=====================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------

                                   FORM 10-QSB


|X|      Quarterly  Report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934

         For the quarterly period ended March 31, 2001

                                       OR

|_|      Transition report under Section 13 OR 15(d) of the Securities  Exchange
         Act of 1934

          For The Transition Period From                  To
                                          ---------------   ------------------

                          Commission File Number 1-5742



                             OCEAN POWER CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

                    Delaware                                   94-3350291
        (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                    Identification No.)

                         5000 Robert J. Mathews Parkway
                        El Dorado Hills, California 95672
              (Address of principal executive offices and Zip Code)

                                 (916) 933-8100
              (Registrant's telephone number, including area code)

                                 Not Applicable

(Former  name,  former  address and former  fiscal year,  if changed  since last
 report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act of 1934  during the past 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. |X|
Yes |_| No

         State the number of shares  outstanding of each of the issuer's classes
of  common  equity,  as of the  latest  practicable  date:  The  registrant  had
38,199,942  shares of its $.01 par value common stock  outstanding as of May 15,
2001.

         Transitional Small Business Disclosure Format (check one): Yes[ ] No:X

     =====================================================================


                                       1
<PAGE>


                             OCEAN POWER CORPORATION

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                     Page
<S>                                                                                                  <C>
Cautionary Statement Regarding Forward Looking Statements...............................................3



                          PART I. FINANCIAL INFORMATION

ITEM 1.      Financial Statements:..............................................................F1 - F-15
ITEM 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations......4

                           PART II. OTHER INFORMATION

ITEM 1.      Legal Proceedings..........................................................................7
ITEM 2.      Changes in Securities and Use of Proceeds..................................................7
ITEM 3.      Defaults Upon Senior Securities............................................................7
ITEM 4.      Submission of Matters to a Vote of Security Holders........................................7
ITEM 5.      Other Information..........................................................................7
ITEM 6.      Exhibits and Reports on Form 8-K...........................................................8
</TABLE>

                                       2
<PAGE>

                           FORWARD-LOOKING STATEMENTS

IN  ADDITION  TO  HISTORICAL  INFORMATION,  THIS FORM  10-QSB  CONTAINS  CERTAIN
FORWARD-LOOKING  STATEMENTS  UNDER  THE  CAPTION  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS  OR  PLAN  OF  OPERATION,"  INCLUDING  STATEMENTS  CONCERNING  (I)  THE
COMPANY'S STRATEGY; (II) THE COMPANY'S EXPANSION PLANS, (III) THE MARKET FOR THE
COMPANY'S  PRODUCTS;  AND (IV)  THE  EFFECTS  OF  GOVERNMENT  REGULATION  OF THE
COMPANY'S  PRODUCTS.  BECAUSE SUCH  STATEMENTS  INVOLVE RISKS OF  UNCERTAINTIES,
ACTUAL  RESULTS MAY DIFFER  MATERIALLY  FROM THOSE  EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING  STATEMENTS.  THE COMPANY  UNDERTAKES  NO OBLIGATION TO PUBLICLY
REVISE THESE FORWARD-LOOKING  STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT
MAY  ARISE  AFTER  THE  DATE  HEREOF,   EXCEPT  AS  REQUIRED  BY  ITS  REPORTING
OBLIGATIONS.

                                       3
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  Financial Statements




                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)

                        CONSOLIDATED FINANCIAL STATEMENTS

                      March 31, 2001 and December 31, 2000


                                      F-1
<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                     ASSETS

                                                                                 March 31,          December 31,
                                                                                  2001              2000
                                                                           ------------------  -----------------
                                                                                (Unaudited)

CURRENT ASSETS
<S>                                                                        <C>                 <C>
   Cash                                                                    $        2,637,083  $       2,152,593
   Cash - restricted                                                                   46,690             23,706
   Advances to employees                                                              321,957            320,567
   Prepaid expenses                                                                   133,929            222,235
                                                                           ------------------  -----------------

     Total Current Assets                                                           3,139,659          2,719,101
                                                                           ------------------  -----------------

EQUIPMENT, NET                                                                        900,039            922,980
                                                                           ------------------  -----------------

OTHER ASSETS

   Deposits                                                                            54,948             55,348
   Patents, and licensing agreements, net                                           6,357,721          6,694,779
   Goodwill, net                                                                    6,150,439          6,315,183
                                                                           ------------------  -----------------

     Total Other Assets                                                            12,563,108         13,065,310
                                                                           ------------------  -----------------

     TOTAL ASSETS                                                          $       16,602,806  $      16,707,391
                                                                           ==================  =================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-2

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                     Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                 March 31,          December 31,
                                                                                  2001                  2000
                                                                           ------------------  -----------------
                                                                                (Unaudited)
CURRENT LIABILITIES
<S>                                                                        <C>                 <C>
   Accounts payable                                                        $          793,242  $       1,127,414
   Accrued expenses                                                                 6,012,055          6,214,282
   Notes payable - related parties                                                  1,315,527          1,317,618
   Notes payable - current portion                                                  3,475,960            488,457
   Research advances                                                                  419,324            473,145
                                                                           ------------------  -----------------

     Total Current Liabilities                                                     12,016,108          9,620,916
                                                                           ------------------  -----------------

LONG-TERM LIABILITIES

   Convertible debentures payable                                                     550,000            550,000
   Notes payable                                                                      629,984            744,588
                                                                           ------------------  -----------------

     Total Long-Term Liabilities                                                    1,179,984          1,294,588
                                                                           ------------------  -----------------

     Total Liabilities                                                             13,196,092         10,915,504
                                                                           ------------------  -----------------

STOCKHOLDERS' EQUITY

   Preferred stock: 20,000,000 shares authorized of
    $0.001 par value; no shares outstanding                                            -                  -
   Common stock: 500,000,000 shares authorized of
    $0.01 par value; 38,149,942 and 38,149,942 shares
    issued and outstanding, respectively                                              381,499            381,499
   Additional paid-in capital                                                      29,296,500         25,611,288
   Deferred consulting expense                                                       (405,416)          (410,667)
   Other comprehensive income                                                         213,414            195,258
   Deficit accumulated during the development stage                               (26,079,283)       (19,985,491)
                                                                           ------------------  -----------------

     Total Stockholders' Equity                                                     3,406,714          5,791,887
                                                                           ------------------  -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $       16,602,806  $      16,707,391
                                                                           ==================  =================
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-3

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                     From
                                                                                                 Inception on
                                                                                                   March 26,
                                                                For the Three Months Ended       1992 Through
                                                                      March 31,                    March 31,
                                                       --------------------------------------
                                                              2001               2000                 2001
                                                       ------------------  ------------------  -----------------
<S>                                                    <C>                 <C>                 <C>
REVENUES                                               $           -       $           -       $          -
                                                       ------------------  ------------------  -----------------

EXPENSES

   General and administrative                                   2,020,799           2,500,051         18,364,087
   Research and development                                        61,496              59,549          1,606,952
   Depreciation and amortization                                  223,691              39,842            663,950
                                                       ------------------  ------------------  -----------------

     Total Expenses                                             2,305,986           2,599,442         20,634,989
                                                       ------------------  ------------------  -----------------

     LOSS FROM OPERATIONS                                      (2,305,986)         (2,599,442)       (20,634,989)
                                                       ------------------  ------------------  -----------------

OTHER INCOME (EXPENSE)

   Currency gain                                                   -                   -                     522
   Interest income                                                 17,107              36,173            232,651
   Loss on sale of assets                                          -                   -                (387,649)
   Interest expense                                            (3,804,913)            (77,376)        (5,455,159)
                                                       ------------------  ------------------  -----------------

     Total Other Income (Expense)                              (3,787,806)            (41,203)        (5,609,635)
                                                       ------------------  ------------------  -----------------

LOSS BEFORE EXTRAORDINARY ITEM                                 (6,093,792)         (2,640,645)       (26,244,624)

EXTRAORDINARY ITEM

   Gain on settlement of debt                                      -                  165,349            165,341
                                                       ------------------  ------------------  -----------------

NET LOSS                                                       (6,093,792)         (2,475,296)       (26,079,283)
                                                       ------------------  ------------------  -----------------

OTHER COMPREHENSIVE INCOME

   Currency translation adjustment                                 18,156              -                 213,414
                                                       ------------------  ------------------  -----------------

     TOTAL COMPREHENSIVE LOSS                          $       (6,075,636) $       (2,475,296) $     (25,865,869)
                                                       ==================  ==================  =================
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       F-4

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                Consolidated Statements of Operations (Continued)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                            For the Three Months Ended
                                                                     March 31,
                                                       --------------------------------------
                                                              2001               2000
                                                       ------------------  ------------------

BASIC AND DILUTED LOSS PER SHARE
<S>                                                    <C>                 <C>
   Operating loss                                      $            (0.16) $            (0.07)
   Extraordinary item                                              -                     0.00
                                                       ------------------  ------------------

     Total                                             $            (0.16) $            (0.07)
                                                       ==================  ==================

WEIGHTED AVERAGE NUMBER OF SHARES
 OUTSTANDING                                                   38,149,942          34,165,608
                                                       ==================  ==================
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       F-5

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>

                                                                                                                      Deficit
                                                                                                                      Accumulated
                                                                        Additional        Other          Deferred     During the
                                                Common Stock              Paid-In      Comprehensive    Consulting    Development
                                       ----------------------------
                                         Shares          Amount           Capital         Income         Expense         Stage
                                       -------------  -------------   --------------  ---------------   -----------  --------------
<S>                                       <C>         <C>             <C>             <C>               <C>          <C>
Balance, December 31, 1999                32,835,925  $     328,359   $    5,589,224  $        -        $    -       $  (10,923,816)

January 4, 2000, common stock
 issued for debt and consideration
 for loan default at $2.75 per share         147,580          1,476          236,024           -             -               -

January 5, 2000, common stock
 issued for services at $4.34 per
 share                                        60,000            600          259,800           -             -               -

January 26, 2000, common stock
 issued pursuant to a private
 placement at $2.10 per share                 47,619            476           99,524           -             -               -

February 1, 2000, warrants
 granted below market value                   -              -                41,242           -             -               -

February 18, 2000, options
 granted below market value                   -              -               494,596           -             -               -

February 22, 2000, options
 granted below market value                   -              -               624,998           -             -               -

March 9, 2000, common stock
 issued for exercise of warrants
 at $1.99 per share                           62,792            628          124,391           -             -               -

March 16, 2000, common stock
 issued for conversion of convertible
 debenture at $1.50 per share                 66,667            667           99,333           -             -               -

March 16, 2000, common stock
 issued for exercise of warrants
 at $0.75 per share                          133,333          1,333           98,667           -             -               -
                                       -------------  -------------   --------------  ---------------   -----------  --------------

Balance Forward                           33,353,916  $     333,539   $    7,667,799  $        -        $    -       $  (10,923,816)
                                       -------------  -------------   --------------  ---------------   ===========  --------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-6

<PAGE>

<TABLE>
<CAPTION>
                                              OCEAN POWER CORPORATION AND SUBSIDIARIES
                                                    (A Development Stage Company)
                                     Consolidated Statements of Stockholders' Equity (Continued)


                                                                                                                      Deficit
                                                                                                                      Accumulated
                                                                        Additional        Other          Deferred     During the
                                                Common Stock              Paid-In      Comprehensive    Consulting    Development
                                       ----------------------------
                                         Shares          Amount           Capital         Income         Expense         Stage
                                       -------------  -------------   --------------  ---------------   -----------  --------------
<S>                                       <C>         <C>             <C>             <C>               <C>          <C>
Balance Forward                           33,353,916  $     333,539   $    7,667,799  $        -        $    -       $  (10,923,816)

March 27, 2000, 3 stock issuances
 for payment of debt at an average
 price of $4.95 per share                     46,486            465          231,347           -             -               -

May 26, 2000, options granted below
 market value                                 -              -             1,272,195           -             -               -

July 25, 2000, common stock issued
 for conversion of accounts payable
 at $4.00 per share                          100,000          1,000          399,000           -           (237,000)         -

July 25, 2000, common stock issued
 for purchase of SIGMA at $3.20 per
 share                                     1,718,748         17,187        5,482,813           -             -               -

January 25 - August 14, 2000, 62
 stock issuances pursuant to a private
 placement memorandum at average
 price of $3.58 per share                  1,930,792         19,308        6,896,423           -             -               -

August 8, 2000, options granted
 below market value                           -              -               358,000           -             -               -

September 15, 2000, 23 stock
 issuances pursuant to a private
 placement memorandum at $3.00
 per share                                 1,000,000         10,000        2,990,000           -             -               -

Currency translation adjustment               -              -                -               195,258        -               -

Warrants granted for consulting
 contract                                     -              -               340,000           -           (173,667)         -

Stock offering costs paid                     -              -               (26,289)          -             -               -

Net loss for the year ended
 December 31, 2000                            -              -                -                -             -           (9,061,675)
                                       -------------  -------------   --------------  ---------------   -----------  --------------

Balance, December 31, 2000                38,149,942  $     381,499   $   25,611,288  $       195,258   $  (410,667) $  (19,985,491)
                                       -------------  -------------   --------------  ---------------   -----------  --------------
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       F-7

<PAGE>

<TABLE>
<CAPTION>
                                              OCEAN POWER CORPORATION AND SUBSIDIARIES
                                                    (A Development Stage Company)
                                     Consolidated Statements of Stockholders' Equity (Continued)


                                                                                                                      Deficit
                                                                                                                      Accumulated
                                                                        Additional        Other          Deferred     During the
                                                Common Stock              Paid-In      Comprehensive    Consulting    Development
                                       ----------------------------
                                         Shares          Amount           Capital         Income         Expense         Stage
                                       -------------  -------------   --------------  ---------------   -----------  --------------
<S>                                       <C>         <C>             <C>             <C>               <C>          <C>
Balance, December 31, 2000                38,149,942  $     381,499   $   25,611,288  $       195,258   $  (410,667) $  (19,985,491)

Valuation adjustment to warrants
 granted for consulting services
 (unaudited)                                  -              -               (45,000)          -              5,251          -

Warrants granted for loan
 consideration (unaudited)                    -              -             3,730,212           -             -               -

Currency translation adjustment
 (unaudited)                                  -              -                -                18,156        -               -

Net loss for the three months ended
 March 31, 2001 (unaudited)                   -              -                -                -             -           (6,093,792)
                                       -------------  -------------   --------------  ---------------   -----------  --------------

Balance, March 31, 2001 (unaudited)       38,149,942  $     381,499   $   29,296,500  $       213,414   $  (405,416) $  (26,079,283)
                                       =============  =============   ==============  ===============   ===========  ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-8

<PAGE>

<TABLE>
<CAPTION>
                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                                                           From
                                                                                                        Inception on
                                                                                                          March 26,
                                                                   For the Three Months Ended           1992 Through
                                                                           March 31,                      March 31,
                                                             -------------------------------------
                                                                 2001               2000                    2001
                                                             -----------------   -----------------  ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                          <C>                 <C>                <C>
   Net loss                                                  $      (6,093,792)  $      (2,475,296) $      (26,079,283)
   Adjustments to reconcile net loss to net
    cash used by operating activities:
     Depreciation and amortization                                     223,691             139,842             663,950
     Deferred consulting expense                                         5,251              -                  334,584
     Value of common stock, warrants, options
      and discounts on equity instruments issued
      for services                                                   3,730,212           1,558,736           7,533,142
     Loss on sale of assets                                             -                   -                  387,649
     Amortization of debenture discount                                 -                   -                  650,000
     Gain on disposition of debt                                        -                   -                 (165,340)
   Change in operating asset and liability accounts,
    net of amounts acquired in business combination:
     (Increase) decrease in overpayment receivable                      -                  (74,700)             -
     (Increase) decrease in advances to employees,
      prepaid expenses, and deposits                                   113,709            (752,500)         (5,772,868)
     (Increase) decrease in other assets                                -                  359,110              -
     Increase (decrease) in accounts payable                          (334,172)             (4,829)            699,289
     Increase (decrease) in accrued expenses                            52,060            (114,387)          6,669,209
                                                             -----------------   -----------------  ------------------

       Net Cash Used by Operating Activities                        (2,303,041)         (1,364,024)        (15,079,668)
                                                             -----------------   -----------------  ------------------

CASH FLOWS FROM INVESTING ACTIVITIES

   Proceeds from sale of assets                                         -                   -                        1
   Purchase of fixed assets                                             (6,472)           (714,761)           (750,447)
   Equipment procurement costs                                          -                   -                 (564,110)
                                                             -----------------   -----------------  ------------------

       Net Cash (Used) by Investing Activities                          (6,472)           (714,761)         (1,314,556)
                                                             -----------------   -----------------  ------------------

CASH FLOWS FROM FINANCING ACTIVITIES

   Proceeds from notes payable                                       3,000,000              -                3,000,000
   Cash acquired in Sigma acquisition                                   -                   -                  142,254
   Repayment of related party notes payable                             (2,091)             -               (1,523,291)
   Repayment of note payable                                          (180,922)         (1,861,222)         (1,519,996)
   Loans from related parties                                           -                   48,648           7,224,287
   Issuance of convertible debentures                                   -                   -                  650,000
   Common stock issued for cash                                         -                7,201,061          11,131,032
   Stock offering costs                                                 -                   -                  (26,289)
                                                             -----------------   -----------------  ------------------

       Net Cash Provided by Financing Activities             $       2,816,987   $       5,388,487  $       19,077,997
                                                             -----------------   -----------------  ------------------
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       F-9

<PAGE>

<TABLE>
<CAPTION>
                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                Consolidated Statements of Cash Flows (Continued)
                                   (Unaudited)

                                                                                                           From
                                                                                                       Inception on
                                                                                                         March 26,
                                                                  For the Three Months Ended           1992 Through
                                                                          March 31,                      March 31,
                                                             -------------------------------------
                                                                 2001               2000                    2001
                                                             -----------------   -----------------  ------------------
<S>                                                          <C>                 <C>                <C>
NET INCREASE IN CASH AND CASH
 EQUIVALENTS                                                 $         507,474   $       3,309,702  $        2,683,773

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF PERIOD                                                           2,176,299             368,276              -
                                                             -----------------   -----------------  ------------------

CASH AND CASH EQUIVALENTS AT END
 OF PERIOD                                                   $       2,683,773   $       3,677,978  $        2,683,773
                                                             =================   =================  ==================
CASH PAID FOR:

   Interest                                                  $          -        $          -       $           -
   Income taxes                                              $          -        $          -       $           -

NON-CASH FINANCING ACTIVITIES

   Value of common stock, warrants, options and
    discounts on equity instruments issued for
    services                                                 $       3,730,212   $       1,558,736  $        7,533,142
   Equity instruments issued for deferred
     consulting expense                                      $          -        $          -       $          740,000
   Common stock issued for recapitalization                  $          -        $          -       $        2,761,773
   Common stock issued for conversion of debt                $          -        $         531,812  $        2,507,225
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      F-10

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                      March 31, 2001 and December 31, 2000


NOTE 1 -      BASIS OF FINANCIAL STATEMENT PRESENTATION

              The  accompanying   unaudited  condensed   consolidated  financial
              statements have been prepared by the Company pursuant to the rules
              and regulations of the Securities and Exchange Commission. Certain
              information  and  footnote   disclosures   normally   included  in
              financial   statements   prepared  in  accordance  with  generally
              accepted  accounting  principles have been condensed or omitted in
              accordance  with  such  rules  and  regulations.  The  information
              furnished  in  the  interim   condensed   consolidated   financial
              statements  include normal recurring  adjustments and reflects all
              adjustments,  which,  in the opinion of management,  are necessary
              for a fair  presentation  of such financial  statements.  Although
              management believes the disclosures and information  presented are
              adequate to make the information  not misleading,  it is suggested
              that these interim condensed  consolidated financial statements be
              read  in  conjunction  with  the  Company's  most  recent  audited
              financial  statements  and notes thereto  included in its December
              31, 2000 Annual Report on Form 10-KSB.  Operating  results for the
              three months ended March 31, 2001 are not  necessarily  indicative
              of the results that may be expected  for the year ending  December
              31, 2001.

NOTE 2 -      PATENTS AND LICENSING AGREEMENTS

              The  Company's  patents and license  agreements  consisted  of the
              following at March 31, 2001 and December 31, 2000:
<TABLE>
<CAPTION>
                                                                                  March 31,           December 31,
                                                                                      2001                2000
                                                                                 -----------------  ------------------
                                                                                    (Unaudited)
<S>                                                                              <C>                <C>
                      Patents                                                    $       1,334,440  $        1,387,677
                      Licensing Agreement - Aquamax and Keeran                           5,492,250           5,762,250
                      Accumulated amortization - patents                                  (468,969)           (455,148)
                                                                                 -----------------  ------------------

                                                                                 $       6,357,721  $        6,694,779
                                                                                 =================  ==================
</TABLE>

              During  November  1998,  the  Company's  wholly-owned  subsidiary,
              SIGMA,  entered  into an agreement  with Silent  Clean  Power,  AB
              (SCP),  (a Swedish  company) to purchase  licenses  and patents to
              certain  technology  associated with the Company's PCP development
              for $1,387,677, paid in stock and a note payable. The licenses and
              patents are being amortized over their  estimated  useful lives of
              111 to 134 months  using the  straight-line  method.  Amortization
              expense for the three  months  ended  March 31, 2001 was  $12,914.
              Accumulated amortization at March 31, 2001 was $468,965.

NOTE 3 -      BUSINESS COMBINATION

              In August 2000,  the Company  acquired  SIGMA  Elektroteknisk,  AS
              (SIGMA) by exchanging 1,718,748 shares of its common stock for all
              of the common stock of SIGMA.  The purchase was accounted for as a
              purchase in accordance with APB 16, "Business  Combinations."  The
              excess of the total  acquisition  cost over the fair  value of the
              net assets acquired of $6,589,756 is being amortized over 10 years
              by the  straight-line  method.  Amortization  expense  amounted to
              $164,744 and $-0- at March 31, 2001 and 2000, respectively.


                                      F-11

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                      March 31, 2001 and December 31, 2000


NOTE 4 -      NOTES PAYABLE

              Notes  payable at March 31, 2001 and  December 31, 2000 consist of
              the following:
<TABLE>
<CAPTION>
                                                                                     March 31,            December 31,
                                                                                      2001                 2000
                                                                                 -----------------  ------------------
                                                                                     (Unaudited)
<S>                                                                              <C>                <C>
              Notes payable to two parties bearing interest at 10.5%,
               collateralized by guarantees of the president of the
               Company, due in full by March 5, 2002.                            $       3,000,000  $           -

              Note payable to SND bearing a variable  interest  rate,
               (10.9% at December 31, 2000) due in equal semi-annual
               payments which began May 1, 2000, uncollateralized.                         116,405             121,049

              Note payable to SND bearing a variable  interest  rate,
               (10.9% at December 31, 2000) due in equal semi-annual
               payments which began May 10, 2000, uncollateralized.                        476,635             569,964

              Note payable to Silent Clean Power bearing  interest at
               10.9%, due in equal semi-annual payments, collateralized
               by patents and licenses                                                     479,565             498,696

              Note payable to SND bearing a variable  interest  rate,
               (10.9% at December 31, 2000) due in equal semi-annual
               payments which began April 3, 2000, uncollateralized.                        33,339              43,336
                                                                                 -----------------  ------------------

              Total Notes Payable                                                $       4,105,944  $        1,233,045
                                                                                 =================  ==================

              Annual maturities of notes payable are as follows:

                      Years Ending
                      December 31,

                            2002                                                 $       3,475,960
                            2003                                                           629,984
                                                                                 -----------------

                                                                                 $       4,105,944
</TABLE>

              The  Company  granted  1,200,000  warrants  valued  at  $3,730,212
              pursuant  to the Black  Scholes  pricing  model  using a risk-free
              interest rate of 6.43% expected volatility of 228% and an expected
              life of 3 years as  additional  consideration  for the  $3,000,000
              loans. The warrants were expensed  immediately as interest expense
              because they were immediately exercisable.

                                      F-12

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                      March 31, 2001 and December 31, 2000


NOTE 5 -      ACCRUED EXPENSES

              The  Company's  accrued  expenses are  comprised of the  following
              items:
<TABLE>
<CAPTION>
                                                                                   March 31,     December 31,
                                                                                    2001                2000
                                                                              -----------------  -----------------
                                                                                  (Unaudited)
<S>                                                                           <C>                <C>
                  Accrued payroll taxes payable                               $          24,481  $          26,657
                  Accrued interest payable - payroll                                     52,717             52,717
                  Accrued payroll tax penalty                                            98,845             98,845
                  Accrued interest payable - notes                                      136,229            118,155
                  Other accrued items                                                    59,783              7,908
                  Accrued license agreement (Note 7)                                  5,640,000          5,910,000
                                                                              -----------------  -----------------

                                Total                                         $       6,012,055  $       6,214,282
                                                                              =================  =================
</TABLE>

NOTE 6 -       GOING CONCERN

               The Company's  financial  statements are prepared using generally
               accepted  accounting  principles  applicable  to a going  concern
               which  contemplates  the realization of assets and liquidation of
               liabilities in the normal course of business. The Company has had
               limited   activities   since   inception   and  is  considered  a
               development stage company because it has no significant operating
               revenues  and,   planned   principal   operations  have  not  yet
               commenced.  The Company has  incurred  losses from its  inception
               through March 31, 2001 of approximately $26,079,000.  The Company
               does not have an established  source of funds sufficient to cover
               its operating costs and, accordingly,  there is substantial doubt
               about its ability to continue as a going concern.

               In order to develop a reliable source of revenues,  and achieve a
               profitable  level of  operations,  the Company  will need,  among
               other things,  additional capital  resources.  Management's plans
               include  raising  additional  capital  through the sale of common
               stock,  the  proceeds  of  which  will  be used  to  develop  the
               Company's   products,   pay   operating   expenses   and   pursue
               acquisitions and strategic alliances. The Company expects that it
               will need  $20,000,000  to  $30,000,000  of additional  funds for
               operations  and  expansion in 2001.  However,  management  cannot
               provide any  assurances  that the Company will be  successful  in
               accomplishing any of its plans.

               The  ability of the  Company to  continue  as a going  concern is
               dependent  upon its ability to  successfully  accomplish the plan
               described  in  the  preceding  paragraph  and  eventually  attain
               profitable  operations.  The accompanying financial statements do
               not  include  any  adjustments  that  might be  necessary  if the
               Company is unable to continue as a going concern.

                                      F-13

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                      March 31, 2001 and December 31, 2000


NOTE 7 -       COMMITMENTS AND CONTINGENCIES

               Wohlreich

               During  January  2000,  the  Company  entered  into a  three-year
               consulting   agreement  with  Clement  J.  Wohlreich  to  receive
               financial,  marketing  and  management  services.  The  agreement
               called for the Company to issue 100,000 units, each consisting of
               one share of the Company's  common stock and one attached warrant
               granting  the  right  for three  years to  purchase  one share of
               common  stock for an exercise  price of $1.50.  As the  agreement
               provided for issuance of the units upon commencement of services,
               the Company accrued a liability and deferred  consulting  expense
               as a reduction of shareholders'  equity in an amount equal to the
               value of the common  stock and  warrant at the  inception  of the
               agreement. The liability was converted to equity upon issuance of
               the  units  and the  value  of the  stock  and  warrants  will be
               expensed  over  the  term of the  agreement  upon  completion  of
               services each quarter.  Pursuant to EITF 96-18,  "Accounting  For
               Equity  Instruments  That Are Issued To Other Than  Employees For
               Acquiring Or In Conjunction With Selling, Goods Or Services", the
               Company will  continue to revalue the warrants  until earned upon
               completion  of  services.  As of March 31, 2000,  the  consulting
               contract was valued at $740,000,  representing the 100,000 shares
               of common stock issued on July 25, 2000 at the then trading price
               of $4.00 per share and the value of the warrants of $295,000,  as
               determined by the Black  Scholes  pricing  model.  For the period
               ended March 31, 2001,  the Company had amortized  $289,584 of the
               contract , leaving a  remaining  balance of $405,416 at March 31,
               2001 which is included as a reduction of stockholders' equity.

               Aquamax and Keeran

               During  September  2000,  the  Company  entered  into a licensing
               agreement with Aquamax (International) Holding, B.V. (Aquamax), a
               Dutch  Corporation  and  Keeran  Corporation,  N.V.  (Keeran),  a
               Netherlands Antilles  Corporation,  to obtain exclusive rights to
               make, have made, use, distribute,install, offer to sell, sell and
               sub-license  licensed  products  and  purchase  parts to  certain
               technology.

               The agreement is for 10 years and calls for payments as follows:

                  a)  $100,000 non-refundable advance upon acceptance;

                  b)  $300,000   upon  full   execution   and  delivery  of  the
                      agreement;

                  c)  200,000  shares of the  Company's  common  stock within 10
                      days of delivery of the agreement;

                  d)  $1,600,000 upon  completion of a private  placement of the
                      Company's common stock no later than December 31, 2000;


                                      F-14

<PAGE>

                    OCEAN POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                      March 31, 2001 and December 31, 2000


NOTE 7 -       COMMITMENTS AND CONTINGENCIES (Continued)

               Aquamax and Keeran (Continued)

                  e)  200,000 shares of the Company's  common stock upon payment
                      of the $1,600,000 payment referred to above;

                  f)  $2,000,000 no later than December 31, 2000; and

                  g)  200,000 shares of the Company's  common stock upon payment
                      of the $2,000,000 payment referred to above.

               The Company also  granted  Aquamax and Keeran  certain  exclusive
               rights in its technology for certain  applications.  In exchange,
               the Company will receive 50% of any license royalty or amounts of
               a similar nature they receive from third parties.

               The Company has demanded  arbitration  pursuant to its  licensing
               agreement with Aquamax and Keeran (Licensors) over the pricing of
               the licensing  agreement because the Licensors have not been able
               to provide all of the licenses stipulated in the agreement.  As a
               result, the Company suspended payments on the licensing agreement
               after paying the initial two installments  aggregating  $400,000.
               The  balance  due  under  the  existing  terms  of the  licensing
               agreement was  $5,910,000,  payable in cash and 600,000 shares of
               the  Company's  common  stock.  Such  amount  was  accrued  as  a
               liability at December 31, 2000. At March 31, 2001,  the liability
               and prepaid asset decreased by $270,000  because the value of the
               600,000 shares decreased. The shares will continue to be revalued
               until such time as they are issued  and,  along with the  amounts
               paid  prior to  suspension  of  payments,  reflected  as  prepaid
               license fees. The prepaid license fees will be amortized over the
               ten-year term of the licensing  agreement using the straight-line
               method.  Management  believes it will prevail in the  arbitration
               proceedings  and will receive an  equitable  reduction in amounts
               due under the contract. Management expects no loss to result from
               the dispute over the pricing of the licensing agreement.

NOTE 8 -       SUBSEQUENT EVENT

               On April 2, 2001, the Company  received  $600,000 in exchange for
               convertible  promissory  notes  payable of $240,000 and $360,000.
               Each note bears interest at 10% per annum and are due by April 2,
               2003.  Each note is  convertible  at any time by the note  holder
               into the Company's  common stock at $4.00 per share.  On April 2,
               2001,  the  Company's  common  stock  closed at $2.73 per  share.
               Concurrent with the promissory notes, the Company granted 200,000
               warrants  with an  exercise  price  of  $1.50  per  share  and an
               expiration  date of April 1, 2003.  The warrants were granted for
               services relating to the funding of the promissory notes and will
               be  valued  at $2.73 per  share  pursuant  to the  Black  Scholes
               pricing  model.  The  Company  will  record  additional  interest
               expense of $546,000 associated with the warrants.



                                      F-15

<PAGE>

ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         This Form 10-QSB contains forward-looking statements.  These statements
relate to future  events or the  Company's  future  financial  performance.  The
Company's financial projections contain figures relating to plans, expectations,
future results,  performance,  events or other matters. When used in the Plan of
Operations,  or elsewhere  in this Form,  words such as  "estimate",  "project",
"intend", "expect", "anticipate",  "believe", "can", "continue", "could", "may",
"plans", "potential",  "predicts",  "should", or "will" or the negative of these
terms or other  similar  expressions  are  intended to identify  forward-looking
statements.

These  statements are only  predictions  and involve known and unknown risks and
uncertainties.  Such  forward  looking  statements  involve  numerous  risks and
uncertainties,  pertaining to technology,  development of the Company's products
and markets for such products, timing and level of customers orders, competitive
products  and  pricing,  changes in  economic  conditions  and  markets  for the
Company's products and other risks and uncertainties.

Actual  results,  performance  and  events  are  likely to differ and may differ
materially and adversely. Investors are cautioned not to place undue reliance on
these forward-looking  statements which speak only as to the date of the Plan of
Operations.

The  Company  undertakes  no  obligation  to  publicly  update or  revise  these
forward-looking  statements  for any  reason,  or to update the  reasons  actual
results could differ materially from those anticipated in these  forward-looking
statements,  even if new information  becomes  available in the future except as
otherwise required by law or its reporting obligations.

Plan Of Operation

The  Company's  current  operations  began  in  January  1997  by  Manufacturing
Technologies   Corporation  (MTC).  MTC  was  a  Delaware  corporation  and  was
originally  set  up  to  develop  a  business   manufacturing  modular  seawater
desalination  and power  plants.  In March of 1998,  MTC  became a wholly  owned
subsidiary of PTC Holdings,  Inc., when PTC Holdings  acquired 100% of the stock
of MTC in return for assuming $1.4 million of its debt which represented 100% of
MTC's outstanding debt. PTC Holdings  subsequently merged with the Company, then
named PTC Group,  in June 1999. PTC Group  continued as the surviving  corporate
entity conducting the business of PTC Holdings.

The Company is developing modular seawater  desalination systems integrated with
environmentally  friendly  power  sources.  It is also  developing  stand  alone
modular Stirling based power systems. These systems are intended to be sold to a
series of regional joint ventures that will ideally take 15-25 year contracts to

                                       4
<PAGE>

sell water and power.  If successful,  this will provide the Company dual income
streams  from  both  equipment  sales and  royalties  from the sale of water and
power.  Entry into  regional  joint  ventures may involve  certain risks such as
exposure to  liabilities  incurred by the other joint  venturer  and the need to
share certain intellectual property with such regional joint venturers. However,
the Company plans to limit these risks by forming such regional  joint  ventures
with entities which limit liability of their owners,  such as  corporations  and
limited liability companies.  The Company does not currently plan to license its
intellectual  property to these regional joint ventures.  All such  intellectual
property will remain the property of Ocean Power. Furthermore,  any enhancements
to Company's  intellectual  property  arising out of the regional joint ventures
will be licensed back to the Company for its use.

The Company has had no profit to date.  It  experienced a total of $9,061,675 in
losses for the year ended  December 31,  2000.  For the three months ended March
31, 2001,  the Company  experienced  a total of  $6,093,792  in losses.  Of this
amount, $3,730,212 in losses resulted from a one-time charge of interest expense
representing  the value of warrants granted which were associated with the loans
for $3,000,000.  The balance of the Company's losses have resulted from the fact
that its products are still in development and no sales have been generated. The
operating  loss without the warrant  expense was  $2,363,580  as compared to the
loss for the three months ended March 31, 2000 of $2,475,296.

The  Company  currently  has  enough  cash to  continue  its  present  level  of
operations for about 3 months.  Due to the increased level of activity projected
during  the next three  years,  additional  funding  will be needed and is being
sought.

The Company does not have an established source of revenues  sufficient to cover
its  operating  costs and,  accordingly,  there is  substantial  doubt about the
ability of the Company to continue as a going concern.

In order to continue as a going concern,  develop a reliable source of revenues,
and achieve a profitable level of operations, the Company will need, among other
things, additional capital resources.  Management's plans to continue as a going
concern include raising  additional  capital through private  placement sales of
the  Company's  common stock and/or  loans from third  parties,  the proceeds of
which will be used to develop the Company's products, pay operating expenses and
pursue  acquisitions and strategic  alliances.  The Company expects that it will
need $20,000,000 to $30,000,000 of additional funds for operations and expansion
in 2001. However, management cannot provide any assurances that the Company will
be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent  upon its
ability to successfully accomplish the plan described in the preceding paragraph
and  eventually  attain  profitable   operations.   The  accompanying  financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.

The Company currently has outstanding debt with an aggregate principal amount of
$13,196,092 as of March 31, 2001. Of this amount, $2,280,588 was incurred during
the three months ended March 31, 2001.

The Company has a limited  operating history on which to evaluate its prospects.
The risks,  expenses and difficulties  encountered by start-up companies must be
considered when  evaluating the Company's  prospects.  All  development  efforts
share  the  risks  that  the  technology   being  pursued  may  not  perform  to
expectations. Also the cost to manufacture may exceed the product's value in the
market.  Changing  market  conditions  and new  technological  breakthroughs  by
competitors also pose risks.

Due to these uncertainties,  the exact cost of the development program described
below cannot be  guaranteed.  Difficulties  and setbacks occur and can adversely
affect  the  Company.  All  plans  contain  contingencies  but  they  may  prove
insufficient.

If  market  conditions  change,  financial  performance  projections  may  prove
unreachable.  All of these  factors must be weighed when  evaluating  the future
prospects (value) of a development stage company.

The Company does not have an established  source of revenue  sufficient to cover
its  operating  costs  and to allow it to  continue  as a going  concern.  Also,
management  cannot provide any assurances that the Company will be successful in
accomplishing  any of its plans.  The  ability of the  Company to  continue as a
going concern is dependent upon its ability to successfully  accomplish the plan
described  in  the  following   paragraphs  and  eventually   attain  profitable
operations.

                                       5
<PAGE>

The Company's plan of operation for the next twelve months is as follows:

         (i)      Since  completion  of its  water  quality  certification  on 9
                  December  1999,  the  Company  has  raised  approximately  $13
                  million  pursuant  to  private  placement  sales of its Common
                  Stock and loans which has allowed the Company to implement its
                  Product  Development  Program,  as well as to further business
                  development,  strategic partnering and acquisition activities.
                  Based on an analysis of its sales and development  costs,  the
                  Company intends to raise an additional $20-30 million pursuant
                  to private  placement  sales of its common  stock and/or loans
                  from third parties during 2001. In addition,  depending on the
                  pace of actual  sales and the  acquisition  activities  of the
                  Company,  the Company may seek to raise an additional round of
                  financing  (for a  minimum  of $100  million  dollars)  in the
                  second half of 2001. The exact method by which this additional
                  round  of  financing  will  be  raised  will be  based  on the
                  maximization of shareholder  value. The additional  equity, if
                  raised by the  Company,  will allow the Company to execute its
                  business plan.

                  Maximization  of  shareholder  value is the basic lens through
                  which all investment  and other  business  decisions are made.
                  One of the major  reasons  that the  Company  prefers to enter
                  into joint  ventures to finance its  endeavors  is to off-load
                  the bulk of the expense of market  development  onto the joint
                  venture partners. This brings market share without dilution of
                  Ocean  Power  shareholders.   However,   there  are  potential
                  disadvantages  to our reliance on joint  ventures,  such as, a
                  reliance on third  parties to properly  implement our business
                  plan. Similarly,  the choice to subcontract  manufacturing and
                  engineering wherever possible is done for the same reason. The
                  only in-house  manufacturing will be of extremely  proprietary
                  components  using  processes  protected by trade  secrets that
                  cannot be otherwise protected.

         (ii)     The Company will be doing  technology and product  development
                  in a number of areas. They are:

                  (a)      low-temperature hydrogen generation
                  (b)       ejectors
                  (c)      chemical-free water pretreatment
                  (d)      enhanced heat transfer in plastic heat exchangers
                  (e)      high-performance alkaline fuel cells
                  (f)      Stirling engines.

                  This  work is all  aimed  at  improving  the  performance  and
                  reducing the capital cost of the Company's products.

         (iii)    The Company intends to build and install additional facilities
                  in the next year. They are

                  (a)      further laboratory and test facilities
                  (b)      system integration facilities, and
                  (c)      a manufacturing facility for proprietary components

         (iv)     Although the Company plans to subcontract  out as much work as
                  possible, during the next year it still anticipates increasing
                  the  number  of  employees  from the  current  37 full time to
                  approximately 50 full time.

                                       6
<PAGE>


                           PART II. OTHER INFORMATION


ITEM 1.  Legal Proceedings

         Not applicable.


ITEM 2.  Changes in Securities and Use of Proceeds

         Previously  reported on the Company's  Form 10-SB as filed with the SEC
on April 12, 2001.


ITEM 3.  Defaults Upon Senior Securities

         Not applicable.


ITEM 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of the security  holders during the
thirteen-week period ended March 31, 2001.


ITEM 5.  Other Information

         Not applicable.

                                       7
<PAGE>


ITEM 6.  Exhibits and Reports on Form 8-K

     (a)          Exhibits

<TABLE>
<CAPTION>
Exhibit
Number                   Description
----------------------- -----------------------------------------------------------------------------------------
<S>                     <C>
 2.01                   Sigma Share Purchase Agreement dated July 25, 2000***
----------------------- -----------------------------------------------------------------------------------------
 3.01                   Certificate of Incorporation of Ocean Power Corporation, a Delaware Corporation, Dated
                        July 21, 1999 *
----------------------- -----------------------------------------------------------------------------------------
 3.02                   Bylaws of the Registrant*
----------------------- -----------------------------------------------------------------------------------------
3.03                    Articles of Incorporation of Kaniksu American Mining Company (Idaho), predecessor of
                        registrant*
----------------------- -----------------------------------------------------------------------------------------
3.04                    Company (Idaho) Certificate of Amendment Kaniksu American Mining Dated August 28, 1995
                        name change to Kaniksu Ventures, Inc.*
----------------------- -----------------------------------------------------------------------------------------
3.05                    Certificate of Amendment Kaniksu Ventures, Inc., Dated April 2, 1997 name change to
                        Intryst, Inc.*
----------------------- -----------------------------------------------------------------------------------------
3.06                    Articles of Amendment of Intryst, Inc., name change Dated December 24, 1997 to PTC
                        Group, Inc.*
----------------------- -----------------------------------------------------------------------------------------
3.07                    Articles of Amendment of PTC Group, Inc., name change Dated July 14, 1999 to Ocean
                        Power Corporation*
----------------------- -----------------------------------------------------------------------------------------
3.08                    Articles of Merger of Ocean Power Corporation Idaho With Ocean Power Corporation
                        Delaware Dated July 28, 1999*
----------------------- -----------------------------------------------------------------------------------------
3.09                    Certificate of Merger of Foreign and Domestic Corporation Dated July 28, 1999*
----------------------- -----------------------------------------------------------------------------------------
10.01                   STM/GSI-Ocean Power Licensing Agreement**
----------------------- -----------------------------------------------------------------------------------------
10.02                   Employment Agreement (Joseph P. Maceda)*
----------------------- -----------------------------------------------------------------------------------------
10.03                   Employment Agreement (J. Michael Hopper)*
----------------------- -----------------------------------------------------------------------------------------
10.04                   Employment Agreement (Lori L. O'Brien)*
----------------------- -----------------------------------------------------------------------------------------
10.05                   Employment Agreement (Robert Campbell)*
----------------------- -----------------------------------------------------------------------------------------
10.06                   Memorandum of Understanding with HyPerTech dated 15 June, 2000**
----------------------- -----------------------------------------------------------------------------------------
10.07                   Purchase Order Memorandum of Understanding with Ecological Engineering & Monitoring,
                        Inc. dated 16 January, 2000.**
</TABLE>

*        Incorporated by reference to the Company's Form 10-SB as filed February
         8, 2000.

**       Incorporated  by reference to the  Company's  Form 10-SB as amended and
         filed February 6, 2001.

***      Incorporated  by  reference  to the  Company's  Form 8-K as amended and
         filed October 19, 2000.

        (b)   Reports on Form 8-K.

         Not applicable.

                                       8
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.





                                   OCEAN POWER CORPORATION


Date: May 15, 2001                 By: /S/ JOSEPH P. MACEDA
                                       --------------------
                                           Joseph P. Maceda
                                           President



Date: May 15, 2001                 By:  /S/ J. MICHAEL HOPPER
                                        ---------------------
                                            J. Michael Hopper
                                            Secretary/Treasurer
                                            (chief accounting officer)



                                       9
<PAGE>