##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April
    30, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File Number
    001-33417
  
      (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.)   1590 REED ROAD
 PENNINGTON, NJ 08534
      (Address of principal executive
    offices, including zip code)
  Registrants telephone number, including area code
    (609) 730-0400
  Securities registered or to be registered pursuant to
    Section 12(b) of the Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $0.001

The Nasdaq Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Document

Part of the Form 10-K into Which IncorporatedProxy Statement for the
    registrants 2007 Annual Meeting of Stockholders

III




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##### 



OCEAN
    POWER TECHNOLOGIES, INC.
  INDEX TO
    REPORT ON
    FORM 10-K
  
  PagePART IItem 1:


Business


4Item 1A:


Risk
    Factors


24Item 1B:


Unresolved Staff
    Comments


39Item 2:


Properties


39Item 3:


Legal
    Proceedings


40Item 4:


Submission of
    Matters to Vote of Security Holders


40PART IIItem 5:


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


40Item 6:


Selected Financial
    Data


43Item 7:


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


44Item 7A:


Quantitative and
    Qualitative Disclosures About Market Risk


55Item 8:


Financial
    Statements and Supplementary Data


56Item 9:


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


56Item 9A:


Controls and
    Procedures


56Item 9B:


Other
    Information


57PART IIIItem 10:


Directors,
    Executive Officers and Corporate Governance


57Item 11:


Executive
    Compensation


57Item 12:


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


57Item 13:


Certain
    Relationships and Related Transactions, and Director
    Independence


57Item 14:


Principal
    Accountant Fees and Services


57PART IVItem 15:


Exhibits and
    Financial Statement Schedules


57EX-23.1: CONSENT OF KPMG LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    ® tm tm sm
  Special
    Note Regarding Forward-Looking Statements
  Form 10-K
 2




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3




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  Overview
    ®
  
    Our utility PowerBuoy system is capable of supplying electricity
    to a local or regional electric power grid. Our wave power
    stations will be comprised of a single PowerBuoy system or an
    integrated array of PowerBuoy systems, plus the remaining
    components required to deliver electricity to a power grid. We
    intend to sell our utility PowerBuoy system to utilities and
    other electrical power producers seeking to add electricity
    generated by wave energy to their existing electricity supply.
    Our PowerBuoy interface with the electrical utility power grid
    has been certified as compliant with international standards. An
    independent laboratory provided testing and evaluation services
    to certify that the OPT systems comply with designated national
    and international standards. The PowerBuoy grid interface will
    bear the Electrical Testing Laboratories (ETL) listing mark, and
    can be connected to the utility grid.
    Our autonomous PowerBuoy system is designed to generate power
    for use independent of the power grid in remote locations. There
    are a variety of potential applications for this system,
    including sonar and radar surveillance, tsunami warning,
    oceanographic data collection, offshore platforms and offshore
    aquaculture.        
    Iberdrola S.A., or Iberdrola, which is a large electric utility
    company located in Spain and one of the largest renewable energy
    producers in the world, Total S.A., or Total, which is one of
    the worlds largest oil and gas companies, and two Spanish
    governmental agencies for the first phase of the construction of
    a 1.39 4




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megawatt, or MW, wave power station off the coast of
    Santoña, Spain. We currently plan for the initial 40kW
    PowerBuoy system for this project to be ready for deployment by
    late 2007.  
    Total and Iberdrola to evaluate the development of a wave power
    station off the coast of France.
    The United States Navy to develop and build wave power systems
    at the US Marine Corps Base in Oahu. One PowerBuoy system was
    installed in connection with this project for a total of eight
    months over a two-year period. Another PowerBuoy system was
    deployed in June 2007. After four weeks of initial testing and
    operation, the system was returned to shore for diagnostic
    analysis and repair. Work is currently in progress on the design
    and construction of a third PowerBuoy system, which is expected
    to be ready for deployment at the Marine Corps Base in Oahu by
    the end of 2007.
    Lockheed Martin Corporation to market cooperatively with us our
    autonomous PowerBuoy system for use with Lockheed Martin
    equipment. Lockheed Martin successfully completed an ocean test
    of an autonomous PowerBuoy system in September 2004.              18-month
  (609) 730-0400. www.oceanpowertechnologies.com.
 5




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Our
    Market
      
    Rising cost of fossil fuels.  The cost of
    fossil fuel used to generate electricity has been rising. From
    2000 to 2005 in the United States, the cost of coal used for
    electricity generation increased by 28%, the cost of natural gas
    used for electricity generation increased by 91% and the cost of
    oil used for electricity generation increased by 64%.
    Dependence on energy from foreign
    sources.  Many countries, including the United
    States, Japan and much of Europe, depend on foreign resources
    for a majority of their domestic energy needs. Concerns over
    political and economic instability in some of the leading energy
    producing regions of the world are encouraging consuming
    countries to diversify their sources of energy.
    Environmental concerns.  Environmental concerns
    regarding the by-products of fossil fuels have led many
    countries and several US states to agree to reduce emissions of
    carbon dioxide and other gases associated with the use of fossil
    fuels and to adopt policies promoting the development of cleaner
    technologies.
    Government incentives.  Many countries have
    adopted policies to provide incentives for the development and
    use of renewable energy sources, such as subsidies to encourage
    the commercialization of renewable energy power generation.
    Infrastructure constraints.  In many parts of
    the world, the existing electricity infrastructure is
    insufficient to meet projected, and in some places existing,
    demand. Expansion of generating capacity from existing energy
    sources is frequently hindered by significant regulatory,
    political and economic constraints.    Wave
    Energy
      
    Scalability within a small site area.  Due to
    the tremendous energy in ocean waves, wave power stations with
    high capacity  50MW and above  can be
    installed in a relatively small area. We estimate that, upon
    completion of the development of our 500kW PowerBuoy system, we
    would be able to construct a wave power station that would
    occupy less than one-tenth of the ocean surface occupied by an
    offshore wind power station of equivalent capacity. 6




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
    Predictability.  The supply of electricity from
    wave energy can be forecasted in advance. The amount of energy a
    wave thousands of miles away will have when it arrives at a wave
    power station days later can be calculated based on satellite
    images and meteorological data with a high degree of accuracy.
    Customers can use this information to develop sourcing plans to
    meet their short-term electricity needs.
    Constant Source of Energy.  The annual flow of
    waves at specific sites can be relatively constant. Based on our
    studies and analysis of our target sites, we believe our wave
    power stations will be able to produce usable electricity for
    approximately 90% of all hours during a year.      
    Hydroelectric power generates electricity by capturing energy
    from flowing waters typically stored in and then released from
    reservoirs. The expansion of hydroelectric power may be limited
    due to the environmental and ecological impact of hydroelectric
    power stations.
    Wind power generates electricity by using wind turbines to
    harness the energy produced as a result of the winds
    motion and to convert it into electricity. Wind turbine
    structures, which can be over 300 feet high and have blades
    with a span over 200 feet wide, require locations with
    plenty of open space and high average wind speeds. Due to the
    perceived aesthetic impact of wind turbines, some local
    governments have zoning restrictions prohibiting the
    installation of wind farms. In addition, because they are often
    close to the shore, offshore wind farms share some of the same
    perceived aesthetic challenges as onshore wind farms.
    Solar (photo-voltaic) power generates electricity from sunlight.
    Since the suns energy is not always available and is
    widely scattered, current solar power technology is not scalable
    to create a large power station for supplying power to the grid.
    Tidal power captures energy contained in moving water due to
    tides and water current power captures energy contained in ocean
    and river flows and non-tidal currents. Both of these
    technologies require specific geographic characteristics for
    installation, which limits the availability of suitable sites.  Our
    Competitive Advantages
    
    Our PowerBuoy system uses an ocean-tested technology to
    generate electricity.  
    We have been conducting ocean tests for a decade in order to
    prove the viability of our technology. We initiated our first
    ocean installation in 1997 and have had several deployments of
    our systems for testing and operation since then, the longest of
    which has lasted 12 months. Our PowerBuoy systems have
    survived several hurricanes and winter storms while installed in
    the ocean. 7




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
    We had an operational demonstration PowerBuoy system off the
    coast of New Jersey from October 2005 until October 2006 when
    the system was removed from the ocean for planned maintenance
    and diagnostic testing. We currently plan to build and deploy
    two additional demonstration wave power stations that, unlike
    the PowerBuoy system in New Jersey, will provide electricity to
    the local power grids. In February 2006, we received approval
    from the South West of England Regional Development Agency to
    install a demonstration wave power station off the coast of
    Cornwall, England and in February 2007, the US Federal Energy
    Regulatory Commission granted us a preliminary permit to
    evaluate the feasibility of a wave power station off the coast
    of Reedsport, Oregon, a portion of which will be for
    demonstration purposes.  
    Our PowerBuoy systems grid connection has been
    certified.  
    On July 2, 2007, we announced that our PowerBuoy grid
    connection system had been certified as compliant with
    designated national and international standards. This qualifies
    our technology for integration into utility grid systems.  
    Our PowerBuoy system is efficient in harnessing wave
    energy.  
    Our PowerBuoy system is designed to efficiently convert wave
    energy into electricity by using onboard sensors to detect
    actual wave conditions and then to automatically adjust the
    performance of the generator using our proprietary electrical
    and electronics-based control systems in response to that
    information.
    One measure of the efficiency of an electric power generation
    system is load factor. The load factor is the percent of
    kilowatt hours produced by a system in a given period as
    compared to the maximum kilowatt hours that could be produced by
    the system in that period. A high load factor indicates a high
    degree of utilization of the capacity of the system and provides
    a means to compare the efficiencies of different energy sources
    to produce equivalent power outputs (without taking into account
    the relative costs of constructing such systems). Since we have
    not yet operated a wave power station, we do not have a measured
    load factor. However, based on our research and analysis, we
    believe the load factor for a PowerBuoy wave power station
    located at most of our targeted sites would be in the range of
    30% to 45%.  
    Our PowerBuoy system takes advantage of time-tested and
    well-known technology.  
    Our PowerBuoy system is designed to combine features of
    ocean-going buoys with advanced electrical and electronics-based
    systems. Since standard ocean-going buoys have been deployed in
    maritime applications for decades, their survival and risk
    profiles are known and proven. By using electrical, rather than
    mechanical, engineering solutions whenever possible, we are able
    to control materials, construction and other capital costs while
    maintaining reliability.
    Our PowerBuoy system can be built using easily sourced
    components supplied by third parties. Due to the PowerBuoy
    systems modular design, total construction time is
    minimized as multiple components can be built simultaneously,
    and generating capacity can be scaled up or down by
    incrementally adding or subtracting groups of PowerBuoy units.
    In addition, our PowerBuoy system can be deployed using common
    maritime techniques.  
    Numerous potential sites for our wave power stations are
    located near major population centers worldwide.  
    Our systems are designed to work in sites with average annual
    wave energy of at least 20kW per meter of wave front, which can
    be found in many coastal locations around the world. In
    particular, we are targeting coastal North America, the west
    coast of Europe, the coasts of Australia and the east coast of
    Japan. These potential sites not only have appropriate natural
    resources for harnessing wave energy, but they are also located
    near large population centers with significant and increasing
    electricity requirements.  
    We have significant commercial relationships.  
    Our current projects with Iberdrola and Total provide us with an
    initial opportunity to sell our wave power stations to
    utilities. By collaborating with leaders in renewable energy
    development, we believe we are able to accelerate both our
    in-house knowledge of the utility power generation market and
    our reputation as a credible renewable energy equipment
    supplier. If these projects are successful, we intend to
    leverage 8




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our experiences with the Spain and France projects to add wave
    power stations, new customers and complementary revenue streams
    from operations and maintenance contracts similar to the
    agreement we have in connection with the Spain project.  
    For certain customers in need of electricity solutions
    independent of the grid in defense and related markets, our
    marketing relationship with Lockheed Martin will enable us to
    offer a complete solution  both equipment and power
    generation for that equipment  thereby maximizing the
    marketability of our autonomous PowerBuoy system for these
    remote applications.
    With the funding from the US Navy, we have been able to refine
    our PowerBuoy system while simultaneously preparing for
    commercial deployment to address a particular customer need. If
    we are able to successfully deploy PowerBuoy systems for the US
    Navy, we believe our market visibility will be significantly
    enhanced.  
    Our PowerBuoy system has the potential to offer a cost
    competitive renewable energy power generation solution.  
    Our product development and engineering efforts are focused on
    increasing the maximum rated output of our utility PowerBuoy
    system from the current 40kW to 150kW in 2007, then to 250kW in
    2008 and ultimately to 500kW in 2010. Assuming we are able to
    reach manufacturing levels of at least 300 units of 500kW
    PowerBuoy systems per year, we believe, based upon our research
    and analysis, that the economies of scale we would have with our
    fabricators would allow us to offer a renewable electricity
    solution that competes on a non-subsidized basis with the price
    of wholesale electricity in key markets. We expect to complete
    development of our 500kW PowerBuoy system in 2010.
    Prior to achieving full production levels of the 500kW PowerBuoy
    system, if we achieve economies of scale for our 150kW or 250kW
    PowerBuoy systems, we expect to be able to offer a renewable
    electricity solution that competes with the price of electricity
    from traditional sources in certain local markets where the
    current retail price of electricity is relatively high or where
    sufficient subsidies are available.  
    Our systems are environmentally benign and aesthetically
    non-intrusive.  
    We believe that our PowerBuoy system does not present
    significant risks to marine life and does not emit significant
    levels of pollutants. In connection with our project at the US
    Marine Corps Base in Hawaii, our customer, the US Navy, obtained
    an independent environmental assessment of our PowerBuoy system
    prior to installation, as required by the National Environmental
    Policy Act. Although our project for the US Navy only
    contemplates an array of up to six PowerBuoy systems in Hawaii,
    we believe that PowerBuoy systems deployed in other geographic
    locations, including larger PowerBuoy systems under development
    and multiple-system wave power stations, would have minimal
    environmental impact due to the physical similarities with the
    tested system.
    Since our PowerBuoy systems are typically located one to five
    miles offshore, PowerBuoy wave power stations are usually not
    visible from the shore. Visual impact is often cited as one of
    the reasons that many communities have opposed plans to develop
    power stations. Our PowerBuoy system has the distinct advantage
    of having only a minimal visual profile. Only a small portion of
    the unit is visible at close range, with the bulk of the unit
    hidden below the water.  Our
    Business Strategy
    
    Concentrate sales and marketing efforts on four geographic
    markets.  We are focusing our sales and marketing
    efforts over the next three years on coastal North America, the
    west coast of Europe, the coasts of Australia and the east coast
    of Japan. We believe that each of these areas represents a
    strong potential market for our PowerBuoy wave power stations
    because they combine appropriate wave conditions, political and
    economic stability, large population centers, high levels of
    industrialization and significant and increasing electricity
    requirements. 9




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
    Continue to increase PowerBuoy system
    output.  Our product development and engineering
    efforts are focused on increasing the output of our PowerBuoy
    systems from 40kW to 500kW. We plan to increase the rated output
    of our PowerBuoy system to 150kW in 2007, to 250kW in 2008 and
    ultimately to 500kW in 2010. The key to increasing the rated
    output of the PowerBuoy system is to increase the systems
    efficiency as well as its diameter. If we increase the size of a
    PowerBuoy system, we will be able to increase the amount of wave
    energy the system can capture and, in turn, increase the output
    of the system. For example, if we double the size of the
    units diameter, we will approximately quadruple its power
    capacity. We believe that by increasing system output, we will
    be able to decrease the cost per kW of our PowerBuoy system and
    the cost per kilowatt hour of the energy generated.
    Construct demonstration wave power stations to encourage
    market adoption of our wave power stations.  Our
    demonstration wave power stations are intended to allow us to
    prove the viability of our PowerBuoy systems in a particular
    region. By enabling customers to experience our technology
    first-hand, we believe we will be able to facilitate our entry
    into our target markets. In addition, demonstration wave power
    stations provide us with the opportunity to test and refine our
    technology in actual operating conditions. In February 2006, we
    were approved by the South West of England Regional Development
    Agency to install a 5MW demonstration wave power station off the
    coast of Cornwall, England. In February 2007, the US Federal
    Energy Regulatory Commission granted us a preliminary permit to
    evaluate the feasibility of a location off the coast of
    Reedsport, Oregon for the proposed construction and operation of
    a wave power station with a maximum rated output of 50MW, of
    which up to the first 5MW will be a demonstration wave power
    station. We have also filed in July 2007 with the US Federal
    Energy Regulatory Commission for the Reedsport project what we
    believe to be the first Pre-Application Document and Notice of
    Intent filed by a wave power company. This filing provides
    notice to the US Federal Energy Regulatory Commission of our
    intent to seek a license for the Reedsport wave park, and
    provides information regarding the project. The Cornwall and
    Reedsport power stations will, if approved and constructed as
    planned, be connected to local power grids.
    Leverage customer relationships to enhance the commercial
    acceptance of our utility PowerBuoy system.  We
    currently have commercial relationships with Iberdrola and Total
    for two projects. We are in the first phase of the construction
    of a 1.39MW wave power station off the coast of Santoña,
    Spain, which phase is to be completed by June 30, 2008. We,
    along with affiliates of Iberdrola and Total, are currently
    assessing the viability of a 2 to 5MW power station off the
    coast of France. In addition, we believe that our project at the
    US Marine Corps Base in Oahu, Hawaii will serve as a prototype
    wave power station for the installation of wave power stations
    at other US Navy bases. We intend to build on these existing
    commercial relationships both by expanding the number and size
    of projects we have with our current customers and by entering
    into new alliances and commercial relationships with other
    utilities and independent power producers.
    Expand revenue streams from our autonomous PowerBuoy
    system.  The autonomous PowerBuoy system addresses
    specific power generation needs of customers requiring off-grid
    electricity generation in remote locations in the open ocean.
    Since our PowerBuoy systems are well suited for many of these
    uses, we do not expect that they will require subsidies or other
    price incentives for commercial acceptance. This equipment might
    be used for powering sonar and radar surveillance, tsunami
    warning, oceanographic data collection, offshore platforms and
    offshore aquaculture. We have entered into a marketing
    cooperation agreement with Lockheed Martin to identify marketing
    opportunities for use of our autonomous PowerBuoy system to
    power Lockheed Martin equipment in remote locations.
    Maximize revenue opportunities with existing
    customers.  In January 2007, we entered into an
    agreement under which we are responsible for the monitoring,
    operation and maintenance of the 40kW PowerBuoy system and the
    ocean-based substation and infrastructure to be manufactured and
    deployed in connection with the first phase of the Spain
    project. Under this agreement, we will be paid a fixed fee for
    scheduled maintenance, ongoing operations and other routine
    services and fees to be negotiated for unscheduled repairs. We
    plan to pursue similar operations and maintenance contracts with
    future customers, including for our France project, in order to
    provide us with ongoing revenue streams. 10




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Our
    Products
      PICTURE

PICTURE       wave-by-wave
     11




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Utility
    PowerBuoy System
          Status of
    Utility PowerBuoy Systems
        mark-up
 12




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Autonomous
    PowerBuoy System
      Status of
    Autonomous PowerBuoy Systems
   13




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18-month
    Marketing
    and Sales
        Utility
    PowerBuoy System Marketing
   14




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Subsidies
    and Incentives
      Demonstration
    Wave Power Stations
        Autonomous
    PowerBuoy System Marketing
     15




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Customers
    Fiscal


Fiscal


FiscalCustomer

2005


2006


2007US Navy


57
%


61
%


54
%New Jersey Board of Public
    Utilities


7
%


5
%


Iberdrola and Total


4
%


9
%


35
%Lockheed Martin


32
%


22
%


       Spain
    Project
      mark-up
 16




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France
    Project
        US
    Navy
    18-month
 17




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Backlog
      Manufacturing
    and Deployment
  Manufacturing
    and Raw Materials
      project-by-project
    Deployment
   18




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Research
    and Development
      on-site.
     19




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Intellectual
    Property
        
    system design;
    control systems;
    power conversion;
    anchoring and mooring; and
    wave farm architecture.    ® tm tm sm
  Competition
     20




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Government
    Regulation
        Sale
    and Transmission of Electricity
   21




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Site
    Approval
      Environmental
    Approval and Compliance
      Subsidies
    and Incentives
     22




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kilowatt-hour
      Employees
      Product
    Insurance
   23




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ITEM 1A.
    RISK
    FACTORS    Risks
    Relating to Our Business
  We
    have a history of operating losses and may never achieve or
    maintain profitability.
    mark-up
    Wave
    energy technology may not gain broad commercial acceptance, and
    therefore our revenues may not increase, and we may be unable to
    achieve and then sustain profitability.
    
    performance, reliability and cost-effectiveness of wave energy
    technology compared to conventional and other renewable energy
    sources and products;
    developments relating to other renewable energy generation
    technologies;
    fluctuations in economic and market conditions that affect the
    cost or viability of conventional and renewable energy sources,
    such as increases or decreases in the prices of oil and other
    fossil fuels;
    overall growth in the renewable energy equipment market; 24




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
    availability and terms of government subsidies and incentives to
    support the development of renewable energy sources, including
    wave energy;
    fluctuations in capital expenditures by utilities and
    independent power producers, which tend to decrease when the
    economy slows and interest rates increase; and
    the development of new and profitable applications requiring the
    type of remote electric power provided by our autonomous wave
    energy systems.    If
    sufficient demand for our PowerBuoy systems does not develop or
    takes longer to develop than we anticipate, our revenues may
    decline, and we may be unable to achieve and then sustain
    profitability.
        The
    reduction or elimination of government subsidies and economic
    incentives for renewable energy sources could prevent demand for
    our PowerBuoy systems from developing, which in turn would
    adversely affect our business, financial condition and results
    of operations.
     25




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Our
    product development costs have been steadily increasing and are
    likely to increase significantly over the next several
    years.
    We
    have invested, and will continue to invest, funds to construct
    demonstration wave power stations that may generate little or no
    direct revenue.
    Our
    PowerBuoy systems do not have a sufficient operating history to
    confirm how they will perform over their estimated
    30-year
    useful life.
  30-year
  Our
    future success depends on our ability to increase the maximum
    rated power output of our utility PowerBuoy system. If we are
    unable to increase the maximum rated output of our utility
    PowerBuoy system, the commercial prospects for our utility
    PowerBuoy system would be adversely affected.
   26




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If we
    do not reach full commercial scale, we may not be able to offer
    a cost competitive power station and the commercial prospects of
    our utility PowerBuoy system would be adversely
    affected.
    We
    have not yet deployed a wave power station consisting of an
    array of two or more PowerBuoy systems. If we are unable to
    deploy a multiple-system wave power station, our revenues may
    not increase, and we may be unable to achieve and then maintain
    profitability.
        If we
    are unable to deploy larger PowerBuoy systems cost effectively
    and without damage to the systems, we may be unable to compete
    effectively.
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If we
    are not successful in completing the development of wave power
    stations in Spain or France, it would materially harm our
    business, financial condition and results of
    operations.
  mark-up.
  30-day 30-day ocean-based
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If we
    are unable to successfully negotiate and enter into operations
    and maintenance contracts with our customers on terms that are
    acceptable to us, our ability to diversify our revenue stream
    will be impaired.
    If we
    are unable to fulfill our obligations under our current
    operations and maintenance contract in a cost effective manner,
    our financial condition and results of operations could be
    adversely affected.
    Our
    inability to effectively manage our growth could adversely
    affect our business and operations.
      Problems
    with the quality or performance of our PowerBuoy systems could
    adversely affect our business, financial condition and results
    of operations.
   29




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We
    currently depend on a limited number of customers for
    substantially all of our revenues. The loss of, or a significant
    reduction in revenues from, any of these customers could
    significantly reduce our revenues and harm our operating
    results.
          Our
    relationships with our alliance partners may not be successful
    and we may not be successful in establishing additional
    relationships, which could adversely affect our ability to
    commercialize our products and services.
   30




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Our
    investments in joint ventures could be adversely affected by our
    lack of sole decision-making authority, our reliance on a
    co-venturers financial condition and disputes between us
    and our
    co-venturers.
  and/or
  Our
    targeted markets are highly competitive. We compete with other
    renewable energy companies and may have to compete with larger
    companies that enter into the renewable energy business. If we
    are unable to compete effectively, we may be unable to increase
    our revenues and achieve or maintain
    profitability.
        We
    have limited manufacturing experience. If we are unable to
    increase our manufacturing capacity in a cost-effective manner,
    our business will be materially harmed.
     31




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##### Table of Contents



Failure
    by third parties to supply or manufacture components of our
    products or to deploy our systems timely or properly could
    adversely affect our business, financial condition and results
    of operations.
        Business
    activities conducted by our third-party contractors and us
    involve the use of hazardous materials, which require compliance
    with environmental and occupational safety laws regulating the
    use of such materials. If we violate these laws, we could be
    subject to significant fines, liabilities or other adverse
    consequences.
      If we
    become ineligible for or are otherwise unable to replace any
    contract with the US federal government that is not extended or
    is terminated, our business, financial condition and results of
    operations will be adversely affected.
     32




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##### Table of Contents



The
    loss of federal funding designed to promote innovative research
    by small businesses may adversely affect our research and
    development costs and revenues.
      We
    market and sell, and plan to market and sell, our products in
    numerous international markets. If we are unable to manage our
    international operations effectively, our business, financial
    condition and results of operations could be adversely
    affected.
    
    changes in general economic and political conditions in the
    countries in which we operate;
    unexpected adverse changes in foreign laws or regulatory
    requirements, including those with respect to renewable energy,
    environmental protection, permitting, export duties and quotas;
    trade barriers such as export requirements, tariffs, taxes and
    other restrictions and expenses, which could increase the prices
    of our PowerBuoy systems and make us less competitive in some
    countries;
    fluctuations in exchange rates may affect demand for our
    PowerBuoy systems and may adversely affect our profitability in
    US dollars to the extent the price of our PowerBuoy systems and
    cost of raw materials and labor are denominated in a foreign
    currency;
    difficulty with staffing and managing widespread operations;
    difficulty of, and costs relating to compliance with, the
    different commercial and legal requirements of the overseas
    markets in which we offer and sell our PowerBuoy systems;
    inability to obtain, maintain or enforce intellectual property
    rights; and
    difficulty in enforcing agreements in foreign legal systems.   33




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##### Table of Contents



We may
    not be able to raise sufficient capital to grow our
    business.
    Our
    financial results may fluctuate from quarter to quarter, which
    may make it difficult to predict our future
    performance.
    
    delays in permitting or acquiring necessary regulatory consents;
    delays in the timing of contract awards and determinations of
    work scope;
    delays in funding for or deployment of wave energy projects;
    changes in cost estimates relating to wave energy project
    completion, which under percentage of completion accounting
    principles could lead to significant changes to previously
    recognized revenue or to changes in the timing of our
    recognition of revenue from those projects;
    delays in meeting specified contractual milestones or other
    performance criteria under project contracts or in completing
    project contracts that could delay the recognition of revenue
    that would otherwise be earned;
    reductions in the availability or level of subsidies and
    incentives for renewable energy sources;
    decisions made by parties with whom we have commercial
    relationships not to proceed with anticipated projects;
    increases in the length of our sales cycle; and
    reductions in the efficiency of our manufacturing processes.  Currency
    translation and transaction risk may adversely affect our
    business, financial condition and results of
    operations.
   34




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##### Table of Contents



Existing
    regulations and policies and changes to these or new regulations
    and policies may present technical, regulatory and economic
    barriers to the use of wave energy technology, which may
    significantly reduce demand for our PowerBuoy
    systems.
      If we
    are unable to obtain all necessary regulatory permits and
    approvals, we will not be able to implement our planned
    projects.
      We
    face hurricane- and storm-related risks and other risks typical
    of a marine environment which could adversely affect our
    business, financial condition and results of
    operations.
   35




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##### Table of Contents



Since
    our PowerBuoy systems can only be deployed in certain geographic
    locations, our ability to grow our business could be adversely
    affected.
    If we
    are unable to attract and retain management and other qualified
    personnel, we may not be able to achieve our business
    objectives.
      Any
    acquisitions that we make or joint venture agreements that we
    enter into, or any failure to identify appropriate acquisition
    or joint venture candidates, could adversely affect our
    business, financial condition and results of
    operations.
     36




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##### Table of Contents



Section 404
    of the Sarbanes-Oxley Act of 2002 will require us to document
    and assess our internal control over financial reporting for
    fiscal 2008 and beyond and will require an independent
    registered public accounting firm to report on the effectiveness
    of these controls. Any delays or difficulty in satisfying these
    requirements could adversely affect our future results of
    operations and our stock price.
      Risks
    Related to Intellectual Property
  If we
    are unable to obtain or maintain intellectual property rights
    relating to our technology and products, the commercial value of
    our technology and products may be adversely affected, which
    could in turn adversely affect our business, financial condition
    and results of operations.
    Our
    contracts with the government could negatively affect our
    intellectual property rights, and our ability to commercialize
    our products could be impaired.
   37




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If we
    are unable to protect the confidentiality of our proprietary
    information and know-how, the value of our technology and
    products could be adversely affected, which could in turn
    adversely affect our business, financial condition and results
    of operations.
    If we
    infringe or are alleged to infringe intellectual property rights
    of third parties, our business, financial condition and results
    of operations could be adversely affected.
       38




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Risks
    Related to our Common Stock
  Provisions
    in our corporate charter documents and under Delaware law may
    delay or prevent attempts by our stockholders to change our
    management and hinder efforts to acquire a controlling interest
    in us.
    
    advance notice requirements for stockholder proposals and
    nominations;
    the inability of stockholders to act by written consent or to
    call special meetings; and
    the ability of our board of directors to designate the terms of
    and issue new series of preferred stock without stockholder
    approval, which could be used to institute a poison
    pill that would work to dilute the stock ownership of a
    potential hostile acquirer, effectively preventing acquisitions
    that have not been approved by our board of directors.      We
    have never paid cash dividends on our common stock, and we do
    not anticipate paying any cash dividends in the foreseeable
    future.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES       39




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Stock
    Price Information and Stockholders
      Nasdaq Global MarketYear Ended April 30, 2007

High


LowFourth quarter

$
20.00


$
14.25     AIM MarketHigh


Low


High


LowYear ended April 30,
    2006First quarter

£
8.45


£
6.55


$
15.29


$
11.86Second quarter

£
10.75


£
7.75


$
19.24


$
13.87Third quarter

£
9.25


£
7.15


$
16.19


$
12.51Fourth quarter

£
10.70


£
6.80


$
18.73


$
11.90Year ended April 30,
    2007First quarter

£
10.00


£
6.60


$
18.50


$
12.21Second quarter

£
8.90


£
6.15


$
16.82


$
11.62Third quarter

£
9.05


£
5.35


$
17.56


$
10.38Fourth quarter

£
12.35


£
8.05


$
24.21


$
15.78  40




---



##### Table of Contents



High


Low


Average


Period EndYear ended April 30,
    2006First quarter

$
1.90


$
1.73


$
1.81


$
1.76Second quarter

$
1.84


$
1.75


$
1.79


$
1.77Third quarter

$
1.79


$
1.71


$
1.75


$
1.78Fourth quarter

$
1.82


$
1.73


$
1.75


$
1.82Year ended April 30,
    2007First quarter

$
1.89


$
1.81


$
1.85


$
1.87Second quarter

$
1.91


$
1.85


$
1.89


$
1.91Third quarter

$
1.98


$
1.89


$
1.94


$
1.96Fourth quarter

$
2.01


$
1.92


$
1.96


$
2.00   Dividend
    Policy
    Recent
    Sales of Unregistered Securities
            Use of
    Proceeds
  Form S-1 No. 333-138595),
 41




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
    approximately $25.0 million to construct demonstration wave
    power stations and approximately $25.0 million to fund
    minority investments in wave station projects to encourage
    market adoption of our wave power stations;
    approximately $10.5 million to fund the continued
    development and commercialization of our PowerBuoy system,
    including increases in system output;
    approximately $7.5 million to fund the expansion of
    assembly, test and field service facilities;
    approximately $4.0 million to expand our international
    sales and marketing capabilities; and
    the balance for working capital and other general corporate
    purposes.     42




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Fiscal Years Ended April 30,2003


2004


2005


2006


2007Consolidated Statement of
    Operations Data:Revenues

$
2,548,294


$
4,713,202


$
5,365,235


$
1,747,715


$
2,531,315Cost of revenues


2,555,267



4,319,850



5,170,521



2,059,318



3,983,742Gross profit (loss)


(6,973
)


393,352



194,714



(311,603
)


(1,452,427
)Operating expenses:Product development costs


180,403



255,958



904,618



4,224,997



6,219,893Selling, general and
    administrative costs


818,596



1,745,955



2,553,911



3,190,687



4,893,580Total operating expenses


998,999



2,001,913



3,458,529



7,415,684



11,113,473Operating loss


(1,005,972
)


(1,608,561
)


(3,263,815
)


(7,727,287
)


(12,565,900
)Other income (expense):Interest income, net


38,441



555,717



1,297,156



1,408,361



1,389,702Other income (expense)


473



(3,500,096
)(1)


1,545



74,294



13,906Foreign exchange gain (loss)






1,585,345



1,507,145



(978,242
)


1,523,527Loss before incomes taxes


(967,058
)


(2,967,595
)


(457,969
)


(7,222,874
)


(9,638,765
)Income tax benefit


146,853



118,119



29,335



143,963



Net loss

$
(820,205
)

$
(2,849,476
)

$
(428,634
)

$
(7,078,911
)

$
(9,638,765
)Basic and diluted net loss per
    share

$
(0.27
)

$
(0.71
)

$
(0.08
)

$
(1.37
)

$
(1.83
)Basic and diluted weighted average
    shares outstanding


3,017,422



4,037,501



5,135,550



5,162,340



5,260,794   As of April 30,2003


2004


2005


2006


2007Consolidated Balance Sheet
    Data:Cash, cash equivalents and
    certificates of deposit

$
2,246,175


$
39,565,574
(2)

$
38,787,176


$
32,439,365


$
115,895,619
(3)Working capital


1,177,789



38,422,395



37,903,207



30,886,029



111,187,195Total assets


2,878,947



40,747,479



41,596,387



33,996,138



119,711,546Long-term debt, net of current
    portion


250,000



250,000



245,844



233,959



231,585Accumulated deficit


(18,275,132
)


(21,124,608
)


(21,553,242
)


(28,632,153
)


(38,270,918
)Total stockholders equity


490,785



37,853,246



37,836,531



31,066,704



112,541,209     (1)
    
    Other expense in fiscal 2004 resulted from a one time charge
    incurred at the time of our stock offering on the AIM market in
    October 2003 relating to a 1999 agreement between us and Tyco
    Electronics Corp. 43




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##### Table of Contents



(2)
    
    On October 31, 2003, we completed our offering on the AIM
    market resulting in net proceeds to us of $38.3 million.(3)
    
    On April 30, 2007, we completed our initial public offering
    in the United States resulting in net proceeds to us of
    $89.9 million.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  You should read the following discussion and analysis of our
    financial condition and results of operations together with our
    consolidated financial statements and the related notes and
    other financial information included elsewhere in this Annual
    Report. Some of the information contained in this discussion and
    analysis or set forth elsewhere in this Annual Report, including
    information with respect to our plans and strategy for our
    business and related financing, includes forward-looking
    statements that involve risks and uncertainties. You should
    review the Risk Factors section of this Annual
    Report for a discussion of important factors that could cause
    actual results to differ materially from the results described
    in or implied by the forward-looking statements contained in the
    following discussion and analysis.
  Overview
       44




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Financial
    Operations Overview
    Revenues
  mark-up
       45




---



##### Table of Contents



Percentage of RevenuesYear Ended


Year Ended


Year EndedApril 30,


April 30,


April 30,Customer Location

2005


2006


2007United States


96
%


91
%


59
%Europe


4



9



39Australia










2Total


100
%


100
%


100
%   Cost
    of revenues
      Product
    development costs
  17-year
      Selling,
    general and administrative costs
   46




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Interest
    income, net
    Foreign
    exchange gain (loss)
          Income
    tax benefit
   47




---



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Results
    of Operations
  Fiscal
    Years Ended April 30, 2006 and 2007
    Fiscal Year Ended


Fiscal Year Ended


Change 2007 PeriodApril 30, 2006


April 30, 2007


to 2006 PeriodAs a% of





As a% ofAmount


Revenues


Amount


Revenues


$ Change


% ChangeRevenues

$
1,747,715



100
%

$
2,531,315



100
%

$
783,600



45
%Cost of revenues


2,059,318



117



3,983,742



157



1,924,424



93Gross loss


(311,603
)


(18
)


(1,452,427
)


(57
)


(1,140,824
)


366Operating expenses:Product development costs


4,224,997



242



6,219,893



246



1,994,896



47Selling, general and
    administrative costs


3,190,687



183



4,893,580



193



1,702,893



53Total operating expenses


7,415,684



425



11,113,473



439



3,697,789



50Operating loss


(7,727,287
)


(442
)


(12,565,900
)


(496
)


(4,838,613
)


63Interest income, net


1,408,361



81



1,389,702



55



(18,659
)


(1
)Other income


74,294



4



13,906



1



(60,388
)


(81
)Foreign exchange (loss) gain


(978,242
)


(56
)


1,523,527



60



2,501,769



256Loss before income taxes


(7,222,874
)


(413
)


(9,638,765
)


(380
)


(2,415,891
)


33Income tax benefit


143,963



8











(143,963
)


(100
)Net loss

$
(7,078,911
)


(405
)%

$
(9,638,765
)


(380
)%

$
(2,559,854
)


36   Revenues
    
    Revenues relating to our utility PowerBuoy system increased by
    approximately $1.1 million due to work that commenced on
    the first phase of construction of a 1.39MW wave power station
    off the coast of Spain, increased revenues relating to our US
    Navy project in Hawaii from a higher activity level, and work
    that commenced on the design, manufacture and installation of an
    OPT wave power station consisting of a single PB150 (150kW)
    PowerBuoy device in Orkney, Scotland.
    Revenues relating to our autonomous PowerBuoy system decreased
    by approximately $0.3 million primarily as a result of the
    completion of a development and construction contract with
    Lockheed Martin in the fiscal year ended April 30, 2006. 48




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##### Table of Contents



Cost of
    revenues
  Share-Based
    Payment
  Product
    development costs
    Selling,
    general and administrative costs
    Interest
    income, net
    Foreign
    exchange (loss) gain
    Income
    tax benefit
   49




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##### Table of Contents



Fiscal
    Years Ended April 30, 2005 and 2006
    Fiscal Year Ended


Fiscal Year Ended


Change 2006April 30, 2005


April 30, 2006


Period to 2005 PeriodAs a% of





As a% ofAmount


Revenues


Amount


Revenues


$ Change


% ChangeRevenues

$
5,365,235



100
%

$
1,747,715



100
%

$
(3,617,520
)


(67
)%Cost of revenues


5,170,521



96



2,059,318



118



(3,111,203
)


(60
)Gross profit (loss)


194,714



4



(311,603
)


(18
)


(506,317
)


(260
)Operating expenses:Product development costs


904,618



17



4,224,997



242



3,320,379



367Selling, general and
    administrative costs


2,553,911



48



3,190,687



183



636,776



25Total operating expenses


3,458,529



64



7,415,684



424



3,957,155



114Operating loss


(3,263,815
)


(61
)


(7,727,287
)


(442
)


(4,463,472
)


137Interest income, net


1,297,156



24



1,408,361



81



111,205



9Other income


1,545







74,294



4



72,749



4,709Foreign exchange gain (loss)


1,507,145



28



(978,242
)


(56
)


(2,485,387
)


(165
)Loss before income taxes


(457,969
)


(9
)


(7,222,874
)


(413
)


(6,764,905
)


1,477Income tax benefit


29,335



1



143,963



8



114,628



58Net loss

$
(428,634
)


(8
)%

$
(7,078,911
)


(405
)%

$
(6,650,277
)


1,552   Revenues
    
    Revenues from our US Navy wave power station project in Hawaii
    decreased by approximately $1.8 million as a result of
    delays in the timing of contract award and in the approval of
    the scope of development and construction of the wave power
    station.
    Revenues related to our autonomous PowerBuoy system decreased by
    approximately $1.3 million as a result of the completion of
    a development and construction contract with Lockheed Martin in
    the first quarter of fiscal 2006, and the determination by
    Lockheed Martin and some of its subcontractors not to proceed
    with an anticipated defense application project that would have
    utilized our autonomous PowerBuoy system, partially offset by
    revenues of approximately $61,000 from a contract with the US
    Department of Homeland Security to design and study an
    autonomous PowerBuoy system for offshore marine surveillance.
    Revenues decreased by approximately $0.3 million as a
    result of the completion early in fiscal 2006 of the
    demonstration wave power station that was deployed off the coast
    of New Jersey under a contract with the New Jersey Board of
    Public Utilities.  Cost of
    revenues
   50




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##### Table of Contents



Product
    development costs
      Selling,
    general and administrative costs
    Interest
    income, net
    Other
    income
    Foreign
    exchange gain (loss)
    Income
    tax benefit
    Liquidity
    and Capital Resources
   51




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##### Table of Contents




    the success of our commercial relationships with Iberdrola,
    Total, the US Navy and Lockheed Martin;
    the cost of manufacturing activities;
    the cost of commercialization activities, including
    demonstration projects, product marketing and sales;
    our ability to establish and maintain additional commercial
    relationships;
    the implementation of our expansion plans, including the hiring
    of new employees;
    potential acquisitions of other products or
    technologies; and
    the costs involved in preparing, filing, prosecuting,
    maintaining and enforcing patent claims and other patent-related
    costs.   52




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##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodLess than


One to


Four to


More thanTotal


One Year


Three Years


Five Years


Five YearsLong-term debt

$
234,000


$
2,000



(1
)


(1
)


(1
)Operating leases

$
1,324,000


$
257,000


$
447,000


$
414,000


$
206,000     (1)
    
    Our long-term debt consists of an interest-free loan from the
    New Jersey Commission on Science and Technology. The amounts to
    be repaid each year are determined as a percentage of revenues
    we receive in that year from our customer contracts that meet
    criteria specified in the loan agreement, with any remaining
    amount due on January 15, 2012.  Off-Balance
    Sheet Arrangements
    Critical
    Accounting Policies and Estimates
      Revenue
    recognition and unearned revenues
       53




---



##### Table of Contents



Stock-based
    compensation
        and/or
    Income
    taxes
  Accounting for Income
 54




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting Changes and Error Corrections Accounting
    Changes
  Accounting for Uncertainty in Income Taxes
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   55




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE     ITEM 9A.
    CONTROLS
    AND PROCEDURES     56




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##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION    PART III   ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K.
   ITEM 11.
    EXECUTIVE
    COMPENSATION  Form 10-K.
   ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K.
   ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Form 10-K.
   ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Form 10-K.
  PART IV   ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  page F-1.
   57




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##### Table of Contents



SIGNATURES
       By:
    /s/  George
    W. Taylor   Chief Executive Officer
    Signature

Title

Date/s/  George
    W.
    TaylorGeorge
    W. Taylor

Director, Chief Executive
    Officer
    (Principal Executive Officer)

July 27, 2007/s/  Seymour
    S. Preston
    IIISeymour
    S. Preston III

Chairman of the Board of Directors

July 27, 2007/s/  Charles
    F.
    DunleavyCharles
    F. Dunleavy

Director, Chief Financial
    Officer,
    Senior Vice President, Treasurer and 
    Secretary (Principal Financial Officer
    and Principal Accounting Officer)

July 27, 2007/s/  Eric
    A.
    AshEric
    A. Ash

Director

July 27, 2007/s/  Thomas
    J.
    MeaneyThomas
    J. Meaney

Director

July 27, 2007  58




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##### Table of Contents



Exhibits Index
  ExhibitNumber

Description3
.1

Certificate of Incorporation of
    the Registrant, as amended (incorporated by reference from
    Exhibit 3.1 to Form S-1 filed November 13, 2006)3
.2

Form of Restated Certificate of
    Incorporation of the Registrant which became effective prior to
    the initial public offering (incorporated by reference from
    Exhibit 3.2 to Form S-1/A filed March 19, 2007)3
.3

Bylaws of the Registrant
    (incorporated by reference from Exhibit 3.3 to
    Form S-1 filed November 13, 2006)3
.4

Form of Amended and Restated
    Bylaws of the Registrant, which became effective prior to the
    closing of the initial public offering (incorporated by
    reference from Exhibit 3.4 to Form S-1/A filed
    March 19, 2007)4
.1

Specimen certificate of common
    stock (incorporated by reference from Exhibit 4.1 to
    Form S-1/A filed March 19, 2007)10
.1+

Engineering, Procurement and
    Construction of a Wave Energy Power Plant at Punta del
    Pescador (Santoña, Spain), dated July 27, 2006,
    between Iberdrola Energias Marinas de Cantabria, S.A. and Ocean
    Powers Technologies Limited (incorporated by reference from
    Exhibit 10.1 to Form S-1 filed November 13, 2006)10
.2+

Contract Number N00014-05-C-0384,
    dated September 20, 2005, between the Office of Naval
    Research, U.S. Navy and Ocean Power Technologies, Inc., as
    amended by the Amendment of Solicitation/ Modification of
    Contract dated March 22, 2007 (incorporated by reference
    from Exhibit 10.2 to Form S-1 filed November 13,
    2006)10
.3+

Contract Number N00014-02-C-0053,
    dated February 8, 2002, between the Office of Naval
    Research, U.S. Navy and Ocean Power Technologies Inc., as
    modified (incorporated by reference from Exhibit 10.3 to
    Form S-1 filed November 13, 2006)10
.4

Option Agreement for Purchase of
    Emissions Credits, dated November 24, 2000 between Ocean
    Power Technologies, Inc. and its affiliates and Woodside
    Sustainable Energy Solutions Pty. Ltd. (incorporated by
    reference from Exhibit 10.4 to Form S-1 filed
    November 13, 2006)10
.5

1994 Stock Option Plan
    (incorporated by reference from Exhibit 10.4 to
    Form S-1 filed November 13, 2006)*10
.6

Incentive Stock Option Plan
    (incorporated by reference from Exhibit 10.6 to
    Form S-1 filed November 13, 2006)*10
.7

2001 Stock Plan (incorporated by
    reference from Exhibit 10.7 to Form S-1 filed
    November 13, 2006)*10
.8

2006 Stock Incentive Plan
    (incorporated by reference from Exhibit 10.8 to
    Form S-1/A filed March 19, 2007)*10
.9

Amended and Restated Voting and
    Right of First Refusal Agreement, dated April 18, 2005,
    between Ocean Power Technologies, Inc., George W. Taylor and
    JoAnne E. Burns (incorporated by reference from
    Exhibit 10.9 to Form S-1 filed November 13, 2006)10
.10

Agreement to Refinance, dated
    November 14, 1993 between Joseph R. Burns, Michael Y.
    Epstein, George W. Taylor and Ocean Powers
    Technologies, Inc. (incorporated by reference from
    Exhibit 10.10 to Form S-1 filed November 13, 2006)10
.11

Employment Agreement, dated
    October 23, 2003, between Charles F. Dunleavy and Ocean
    Power Technologies, Inc. (incorporated by reference from
    Exhibit 10.11 to Form S-1 filed November 13,
    2006)*10
.12

Employment Agreement, dated
    October 23, 2003, between George W. Taylor and Ocean Power
    Technologies, Inc. (incorporated by reference from
    Exhibit 10.12 to Form S-1 filed November 13,
    2006)*10
.13

Consultant Agreement, dated
    August 1, 1999, between Thomas J. Meaney and Ocean Power
    Technologies, Inc. (incorporated by reference from
    Exhibit 10.13 to Form S-1 filed November 13, 2006)10
.14

Employment Agreement, dated
    September 9, 2004, between Mark R. Draper and Ocean Power
    Technologies Ltd. (incorporated by reference from
    Exhibit 10.14 to Form S-1 filed November 13,
    2006)*10
.15

Employment Agreement, dated
    September 30, 2005, between John A. Baylouny and Ocean
    Power Technologies, Inc. (incorporated by reference from
    Exhibit 10.15 to Form S-1 filed November 13,
    2006)* 59




---



##### Table of Contents



ExhibitNumber

Description10
.16

Lease Agreement, dated
    August 30, 2005 between Ocean Power Technologies, Inc. and
    Reed Road Industrial Park LLC #1, as amended on January 27,
    2006 (incorporated by reference from Exhibit 10.16 to
    Form S-1 filed November 13, 2006)10
.17

Lease, dated January 15,
    2007, between University of Warwick Science Park Innovation
    Centre Limited and Ocean Power Technologies Ltd. (incorporated
    by reference from Exhibit 10.17 to Form S-1/A filed
    March 19, 2007)10
.18

Agreement for Renewable Energy
    Economic Development Grants, dated November 3, 2003,
    between State of New Jersey Board of Public Utilities and Ocean
    Power Technologies, Inc. (incorporated by reference from
    Exhibit 10.18 to Form S-1/A filed March 19, 2007)10
.19+

Contract for the Development and
    Application of a Sea Wave Energy Generation System in France,
    dated as of June 17, 2005, between Iberdrola Energias
    Renovables II, S.A. Sociedad Unipersonal, Total Energie
    Development SA, Ocean Power Technologies Ltd. and Ocean Power
    Technologies, Inc. (incorporated by reference from
    Exhibit 10.19 to Form S-1/A filed March 19, 2007)10
.20

Contract Number DM259735, dated
    September 17, 2005 between Lockheed Martin Corporation
    Maritime Systems and Sensors (MS2) and Ocean Power Technologies,
    Inc., as modified (incorporated by reference from
    Exhibit 10.20 to Form S-1/A filed March 19, 2007)10
.21

Marketing Cooperation Agreement,
    dated September 9, 2006, between Ocean Power Technologies,
    Inc. and Lockheed Martin Corporation through its Maritime
    Systems and Sensors business unit (incorporated by reference
    from Exhibit 10.21 to
    Form S-1/A
    filed April 10, 2007)10
.22+

Contract Number N00014-07-C-0617,
    dated May 24, 2007, between the Office of Naval Research,
    U.S. Navy and Ocean Power Technologies, Inc. (incorporated by
    reference from Exhibit 99.1+ to Form 8K filed
    June 8, 2007)21
.1

Subsidiaries of the Registrant
    (incorporated by reference from Exhibit 21.1 to
    Form S-1/A filed March 19, 2007)23
.1

Consent of KPMG LLP31
.1

Certification of Chief Executive
    Officer31
.2

Certification of Chief Financial
    Officer32
.1

Certification of Chief Executive
    Officer pursuant to Section 906 of Sarbanes-Oxley Act of
    200232
.2

Certification of Chief Financial
    Officer pursuant to Section 906 of Sarbanes-Oxley Act of
    2002     +
    
    Confidential treatment requested as to certain portions, which
    portions have been omitted and filed separately with the
    Securities and Exchange Commission.*
    
    Management contract or compensatory plan or arrangement 60




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Index to
    Consolidated Financial Statements
  PageReport of
    Independent Registered Public Accounting Firm


F-2Consolidated
    Balance Sheets, April 30, 2006 and 2007


F-3Consolidated
    Statements of Operations, Years ended April 30, 2005, 2006
    and 2007


F-4Consolidated
    Statements of Stockholders Equity and Comprehensive Loss,
    Years ended April 30, 2005, 2006 and 2007


F-5Consolidated
    Statements of Cash Flows, Years ended April 30, 2005, 2006
    and 2007


F-6Notes to
    Consolidated Financial Statements


F-7  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm           Share-Based Payment
       F-2




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  April 30,2006


2007ASSETSCurrent assets:Cash and cash equivalents

$
31,957,209



107,505,473Certificates of deposit


482,156



8,390,146Accounts receivable






865,081Unbilled receivables


211,000



313,080Other current assets


331,139



441,342Total current assets


32,981,504



117,515,122Property and equipment, net


544,285



387,923Patents, net of accumulated
    amortization of $157,451 and $176,840, respectively


372,448



597,280Restricted cash






983,376Other noncurrent assets


97,901



227,845Total assets

$
33,996,138



119,711,546LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
242,624



1,708,408Accrued expenses


1,726,870



4,593,413Unearned revenues


14,405



Other current liabilities


111,576



26,106Total current liabilities


2,095,475



6,327,927Long-term debt


233,959



231,585Deferred rent






10,825Deferred credits


600,000



600,000Total liabilities


2,929,434



7,170,337Commitments and contingencies
    (note 13)Stockholders equity:Preferred stock, $0.001 par
    value; authorized 5,000,000 shares, issued or outstanding






Common stock, $0.001 par
    value; authorized 105,000,000 shares, issued and
    outstanding 5,171,119 and 10,186,254 shares, respectively


5,171



10,186Additional paid-in capital


59,725,777



150,842,671Accumulated deficit


(28,632,153
)


(38,270,918
)Accumulated other comprehensive
    loss


(32,091
)


(40,730
)Total stockholders equity


31,066,704



112,541,209Total liabilities and
    stockholders equity

$
33,996,138



119,711,546    F-3




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Consolidated Statements of Operations
  Year Ended April 30,2005


2006


2007Revenues

$
5,365,235



1,747,715



2,531,315Cost of revenues


5,170,521



2,059,318



3,983,742Gross profit (loss)


194,714



(311,603
)


(1,452,427
)Operating expenses:Product development costs


904,618



4,224,997



6,219,893Selling, general and
    administrative costs


2,553,911



3,190,687



4,893,580Total operating expenses


3,458,529



7,415,684



11,113,473Operating loss


(3,263,815
)


(7,727,287
)


(12,565,900
)Interest income, net


1,297,156



1,408,361



1,389,702Other income


1,545



74,294



13,906Foreign exchange gain (loss)


1,507,145



(978,242
)


1,523,527Loss before income taxes


(457,969
)


(7,222,874
)


(9,638,765
)Income tax benefit


29,335



143,963



Net loss

$
(428,634
)


(7,078,911
)


(9,638,765
)Basic and diluted net loss per
    share

$
(0.08
)


(1.37
)


(1.83
)Weighted average shares used to
    compute basic and diluted net loss per share


5,135,550



5,162,340



5,260,794    F-4




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Consolidated Statements of Stockholders Equity and
    Comprehensive Loss
  AccumulatedAdditional





OtherCommon Stock


Paid-in


Accumulated


Comprehensive


StockholdersShares


Amount


Capital


Deficit


Loss


EquityBalance, May 1, 2004


5,116,502


$
5,116



59,005,666



(21,124,608
)


(32,928
)


37,853,246Net loss














(428,634
)






(428,634
)Foreign currency translation
    adjustment


















(6,405
)


(6,405
)Total comprehensive loss






















(435,039
)Compensation related to stock
    option grants issued to employees










131,500











131,500Compensation related to stock
    option grants issued for services










53,174











53,174Adjustment for stockholder
    reduction in shares held


(1,397
)


(1
)


1











Proceeds from exercise of stock
    options


36,116



36



233,614











233,650Balance, April 30, 2005


5,151,221



5,151



59,423,955



(21,553,242
)


(39,333
)


37,836,531Net loss














(7,078,911
)






(7,078,911
)Foreign currency translation
    adjustment


















7,242



7,242Total comprehensive loss






















(7,071,669
)Compensation related to stock
    option grants issued to employees










44,000











44,000Compensation related to stock
    option grants issued for services










85,139











85,139Shares issued for amounts received
    in prior years


2,732



3



49,997











50,000Proceeds from exercise of stock
    options


17,166



17



122,686











122,703Balance, April 30, 2006


5,171,119



5,171



59,725,777



(28,632,153
)


(32,091
)


31,066,704Net loss














(9,638,765
)






(9,638,765
)Foreign currency translation
    adjustment


















(8,639
)


(8,639
)Total comprehensive loss






















(9,647,404
)Compensation related to stock
    option grants issued to employees










1,082,181











1,082,181Compensation related to stock
    option grants issued for services










70,235











70,235Adjustment for reverse stock split
    rounding


(9
)


















Sale of common stock, net of
    issuance costs


5,000,000



5,000



89,898,819











89,903,819Proceeds from exercise of stock
    options


15,144



15



65,659











65,674Balance, April 30, 2007


10,186,254


$
10,186



150,842,671



(38,270,918
)


(40,730
)


112,541,209    F-5




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Consolidated Statements of Cash Flows
  Year Ended April 30,2005


2006


2007Cash flows from operating
    activities:Net loss

$
(428,634
)


(7,078,911
)


(9,638,765
)Adjustments to reconcile net loss
    to net cash used in operating activities:Foreign exchange (gain) loss


(1,507,145
)


978,242



(1,523,527
)Depreciation and amortization


140,984



233,132



269,075Loss on disposal of equipment










24,572Compensation expense related to
    stock option grants


184,674



129,139



1,152,416Realization of deferred credits






(75,000
)


Deferred rent










10,825Changes in operating assets and
    liabilities:Accounts receivable


(621,499
)


668,424



(827,287
)Unbilled receivables


(268,216
)


611,037



(95,896
)Other current assets


(239,274
)


161,505



(99,436
)Accounts payable


404,491



(632,778
)


1,233,484Accrued expenses


708,022



(121,840
)


2,126,616Unearned revenues


(246,890
)


(2,383
)


(14,405
)Other current liabilities






57,803



(85,470
)Net cash used in operating
    activities


(1,873,487
)


(5,071,630
)


(7,467,798
)Cash flows from investing
    activities:Purchases of certificates of
    deposit


(58,050,287
)


(62,677,400
)


(55,187,304
)Maturities of certificates of
    deposit


33,573,254



87,397,606



47,279,314Restricted cash










(983,376
)Purchases of equipment


(435,488
)


(330,047
)


(107,271
)Payments of patent costs


(125,414
)


(57,396
)


(217,763
)Investments in joint ventures and
    other noncurrent assets


(78,399
)


(30,747
)


(122,001
)Net cash (used in) provided by
    investing activities


(25,116,334
)


24,302,016



(9,338,401
)Cash flows from financing
    activities:Sale of common stock, net of
    issuance costs










90,773,935Proceeds from exercise of stock
    options


233,650



122,703



65,674Net cash provided by financing
    activities


233,650



122,703



90,839,609Effect of exchange rate changes on
    cash and cash equivalents


1,500,740



(980,694
)


1,514,854Net (decrease) increase in cash
    and cash equivalents


(25,255,431
)


18,372,395



75,548,264Cash and cash equivalents,
    beginning of period


38,840,245



13,584,814



31,957,209Cash and cash equivalents, end of
    period

$
13,584,814



31,957,209



107,505,473Supplemental disclosure of noncash
    investing and financing activities:Issuance of shares in connection
    with amounts received in prior years

$




50,000



Capitalized patent costs financed
    through accounts payable










30,343Stock issuance costs financed
    through accounts payable and accrued expenses










870,116    F-6




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
  (1)
    Background    (2)
    Summary
    of Significant Accounting Policies  (a)
    Consolidation    Consolidation of Variable
    Interest Entities
  (b)
    Use of
    Estimates    (c)
    Revenue
    Recognition      (d)
    Cash
    Equivalents   F-7




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (e)
    Restricted
    Cash and Credit Facility    (f)
    Property
    and Equipment    (g)
    Foreign
    Exchange Gains and Losses    (h)
    Patents    (i)
    Long-Lived
    Assets  Accounting for the Impairment or
    Disposal of Long-Lived Assets
  (j)
    Concentration
    of Credit Risk   F-8




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Years Ended April 30,Customer

2005


2006


2007US Navy


57
%


61
%


54
%Iberdrola and Total


4
%


9
%


35
%Lockheed Martin


32
%


22
%


     (k)
    Net
    Loss per Common Share      (l)
    Stock-Based
    Compensation  Accounting for Stock Issued to Employees Accounting for Certain Transactions Involving Stock
    Compensation Accounting for Stock-Based Compensation Accounting for Stock-Based
    Compensation  Transition and Disclosure
  Years Ended April 30,2005


2006Net loss, as reported

$
(428,634
)


(7,078,911
)Add stock-based employee
    compensation expense included in reported net loss


131,500



44,000Deduct total stock-based employee
    compensation expense determined under fair-value-based method
    for all awards


(1,367,000
)


(680,000
)Pro forma net loss

$
(1,664,134
)


(7,714,911
)Basic and diluted net loss per
    share, as reported

$
(0.08
)


(1.37
)Basic and diluted net loss per
    share, pro forma

$
(0.32
)


(1.49
)    F-9




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Share-Based Payment
  Valuation
    Assumptions for Options Granted During the Year Ended
    April 30, 2007
  Share-Based Payment.
  Risk-free interest rate


5
%Expected dividend yield


0.0
%Expected life


5.5 yearsExpected volatility


72.0
%     (m)
    Accounting
    for Income Taxes    (n)
    Accumulated
    Other Comprehensive Loss   F-10




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (o)
    Recent
    Accounting Pronouncements  Accounting Changes and Error Corrections Accounting Changes,
  Accounting for Uncertainty in Income Taxes, Accounting for Income Taxes
  Considering the
    Effects of Prior Year Misstatements when Quantifying
    Misstatements in Current Year Financial Statements
  (3)
    Certificates
    of Deposit    Nominal Face





April 30,Amount


Currency


2006


20073.92% due August 11, 2006


482,156



USD


$
482,156



5.20% due May 17, 2007


2,496,832



GBP







4,989,4205.22% due June 20, 2007


1,701,810



GBP







3,400,726$
482,156



8,390,146  F-11




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (4)
    Property
    and Equipment    April 30,2006


2007Computers and software

$
402,037



466,734Equipment


452,448



403,233Office furniture and equipment


233,178



198,923Leasehold improvements


59,358



47,4941,147,021



1,116,384Less accumulated depreciation


(602,736
)


(728,461
)$
544,285



387,923   (5)
    Accrued
    Expenses    (6)
    Related-Party
    Transactions        (7)
    Debt   F-12




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (8)
    Deferred
    Credits      (9)
    Common
    Stock          (10)
    Preferred
    Stock    (11)
    Stock
    Options   F-13




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
        WeightedAverageWeighted


RemainingShares Under


Average


ContractualOption


Exercise Price


Term(In Years)Outstanding April 30, 2006


1,205,030



14.19Forfeited


(10,026
)


16.83Expired


(64,950
)


8.42Exercised


(22,600
)


8.55Granted


196,120



13.75Outstanding April 30, 2007


1,303,574



14.49



5.1Exercisable April 30, 2007


974,266



14.89



4.0      F-14




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (12)
    Income
    Taxes    April 30,2006


2007Deferred tax assets:Federal net operating loss
    carryforwards

$
6,638,000



8,218,000Foreign net operating loss
    carryforwards


1,210,000



1,897,000Research and development tax
    credits


505,000



761,000Stock compensation


1,478,000



1,509,000Unrealized foreign exchange loss






6,000Accrued expenses


314,000



829,000Gross deferred tax assets


10,145,000



13,220,000Deferred tax liabilities:Property and equipment


(31,000
)


(17,000
)Unrealized foreign exchange gain


(60,000
)


Gross deferred tax liabilities


(91,000
)


(17,000
)Deferred tax assets valuation
    allowance


(10,054,000
)


(13,203,000
)Net deferred tax assets

$




     Years Ended April 30,2005


2006


2007Computed expected tax
    benefit


(34
)%


(34
)%


(34
)%Increase (reduction) in income
    taxes resulting from:State income taxes, net of federal
    benefit


(6
)


(6
)


(6
)Stock-based compensation expense










8Federal research and development
    tax credits


(6
)


(2
)


(1
)Sale of state loss carryforwards
    and tax credits


(6
)


(2
)


Other non-deductible expenses


9



1



1Increase in valuation allowance


37



41



32(6
)%


(2
)%


    F-15




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
        (13)
    Commitments
    and Contingencies  (a)
    Operating
    Lease Commitments    Year ending April 30:2008

$
256,8572009


240,1912010


206,8592011


206,8592012


206,859Thereafter


206,859$
1,324,484   (b)
    Litigation   F-16




---



##### Table of Contents



OCEAN
    POWER TECHNOLOGIES, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (14)
    Quarterly
    Financial Data (Unaudited)  Three Months EndedFiscal Year 2007

Jul 31


Oct 31


Jan 31


Apr 30Revenues

$
305,186



555,561



652,884



1,017,684Gross profit (loss)


79,221



(601,104
)


(67,594
)


(862,950
)Operating loss


(2,360,950
)


(2,976,109
)


(2,436,457
)


(4,792,384
)Net loss


(1,660,954
)


(2,307,200
)


(1,540,296
)


(4,130,315
)Basic and diluted net loss per
    share

$
(0.32
)


(0.45
)


(0.30
)


(0.75
)   Three Months EndedFiscal Year 2006

Jul 31


Oct 31


Jan 31


Apr 30Revenues

$
492,820



613,679



360,784



280,432Gross profit (loss)


(123,615
)


(276,520
)


(53,562
)


142,094Operating loss


(1,401,420
)


(1,984,647
)


(1,866,638
)


(2,474,582
)Net loss


(2,645,920
)


(1,402,480
)


(1,437,877
)


(1,592,634
)Basic and diluted net loss per
    share

$
(0.51
)


(0.27
)


(0.28
)


(0.31
)   (15)
    Operating
    Segments and Geographic Information      Year Ended April 30, 2005North America


Europe


Australia


TotalRevenues from external customers

$
5,365,235











5,365,235Operating loss


(3,263,815
)










(3,263,815
)Long-lived assets


427,613











427,613Total assets


41,596,387











41,596,387   Year Ended April 30, 2006North America


Europe


Australia


TotalRevenues from external customers

$
1,747,715











1,747,715Operating loss


(6,743,896
)


(833,147
)


(150,244
)


(7,727,287
)Long-lived assets


487,770



56,515







544,285Total assets


33,820,540



156,102



19,496



33,996,138   Year Ended April 30, 2007North America


Europe


Australia


TotalRevenues from external customers

$
1,484,998



1,007,689



38,628



2,531,315Operating loss


(10,254,579
)


(2,191,703
)


(119,618
)


(12,565,900
)Long-lived assets


293,633



94,290







387,923Total assets


118,074,176



1,607,549



29,821



119,711,546  F-17