to our business activities by these actions;
our ability to hire and retain key personnel, including senior management, to achieve our business objectives; and
our ability to establish and maintain 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, 2023, 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.

 

 3 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(in $000’s, except share data)

 

   October 31, 2023   April 30, 2023 
   (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $3,292   $6,883 
Short term investments   15,427    27,790 
Restricted cash, short-term   219    65 
Accounts receivable   516    745 
Contract assets   326    152 
Inventory   2,546    1,044 
Other current assets   1,505    994 
Total current assets   23,831    37,673 
Property and equipment, net   1,806    1,280 
Intangibles, net   3,898    3,978 
Right-of-use asset, net   1,550    1,751 
Restricted cash, long-term       155 
Goodwill   8,537    8,537 
Total assets  $39,622   $53,374 
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $1,754   $952 
Earnout payable       1,500 
Accrued expenses   2,094    2,346 
Contingent liabilities   1,117    1,202 
Right-of-use liabilities, current portion   579    529 
Contract liabilities   1,164    1,378 
Total current liabilities   6,708    7,907 
Deferred tax liability   203    203 
Right-of-use liabilities, less current portion   1,060    1,311 
Total liabilities   7,971    9,421 
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 100,000,000 shares, issued 58,833,758 shares and 56,304,642 shares, respectively; outstanding 58,788,770 shares and 56,263,728 shares, respectively   59    56 
Treasury stock, at cost; 44,988 shares and 40,914 shares, respectively   (357)   (355)
Additional paid-in capital   326,342    324,393 
Accumulated deficit   (294,348)   (280,096)
Accumulated other comprehensive loss   (45)   (45)
Total shareholders’ equity   31,651    43,953 
Total liabilities and shareholders’ equity  $39,622   $53,374 

 

See accompanying notes to unaudited consolidated financial statements.

 

 4 

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(in $000’s, except per share data)

Unaudited

 

   2023   2022   2023   2022 
   Three months ended October 31,   Six months ended October 31, 
   2023   2022   2023   2022 
                 
Revenues  $889   $303   $2,161   $1,017 
Cost of revenues   401    264    1,010    784 
Gross margin   488    39    1,151    233 
                     
Gain from change in fair value of consideration   (23)   (90)   (86)   (221)
Operating expenses   7,995    6,409    16,100    12,727 
Operating loss   (7,484)   (6,280)   (14,863)   (12,273)
                     
Interest income, net   270    234    610    375 
Other income, employee retention credit       1,202        1,202 
Foreign exchange gain   1        1     
Loss before income taxes   (7,213)   (4,844)   (14,252)   (10,696)
Provision for income taxes                
Net loss  $(7,213)  $(4,844)  $(14,252)  $(10,696)
Basic and diluted net loss per share  $(0.12)  $(0.09)  $(0.24)  $(0.19)
Weighted average shares used to compute basic and diluted net loss per common share   58,781,505    55,898,528    58,752,291    55,894,090 

 

See accompanying notes to unaudited consolidated financial statements.

 

 5 

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(in $000’s)

Unaudited

 

   2023   2022   2023   2022 
   Three months ended October 31,   Six months ended October 31, 
   2023   2022   2023   2022 
                 
Net loss  $(7,213)  $(4,844)  $(14,252)  $(10,696)
Foreign currency translation adjustment                
Total comprehensive loss  $(7,213)  $(4,844)  $(14,252)  $(10,696)

 

See accompanying notes to unaudited consolidated financial statements.

 

 6 

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(in $000’s, except share data)

Unaudited

 

   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Equity 
   Six Months Ended October 31, 2023 
   Common Shares   Treasury Shares  

Additional

Paid-In

  

Accumulated

  

Accumulated

Other

Comprehensive

  

Total

Shareholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Equity 
                                 
Balances at May 1, 2023   56,304,642   $56    (40,914)  $(355)  $324,393   $(280,096)  $(45)   43,953 
Net loss                       (14,252)       (14,252)
Share-based compensation                   673            673 
Common stock issued related to bonus and earnout payments   2,403,846    3            1,247            1,250 
Common stock issued upon vesting of restricted stock   69,666                             
Issuance of common stock - Cantor At The Market offering, net of issuance costs   55,604                29            29 
Shares withheld for tax withholdings           (4,074)   (2)               (2)
Balances at October 31, 2023   58,833,758   $59    (44,988)  $(357)  $326,342   $(294,348)  $(45)  $31,651 

 

   Shares   Amount   Shares   Amount   Paid-In
Capital
  

Accumulated

Deficit

   Comprehensive Loss  

Shareholders’

Equity

 
   Six Months Ended October 31, 2022 
   Common Shares   Treasury Shares  

Additional

Paid-In

  

Accumulated

   Accumulated Other Comprehensive  

Total

Shareholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss    Equity  
                                 
Balances at May 1, 2022   55,905,213   $56    (23,352)  $(341)  $322,932   $(253,770)  $(46)  $68,831 
Net loss      $                (10,696)       (10,696)
Share-based compensation      $            632            632 
Common stock issued upon vesting of restricted stock units   16,667   $                         
Balances at October 31, 2022   55,921,880   $56    (23,352)  $(341)  $323,564   $(264,466)  $(46)  $58,767 

 

   Shares   Amount   Shares   Amount   Paid-In
Capital
  

Accumulated

Deficit

   Comprehensive Loss  

Shareholders’

Equity

 
   Three Months Ended October 31, 2023 
   Common Shares   Treasury Shares  

Additional

Paid-In

  

Accumulated

  

Accumulated

Other

Comprehensive

  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss    Equity  
                                 
Balance at August 1, 2023   58,776,654   $59    (44,680)  $(357)  $326,041   $(287,135)  $(45)   38,563 
Net loss                       (7,213)       (7,213)
Share-based compensation                   272            272 
Common stock issued upon vesting of restricted stock   1,500                             
Issuance of common stock - Cantor At The Market offering, net of issuance costs   55,604                29            29 
Acquisition of treasury stock           (308)                    
Balances at October 31, 2023   58,833,758   $59    (44,988)  $(357)  $326,342   $(294,348)  $(45)  $31,651 

 

   Shares   Amount   Shares   Amount   Paid-In
Capital
  

Accumulated

Deficit

   Comprehensive Loss  

Shareholders’

Equity

 
   Three Months Ended October 31, 2022 
   Common Shares   Treasury Shares  

Additional

Paid-In

  

Accumulated

  

Accumulated

Other

Comprehensive

  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss    Equity  
                                 
Balance at August 1, 2022   55,921,880   $56    (23,352)  $(341)  $323,265   $(259,622)  $(46)   63,312 
Net loss                       (4,844)       (4,844)
Share-based compensation                   299            299 
Balances at Balance, October 31, 2022   55,921,880   $56    (23,352)  $(341)  $323,564   $(264,466)  $(46)  $58,767 

 

See accompanying notes to unaudited consolidated financial statements.

 

 7 

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in $000’s)

Unaudited

 

   2023   2022 
   Six months ended October 31, 
   2023   2022 
Cash flows from operating activities:          
Net loss  $(14,252)  $(10,696)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation of fixed assets   172    117 
Foreign exchange gain   1     
Amortization of intangible assets   80    79 
Amortization of right of use asset   201    152 
(Accretion of discount)/amortization of premium on investments   (211)   191 
Change in contingent consideration liability   (86)   (221)
Stock based compensation   673    632 
Changes in operating assets and liabilities:          
Accounts receivable   229    (105)
Contract assets   (174)   85 
Inventory   (1,502)   (586)
Other assets   (511)   (2,180)
Accounts payable   802    (316)
Earnout payable   (500)    
Accrued expenses   (2)   680 
Change in lease liability   (201)   (166)
Contract liabilities   (214)   1,333 
Net cash used in operating activities  $(15,495)  $(11,001)
Cash flows from investing activities:          
Redemptions of short term investments   20,600    33,433 
Purchases of short term investments   (8,026)   (20,108)
Purchases of property and equipment   (698)   (179)
Net cash provided by investing activities  $11,876   $13,146 
Cash flows from financing activities:          
Cash paid for tax withholding related to shares withheld   (2)    
Proceeds from issuance of common stock - Cantor At The Market offering, net of issuance costs  $29   $ 
Net cash provided by financing activities  $27   $ 
Net (decrease) / increase in cash, cash equivalents and restricted cash  $(3,592)  $2,145 
Cash, cash equivalents and restricted cash, beginning of period  $7,103   $8,362 
Cash, cash equivalents and restricted cash, end of period  $3,511   $10,507 
           
Supplemental disclosure of noncash investing and financing activities:          
Issuance of common stock for Marine Advanced Robotics earnout  $1,000   $ 
Bonus paid through stock issuance  $250   $ 

 

See accompanying notes to unaudited consolidated financial statements.

 

 8 

 

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. (the “Company”) was founded in 1984 in New Jersey, commenced business operations in 1994 and re-incorporated in Delaware in 2007. We provide ocean data collection and reporting, marine power, offshore communications and Domain Awareness Systems (“MDA” or “MDAS”) products, integrated solutions, and consulting services. Our solutions focus on four major service areas: Data as a Service (“DaaS”), which includes data collected by our Wave Adaptive Modular Vessel (WAM-V®) autonomous vehicles or our PowerBuoy® product lines; Robotics as a Service (“RaaS”), which provides a lower cost subscription model for our customers to access use of our WAM-V’s®; Power as a Service (“PaaS”), which includes our PowerBuoy® products; and our Strategic Consulting Services. We offer our products and services to a wide-range of customers, including those in government and offshore energy, oil and gas, construction, wind power and other industries. We are involved in the entire life cycle of product development, from product design through assembly, testing, deployment, maintenance and upgrades, while working closely with partners across our supply chain. Our solutions are based on technologies that enable autonomous, zero or low carbon emitting, and cost effective data collection, analysis, transportation and communication. Our solutions are primarily suited to ocean and other offshore environments, and support generation of actionable intelligence on a standalone basis or working with other data sources. We then channel the information we collect, and other communications, through control equipment linked to edge computing and cloud hosting environments. Our goal is to generate most of our revenues from the sale or lease of our products and solutions. As we continue to commercialize our products and services, we expect to have a decrease in cash to fund operating activities until we achieve positive cash flow from the meaningful progress we have made in orders, pipeline, and backlog across our business.

 

(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, 2023, as filed with the SEC and elsewhere in our subsequent Exchange Act filings, including this Form 10-Q. Certain amounts have been reclassified to conform to current period presentation. This reclassification had no impact on the previously reported net loss and comprehensive loss.

 

(c) Liquidity

 

For the six months ended October 31, 2023, the Company incurred net losses of approximately $14.3 million, used cash in operations of approximately $15.5 million and had an accumulated deficit of approximately $294.3 million. Cash used in operations includes cash payments of the MAR earnout payable of $0.5 million and payment of the fiscal 2023 bonus for all employees. The Company has continued to make investments in ongoing product development efforts and to build inventory in anticipation of, and to support, future growth. 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 (including recent litigation with Paragon Technologies, Inc.), and deployment risks and integration of acquisitions. For the six months ended October 31, 2023 and through the date of filing of this Form 10-Q, management has not obtained any material additional capital financing. Management believes the Company’s current cash balance at October 31, 2023 of $3.5 million and short term investments balance of $15.4 million is sufficient to fund its planned expenditures through at least December 2024.

 

 9 

 

(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), 3dent Technologies LLC (TX), Oregon Wave Energy Partners I LLC (DE), ReedSport OPT WavePark, LLC (OR) and Ocean Power Technologies Ltd. in the United Kingdom. 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 revenues and expenses during the period. Significant items subject to such estimates and assumptions include, among other items, stock-based compensation, over time revenue recognition, valuation consideration related to business combinations, including contingent consideration, and other assumptions and estimates used to evaluate the recoverability of long-lived assets, goodwill and other intangible assets. Actual results could differ from those estimates.

 

(c) Business Combinations

 

The Company accounts for business combinations in accordance with Financial Accounting and Standards Board (“FASB”) Business Combinations (Topic 805). The Company allocates the fair value of consideration transferred in a business combination to the estimated fair value at the acquisition date of the tangible and intangible assets acquired as well as the liabilities assumed. Acquisition costs are expensed as incurred. Any excess consideration transferred is recorded as goodwill and in instances where the fair value of consideration transferred is less than the estimated fair value of tangible and intangible assets acquired less liabilities assumed, such amounts are recorded as a gain on the bargain purchase.

 

(d) Cash, Cash Equivalents, Restricted Cash and Security Agreements and Short Term Investments

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company invests excess cash in a money market account or in short term investments that are held-to-maturity. The Company had cash and cash equivalents of approximately $3.3 million as of October 31, 2023 and $6.9 million as of April 30, 2023.

 

Restricted Cash and Security Agreements

 

The Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $156,000 is on deposit at Santander and serves as security for a letter of credit issued by Santander for the lease of warehouse/office space in Monroe Township, New Jersey. This agreement cannot be extended beyond July 31, 2025 and is cancellable at the discretion of Santander.

 

Santander also issued a letter of credit to subsidiaries of Enel Green Power (“EGP”) pursuant to the Company’s contracts with EGP. This letter of credit was originally issued in August 2020 and has a remaining amount of $65,000 which will be released in January 2024.

 

 10 

 

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.

 

   October 31, 2023   April 30, 2023 
   (in thousands) 
Cash and cash equivalents  $3,292   $6,883 
Restricted cash- short term   219    65 
Restricted cash- long term       155 
Cash, cash equivalents, restricted cash and restricted cash equivalents  $3,511   $7,103 

 

Short Term Investments

 

As of October 31, 2023 and April 30, 2023, the carrying value was approximately $15.4 million and $27.8 million, respectively. All short term investments consist of corporate bonds, government agency bonds, or U.S. Treasury Notes and Bonds, are investment grade rated or better, and mature within 12 months. The Company has the ability and the intention to hold all investments to maturity, and as such are classified as held-to-maturity investments and carried at amortized cost.

 

The total accretion of discounts (amortization of premium) recognized for the six month periods ended October 31, 2023 and 2022 is approximately $0.2 million and $(0.2) million, respectively. The total accretion of discounts (amortization of premium) on investments for the three month period ended October 31, 2023 and 2022 was $0.1 million and $(0.06) million, respectively. Additionally, there has been no impairment on these investments.

 

The following table summarizes the Company’s short term investments as of October 31, 2023 and April 30, 2023:

 

   October 31, 2023   April 30, 2023 
Category  Amortized Cost   Unrealized Gains   Market Value   Amortized Cost   Unrealized Gains   Market Value 
   (in thousands)   (in thousands) 
Corporate Bonds  $6,911   $56   $6,967   $14,776   $100   $14,876 
Government Bonds & Notes   6,692   $35    6,727    9,188   $33    9,221 
Government Agency Bonds   1,824   $23    1,847    3,826    25    3,851 
Total Short Term Investments  $15,427   $114   $15,541   $27,790   $158   $27,948 

 

 11 

 

(e) Inventory

 

In accordance with Accounting Standards Codification 330 (ASC 330), inventory is stated at the lower of costs or net realizable value applicable to goods on hand remaining after the matching of absorbed costs with concurrent revenues. The Company has three classes of inventory; raw materials, work in process, and finished goods. Items remain in inventory until they are shipped to the customer, at which time the costs are transferred on a FIFO basis to cost of revenue, or moved to leased assets as applicable.

 

(f) Accounts Receivable

 

Accounts receivable are stated at the net amount expected to be collected. Amounts are ordinarily due between 30 and 90 days after the issuance of the invoice. We are exposed to credit losses primarily on our accounts receivable and contract assets related to our 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. Based on these factors, management has determined the allowance for credit losses was immaterial. Expected credit losses are written off in the period in which the financial asset is no longer collectible.

 

The Company grants credit to its customers, generally, without collateral, under normal payment terms (typically 30 to 90 days after invoicing). Generally, invoicing occurs after the services are performed or control of the product has transferred to the customer. Accounts receivable represent an unconditional right to consideration arising from the Company’s performance under contracts with customers.

 

(g) Property and Equipment, net

 

Property and equipment 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 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.

 

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 Buoys assets   10 years
Leased WAM-V assets   10 years

 

(h) Foreign Exchange Gains and Losses

 

The Company maintains cash accounts that are denominated in British pound sterling. These amounts are included in cash, cash equivalents and restricted cash on the accompanying Consolidated Balance Sheets. Transactions denominated in a foreign currency may result in realized and unrealized foreign exchange gains or losses from exchange rate fluctuations, which are included in “Foreign exchange (loss)/gain” in the accompanying Consolidated Statements of Operations.

 

 12 

 

(i) Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to credit risk consist principally of trade accounts receivable, short term investments and cash 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 invests its excess cash in a money market fund and short term held-to maturity investments and does not believe that it is exposed to any significant risks related to its cash accounts, money market fund, or held-to maturity investments. Cash is also maintained at foreign financial institutions. Cash in foreign financial institutions as of October 31, 2023 was immaterial.

 

For the six months ended October 31, 2023 and 2022, the Company had three and four customers whose revenues accounted for at least 10% of the Company’s consolidated revenues, respectively. These revenues accounted for approximately 55% and 69% of the Company’s total revenues for the respective periods. For the three months ended October 31, 2023 and 2022, the Company had four and five customers whose revenues accounted for at least 10% of the Company’s consolidated revenues, respectively. These revenues accounted for approximately 71% and 80% of the Company’s total revenues for the respective periods.

 

(j) Share-Based Compensation

 

Costs resulting from all share-based payment transactions are recognized in the consolidated financial statements at their fair values. The aggregate share-based compensation expense recorded in the Consolidated Statements of Operations for the six months ended October 31, 2023 and 2022 was approximately $0.7 million and $0.6 million, respectively. For the three months ended October 31, 2023 and 2022, share-based compensation expense was approximately $0.3 million and $0.3 million, respectively. The Company’s policy is to account for forfeitures of share-based compensation as they occur.

 

(k) Revenue Recognition

 

The Company accounts for revenue in accordance with Accounting Standards Codification 606 (ASC 606) for contracts with customers and Accounting Standards Codification 842 (ASC 842) for leasing arrangements. In relation to ASC 606, which states that a performance obligation is the unit of account for revenue recognition, the Company assesses the goods or services promised in a contract with a customer and identifies as a performance obligation as either: a) a good or service (or a bundle of goods or services) that is distinct; or b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. A contract may contain a single performance obligation or multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the contracted transaction price to each performance obligation based upon the relative standalone selling price, which represents the price the Company would sell a promised good or service separately to a customer. The Company determines the standalone selling price based upon the facts and circumstances of each obligated good or service. When no observable standalone selling price is available, the standalone selling price is generally estimated based upon the Company’s forecast of the total cost to satisfy the performance obligation plus an appropriate profit margin.

 

The nature of the Company’s contracts may give rise to several types of variable consideration, including unpriced change orders, liquidated damages and penalties. Variable consideration can also arise from modifications to the scope of services. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, performance, and any other information (historical, current, and forecasted) that is reasonably available to us. There was no variable consideration as of October 31, 2023 or 2022. The Company presents shipping and handling costs, that occur after control of the promised goods or services transfer to the customer, as fulfillment costs in costs of goods sold and regular shipping and handling activities charged to operating expenses.

 

 13 

 

The Company recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either (1) at a point in time or (2) over time. A good or service is transferred when or as the customer obtains control. The evaluation of whether control of each performance obligation is transferred at a point in time or over time is made at contract inception. Input measures such as costs incurred are utilized to assess progress against specific contractual performance obligations for the Company’s services. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided. For the Company, the input method using costs 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. 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 six-month period ended October 31, 2023 the Company recognized approximately $1.2 million in revenue related to performance obligations satisfied at a point in time and approximately $0.9 million in revenue related to performance obligations satisfied over time. During the three-month period ended October 31, 2023, the Company recognized approximately $0.5 million in revenue related to performance obligation 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 or service agreements. Under cost plus contracts, customers are billed for actual expenses incurred plus an agreed-upon fee.

 

The Company has two types of fixed-price contracts, firm fixed-price and cost-sharing. Under firm fixed-price contracts, the Company receives an agreed-upon amount for providing products and services specified in the contract, and a profit or loss is recognized depending on whether actual costs are more or less than the agreed upon amount. Under cost-sharing contracts, the fixed amount agreed upon with the customer is only intended to fund a portion of the costs on a specific project. Under cost sharing contracts, an amount corresponding to the revenue is recorded in cost of revenue, resulting in gross profit on these contracts of zero. The Company’s share of the costs is recorded as product development expense. The Company reports its disaggregation of revenue by contract type since this method best represents the Company’s business. For the six-month periods ended October 31, 2023 and 2022, 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. At inception of a contract for those classified under ASC 842, the Company classifies leases as either operating or financing in accordance with the authoritative accounting guidance contained within ASC Topic 842, “Leases”. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a finance lease. All others are treated as operating leases. The Company recognizes revenue from operating lease arrangements generally on a straight-line basis over the lease term, or as agreed upon in-use days are utilized, which is presented in Revenue in the Consolidated Statement of Operations. The Company also enters into lease arrangements for its PowerBuoys® 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.

 

As of October 31, 2023, the Company’s total remaining performance obligations, also referred to as backlog, totaled $4.5 million. The Company expects to recognize approximately 70%, or $3.2 million, of the remaining performance obligations as revenue over the next twelve months.

 

 14 

 

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 below table represents the total revenue recognized under ASC 606 and ASC 842 for the three and six months ended October 31, 2023 and 2022.

 

  

Six months ended October 31, 2023

  

Six months ended October 31, 2022

 
   ASC 606   ASC 842   Total   ASC 606   ASC 842   Total 
   (in thousands)   (in thousands) 
Product Line:                              
WAM-V  $540   $509   $1,049   $420   $15   $435 
Buoy   630        630    50        50 
Services   482        482    532        532 
Total  $1,652   $509   $2,161   $1,002   $15   $1,017 
                               
Region:                              
North and South America  $1,652   $509   $2,161   $770   $15   $785 
Asia and Australia               232        232 
Total  $1,652   $509   $2,161   $1,002   $15   $1,017 

 

  

Three months ended October 31, 2023

  

Three months ended October 31, 2022

 
   ASC 606   ASC 842   Total   ASC 606   ASC 842   Total 
   (in thousands)   (in thousands) 
Product Line:                              
WAM-V  $81   $266   $347   $98   $   $98 
Buoy   380        380    38        38 
Services   162        162    167        167 
Total  $623   $266   $889   $303   $   $303 
                               
Region:                              
North and South America  $623   $266   $889   $249   $   $249 
Asia and Australia               54        54 
Total  $623   $266   $889   $303   $   $303 

 

(l) Net Loss per Common Share

 

Basic and diluted net loss per share for all periods presented is computed by dividing net loss by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Due to the Company’s net losses, potentially dilutive securities, consisting of options to purchase shares of common stock, warrants on common stock and unvested restricted stock units (“RSU”) issued to employees and non-employee directors, were excluded from the diluted loss per share calculation due to their anti-dilutive effect.

 

 15 

 

In computing diluted net loss per share on the Consolidated Statement of Operations, warrants on common stock, options to purchase shares of common stock and unvested RSUs issued to employees and non-employee directors, totaling 7,294,852 and 6,242,465 as of October 31, 2023 and 2022, respectively, were excluded from each of the computations as the effect would have been anti-dilutive due to the net loss for the period. Share purchase rights, which include a contingency, are not included in the calculation until the contingency is resolved.

 

(m) Intangibles

 

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Intangible assets, including patents, are amortized over the estimated useful life of the asset on a basis that approximates the pattern of economic benefit. The patents, trade name and customer relationship intangibles are being amortized over 20, 12 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 the six months ended October 31, 2023 and 2022.

 

(n) Goodwill

 

Goodwill is assessed for impairment using a qualitative or quantitative approach. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual impairment tests. There were no indications of potential impairment of goodwill identified for the six months ended October 31, 2023 and 2022.Where the Company use a qualitative analysis, it considers factors that include historical financial performance, macroeconomic and industry conditions, and the legal and regulatory environment. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is also performed. The quantitative assessment requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates and the selection of assumptions underlying a discount rate (weighted average cost of capital) based on market data available at the time to determine fair value of the Company. If the fair value is less than the carrying amounts, an impairment charge for the difference is recorded. The Company acquired goodwill as part of its purchase of MAR. Management performed its annual qualitative assessment in fiscal year 2023 and determined that it is more likely than not that no goodwill impairment existed as of April 30, 2023.

 

(o) Income Taxes

 

Income taxes are accounted for under ACS 740 utilizing the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss and tax credit carry forwards are expected to be recovered, settled or utilized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. If such event occurs, a valuation allowance is recorded. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon examination. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses, to the extent incurred. Refer to Note 15 for additional disclosure.

 

 16 

 

(p) Accumulated Other Comprehensive Loss

 

The functional currency for the Company’s foreign operations is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during the period. The unrealized gains or losses resulting from such translation are included in Accumulated Other Comprehensive Loss within Shareholders’ Equity. For the six months ended October 31, 2023 and 2022, there were no amounts recorded to other comprehensive (income) loss due to limited foreign operations.

 

(q) Warranty

 

The Company does not include a right of return on its products other than rights related to standard warranty provisions that permit repair or replacement of defective goods.

 

(r) Research and Development

 

Costs related to research and development activities by the Company are expensed as incurred. The Company had approximately $4.0 million and $4.7 million in product development expense for the six months ended October 31, 2023 and 2022, respectively. The Company had approximately $2.1 million and $2.3 million in product development expense for the three months ended October 31, 2023 and 2022, respectively.

 

(s) Recently Issued Accounting Standards

 

There have been no recently issued accounting standards in the current period that would significantly affect the Company’s financial statements, that have not been address in prior periods.

 

(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:

 

   October 31, 2023   April 30, 2023   April 30, 2022 
   (in thousands) 
Accounts receivable  $516   $745   $482 
Contract assets  $326   $152   $386 
Contract liabilities  $1,164   $1,378   $129 

 

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 increase in contract assets is primarily a result of consulting services projects for which revenue was recognized in the current period but has not yet been billed due to the terms of the project agreements. No impairments to contract assets were incurred during the six months ended October 31, 2023 and 2022.

 

 17 

 

Significant changes in the contract assets balances during the period were as follows:

 

  

Six months ended

October 31, 2023

  

Six months ended

October 31, 2022

 
   (in thousands) 
Transferred to receivables from contract assets recognized  $(745)  $(132)
Revenue recognized and not billed   919    47 
Net change in contract assets  $174   $(85)

 

Contract Liabilities

 

Contract liabilities consist of amounts invoiced to customers in excess of revenue recognized. The decrease in contract liabilities is primarily due to recognizing revenue on the DOE Phase II contract for which the Company was paid in prior periods.

 

Significant changes in the contract liabilities balances during the period are as follows:

 

  

Six months ended

October 31, 2023

  

Six months ended

October 31, 2022

 
   (in thousands) 
         
Revenue recognized  $(762)  $(129)
Payments collected for which revenue has not been recognized   548    1,462 
Net change in contract liabilities  $(214)  $1,333 

 

(4) Inventory

 

The Company holds inventory related to the production of its WAM-V® and PowerBuoy® products.

 

   October 31, 2023   April 30, 2023 
   (in thousands) 
Raw Materials  $1,812   $1,044 
Work in Process   723     
Finished Products  $11   $ 
Inventory, net   $2,546   $1,044 

 

 18 

 

(5) Other Current Assets

 

Other current assets consisted of the following at October 31, 2023 and April 30, 2023:

 

   October 31, 2023   April 30, 2023 
   (in thousands) 
Prepaid insurance  $559   $358 
Prepaid software & licenses   108    190 
Prepaid sales & marketing   99    122 
Prepaid project costs   427    46 
Prepaid expenses- other   312    278 
Total other current assets  $1,505   $994 

 

(6) Property and Equipment, net

 

The components of property and equipment, net as of October 31, 2023 and April 30, 2023 consisted of the following:

  

   October 31, 2023   April 30, 2023 
   (in thousands) 
Equipment  $1,040   $783 
Computer equipment & software   728    700 
Office furniture & equipment   422    386 
Leasehold improvements   628    611 
Leased WAM-V’s   620    371 
Leased Buoys   111     
Property and equipment, gross   3,549    2,851 
Less: accumulated depreciation   (1,743)   (1,571)
Property and equipment, net  $1,806   $1,280 

 

Leased WAM-V’s represent fixed assets that are part of underlying operating leases with customers as discussed in the revenue recognition section of ASC 842 policy disclosure. Depreciation expense was approximately $172,000 and $117,000 for the six-month periods ended October 31, 2023 and 2022, respectively. Depreciation expense was approximately $101,000 and $74,000 for the three-month periods ended October 31, 2023 and 2022, respectively.

 

 19 

 

(7) Intangible Assets

 

The components of intangible assets, net as of October 31, 2023 and April 30, 2023 consisted of the following:

  

   October 31, 2023   April 30, 2023 
   (in thousands) 
Patents  $2,729   $2,729 
Trademarks   2,769    2,769 
Tradename   130    130 
Customer Relationships   150    150 
Intangible assets, gross   5,778    5,778 
Accumulated amortization   (1,880)   (1,800)
Intangible assets, net  $3,898   $3,978 

 

Amortization expense was approximately $80,000 and $79,000 for the six-month periods ended October 31, 2023 and 2022, respectively. Amortization expense was approximately $40,000 and $40,000 for the three-month periods ended October 31, 2023 and 2022, 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 six-month periods ended October 31, 2023 and 2022.

 

(9) Leases

 

Lessor Information

 

As of April 30, 2023 and October 31, 2023, the Company had three and nine 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 asset 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. The lease includes an initial lease term of seven years which is set to expire on October 31, 2024, and contains an option to extend the lease for another five years. The lease is classified as an operating lease and is included in right-of-use assets, right-of-use liabilities on the Company’s Consolidated Balance Sheets.

 

 20 

 

The Company also has a lease for office space located in Houston, Texas for office space. The lease term is for 1 year, and expires on January 2024. This lease will not be renewed. ASC 842 allows a company an accounting policy election to recognize lease payments within the Consolidated Statement of Operations on a straight-line basis if the lease term is equal to or less than 12 months and not recognize a right-of use asset and lease liability. The accounting policy election is made on the commencement date of the lease. The Company has chosen this election for the Houston lease and has classified it as a short-term lease.

 

The Company also has a lease for office space located in Richmond, California for MAR. 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.

 

Variable lease expenses, if any, are recorded as incurred. The operating lease cash flow payments for the three months ended October 31, 2023 and 2022 were $186,000 and $108,000, respectively. The operating lease cash flow payments for the six months ended October 31, 2023 and 2022 were $371,000 and $215,000, respectively.

 

The components of lease expense in the Consolidated Statement of Operations for the three and six months ended October 31, 2023 and 2022 were as follows:

 

   2023   2022   2023   2022 
   Three months ended October 31,   Six months ended October 31, 
   2023   2022   2023   2022 
   (in thousands)   (in thousands) 
Operating lease cost  $159   $92   $316   $184 
Short-term lease cost   20    8    40    16 
Total lease cost  $179   $100   $356   $200 

 

Information related to the Company’s right-of use assets and lease liabilities as of October 31, 2023 was as follows:

 

   October 31, 2023 
   (in thousands) 
     
Operating lease:     
Operating right-of-use asset, net  $1,550 
      
Right-of-use liabilities- current  $579 
Right-of-use liabilities- long term   1,060 
Total lease liabilities  $1,639 
      
Weighted average remaining lease term- operating leases   3.80 years 
Weighted average discount rate- operating leases   8.4%

 

 21 

 

Total remaining lease payments under the Company’s operating leases are as follows:

 

   October 31, 2023 
   (in thousands) 
     
Remainder of fiscal year 2024  $358 
2025   514 
2026   338 
2027   329 
2028   333 
thereafter   28 
Total future minimum lease payments  $1,900 
Less imputed interest   (261)
Total  $1,639 

 

(10) Accrued Expenses

 

Accrued expenses consisted of the following at October 31, 2023 and April 30, 2023:

 

   October 31, 2023   April 30, 2023 
   (in thousands) 
Project costs  $141   $181 
Employee incentive payments   901    1,948 
Accrued salary and benefits   486    52 
Professional fees   450     
Other   116    165 
Accrued expenses total   $2,094   $2,346 

 

(11) Warrants

 

Equity Classified Warrants

 

The underwritten public offering from April 2019 included the issuance of common stock warrants to purchase up to 4,927,680 shares of common stock that have an exercise price of $3.85 per share and expire five years from the issuance date. As of October 31, 2023, common warrants to purchase 732,500 shares of the common stock had been exercised.

 

(12) 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. The 2015 Plan will terminate ten years after its effective date, in October 2025, but is subject to earlier termination as provided in the 2015 Plan. At subsequent shareholder meetings, including most recently in January 2023, the shareholders approved an aggregate increase to the 2015 Plan of 3,050,000 shares resulting in total shares authorized for issuance of 4,382,036 as of January 2023. As of October 31, 2023, the Company had approximately 684,000 shares available for future issuance under the 2015 Plan.

 

 22 

 

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. As of October 31, 2023, there were approximately 111,000 shares available for grant under the 2018 Inducement Plan. The 2015 Plan and the 2018 Inducement Plan together comprise the “Stock Incentive Plans”.

 

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 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 three and six months ended October 31, 2023 and 2022.

 

A summary of stock options under our Stock Incentive Plans is detailed in the following table.

 

  

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