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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 January 31, 2022

 

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

 

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            

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

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. ☐

 

As of March 14, 2022, the number of outstanding shares of common stock of the registrant was 55,894,213.

 

 

 

 

 

OCEAN POWER TECHNOLOGIES, INC.

INDEX TO FORM 10-Q

 

 

Page

Number

PART I — FINANCIAL INFORMATION  
Item 1. Financial Statements:  
Consolidated Balance Sheets as of January 31, 2022 (unaudited) and April 30, 2021 4
Unaudited Consolidated Statements of Operations for the three and nine  months ended January 31, 2022 and 2021 5
Unaudited Consolidated Statements of Comprehensive Loss for the three and nine  months ended January 31, 2022 and 2021 6
Unaudited Consolidated Statement of Shareholders’ Equity for the three and nine  months ended January 31, 2022 and 2021 7
Unaudited Consolidated Statements of Cash Flows for the nine months ended January 31, 2022 and 2021 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 45
Item 4. Controls and Procedures 45
PART II — OTHER INFORMATION 46
Item 1. Legal Proceedings 46
Item 1A. Risk Factors 46
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 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 our 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;

 

the continued impact of the COVID-19 pandemic and its variants on our business, operations, customers, suppliers and manufacturers and personnel;
     
  our ability to meet product development, manufacturing and customer delivery deadlines that may be impacted by disruptions to our supply chain, primarily related to labor shortages and manufacturing and transportation delays both here in the U.S. and abroad;

 

our acquisitions and our ability to integrate them into our operations may use significant resources, be unsuccessful or expose us to unforeseen liabilities;

 

our estimates regarding future expenses, revenues, and capital requirements;

 

the adequacy of our cash balances and our need for additional financings;

 

our ability to identify and penetrate markets for our products, services, and solutions;

 

our ability to implement our commercialization strategy as planned, or at all;

 

our relationships with our strategic partners may not be successful and we may not be successful in establishing additional relationships;

 

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 improve the power output and survivability of our products;

 

the impact of pending and threatened litigation on our business, financial condition and liquidity;

 

changes in current legislation, regulations and economic conditions that affect the demand for renewable energy, or restrict the use of our products;
     
  our ability to attract and retain key personnel, including senior management, to achieve our business objectives;

 

our history of operating losses, which we expect to continue for at least the short term and possibly longer; and

 

our ability to protect our intellectual property portfolio.

 

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, 2021, 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)

 

    January 31, 2022     April 30, 2021  
    (Unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 63,454     $ 83,028  
Restricted cash, short-term     384       384  
Accounts receivable     113       350  
Contract assets     407       190  
Inventory     193        
Other current assets     436       487  
Total current assets     64,987       84,439  
Property and equipment, net     365       406  
Intangibles, net     4,203       274  
Right-of-use asset, net     825       1,036  
Restricted cash, long-term     222       222  
Goodwill   7,754      
Total assets   $ 78,356     $ 86,377  
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 522     $ 687  
Accrued expenses     1,292       1,881  
Contract liabilities     15        
Right-of-use liability, current portion     323       347  
Advance payable    

456

      -  
Litigation payable     -       1,224  
Contingent liabilities     1,591       60  
Paycheck protection program loan- current           495  
Total current liabilities     4,199       4,694  
Paycheck protection program loan, less current portion           396  
Right-of-use liability, less current portion     615       819  
Total liabilities     4,814       5,909  
Commitments and contingencies (Note 15)     -        -   
Shareholders’ Equity:                
Preferred stock, $0.001 par value; authorized 5,000,000 shares, none issued or outstanding            
Common stock, $0.001 par value; authorized 100,000,000 shares, issued 55,894,213 and 52,458,011 shares, respectively     56       52  
Treasury stock, at cost; 21,040 shares     (338 )     (338 )
Additional paid-in capital     322,626       315,821  
Accumulated deficit     (248,617 )     (234,896 )
Accumulated other comprehensive loss     (185 )     (171 )
Total shareholders’ equity     73,542       80,468  
Total liabilities and shareholders’ equity   $ 78,356     $ 86,377  

 

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

 

    2022     2021     2022     2021  
    Three months ended January 31,     Nine months ended January 31,  
    2022     2021     2022     2021  
                         
Revenues   $ 484     $ 317     $ 1,003     $ 604  
Cost of revenues     597       698       1,320       1,248  
Gross loss     (113 )     (381 )     (317 )     (644 )
                                 
Operating expenses:                                
Engineering and product development costs     2,465       1,019       7,518       3,334  
Selling, general and administrative costs     2,974       1,763       7,933       5,591  
Total operating expenses     5,439       2,782       15,451       8,925  
Operating loss     (5,552 )     (3,163 )     (15,768 )     (9,569 )
                                 
Interest income, net     16       25       56       45  
Other income (expense), net     60       (16 )     60       (49 )
Gain on extinguishment of PPP loan                 890        
Foreign exchange gain     5       3             13  
Loss before income taxes     (5,471 )     (3,151 )     (14,762 )     (9,560 )
Income tax benefit                 1,041        
Net loss   $ (5,471 )   $ (3,151 )   $ (13,721 )   $ (9,560 )
Basic and diluted net loss per common share   $ (0.10 )   $ (0.09 )   $ (0.26 )   $ (0.41 )
Weighted average common shares used to compute basic and diluted net loss per common share     55,308,799       33,715,334       53,408,998       23,160,885  

 

See accompanying notes to unaudited consolidated financial statements.

 

5

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(in $000’s)

Unaudited

 

    2022     2021     2022     2021  
    Three months ended January 31,     Nine months ended January 31,  
    2022     2021     2022     2021  
                         
Net loss   $ (5,471 )   $ (3,151 )   $ (13,721 )   $ (9,560 )
Foreign currency translation adjustment     (1 )     (2 )     (14 )     6  
Total comprehensive loss     (5,472 )     (3,153 )     (13,735 )     (9,554 )

 

See accompanying notes to unaudited consolidated financial statements.

 

6

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statement of Shareholders’ Equity

(in $000’s, except share data)

Unaudited

 

    Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Loss     Equity  
    Nine Months Ended January 31, 2022  
    Common Shares     Treasury Shares    

Additional

Paid-In

    Stock Subscription    

Accumulated

   

Accumulated

Other

Comprehensive

   

Total

Shareholders’

 
    Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Loss     Equity  
                                                       
Balances at May 1, 2021     52,479,051     $ 52       (21,040 )   $ (338 )   $ 315,821     $     $ (234,896 )   $ (171 )     80,468  
Net loss                                         (13,721 )           (13,721 )
Share-based compensation                             864                         864  
Proceeds from stock options exercises     85,000       1                   89                         90  
Issuance of shares for acquisition     3,330,162       3                   5,852                         5,855  
Other comprehensive gain/(loss)                                               (14 )     (14 )
Balance, January 31, 2022     55,894,213     $ 56       (21,040 )   $ (338 )   $ 322,626     $     $ (248,617 )   $ (185 )   $ 73,542  

 

    Nine Months Ended January 31, 2021  
    Common Shares     Treasury Shares    

Additional

Paid-In

    Stock Subscription    

Accumulated

   

Accumulated

Other

Comprehensive

   

Total

Shareholders’

 
    Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Loss     Equity  
                                                       
Balances at May 1, 2020     12,939,420     $ 13       (4,251 )   $ (302 )   $ 231,101     $     $ (220,136 )   $ (183 )     10,492  
Net loss                                           (9,560 )           (9,560 )
Share-based compensation         $           $     $ 338             $     $       338  
Proceeds from stock options exercises     175,500                         184       (144 )                 40  
Exercise of common warrants, net of costs     677,500     $ 1           $     $ 2,607     $ (1,839 )   $     $       769  
Issuance of common stock- Aspire financing, net of issuance costs     7,275,000       7                   9,976                           9,983  
Issuance of common stock- AGP At The Market offering, net of issuance costs     29,522,389     $ 30           $     $ 66,136             $     $       66,166  
Acquisition of treasury stock                 (16,789 )     (36 )                             (36 )
Other comprehensive gain         $           $     $             $     $ 6       6  
Balances at January 31, 2021     50,589,809       51       (21,040 )     (338 )     310,342       (1,983 )     (229,696 )     (177 )     78,199  

 

    Three Months Ended January 31, 2022  
    Common Shares     Treasury Shares    

Additional

Paid-In

    Stock Subscription    

Accumulated

   

Accumulated

Other

Comprehensive

   

Total

Shareholders’

 
    Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Loss     Equity  
                                                       
Balances at November 1, 2021     52,499,051       52       (21,040 )   $ (338 )     316,389           $ (243,191 )   $ (139 )     72,773  
Net loss                                         (5,471 )           (5,471 )
Share-based compensation                             317                         317  
Proceeds from stock options exercises     65,000       1                   68                         69  
Issuance of shares for acquisition     3,330,162       3                   5,852                         5,855  
Other comprehensive gain/(loss)                                         45       (46 )     (1 )
Balance, January 31, 2021     55,894,213       56       (21,040 )     (338 )     322,626             (248,617 )     (185 )     73,542  

 

    Three Months Ended January 31, 2021  
    Common Shares     Treasury Shares    

Additional

Paid-In

    Stock Subscription    

Accumulated

   

Accumulated

Other

Comprehensive

   

Total

Shareholders’

 
    Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Loss     Equity  
                                                       
Balances at November 1, 2020     24,153,554     $ 24       (4,251 )   $ (302 )   $ 240,782     $     $ (226,545 )   $ (175 )   $ 13,784  
Net loss                                         (3,151 )           (3,151 )
Share-based compensation                             115                         115  
Proceeds from stock options exercises     175,500                         184       (144 )                 40  
Exercise of common warrants, net of costs     677,500       1                   2,607       (1,839 )                 769  
Issuance of common stock- Aspire financing, net of issuance costs     1,750,000       2                   6,740                         6,742  
Issuance of common stock- AGP At The Market offering, net of issuance costs     23,833,255       24                   59,914                         59,938  
Acquisition of treasury stock                 (16,789 )     (36 )                             (36 )
Other comprehensive gain                                               (2 )     (2 )
Balances at January 31, 2021     50,589,809       51       (21,040 )     (338 )     310,342       (1,983 )     (229,696 )     (177 )     78,199  

 

See accompanying notes to unaudited consolidated financial statements.

 

7

 

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in $000’s)

Unaudited

 

    2022     2021  
    Nine months ended January 31,  
    2022     2021  
             
Cash flows from operating activities:                
Net loss   $ (13,721 )   $ (9,560 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Foreign exchange loss (gain)           (13 )
Depreciation of fixed assets     104       106  
Amortization of intangible assets     18        
Amortization of right of use asset     211       159  
Loss on disposal of property, plant and equipment           2  
Gain on extinguishment of PPP Loan     (890 )      
Stock-based compensation     864       338  
Change in fair value of contingent liability     (60 )      
Changes in operating assets and liabilities, net of acquisition:                
Accounts receivable     237       105  
Contract assets     (217 )     188  
Inventory     (193 )      
Other assets     51       (310 )
Accounts payable     (165 )     (473 )
Accrued expenses     (589 )     1,192  
Change in lease liability     (228 )     (169 )
Contract liabilities     15       (90 )
Litigation payable     (1,224 )      
Net cash used in operating activities     (15,787 )     (8,525 )
Cash flows from investing activities:                
Purchase of property, plant and equipment     (319 )     (17 )
Payments for MAR acquisition, net of cash acquired     (3,544 )      
Net cash used in investing activities     (3,863 )     (17 )
Cash flows from financing activities:                
Proceeds from Paycheck Protection Program Loan           890  
Proceeds from loan payable           467  
Payments of loan payable           (292 )
Proceeds from stock option exercises     90       40  
Proceeds from issuance of common stock- Aspire financing net of issuance costs           9,983  
Proceeds from issuance of common stock- AGP At The Market offering, net of issuance costs           66,166  
Proceeds associated with exercise of common stock warrants           769  
Acquisition of treasury stock           (36 )
Net cash provided by financing activities     90       77,987  
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (14 )     32  
Net (decrease) / increase in cash, cash equivalents and restricted cash     (19,574 )     69,477  
Cash, cash equivalents and restricted cash, beginning of period     83,634       10,930  
Cash, cash equivalents and restricted cash, end of period   $ 64,060     $ 80,407  
                 
Supplemental disclosure of noncash operating activities:                
Prepaid financing costs reported in accrued expenses   $     $ 62  
                 
Supplemental disclosure of noncash investing and financing activities:                
Acquisition of property, plant and equipment through accounts payable   $     $ 9  
Issuance of common stock in acquisition of MAR    

5,855

       
Advance payable – MAR    

456

       
Contingent liability    

1,591

       
Outstanding receivable for sale of shares from warrant exercises   $     $ 1,838  
Outstanding receivable for sale of shares from stock option exercises   $     $ 144  

 

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 are a complete solutions provider, controlling the design, manufacturing, sales, installation, operations and maintenance of our products and services. Our solutions provide distributed offshore power which is persistent, reliable, and economical along with power and communications for remote surface and subsea applications. Historically, funding from government agencies, such as research and development grants, accounted for a significant portion of the Company’s revenues. Today our goal is to generate the majority of our revenue from the sale or lease of our products and solutions, and sales of services to support our business operations. As we continue to develop and commercialize our products and services, we expect to have a net decrease in cash due to the use of cash from operating activities unless and until we achieve positive cash flow from the commercialization of products, solutions and services.

 

(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 10 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, 2021, as filed with the SEC and elsewhere in this Form 10-Q. Certain items have been reclassified from prior periods to be consistent with current GAAP presentations.

 

(c) Liquidity

 

For the nine months ended January 31, 2022, and the fiscal year ended April 30, 2021, the Company incurred net losses of approximately $13.7 million and $14.8 million, respectively, and used cash in operating activities of approximately $15.8 million and $11.7 million, respectively. The Company has continued to make investments in ongoing product development efforts in anticipation of future growth, including its recent acquisition of Marine Advanced Robotics, Inc., as described in Note 18. 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, technology development, scalability of technology and production, ability to attract and retain key personnel, concentration of customers and suppliers, deployment risks and integration of acquisitions, pending or threatened litigation, and the impact of COVID-19, and any variants on its business. The Company previously obtained equity financing through its At the Market Offering Agreement (“ATM”) with A.G.P/Alliance Global Partners (“AGP”) and through its equity line financing with Aspire Capital Fund, LLC (“Aspire Capital”), but the Company cannot be sure that additional equity and/or debt financing will be available to the Company as needed on acceptable terms, or at all. For fiscal year 2022 to date, management has not obtained any additional capital financing. Management believes the Company’s current cash balance of $63.5 million is sufficient to fund its planned expenditures through at least March 2023.

 

On January 7, 2019, the Company entered into an At the Market Offering Agreement with AGP (the “2019 ATM Facility”), under which the Company could issue and sell to or through AGP, acting as agent and/or principal, shares of the Company’s common stock having an aggregate offering price of up to $25.0 million. From inception of the program through its termination on December 8, 2020, under the 2019 ATM Facility, the Company sold and issued an aggregate of 17,595,472 shares of its common stock with an aggregate market value of $23.4 million at an average price of $1.33 per share, including 12,342,506 shares in fiscal year 2021 with an aggregate market value of $18.7 million at an average price of $1.51 per share and paid AGP a sales commission of approximately $0.8 million related to those shares. The agreement was fully utilized and terminated on December 8, 2020.

 

9

 

On November 20, 2020, the Company entered into another At the Market Offering Agreement with AGP (the “2020 ATM Facility”), having capacity up to $100.0 million. On December 4, 2020, the Company filed a prospectus with the Securities and Exchange Commission whereby, the Company could issue and sell to or through AGP, acting as agent and/or principal, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. From inception of the 2020 ATM Facility through January 31, 2022, the Company had sold and issued an aggregate of 17,179,883 shares of its common stock with an aggregate market value of $50.0 million at an average price of $2.91 per share and paid AGP a sales commission of approximately $1.6 million related to those shares. A prospectus supplement was filed on January 10, 2022 to allow the Company to sell an additional $25.0 million (or an aggregate of $75.0 million) under the 2020 ATM Facility, none of which has been sold to date.

 

Equity Line Common Stock Purchase Agreements

 

On October 24, 2019, the Company entered into a common stock purchase agreement with Aspire Capital which provided that, subject to certain terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $10.0 million shares of the Company’s common stock over a 30-month period. Through September 18, 2020, the Company had sold an aggregate of 6,424,205 shares of common stock with an aggregate market value of $4.0 million at an average price of $0.63 per share pursuant to this common stock purchase agreement, including 5,025,000 shares in fiscal year 2021 with an aggregate market value of $2.9 million at an average price of $0.57 per share. The agreement was fully utilized and terminated on September 18, 2020.

 

On September 18, 2020, the Company entered into a new common stock purchase agreement with Aspire Capital which provided that, subject to certain terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $12.5 million shares of the Company’s common stock over a 30-month period subject to a limit of 19.99% of the outstanding common stock on the date of the agreement if the price did not exceed a specified price in the agreement. The number of shares the Company could issue within the 19.99% limit was 3,722,251 shares without shareholder approval. Shareholder approval was received at the Company’s annual meeting of shareholders on December 23, 2020 for the sale of 9,864,706 additional shares of common stock to Aspire Capital, which exceeded the 19.99% limit of the outstanding common stock on the date of the agreement. Through January 31, 2022, the Company had sold an aggregate of 3,722,251 shares of common stock with an aggregate market value of $11.8 million at an average price of $3.17 per share pursuant to this common stock purchase agreement with approximately $1.0 million remaining on the facility as of January 31, 2022.

 

(2) Summary of Significant Accounting Policies

 

(a) Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. 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 a number of 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, valuations, purchase price allocations and contingent consideration related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets, goodwill and other intangible assets and the related amortization methods and periods, estimated costs to complete projects and percentage of completion of customer contracts for purposes of revenue recognition. Actual results could differ from those estimates.

 

10

 

(c) Cash, Cash Equivalents, Restricted Cash and Security Agreements

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company invests excess cash in a money market account. The following table summarizes cash and cash equivalents as of January 31, 2022 and April 30, 2021:

 

    January 31, 2022     April 30, 2021  
    (in thousands)  
             
Checking and savings accounts   $ 1,519     $ 1,850  
Money market account     61,935       81,178  
    $ 63,454     $ 83,028  

 

Restricted Cash and Security Agreements

 

The Company has a letter of credit agreement with Santander Bank, N.A. (“Santander”). Cash of $157,000 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 two letters of credit to subsidiaries of Enel Green Power (“EGP”) pursuant to the Company’s contracts with EGP. The first letter of credit was issued in the amount of $126,000 that will be released 12 months after the PB3 PowerBuoy® (“PB3”) is fully deployed. The second letter of credit was issued in the amount of $645,000 and was reduced to $323,000 in August 2020. The second letter of credit will be reduced by $259,000 once the PB3 is fully deployed and passes final acceptance testing. The remaining restricted amount of $64,000 will be released 12 months after the buoy is fully deployed.

 

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.

 

    January 31, 2022     April 30, 2021  
    (in thousands)  
Cash and cash equivalents   $ 63,454     $ 83,028  
Restricted cash- short term     384       384  
Restricted cash- long term     222       222  
Cash, cash equivalents and restricted cash   $ 64,060     $ 83,634  

 

(d) Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to credit risk consist principally of accounts receivable and cash and cash equivalents. The Company believes that its current contracts do not represent a risk of collectability on its receivables. The Company invests its excess cash in a money market account and does not believe that it is exposed to any significant risks related to its cash and money market accounts. Cash and cash equivalents are also maintained at foreign financial institutions. Cash and cash equivalents in foreign financial institutions as of January 31, 2022 was $30,000.

 

11

 

The table below shows the amount of the Company’s revenues derived from customers whose revenues accounted for at least 10% of the Company’s consolidated revenues for at least one of the periods indicated:

 

    2022     2021     2022     2021  
    Three months ended January 31,     Nine months ended January 31,  
    2022     2021     2022     2021  
    (in thousands)     (in thousands)  
Eni S.p.A.   $     $ 34     $ 14     $ 135  
Department of Energy     102             182        
EGP           223       163       379  
ACET           33             37  
Valaris (1)     7             142        
Brigham Young University (2)     66             66        
Nippon Kaiyo (2)     78             78        
Naval Surface Warfare Center (2)     98             98        
Other (no customer over 10%)     133       27       260       53  
Revenues   $ 484     $ 317     $ 1,003     $ 604  

 

(1) 3Dent related consulting
(2) MAR related sales

 

(e) Share-Based Compensation

 

Costs resulting from all share-based payment transactions are recognized in the consolidated financial statements at their fair values. The following table summarizes share-based compensation related to the Company’s share-based plans by expense category for the three and nine months ended January 31, 2022 and 2021:

 

    2022     2021     2022     2021  
    Three months ended January 31,     Nine months ended January 31,  
    2022     2021     2022     2021  
    (in thousands)     (in thousands)  
Engineering and product development   $ 209     $ 32     $ 551     $ 91  
Selling, general and administrative     108       83       313       247  
Total share-based compensation expense   $ 317     $ 115     $ 864     $ 338  

 

(f) Revenue Recognition

 

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 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 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. The majority of the Company’s contracts have no observable standalone selling price since the associated products and services are customized to customer specifications. As such, the standalone selling price generally reflects 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 and 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 January 31, 2022 or 2021. The Company presents shipping and handling costs, that occur after control of the promised goods or services transfer to the customer, as fulfillment costs rather than evaluating whether the shipping and handling activities are promised services to the customer.

 

12

 

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 or time elapsed are utilized to assess progress against specific contractual performance obligations for the Company’s services. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided. For the Company, the input method using costs incurred or time elapsed 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, incentive awards, 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 projects 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.

 

The Company’s contracts are either cost plus or fixed price contracts. Under cost plus contracts, customers are billed for actual expenses incurred plus an agreed-upon fee. Under cost plus contracts, a profit or loss on a project is recognized depending on whether actual costs are more or less than the agreed upon amount.

 

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 revenues, 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 nine-month periods ended January 31, 2022 and 2021, all of the Company’s contracts were classified as firm fixed price.

 

As of January 31, 2022, the Company’s total remaining performance obligations, also referred to as backlog, totaled $0.8 million. The Company expects to recognize 100% of the remaining performance obligations as revenue over the next twelve months.

 

The Company also enters into lease arrangements for its PB3 and our 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 PB3 and components, while non-lease elements generally include engineering, monitoring and support services. In the lease arrangement, the customer is provided an option to extend the lease term or purchase the leased PB3 at some point during and/or at the end of the lease term.

 

Products and Solutions Leasing

 

The Company enters into lease arrangements with certain customers for their products and solutions. As of January 31, 2022, the Company had one lease arrangement with a remaining operating lease term of less than 7 months. 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 PB3 and components, while non-lease elements generally include engineering, monitoring and support services. In the lease arrangement, the customer is provided an option to extend the lease term or purchase the leased PB3 at some point during and/or at the end of the lease term.

 

13

 

The Company classifies leases as either operating or financing in accordance with the authoritative accounting guidance contained within ASC Topic 842, “Leases”. At inception of the contract, the Company evaluates the lease against the lease classification criteria within ASC Topic 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a finance lease. All other leases are treated as operating leases.

 

The Company recognizes revenue from operating lease arrangements generally on a straight-line basis over the lease term which is presented in Revenues in the Consolidated Statements of Operations. The lease revenue for the nine months ended January 31, 2022 and 2021 was immaterial.

 

(g) Net Loss per Common Share

 

Basic and diluted net loss per common share for all periods presented is computed by dividing net loss by the weighted average number of shares of common stock and common stock equivalents outstanding during the periods. The pre-funded warrants were determined to be common stock equivalents and have been included in the weighted average number of shares outstanding for calculation of basic net loss per common share . 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 issued to employees and non-employee directors, were excluded from the diluted net loss per common share calculation due to their anti-dilutive effect.

 

In computing diluted net loss per common share on the Consolidated Statements of Operations, warrants exercisable for common stock, options to purchase shares of common stock and non-vested restricted stock issued to employees and non-employee directors, totaling 6,356,123 and 5,221,258 for the nine months ended January 31, 2022 and 2021, respectively, were excluded from each of the computations as the effect would be anti-dilutive due to the Company’s net losses.

 

(h) Recently Issued Accounting Standards

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. In November 2019, the FASB issued No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date of ASU 2016-13 for Smaller Reporting Companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements.

 

(3) Account Receivable and Contract Assets

 

The following provides further details on the balance sheet accounts of accounts receivable and contract assets from contracts with customers:

 

    January 31, 2022     April 30, 2021  
    (in thousands)  
Accounts receivable   $ 113     $ 350  
Contract assets     407       190  
Contract liabilities     15        

 

Accounts Receivable

 

The Company grants credit to its customers, generally without collateral, under normal payment terms (typically 30 to 60 days after invoicing). Generally, invoicing occurs after the related services are performed or control of goods have transferred to the customer. Accounts receivable represent an unconditional right to consideration arising from the Company’s performance under contracts with customers. The carrying value of such receivables represents their estimated realizable value.

 

14

 

Contract Assets

 

Contract assets include unbilled amounts typically resulting from arrangements whereby the right to payment is conditioned on completing additional tasks or services for a performance obligation. Significant changes in the contract assets balance during the period were as follows:

 

    Nine months ended January 31, 2022  
    (in thousands)  
Transferred to receivables from contract assets recognized at the beginning of the period   $ (190 )
Revenue recognized and not billed as of the end of the period     407  
Net change in contract assets   $ 217  

 

(4) Other Current Assets

 

Other current assets consisted of the following at January 31, 2022 and April 30, 2021:

 

    January 31, 2022     April 30, 2021  
    (in thousands)  
Prepaid insurance   $      178     $      194  
Prepaid software & licenses     84       93  
Prepaid sales and marketing     65       37  
Prepaid recruiting     57       12  
Other receivables     24       21  
Deposits           68  
Prepaid expenses- other     28       62  
Other current assets   $ 436     $ 487  

 

(5) Property and Equipment, net

 

The components of property and equipment, net as of January 31, 2022 and April 30, 2021 consisted of the following:

 

    January 31, 2022     April 30, 2021  
    (in thousands)  
Equipment   $ 320     $ 291  
Computer equipment & software     521       498  
Office furniture & equipment     352       341  
Leasehold improvements     474       474  
Construction in process     15       15  
Property and equipment, gross     1,682       1,619  
Less: accumulated depreciation     (1,317 )     (1,213 )
Property and equipment, net   $ 365     $ 406  

 

Depreciation expense was approximately $104,000 and $106,000 for the nine month periods ended January 31, 2022 and 2021, respectively.

 

15

 

(6) Leases

 

Lessor Information

 

As of January 31, 2022, the Company has one lease which has been classified as an operating lease per accounting guidance contained within ASC Topic 842,” Leases”. The Company’s remaining term on this operating lease is less than 7 months. The maturity of lease payments remaining on this lease is immaterial.

 

Lessee Information

 

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 initial lease term is for seven years which expires in November of 2024 with an option to extend the lease for another five years. The lease is classified as an operating lease. The operating lease is included in right-of-use assets, lease liabilities- current and lease liabilities- long-term on the Company’s Consolidated Balance Sheets.

 

The Company also has two leases for properties located in Houston, Texas. The first was acquired as part of the 3Dent acquisition (see Note 18) that is used as office space. The lease term is for 3 years and is set to expire in January of 2023. The lease is classified as an operating lease and included in the right-of-use assets, lease liabilities- current and lease liabilities- long-term on the Company’s Consolidated Balance Sheets.

 

The other Houston lease is for additional office space and was renewed for a 12-month term ending on June 30, 2022. In accordance with ASC 842-20-5-2, since the lease term at the time of renewal was 12 months, the asset was recognized directly to the profit and loss statement on a straight-line basis and was not recognized as a right-of-use asset.

 

The Company also has a lease with the University of California Berkeley in Berkeley, California that was acquired as part of the MAR acquisition (see Note 18). The lease expires on June 30, 2022. In accordance with ASC 842-20-5-2, since the remaining lease term at the time of the acquisition of MAR was less than 12 months, the asset was recognized directly to the profit and loss statement on a straight-line basis and was not recognized as a right-of-use asset.

 

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. 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. Variable lease expenses, if any, are recorded as incurred.

 

The operating lease cash flow payments for the three months ended January 31, 2022 and 2021 were $111,000 and $91,000, respectively. The operating lease cash flow payments for the nine months ended January 31, 2022 and 2021 were $315,000 and $259,000, respectively.

 

16

 

The components of lease expense in the Consolidated Statements of Operations for the three and nine months ended January 31, 2022 and 2021 were as follows:

 

    2022     2021     2022     2021  
    Three months ended January 31,     Nine months ended January 31,  
    2022     2021     2022     2021  
    (in thousands)     (in thousands)  
Operating lease cost   $ 92     $ 79     $ 276     $ 238  
Short-term lease cost     12       7       22       12  
Total lease cost   $ 104     $ 86     $ 298     $ 250  

 

Information related to the Company’s right-of use assets and lease liabilities as of January 31, 2022 was as follows:

 

    January 31, 2022  
      (in thousands)  
         
Operating lease:        
Operating right-of-use asset, net   $ 825  
         
Right-of-use liability- current   $ 323  
Right-of-use liability- long term     615  
Total lease liability   $ 938  
         
Weighted average remaining lease term- operating leases     2.61 years  
Weighted average discount rate- operating leases     8.2 %

 

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

 

    January 31, 2022  
    (in thousands)  
         
Remainder of fiscal year 2022   $ 99  
2023     391  
2024     362  
2025     184  
Total future minimum lease payments   $ 1,036  
Less imputed interest     (98 )
Total   $ 938  

 

17

 

(7) Accrued Expenses

 

Accrued expenses consisted of the following at January 31, 2022 and April 30, 2021:

 

    January 31, 2022     April 30, 2021  
    (in thousands)     (in thousands)  
Project costs   $ 102     $ 368  
Contract loss reserve     328       328  
Employee incentive payments     191       283  
Accrued salary and benefits     409       631  
Professional fees     96       200  
Other     166       71  
Accrued expenses total    $ 1,292     $ 1,881  

 

18

 

(8) Warrants

 

Liability Classified Warrants

 

On June 2, 2016, the Company entered into a securities purchase agreement, which was amended on June 7, 2016 (as amended, the “June Purchase Agreement”) with certain institutional purchasers (the “June Purchasers”). Pursuant to the terms of the June Purchase Agreement, the Company sold an aggregate of 20,850 shares of Common Stock together with warrants to purchase up to an aggregate of 7,298 shares of Common Stock. Each share of common stock was sold together with a warrant to purchase 0.35 of a share of common stock at a combined purchase price of $92.00. The warrants have an exercise price of $121.60 per share, became exercisable on December 3, 2016 (“Initial Exercise Date”), and expired on December 3, 2021, five years following the Initial Exercise Date. As of the expiration date, none of the warrants had been exercised.

 

On July 22, 2016, the Company entered into a Second Amendment to the Purchase Agreement (the “Second Amended Purchase Agreement”) with certain institutional purchasers (the “July Purchasers”). Pursuant to the terms of the Second Amended Purchase Agreement, the Company sold an aggregate of 29,750 shares of Common Stock together with warrants to purchase up to an aggregate of 8,925 shares of Common Stock. Each share of common stock was sold together with a warrant to purchase 0.30 of a share of common stock at a combined purchase price of $135.00. The warrants were exercisable immediately at an exercise price of $187.20 per share. The warrants expired on January 23, 2022, the fifth (5th) anniversary of the initial exercise date of January 23, 2017. As of the expiration date, none of the warrants had been exercised.

 

Equity Classified Warrants

 

On April 8, 2019, the Company issued and sold 1,542,000 shares of common stock and pre-funded warrants to purchase up to 3,385,680 shares of common stock and common warrants to purchase up to 4,927,680 shares of our common stock in an underwritten public offering. The public offering price for the pre-funded warrants was equal to the public offering price of the common stock, less the $0.01 per share exercise price of each warrant. The pre-funded warrants have no expiration date. As of January 31, 2022, all of the pre-funded warrants had been exercised. The common stock warrants have an exercise price of $3.85 per share and expire five years from the issuance date. As of January 31, 2022, all of the common warrants had been exercised.

 

The Company accounts for warrants issued in connection with its June 2016 and July 2016 public offerings in accordance with the guidance on “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” in Topic 480 which provides that the Company classify the warrant instruments as a liability at its fair value. The warrant liabilities are subject to re-measurement at each balance sheet date using the Black-Scholes option pricing model. The June 2016 and July 2016 warrants contained a feature whereby they could require the transfer of assets and therefore are classified as a liability award in accordance with the guidance in Topic 480. The warrants were all expired as of January 31, 2022 and had a value near zero as of April 30, 2021. The pre-funded and common warrants issued in the Company’s April 8, 2019 public offering did not meet the criteria to be classified as a liability award and therefore were treated as an equity award and recorded as a component of shareholders’ equity in the Consolidated Balance Sheets.

 

19

 

(9) Paycheck Protection Program Loan

 

On March 27, 2020, the U.S. Government passed into law the Coronavirus Aid, Relief and Economic Security Act, or the (“CARES Act”). On May 3, 2020, the Company signed a Paycheck Protection Program (“PPP”) loan with Santander as the lender for approximately $890,000 in support through the Small Business Association (“SBA”) under the PPP Loan. The PPP Loan was unsecured and evidenced by a note in favor of Santander as the lender and governed by a Loan Agreement with Santander. The Company received the proceeds on May 5, 2020.

 

The Company filed its loan forgiveness application at the end of February 2021 asking for 100% forgiveness of the loan. In June 2021, the Company was informed that its application was approved, and that the loan is now fully forgiven. The Company recognized a gain on extinguishment of PPP loan of approximately $890,000 during the nine months ended October 31, 2021 as reflected on the Consolidated Statement of Operations.

 

(10) Preferred Stock

 

The Company has authorized 5,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. As of January 31, 2022, no shares of preferred stock had been issued.

 

(11) Common Stock

 

The Company has authorized 100,000,000 shares of common stock with a par value of $0.001 per share. As of January 31, 2022, 55,894,213 shares had been issued and are outstanding.

 

(12) Treasury Shares

 

During each of the nine months ended January 31, 2022 and 2021, no shares of common stock were purchased by the Company from employees to pay taxes related to the vesting of restricted stock.

 

(13) 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. As of January 31, 2022, the Company has 696,627 shares available for future issuance under the 2015 Plan which reflects adjustments made for the departure of our former CEO as well as other departures.

 

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, awards under the Inducement Plan may only be made to individuals not previously employed by the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company. An award is any right to receive the Company’s common stock pursuant to the 2018 Inducement Plan, consisting of a performance share award, restricted stock award, a restricted stock unit award or a stock payment award. As of January 31, 2022, there were 11,487 shares available for grant under the 2018 Inducement Plan. On February 9, 2022 the 2018 Inducement Plan was amended to increase the authorized shares by 250,000 to 275,000.

 

20

 

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 the weighted average valuation assumptions noted in the following table. The risk-free rate is based on the US Treasury yield curve in effect at the time of grant. The expected life (estimated period of time outstanding) of the stock options granted is 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 granted options to acquire 793,850 and 248,876 shares of stock options during the three and nine months ended January 31, 2022 and 2021, respectively. The following assumptions were used to value the awards:

 

    Nine months ended January 31,  
    2022     2021  
Risk-free interest rate     1.5 %     6.0 %
Expected dividend yield     %     %
Expected life (in years)     5.6       5.9  
Expected volatility     121.9 %     136.5 %

 

A summary of stock options under our stock incentive plans is detailed in the following table.

 

   

Shares

Underlying

Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Term

(In Years)

 
Outstanding as of April 30, 2021     516,827     $ 3.89       9.0  
Granted     793,850     $ 1.43          
Exercised     (44,332 )   $ 1.05          
Expired     (1,806 )   $ 32.62