S-1/A 1 y25790a1sv1za.htm AMENDMENT NO. 1 TO FORM S-1 S-1/A
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As filed with the Securities and Exchange Commission on February 5, 2007
Registration No. 333-138595
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
AMENDMENT NO. 1
TO
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
OCEAN POWER TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
         
New Jersey   3629   22-2535818
(State or Other Jurisdiction of
Incorporation or Organization) 		  (Primary Standard Industrial
Classification Code No.) 		  (I.R.S. Employer
Identification No.)
 
 
 
 
1590 Reed Road
Pennington, NJ 08534
(609) 730-0400
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
 
 
 
Dr. George W. Taylor
Chief Executive Officer
Ocean Power Technologies, Inc.
1590 Reed Road
Pennington, NJ 08534
(609) 730-0400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
 
 
 
Copies to:
 
     
Robert A. Schwed, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
399 Park Avenue
New York, New York 10022
(212) 230-8800 		  Joseph A. Hall, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement is declared effective.
 
 
 
 
If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) please check the following box.  o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION FEBRUARY 2, 2007
 
PRELIMINARY PROSPECTUS
 
           Shares
 
LOGO
 
Common Stock
 
 
 
 
This is the initial public offering of our common stock in the United States. We are offering                     shares of common stock offered by this prospectus. We expect the public offering price to be between $      and $      per share.
 
We will apply to have our common stock approved for listing on The Nasdaq Global Market under the symbol “OPTT.”
 
Our common stock is listed on the AIM market of the London Stock Exchange plc under the symbol “OPT.” We will apply to list the shares of common stock being offered by this prospectus on the AIM market. The last reported sale price of our common stock on the AIM market on          , 2007 was £      per share, or approximately $      per share based on the noon buying rate for sterling of £1.00 = $      on          , 2007.
 
Investing in our common stock involves a high degree of risk. Before buying any shares, you should read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 7 of this prospectus.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
                 
    Per Share     Total  
 
Public offering price
  $           $        
Underwriting discounts and commissions
  $       $    
Proceeds, before expenses, to us
  $       $  
 
The underwriters may also purchase up to an additional           shares of our common stock from the selling stockholders identified in this prospectus and up to           additional shares of common stock from us at the public offering price, less the underwriting discounts and commissions, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $     , and our total proceeds, before expenses, will be $     . We will not receive any proceeds from the sale of shares by the selling stockholders.
 
The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares will be made on or about          , 2007.
 
 
UBS Investment Bank
 		 
  Banc of America Securities LLC
 		 
  Bear, Stearns & Co. Inc.
 
 
 
 
First Albany Capital
 
          , 2007

 

You should rely only on the information contained in this prospectus. We have not, the selling stockholders have not and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.
 
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  F-1
 EX-10.18: AGREEMENT FOR RENEWABLE ENERGY ECONOMIC DEVELOPMENT GRANTS
 EX-10.19: CONTRACT FOR DEVELOPMENT AND APPLICATION
 EX-10.20: LOCKHEED MARTIN
 EX-23.1: CONSENT OF KPMG LLP
 EX-23.2: CONSENT OF DELOITTE AND TOUCHE LLP
 
PowerBuoy® is a registered trademark of Ocean Power Technologies, Inc. The Ocean Power Technologies logo, CellBuoytm, Talk on Watertm and Making Waves in Powersm are trademarks or service marks of Ocean Power Technologies, Inc. All other trademarks appearing in this prospectus are the property of their respective holders.

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PROSPECTUS SUMMARY
 
This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our common stock, especially the risks of investing in our common stock, which we discuss under “Risk Factors,” and our consolidated financial statements and related notes beginning on page F-1.
 
Our Company
 
We develop and are commercializing proprietary systems that generate electricity by harnessing the renewable energy of ocean waves. The energy in ocean waves is predictable, and electricity from wave energy can be produced on a consistent basis at numerous sites located near major population centers worldwide. Wave energy is an emerging segment of the renewable energy market. Based on our proprietary technology, considerable ocean experience, existing products and expanding commercial relationships, we believe we are the leading wave energy company.
 
We currently offer two products as part of our line of PowerBuoy® systems: a utility PowerBuoy system and an autonomous PowerBuoy system. Our PowerBuoy system is based on modular, ocean-going buoys, which we have been ocean testing for nearly a decade. The rising and falling of the waves moves the buoy-like structure creating mechanical energy that our proprietary technologies convert into electricity. We have tested and developed wave power generation and control technology using proven equipment and processes in novel applications. Our two products are designed for the following applications:
 
  •  Our utility PowerBuoy system is capable of supplying electricity to a local or regional electric power grid. Our wave power stations will be comprised of a single PowerBuoy system or an integrated array of PowerBuoy systems, plus the remaining components required to deliver electricity to a power grid. We intend to sell our utility PowerBuoy system to utilities and other electrical power producers seeking to add electricity generated by wave energy to their existing electricity supply.
 
  •  Our autonomous PowerBuoy system is designed to generate power for use independently of the power grid in remote locations. There are a variety of potential applications for this system, including sonar and radar surveillance, offshore cellular phone service, tsunami warning, oceanographic data collection, offshore platforms and offshore aquaculture.
 
From October 2005 to October 2006, we operated a demonstration PowerBuoy system with a maximum peak, or rated, output of 40 kilowatts, or kW, off the coast of New Jersey under a contract with the New Jersey Board of Public Utilities. This PowerBuoy system has been removed from the ocean and is currently undergoing planned maintenance prior to re-deployment. No other PowerBuoy systems are currently deployed.
 
Our current efforts are focused on our goal of increasing the maximum rated output of our utility PowerBuoy system from the current 40kW to 150kW in 2007, then to 250kW in 2008 and ultimately to 500kW in 2010, as well as expanding our key commercial opportunities for both the utility and the autonomous PowerBuoy systems. We currently have commercial relationships with the following:
 
  •  Iberdrola S.A., or Iberdrola, which is a large electric utility company located in Spain and one of the largest renewable energy producers in the world, Total S.A., or Total, which is one of the world’s largest oil and gas companies, and two Spanish governmental agencies for the first phase of the construction of a 1.39 megawatt, or MW, wave power station off the coast of Santoña, Spain. We currently plan to deploy an initial 40kW PowerBuoy system for this project by October 2007.
 
  •  Iberdrola and Total to evaluate the development of a wave power station off the coast of France.
 
  •  The United States Navy to develop and build a wave power station at the US Marine Corps Base in Oahu, Hawaii that we believe will serve as a prototype wave power station for the installation of wave power stations at other US Navy bases. One PowerBuoy system was installed in connection with this


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  project for a total of eight months over a two-year period. We plan to deploy an improved system by April 2007.
 
  •  Lockheed Martin Corporation to market cooperatively with us our autonomous PowerBuoy system for use with Lockheed Martin equipment. Lockheed Martin successfully completed an ocean test of an autonomous PowerBuoy system in September 2004.
 
As part of our marketing efforts, we use demonstration wave power stations to establish the feasibility of wave power generation. In addition to the demonstration PowerBuoy system operated off the coast of New Jersey, we plan to develop and operate two additional demonstration wave power stations. Unlike the New Jersey power system, these demonstration wave power stations will, if approved and constructed as planned, be connected to the local power grids. In February 2006, we received approval from the South West of England Regional Development Agency to install a 5MW demonstration wave power station off the coast of Cornwall, England. In July 2006, we filed an application with the US Federal Energy Regulatory Commission for a preliminary permit to evaluate the feasibility of a location off the coast of Reedsport, Oregon for the proposed construction and operation of a wave power station with a maximum rated output of 50MW, of which up to the first 5MW will be a demonstration wave power station. We plan to generate incremental revenue from the demonstration wave power stations by selling electricity to utilities.
 
We had revenues of $1.7 million in fiscal 2006 and recorded a net loss of $7.1 million, compared to revenues of $5.4 million and a net loss of $0.4 million in fiscal 2005. For the six months ended October 31, 2006, we had revenues of $0.9 million and a net loss of $4.0 million. As of October 31, 2006, our accumulated deficit was $32.6 million.
 
Our Market
 
Global demand for electric power is expected to increase from 14.8 trillion kilowatt hours in 2003 to 30.1 trillion kilowatt hours by 2030, according to the Energy Information Administration, or the EIA. To meet this demand, the International Energy Agency, or the IEA, estimates that investments in new generating capacity will exceed $4 trillion in the period from 2003 to 2030, of which $1.6 trillion will be for new renewable energy generation equipment.
 
A variety of factors are contributing to the development of renewable energy systems that capture energy from replenishable natural resources, including ocean waves, flowing water, wind and sunlight, and convert it into electricity. These factors include the rising cost of fossil fuels, dependence on energy from foreign sources, environmental concerns, government incentives and infrastructure constraints.
 
Wave energy systems such as ours compare favorably with many other renewable energy technologies. Due to the tremendous energy in ocean waves, wave power stations with high capacity — 50MW and above — can be installed in a relatively small area. In addition, the supply of electricity from wave energy can be forecasted days in advance and the annual flow of waves at specific sites can be relatively constant.
 
Our Competitive Advantages
 
We believe that our technology for generating electricity from wave energy and our commercial relationships give us several potential competitive advantages in the renewable energy market, including the following:
 
  •  our PowerBuoy system uses an ocean-tested technology to generate electricity;
 
  •  our PowerBuoy system is efficient in harnessing wave energy;
 
  •  our PowerBuoy system takes advantage of time-tested and well-known technology;
 
  •  numerous potential sites for our wave power stations are located near major population centers worldwide;
 
  •  we have significant commercial relationships with governmental and commercial entities active in the development of renewable energy;


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  •  our PowerBuoy system has the potential to offer cost competitive renewable energy power generation solutions; and
 
  •  our PowerBuoy system is environmentally benign and aesthetically non-intrusive.
 
Our Business Strategy
 
Our goal is to strengthen our leadership in developing wave energy technologies and commercializing wave power stations and related services. In order to achieve this goal, we are pursuing the following business strategies:
 
  •  concentrate sales and marketing efforts on four geographic markets: coastal North America, the west coast of Europe, the coasts of Australia and the east coast of Japan;
 
  •  continue to increase PowerBuoy system output;
 
  •  construct demonstration wave power stations to encourage market adoption of our wave power stations;
 
  •  leverage customer relationships to enhance the commercial acceptance of our utility PowerBuoy system;
 
  •  expand revenue streams from our autonomous PowerBuoy system; and
 
  •  maximize revenue opportunities with existing customers.
 
Risks Associated with Our Business
 
Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. We have a history of operating losses, and we may never achieve or maintain profitability. Wave energy technology may not gain broad commercial acceptance, and demand for our PowerBuoy systems may not develop. The reduction or elimination of subsidies and incentives for renewable energy sources could prevent demand for our PowerBuoy systems from developing. Our product development costs have been increasing and are likely to increase significantly over the next several years. We have invested, and will continue to invest, funds in demonstration wave power stations that generate little or no direct revenue. Our PowerBuoy systems do not have a long operating history and may develop performance problems. We may be unable to increase the power output of our utility PowerBuoy system, and we may not be able to deploy multiple systems in a large-scale wave power station or to deploy larger PowerBuoy systems cost effectively and without damage to the systems. We depend on a small number of customers for substantially all of our revenues, and the US Navy currently accounts for a majority of our revenues. Our relationships with alliance partners may not be successful. We compete with other renewable energy companies. We are also subject to risks associated with international operations.
 
Our Corporate Information
 
We were incorporated under the laws of the State of New Jersey in April 1984 and began commercial operations in 1994. We plan to reincorporate in Delaware prior to this offering. Our principal executive offices are located at 1590 Reed Road, Pennington, New Jersey 08534, and our telephone number is (609) 730-0400. Our website address is www.oceanpowertechnologies.com. The information on our website is not a part of this prospectus.


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THE OFFERING
 
Common stock we are offering            shares
 
Over-allotment option            shares
 
The underwriters have an option for a period of up to 30 days to purchase up to           additional shares of common stock from the selling stockholders and up to           additional shares of common stock from us to cover over-allotments.
 
Common stock to be outstanding after this offering            shares (          shares if the over-allotment option is exercised in full)
 
Use of proceeds after expenses We estimate that the net proceeds from this offering after expenses will be approximately          , assuming an initial public offering price of $      per share.
 
We intend to use the net proceeds from this offering to construct demonstration wave power stations and to fund minority investments in wave station projects to encourage market adoption of our wave power stations; to fund the continued development of our PowerBuoy system, including increases in system output; to expand our international sales and marketing capabilities; and for working capital and general corporate purposes, including potential acquisitions of complementary businesses, products or technologies. See “Use of Proceeds.”
 
For a sensitivity analysis of the effect of changes in the public offering price on our net proceeds, see “Use of Proceeds.”
 
We will not receive any proceeds from the sale of shares of common stock by the selling stockholders as a result of the exercise by the underwriters of their over-allotment option.
 
Risk Factors Investing in our common stock involves a high degree of risk. Before buying any shares, you should read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 7 of this prospectus.
 
Proposed Nasdaq Global Market symbol OPTT
 
Listing on AIM market Our common stock is listed on the AIM market of the London Stock Exchange under the symbol “OPT.” We will apply to list the shares of common stock being offered by this prospectus on the AIM market.
 
The number of shares of our common stock outstanding immediately after this offering is based on           shares of common stock outstanding as of October 31, 2006.
 
The number of shares of our common stock outstanding immediately after this offering excludes:
 
  •             shares of our common stock issuable upon the exercise of stock options outstanding as of October 31, 2006 at a weighted average exercise price of $      per share; and


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  •             shares of our common stock available for future grant under our equity compensation plans, including our new 2006 stock incentive plan, as of October 31, 2006.
 
Unless otherwise indicated, all information in this prospectus:
 
  •  assumes that the underwriters do not exercise their option to purchase up to           additional shares of our common stock to cover over-allotments, if any;
 
  •  gives effect to the one-for-ten reverse stock split of our common stock to be completed prior to this offering;
 
  •  gives effect to our reincorporation in Delaware and the adoption of a new certificate of incorporation and bylaws, which will become effective prior to this offering; and
 
  •  gives effect to the establishment of our 2006 stock incentive plan, which will become effective upon the effectiveness of the registration statement for this offering.


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SUMMARY CONSOLIDATED FINANCIAL DATA
 
The following summary consolidated financial data as of and for the fiscal years ended April 30, 2004, 2005 and 2006 have been derived from our audited consolidated financial statements. We refer to the fiscal year ended April 30, 2004 as fiscal 2004, the fiscal year ended April 30, 2005 as fiscal 2005 and the fiscal year ended April 30, 2006 as fiscal 2006. The summary consolidated financial data as of October 31, 2006 and for the six month periods ended October 31, 2005 and 2006 have been derived from our unaudited consolidated financial statements. The unaudited summary consolidated financial statement data includes, in our opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Operating results for the six months ended October 31, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2007. You should read this information together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.
 
The as adjusted balance sheet information gives effect to the sale by us of           shares of common stock in this offering at an assumed initial public offering price of $      per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. For a sensitivity analysis of the effect of changes in the public offering price on our capitalization, see “Capitalization.”
 
                                         
          Six Months
 		 
    Fiscal Year Ended April 30,     Ended October 31,  
    2004     2005     2006     2005     2006  
                      (Unaudited)  
 
Consolidated Statement of Operations Data:
                                       
Revenues
  $ 4,713,202     $ 5,365,235     $ 1,747,715     $ 1,106,499     $ 860,747  
Cost of revenues
    4,319,850       5,170,521       2,059,318       1,506,634       1,382,630  
                                         
Gross profit (loss)
    393,352       194,714       (311,603 )     (400,135 )     (521,883 )
                                         
Operating expenses:
                                       
Product development costs
    255,958       904,618       4,224,997       1,551,638       2,802,039  
Selling, general and administrative costs
    1,745,955       2,553,911       3,190,687       1,434,294       2,013,137  
                                         
Total operating expenses
    2,001,913       3,458,529       7,415,684       2,985,932       4,815,176  
                                         
Operating loss
    (1,608,561 )     (3,263,815 )     (7,727,287 )     (3,386,067 )     (5,337,059 )
Interest income, net
    555,717       1,297,156       1,408,361       709,457       722,928  
Other income (expense)(1)
    (3,500,096 )     1,545       74,294       75,000       —  
Foreign exchange gain (loss)
    1,585,345       1,507,145       (978,242 )     (1,446,790 )     645,977  
                                         
Loss before income taxes
    (2,967,595 )     (457,969 )     (7,222,874 )     (4,048,400 )     (3,968,154 )
Income tax benefit
    118,119       29,335       143,963       —       —  
                                         
Net loss
  $ (2,849,476 )   $ (428,634 )   $ (7,078,911 )   $ (4,048,400 )   $ (3,968,154 )
                                         
Basic and diluted loss per share
  $       $       $       $       $  
                                         
Basic and diluted weighted average common shares outstanding
                                       
                                         
 
(1) The $3.5 million expense in fiscal 2004 resulted from a one time charge incurred at the time of our stock offering on the AIM market in October 2003 relating to a 1999 agreement between us and Tyco Electronics Corp.
 
                 
    As of October 31, 2006  
    Actual     As Adjusted  
    (Unaudited)  
 
Consolidated Balance Sheet Data:
               
Cash, cash equivalents and certificates of deposit
  $ 29,178,596     $    
Working capital
    27,445,515          
Total assets
    32,685,104          
Long-term debt
    233,959          
Deferred credits
    600,000          
Accumulated deficit
    (32,600,307 )        
Total stockholders’ equity
    27,844,482          


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RISK FACTORS
 
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below with all of the other information included in this prospectus before deciding to invest in our common stock. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In this event, the market price of our common stock could decline and you could lose part or all of your investment.
 
Risks Relating to Our Business
 
We have a history of operating losses and may never achieve or maintain profitability.
 
We have incurred net losses since we began operations in 1994, including net losses of $2.8 million in fiscal 2004, $0.4 million in fiscal 2005 and $7.1 million in fiscal 2006. As of October 31, 2006, we had an accumulated deficit of approximately $32.6 million. These losses have resulted primarily from costs incurred in our research and development programs and from our selling, general and administrative costs. We expect to increase our operating expenses significantly as we continue to expand our infrastructure, research and development programs and commercialization activities. As a result, we will need to generate significant revenues to cover these costs and achieve profitability.
 
We have entered into an agreement for the first phase of construction of a wave power station off the coast of Santoña, Spain, as well as an operations and maintenance contract for the equipment to be installed in this first phase. Under both contracts our potential profitability is limited. Under the construction contract, our revenues are limited to reimbursement for our construction costs without any mark-up and we are required to bear the first €0.5 million of any cost overruns. Under the operations and maintenance contract, we are paid a fixed fee for scheduled maintenance, the profits on which are required to be refunded to cover any unscheduled maintenance fees we receive during the term of the agreement.
 
We do not know whether or when we will become profitable because of the significant uncertainties with respect to our ability to successfully commercialize our PowerBuoy® systems in the emerging renewable energy market. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, the market value of our common stock may decline.
 
Wave energy technology may not gain broad commercial acceptance, and therefore our revenues may not increase, and we may be unable to achieve and then sustain profitability.
 
Wave energy technology is at an early stage of development, and the extent to which wave energy power generation will be commercially viable is uncertain. Many factors may affect the commercial acceptance of wave energy technology, including the following:
 
  •  performance, reliability and cost-effectiveness of wave energy technology compared to conventional and other renewable energy sources and products;
 
  •  developments relating to other renewable energy generation technologies;
 
  •  fluctuations in economic and market conditions that affect the cost or viability of conventional and renewable energy sources, such as increases or decreases in the prices of oil and other fossil fuels;
 
  •  overall growth in the renewable energy equipment market;
 
  •  availability and terms of government subsidies and incentives to support the development of renewable energy sources, including wave energy;
 
  •  fluctuations in capital expenditures by utilities and independent power producers, which tend to decrease when the economy slows and interest rates increase; and
 
  •  the development of new and profitable applications requiring the type of remote electric power provided by our autonomous wave energy systems.
 
If wave energy technology does not gain broad commercial acceptance, our business will be materially harmed and we may need to curtail or cease operations.


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If sufficient demand for our PowerBuoy systems does not develop or takes longer to develop than we anticipate, our revenues may decline, and we may be unable to achieve and then sustain profitability.
 
Even if wave energy technology achieves broad commercial acceptance, our PowerBuoy systems may not prove to be a commercially viable technology for generating electricity from ocean waves. We have invested a significant portion of our time and financial resources since our inception in the development of our PowerBuoy systems. To date, we have not yet manufactured and