10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended July 31, 2007

Or

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

For the Transition Period From                      to                     

Commission file number: 001-33417

OCEAN POWER TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 22-2535818
(I.R.S. Employer
Identification No.)

1590 REED ROAD, PENNINGTON, NJ 08534
(Address of Principal Executive Offices, Including Zip Code)

(609) 730-0400
(Registrant’s Telephone Number, Including Area Code)

None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o      Accelerated Filer o      Non-accelerated Filer þ

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

As of August 31, 2007, the number of outstanding shares of common stock of the registrant was 10,190,604.

OCEAN POWER TECHNOLOGIES, INC.

INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2007

	Page
	Number
PART I — FINANCIAL INFORMATION
Item 1.    Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of April 30, 2007 and July 31, 2007		3
Consolidated Statements of Operations for the Three Months Ended July 31, 2006 and 2007		4
Consolidated Statements of Cash Flows for the Three Months Ended July 31, 2006 and 2007		5
Notes to Consolidated Financial Statements		6
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.    Quantitative and Qualitative Disclosures About Market Risk		19
Item 4.    Controls and Procedures		20
PART II — OTHER INFORMATION
Item 1.    Legal Proceedings		20
Item 1A. Risk Factors		20
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3.    Defaults Upon Senior Securities		21
Item 4.    Submission of Matters to a Vote of Security Holders		21
Item 5.    Other Information		21
Item 6.    Exhibits		21
EX-3.1: Restated Certificate of Incorporation
EX-3.2: Amended and Restated ByLaws of the Registrant
EX-10.1: Amendment to Contract
EX-31.1: Certification of Chief Executive Officer
EX-31.2: Certification of Chief Financial Officer
EX-32.1: Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
EX-32.2: Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

          PowerBuoy® is a registered trademark of Ocean Power Technologies, Inc. The Ocean Power Technologies logo, CellBuoy^tm, Talk on Water^tm and Making Waves in Power^sm are trademarks or service marks of Ocean Power Technologies, Inc. All other trademarks appearing in this report are the property of their respective holders.

Special Note Regarding Forward-Looking Statements

          We have made statements in this Quarterly Report on Form 10-Q that are forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “may,” “continue,” “estimate,” “intend,” “plan,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

          Any or all of our forward-looking statements in this report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or unknown risks and uncertainties, including the risks, uncertainties and assumptions described in Item 1A — “Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended April 30, 2007. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur as contemplated and actual results could differ materially from those anticipated or implied by the forward-looking statements.

          You should not unduly rely on these forward-looking statements, which speak only as of the date of this filing. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise.

2

PART I — FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

	April 30, 2007			July 31, 2007
				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	107,505,473			102,227,435
Certificates of deposit		8,390,146			9,739,322
Accounts receivable		865,081			78,000
Unbilled receivables		313,080			594,958
Other current assets		441,342			1,160,172
Total current assets		117,515,122			113,799,887
Property and equipment, net		387,923			385,338
Patents, net of accumulated amortization of $176,840 and $181,789, respectively		597,280			609,269
Restricted cash		983,376			983,304
Other noncurrent assets		227,845			227,764
Total assets	$	119,711,546			116,005,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,708,408			1,187,395
Accrued expenses		4,593,413			2,852,929
Unearned revenues		—			240,954
Other current liabilities		26,106			26,106
Total current liabilities		6,327,927			4,307,384
Long-term debt		231,585			188,784
Deferred rent		10,825			12,178
Deferred credits		600,000			600,000
Total liabilities		7,170,337			5,108,346
Commitments and contingencies (note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 5,000,000 shares, none issued or outstanding		—			—
Common stock, $0.001 par value; authorized 105,000,000 shares, issued and outstanding 10,186,254 and 10,190,604 shares, respectively		10,186			10,191
Additional paid-in capital		150,842,671			151,631,189
Accumulated deficit		(38,270,918	)		(40,708,762	)
Accumulated other comprehensive loss		(40,730	)		(35,402	)
Total stockholders’ equity		112,541,209			110,897,216
Total liabilities and stockholders’ equity	$	119,711,546			116,005,562

See accompanying notes to consolidated financial statements (unaudited).

3

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended July 31,
	2006			2007
Revenues	$	305,186			555,704
Cost of revenues		225,965			804,992
Gross profit (loss)		79,221			(249,288	)
Operating expenses:
Product development costs		1,052,126			1,815,734
Selling, general and administrative costs		1,388,045			1,996,602
Total operating expenses		2,440,171			3,812,336
Operating loss		(2,360,950	)		(4,061,624	)
Interest income, net		362,367			1,444,286
Foreign exchange gain		337,629			179,494
Net loss	$	(1,660,954	)		(2,437,844	)
Basic and diluted net loss per share	$	(0.32	)		(0.24	)
Weighted average shares used to compute basic and diluted net loss per share		5,171,527			10,189,354

See accompanying notes to consolidated financial statements (unaudited).

4

Ocean Power Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended July 31,
	2006			2007
Cash flows from operating activities:
Net loss	$	(1,660,954	)		(2,437,844	)
Adjustments to reconcile net loss to net cash used in operating activities:
Foreign exchange gain		(337,629	)		(179,494	)
Depreciation and amortization		65,671			63,909
Compensation expense related to stock option grants		445,553			752,552
Deferred rent		6,765			1,353
Changes in operating assets and liabilities:
Accounts receivable		(7,614	)		788,136
Unbilled receivables		52,145			(276,397	)
Other current assets		(16,818	)		(715,277	)
Accounts payable		(86,159	)		(382,287	)
Accrued expenses		(16,273	)		(1,109,675	)
Unearned revenues		(14,405	)		240,954
Other current liabilities		(24,420	)		—
Net cash used in operating activities		(1,594,138	)		(3,254,070	)
Cash flows from investing activities:
Purchases of certificates of deposit		(29,123,293	)		(9,030,855	)
Maturities of certificates of deposit		—			7,681,679
Purchases of equipment		(15,836	)		(9,632	)
Payments of patent costs		(18,432	)		(16,938	)
Investments in joint ventures and other noncurrent assets		(19,469	)		—
Net cash used in investing activities		(29,177,030	)		(1,375,746	)
Cash flows from financing activities:
Common stock issuance costs		—			(870,116	)
Proceeds from exercise of stock options		7,700			35,971
Net cash provided by (used in) financing activities		7,700			(834,145	)
Effect of exchange rate changes on cash and cash equivalents		336,798			185,923
Net decrease in cash and cash equivalents		(30,426,670	)		(5,278,038	)
Cash and cash equivalents, beginning of period		31,957,209			107,505,473
Cash and cash equivalents, end of period	$	1,530,539			102,227,435
Supplemental disclosure of noncash investing and financing activities:
Capitalized purchases of equipment financed through accounts payable	$	—			45,566

See accompanying notes to consolidated financial statements (unaudited).

5

Ocean Power Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(1) Background and Basis of Presentation

          Ocean Power Technologies, Inc. (the Company) was incorporated on April 19, 1984 in the State of New Jersey, commenced active operations in 1994 and re-incorporated in the State of Delaware in April 2007. The Company develops and is commercializing proprietary systems that generate electricity by harnessing the renewable energy of ocean waves. The Company markets and sells its products in the United States and internationally.

          The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2007 are not necessarily indicative of the results that may be expected for the year ending April 30, 2008. Further information on potential factors that could affect the Company’s financial results can be found in the Company’s Annual Report on Form 10-K for the year ended April 30, 2007 filed with the Securities and Exchange Commission and in this Form 10-Q.

(2) Summary of Significant Accounting Policies

(a) Consolidation

          The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

          In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46(R), Consolidation of Variable Interest Entities (FIN 46R), and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R.

(b) Use of Estimates

          The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the recoverability of the carrying amount of property and equipment and patents; valuation allowances for receivables and deferred income tax assets; and percentage of completion of customer contracts for purposes of revenue recognition. Actual results could differ from those estimates.

(c) Revenue Recognition

          The Company recognizes revenue on government and commercial contracts under the percentage-of-completion method. The percentage of completion is determined by relating the costs incurred to date to the estimated total costs. The cumulative effects resulting from revisions of estimated total contract costs and revenues are recorded in the period in which the facts requiring revision become known. Upon anticipating a loss on a contract, the Company recognizes the full amount of the anticipated loss in the current period. During the three months ended July 31, 2007, the Company did not record any additional provisions related to anticipated losses on contracts. Reserves related to loss contracts in the amounts of approximately $1,780,000 and $1,742,000 are included in accrued expenses in the accompanying consolidated balance sheets as of April 30, 2007 and July 31, 2007, respectively.

          Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are normally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables, and to the extent that such billings exceed costs incurred plus applicable profit margin, they are recorded as unearned revenues.

6

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

(d) Cash Equivalents

          Cash equivalents consist of investments in short-term financial instruments with maturities of three months or less from the date of purchase. Cash and cash equivalents include an aggregate of $106,254,000 and $98,523,000 of money market funds, certificates of deposit, commercial paper and treasury bills with an initial term of less than three months at April 30, 2007 and July 31, 2007, respectively.

(e) Restricted Cash and Credit Facility

          As of July 31, 2007, the Company had $983,304 in cash restricted under the terms of a security agreement between Ocean Power Technologies, Inc and Barclays Bank. Under this agreement, the cash is on deposit at Barclays Bank and serves as security for letters of credit which are expected to be issued by Barclays Bank on behalf of Ocean Power Technologies Ltd., the Company’s U.K. subsidiary, under a €800,000 credit facility established by Barclays Bank for such subsidiary. The credit facility is for the issuance of letters of credit and bank guarantees, and carries a fee of 1% per annum of the amount of any such obligations issued by Barclays Bank. The credit facility does not have an expiration date, and is cancelable at the discretion of the bank.

(f) Property and Equipment

          Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives (three to seven years) of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the remaining lease term. Expenses for maintenance and repairs are charged to operations as incurred. Depreciation expense was $61,125 and $58,960 for the three months ended July 31, 2006 and 2007, respectively.

(g) Foreign Exchange Gains and Losses

          The Company has invested in certain certificates of deposit and has maintained cash accounts that are denominated in British pound sterling, Euros and Australian dollars. Such certificates of deposit and cash accounts had a balance of approximately $15,646,000 and $14,963,000 as of April 30, 2007 and July 31, 2007, respectively. Such positions may result in realized and unrealized foreign exchange gains or losses from exchange rate fluctuations, which are included in foreign exchange gain (loss) on the accompanying consolidated statements of operations.

(h) Patents

          External costs related to the filing of patents, including legal and filing fees, are capitalized. Amortization is calculated using the straight-line method over the life of the patents (17 years). Expenses for the development of technology are charged to operations as incurred. Amortization expense was $4,546 and $4,949 for the three months ended July 31, 2006 and 2007, respectively. Amortization expense for the next five fiscal years related to amounts capitalized for patents as of July 31, 2007 is estimated to be approximately $22,000 per year.

(i) Long-Lived Assets

          In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet. The Company reviewed its long-lived assets for indicators of

7

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

impairment in accordance with SFAS No. 144 and determined that no impairment review was necessary for the three months ended July 31, 2006 and 2007.

(j) Concentration of Credit Risk

          Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, bank certificates of deposit and trade receivables. The Company invests its excess cash in highly liquid investments (principally short-term bank deposits, money market funds, commercial paper and treasury bills) and does not believe that it is exposed to any significant risks related to such investments.

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

	Three Months Ended July 31,
Customer	2006			2007
U.S. Navy		63	%		45	%
Iberdrola and Total		12	%		24	%
U.S. Department of Interior for Department of Homeland Security		13	%		—
Scottish Executive		—			31	%
Australian Greenhouse Office		12	%		—

          The loss of, or a significant reduction in revenues from, any of these customers could significantly impact the Company’s financial position or results of operations. The Company does not require collateral from its customers.

(k) Net Loss per Common Share

          Basic and diluted net loss per share for all periods presented is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Due to the Company’s net losses, potentially dilutive securities, consisting of outstanding stock options, were excluded from the diluted loss per share calculation due to their anti-dilutive effect.

          In computing diluted net loss per share, 1,386,832 and 1,525,071 options to purchase shares of common stock were excluded from the computations for the three months ended July 31, 2006 and 2007, respectively.

(l) Stock-Based Compensation

          On May 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), which requires that the costs resulting from all share-based payment transactions be recognized in the consolidated financial statements at their fair values. The Company adopted SFAS No. 123R using the modified prospective application method under which the provisions of SFAS No. 123R apply to new awards and to awards modified, repurchased, or canceled after the adoption date. Additionally, compensation cost for the portion of the awards for which the requisite service had not been rendered that were outstanding as of May 1, 2006 will be recognized in the consolidated statements of operations over the remaining service period after such date based on the award’s original estimated fair value. The aggregate share-based compensation expense recorded in the consolidated statements of operations for the three months ended July 31, 2006 and 2007 under SFAS No. 123R was approximately $446,000 and $753,000, respectively. For the three months ended July 31, 2006 and 2007, this share-based compensation expense increased basic and diluted net loss per share by approximately $0.09 and $0.07, respectively.

8

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

Valuation Assumptions for Options Granted During the Three Months Ended July 31, 2006 and 2007

          The fair value of each stock option granted during the three months ended July 31, 2006 and 2007 was estimated at the date of grant using the Black-Scholes option pricing model, assuming no dividends and using the weighted average valuation assumptions noted in the following table. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life (estimated period of time outstanding) of the stock options granted was estimated using the “simplified” method as permitted by the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107, Share-Based Payment. Expected volatility was based on historical volatility for a peer group of companies for a period equal to the stock option’s expected life, calculated on a daily basis.

	2006			2007
Risk-free interest rate		5.0	%		5.1	%
Expected dividend yield		0.0	%		0.0	%
Expected life	5.5 years			6.1 years
Expected volatility		72.0	%		77.8	%

          The above assumptions were used to determine the weighted average per share fair value of $8.85 and $11.48 for stock options granted during the three months ended July 31, 2006 and 2007, respectively.

(m) Accounting for Income Taxes

          Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss and tax credit carryforwards are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(n) Accumulated Other Comprehensive Loss

          The functional currency for the Company’s foreign operations is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during the period. The unrealized gains or losses resulting from such translation are included in accumulated other comprehensive loss within stockholders’ equity.

(o) Recent Accounting Pronouncements

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which establishes a framework for reporting fair value and expands disclosures about fair value measurements. SFAS No. 157 becomes effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the potential impact of this standard.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 allows companies to elect to measure certain assets and liabilities at fair value and is effective for fiscal years beginning after November 15, 2007. This standard is not expected to have any impact on the Company’s consolidated financial condition or results of operations.

(3) Accrued Expenses

          Included in accrued expenses at April 30, 2007 and July 31, 2007 were contract loss reserves of approximately $1,780,000 and $1,742,000, respectively. Accrued expenses at April 30, 2007 also included accrued employee incentive payments of approximately $1,051,000 and costs associated with the initial public offering in the U.S. of

9

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

approximately $680,000. There were approximately $41,000 of accrued employee incentive payments and no accrued expenses associated with the public offering at July 31, 2007.

(4) Related-Party Transactions

          The Company is obligated to pay royalties to G.W. Taylor, a founding stockholder of the Company, and to M.Y. Epstein and the estate of J.R. Burns (stockholders of the Company) related to U.S. patent 4404490 entitled, “Power Generation from Waves Near the Surface of Bodies of Water.” Royalty payments are limited to $925,000 in the aggregate, based on revenues related to certain piezoelectric-technology, if any, on the basis of 6% of future licenses sold and 4% of future product sales and development contracts. Through July 31, 2007, approximately $200,000 of royalties had been earned. During the three months ended July 31, 2006 and 2007, no royalties were earned pursuant to these agreements, and no future royalties are expected to be earned. As of April 30, 2007 and July 31, 2007, approximately $26,000 was included in other current liabilities related to these agreements.

          In August 1999, the Company entered into a consulting agreement with an individual for marketing services, which currently provides for a rate of $800 per day of services provided. The individual became a member of the board of directors in June 2006. Under this consulting agreement, the Company expensed approximately $13,000 and $16,000 during the three months ended July 31, 2006 and 2007, respectively.

          Also see note 7 for an additional related-party transaction.

(5) Debt

          During the year ended April 30, 2000, the Company received an award of $250,000 from the State of New Jersey Commission on Science and Technology for the development of a wave power system that was deployed off the coast of New Jersey. Under the terms of this award, the Company must repay the amount funded, without interest, by January 15, 2012. The amounts to be repaid each year are determined as a percentage of revenues (as defined in the loan agreement) the Company receives that year from its customer contracts that meet criteria specified in the loan agreement, with any remaining amount due on January 15, 2012. Based upon the terms of the award, the Company has repaid approximately $18,000 and is required to repay an additional approximately $43,000 as of July 31, 2007. The total repayment amount of approximately $61,000 has reduced the long-term debt balance. The current payment required was included in accrued expenses in the accompanying consolidated balance sheet as of July 31, 2007.

(6) Income Taxes

          The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on May 1, 2007. At the adoption date and at July 31, 2007, the Company did not have any unrecognized tax benefits as a result of the adoption of FIN 48. The Company would recognize interest and penalties related to unrecognized tax benefits in income tax expense. The Company has net operating loss carryforwards which originated in years dating back to the tax year ended April 30, 1994. The tax years April 30, 1994 through April 30, 2007 remain open to examination by the major taxing jurisdictions to which the Company is subject.

(7) Deferred Credits

          During the year ended April 30, 2001, in connection with the sale of common stock to an investor, the Company received $600,000 from the investor in exchange for an option to purchase up to 500,000 metric tons of carbon emissions credits generated by the Company during the years 2008 through 2012, at a 30% discount from the then-prevailing market rate. This amount has been recorded in deferred credits in the accompanying consolidated balance sheets as of April 30, 2007 and July 31, 2007. If by December 31, 2012 the Company does not become entitled under applicable laws to the full amount of emission credits covered by the option, the Company is obligated to return the option fee of $600,000, less the aggregate discount on any emission credits sold to the investor prior to such date. If the Company receives emission credits under applicable laws and fails to sell to the investor the credits up to the full amount of emission credits covered by the option, the investor is entitled to

10

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

liquidated damages equal to 30% of the aggregate market value of the shortfall in emission credits (subject to a limit on the market price of emission credits).

(8) Common Stock

          On December 7, 2006, the board of directors approved and recommended to shareholders, and on January 12, 2007, the shareholders of the Company approved, a one-for-ten reverse stock split, which was effective on April 20, 2007. All share data shown in the accompanying consolidated financial statements have been retroactively restated to reflect the reverse stock split and the reincorporation.

          On April 30, 2007, the Company completed an initial public offering in the United States on The NASDAQ Global Market by issuing 5,000,000 shares of its common stock for a purchase price of $20.00 per share, resulting in net proceeds to the Company of $89,903,819.

(9) Preferred Stock

          In September 2003, the Company’s stockholders authorized 5,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. At April 30, 2006 and July 31, 2007, no shares of preferred stock had been issued.

(10) Stock Options

          Prior to August 2001, the Company maintained qualified and nonqualified stock option plans. The Company has reserved 493,490 shares of common stock for issuance under these plans. There are no options available for future grant under these plans as of July 31, 2007.

          In August 2001, the Company approved the 2001 Stock Plan, which provides for the grant of incentive stock options and nonqualified stock options. A total of 1,000,000 shares were authorized for issuance under the 2001 Stock Plan. As of July 31, 2007, the Company had issued or reserved 784,589 shares for issuance under the 2001 Stock Plan. After the effectiveness of the 2006 Stock Incentive Plan, no further options or other awards have been or will be granted under the 2001 Stock Plan.

          On April 24, 2007, the Company’s 2006 Stock Incentive Plan became effective. A total of 803,215 shares are authorized for issuance under the 2006 Stock Incentive Plan. As of July 31, 2007, the Company had issued options for 246,992 shares and reserved an additional 556,223 shares for future issuance under the 2006 Stock Incentive Plan. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2006 Stock Incentive Plan; however, incentive stock options may only be granted to employees. The maximum number of shares of common stock with respect to which awards may be granted to any participant under the 2006 Stock Incentive Plan is 200,000 per calendar year. Members of the board of directors who are not full-time employees receive an annual option grant to acquire 2,500 shares. Vesting of stock options is determined by the board of directors. The contractual term of these stock options is up to ten years. The 2006 Stock Incentive Plan is administered by the Company’s board of directors who may delegate authority to one or more committees or subcommittees of the board of directors or to the Company’s officers. If the board of directors delegates authority to an officer, the officer has the power to make awards to all of the Company’s employees, except to executive officers. The board of directors will fix the terms of the awards to be granted by such officer. No award may be granted under the 2006 Stock Incentive Plan after December 7, 2016, but the vesting and effectiveness of awards granted before that date may extend beyond that date.

11

Ocean Power Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
(Unaudited)

          Transactions under these option plans during the three months ended July 31, 2007 are as follows:

						Weighted
						Average
				Weighted		Remaining
	Shares Under			Average Exercise		Contractual
	Option			Price		Term
						(In Years)
Outstanding April 30, 2007		1,303,574		$	14.49
Forfeited		(19,291	)		14.28
Expired		(1,854	)		15.85
Exercised		(4,350	)		8.27
Granted		246,992			16.13
Outstanding July 31, 2007		1,525,071			14.77		5.6
Exercisable July 31, 2007		1,068,337			14.90		4.3

          The total intrinsic value of options exercised during the three months ended July 31, 2006 and 2007 was approximately $5,700 and $34,800, respectively. The total intrinsic value of outstanding and exercisable options as of July 31, 2007 was approximately $2,600,000 and $2,200,000, respectively. As of July 31, 2007, approximately 404,000 additional options were expected to vest, which had total intrinsic value of approximately $331,000 and a weighted average remaining contractual term of 8.8 years. As of July 31, 2007, there was approximately $4,054,000 of total unrecognized compensation cost related to non-vested stock options granted under the plans. This cost is expected to be recognized over a remaining weighted-average period of 3 years. The Company normally issues new shares to satisfy option exercises under these plans.

(11) Commitments and Contingencies

Litigation

          The Company is involved from time to time in certain legal actions arising in the ordinary course of business. Management believes that the outcome of such actions will not have a material adverse effect on the Company’s financial position or results of operations.

(12) Operating Segments and Geographic Information

          The Company’s business consists of one segment as this represents management’s view of the Company’s operations. The Company operates on a worldwide basis with one operating company in the U.S., one subsidiary in the U.K. and one subsidiary in Australia, which are categorized below as North America, Europe and Australia, respectively. Revenues are generally attributed to the operating unit which bills the customers.

          Geographic information is as follows:

	Three Months Ended July 31, 2006
	North America			Europe			Australia		Total
Revenues from external customers	$	230,301			37,256			37,629		305,186
Operating loss		(1,970,883	)		(392,389	)		2,322		(2,360,950	)
Long-lived assets		443,662			56,482			—		500,144
Total assets		32,347,571			240,576			67,262		32,655,409

	Three Months Ended July 31, 2007
	North America			Europe			Australia			Total
Revenues from external customers	$	246,702			309,002			—			555,704
Operating loss		(3,166,591	)		(822,493	)		(72,540	)		(4,061,624	)
Long-lived assets		261,638			122,045			1,655			385,338
Total assets		114,387,842			1,583,413			34,307			116,005,562

12

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes as of July 31, 2007 and for the three months ended July 31, 2006 and 2007, included elsewhere herein. References to a fiscal year in this Form 10-Q refer to the year ended April 30 of that year (e.g., fiscal 2007 refers to the year ended April 30, 2007).

Overview

          We develop and are commercializing proprietary systems that generate electricity by harnessing the renewable energy of ocean waves. Our PowerBuoy systems use proprietary technologies to convert the mechanical energy created by the rising and falling of ocean waves into electricity. We currently offer two PowerBuoy products, which consist of our utility PowerBuoy system and our autonomous PowerBuoy system.

          We market our utility PowerBuoy system, which is designed to supply electricity to a local or regional power grid, to utilities and other electrical power producers seeking to add electricity generated by wave energy to their existing electricity supply. We market our autonomous PowerBuoy system, which is designed to generate power for use independent of the power grid, to customers that require electricity in remote locations. We believe there are a variety of potential applications for our autonomous PowerBuoy system, including sonar and radar surveillance, tsunami warning, oceanographic data collection, offshore platforms and offshore aquaculture. We also offer our customers operations and maintenance services for our PowerBuoy systems, which are expected to provide a source of recurring revenues.

          We were incorporated in New Jersey in April 1984, began commercial operations in 1994, and were re-incorporated in Delaware in 2007. We currently have five wholly owned subsidiaries, which include Ocean Power Technologies Ltd., Reedsport OPT Wave Park LLC, Oregon Wave Energy Partners I, LLC, Oregon Wave Energy Partners II, LLC and Fairhaven OPT Ocean Power LLC, and we own approximately 88% of the ordinary shares of Ocean Power Technologies (Australasia) Pty Ltd. Our revenues have been generated from research contracts and development and construction contracts relating to our wave energy technology. The development of our technology has been funded by capital we raised and by development engineering contracts we received starting in fiscal 1995. In fiscal 1996, we received the first of several research contracts with the U.S. Navy to study the feasibility of wave energy. As a result of those research contracts, we entered into our first development and construction contract with the U.S. Navy in fiscal 2002 under a still on-going project for the development and construction of a wave power station at the U.S. Marine Corps Base in Oahu, Hawaii. We generated our first revenue relating to our autonomous PowerBuoy system from contracts with Lockheed Martin Corporation in fiscal 2003, and we entered into our first development and construction contract with Lockheed Martin in fiscal 2004 for the development and construction of a prototype demonstration autonomous PowerBuoy system. In fiscal 2005, we entered into a development agreement with an affiliate of Iberdrola S.A., a large electric utility company located in Spain and one of the largest renewable energy producers in the world, and other parties to jointly study the possibility of developing a wave power station off the coast of northern Spain. An affiliate of Total S.A., which is one of the world’s largest oil and gas companies, joined the development agreement in June 2005. In January 2006, we completed the assessment phase of the project, and in July 2006 we entered into an agreement with Iberdrola Energias Marinas de Cantabria, S.A. to complete the first phase of the construction of a 1.39 megawatt (MW) wave power station. In addition, we have entered into a contract with affiliates of Iberdrola and Total to assess the viability of a 2 to 5MW power station off the coast of France. In 2007 we received a $1.8 million contract from the Scottish Executive for the demonstration of a 150 kilowatt PowerBuoy system at Orkney, Scotland. In June 2007, we received a $1.7 million contract from the U.S. Navy to provide our PowerBuoy technology to a unique program for ocean data gathering. Under this 18-month program, the U.S. Navy will conduct an ocean test of our autonomous PowerBuoy as the power source for the Navy’s Deep Water Acoustic Detection System.

          For the three months ended July 31, 2007, we generated revenues of $0.6 million and incurred a net loss of $2.4 million, compared to revenues of $0.3 million and a net loss of $1.7 million for the three months ended July 31, 2006. As of July 31, 2007, our accumulated deficit was $40.7 million. We have not been profitable since inception, and we do not know whether or when we will become profitable because of the significant uncertainties with respect

13

to our ability to successfully commercialize our PowerBuoy systems in the emerging renewable energy market. Since fiscal 2002, the U.S. Navy has accounted for a significant portion of our revenues. We expect that over time, revenues derived from utilities and other non-government commercial customers will increase more rapidly than sales to government customers and will, within a few years, represent the majority of our revenues.

Financial Operations Overview

          The following describes certain line items in our statement of operations and some of the factors that affect our operating results.

Revenues

          We have historically generated revenues primarily from the development and construction of our PowerBuoy systems for demonstration purposes and, to a lesser extent, from customer-sponsored research and development. For the three months ended July 31, 2006 and 2007, we derived approximately 87% and 69% respectively, of our revenues from government and commercial development and construction contracts and 13% and 31% respectively, of our revenues from customer-sponsored research and development. Generally, we recognize revenue on the percentage-of-completion method based on the ratio of costs incurred to total estimated costs at completion. In certain circumstances, revenue under contracts that have specified milestones or other performance criteria may be recognized only when our customer acknowledges that such criteria have been satisfied. In addition, recognition of revenue (and the related costs) may be deferred for fixed-price contracts until contract completion if we are unable to reasonably estimate the total costs of the project prior to completion. Because we have a small number of contracts, revisions to the percentage of completion determination or delays in meeting performance criteria or in completing projects may have a significant effect on our revenue for the periods involved.

          Under our agreement for the first phase of construction of a wave power station off the coast of Santoña, Spain, our revenues are limited to reimbursement for our construction costs without any mark-up and we are required to bear the first €0.5 million of any cost overruns and to absorb certain other costs as set forth in the agreement. Our estimates of the project’s costs may increase in the future, and we may be required to seek customer approval for additional increases in the construction budget for the project. If the construction budget is not increased, we may elect to incur the additional costs and continue the project, to seek other suppliers for the materials or services related to the cost increases or to terminate the agreement. Any of such outcomes may have a material effect on our financial condition and results of operations.

          Our revenues for the three months ended July 31, 2007 increased compared to the revenues for the three months ended July 31, 2006. The revenue increase reflected a higher level of activity in connection with our Spain construction contract, our entry into a new contract with the U.S. Navy in June 2007 and a higher level of activity on our contract for the construction, installation and in-ocean demonstration of our latest 150 kilowatt (kW) PowerBuoy that will be installed at the European Marine Energy Centre (EMEC) at Orkney, Scotland.

          The U.S. Navy has been our largest customer since fiscal 2002. The U.S. Navy accounted for approximately 45% of our revenues in the three months ended July 31, 2007 and approximately 63% of our revenues in the three months ended July 31, 2006. We anticipate that, if our commercialization efforts are successful, the relative contribution of the U.S. Navy to our revenue will decline in the future.

          We currently focus our sales and marketing efforts on coastal North America, the west coast of Europe, the coasts of Australia and the east coast of Japan. During the three months ended July 31, 2007, we derived 55%, and during the three months ended July 31, 2006, we derived 24%, of our revenues from outside the United States.

Cost of revenues

          Our cost of revenues consists primarily of material, labor and manufacturing overhead expenses, such as engineering expense, equipment depreciation and maintenance and facility related expenses, and includes the cost of PowerBuoy parts and services supplied by third-party suppliers. Cost of revenues also includes PowerBuoy system delivery and deployment expenses.

          In the three months ended July 31, 2007, we operated at a gross loss of $0.2 million, while in the three

14

months ended July 31, 2006 we operated at a gross profit of $0.1 million. Our ability to operate at a gross profit will depend on our success at increasing sales of our PowerBuoy systems and on our ability to manage costs incurred on fixed price commercial contracts.

Product development costs

          Our product development costs consist of salaries and other personnel-related costs and the costs of products, materials and outside services used in our product development and unfunded research activities. Our product development costs primarily relate to our efforts to increase the output of our current 40kW utility PowerBuoy system to 150kW in 2007, then to 250kW in 2008 and ultimately to 500kW in 2010 and, to a lesser extent, to our research and development of new products, product applications and complementary technologies. We expense all of our product development costs as incurred, except for external patent costs, which we capitalize and amortize over a 17-year period commencing with the issuance date of each patent.

          Our product development costs increased in the three months ended July 31, 2007 as a result of our work to continue to increase the output and efficiency of our PowerBuoy systems.

          We introduced our current 40kW PowerBuoy system in fiscal 2006. One system was deployed off the coast of New Jersey from October 2005 to October 2006, when it was removed from the ocean for routine maintenance and diagnostic testing. This system has been redeployed off the coast of New Jersey. Another system was deployed in Hawaii for the U.S. Navy project in June 2007. After four weeks of initial testing and operation, the system was returned to shore for diagnostic analysis and repair, which work is now in process. Work is also 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. During the three months ended July 31, 2007, we continued development activity in connection with our 150kW PowerBuoy system and expect to commence ocean testing of that system in 2008.

Selling, general and administrative costs

          Our selling, general and administrative costs consist primarily of professional fees, salaries and other personnel-related costs for employees and consultants engaged in sales and marketing and support of our PowerBuoy systems and costs for executive, accounting and administrative personnel, professional fees and other general corporate expenses.

          We expect our selling, general and administrative costs to increase as we expand our sales and marketing capabilities, including increased headcount, and as a result of our becoming a public company in the United States, in April 2007.

Interest income, net

          Interest income, net consists primarily of interest received on cash and cash equivalents and investments in commercial bank-issued certificates of deposit. Prior to April 30, 2007, most of our cash, cash equivalents and bank-issued certificates of deposit resulted from the remaining proceeds of our October 2003 offering on the AIM market of the London Stock Exchange. On April 30, 2007, we completed our initial public offering in the United States, which resulted in net proceeds to us of $89.9 million. Total cash, cash equivalents and certificates of deposit were $112.0 million as of July 31, 2007, compared to $31.1 million as of July 31, 2006. We anticipate that our interest income reported in fiscal 2008 will continue to be significantly higher than the comparable periods of the prior fiscal year as a result of the investment of the proceeds from our United States initial public offering.

Foreign exchange gain

          We transact business in various countries and have exposure to fluctuations in foreign currency exchange rates. Foreign exchange gains and losses arise in the translation of foreign-denominated assets and liabilities, which may result in realized and unrealized gains or losses from exchange rate fluctuations. Since we conduct our business in U.S. dollars and our functional currency is the U.S. dollar, our main foreign exchange exposure, if any, results from changes in the exchange rate between the U.S. dollar and the British pound sterling, the Euro and the Australian dollar.

15

          We invest in certificates of deposit and maintain cash accounts that are denominated in British pounds, Euros and Australian dollars. These foreign denominated certificates of deposit and cash accounts had a balance of $15.0 million as of July 31, 2007 and $16.8 million as of July 31, 2006, compared to our total certificates of deposits and cash account balances of $112.0 million as of July 31, 2007 and $31.1 million as of July 31, 2006. These foreign currency balances are translated at each month end to our functional currency, the U.S. dollar, and any resulting gain or loss is recognized in our results of operations.

          In addition, a portion of our operations is conducted through our subsidiaries in countries other than the United States, specifically Ocean Power Technologies Ltd. in the United Kingdom, the functional currency of which is the British pound sterling, and Ocean Power Technologies (Australasia) Pty Ltd. in Australia, the functional currency of which is the Australian dollar. Both of these subsidiaries have foreign exchange exposure that results from changes in the exchange rate between their functional currency and other foreign currencies in which they conduct business. All of our international revenues for the three months ended July 31, 2006 and 2007 were recorded in Euros, British pounds or Australian dollars.

          We currently do not hedge our exchange rate exposure. However, we assess the anticipated foreign currency working capital requirements and capital asset acquisitions of our foreign operations and attempt to maintain a portion of our cash, cash equivalents and certificates of deposit denominated in foreign currencies sufficient to satisfy these anticipated requirements. We also assess the need and cost to utilize financial instruments to hedge currency exposures on an ongoing basis and may hedge against exchange rate exposure in the future.

Results of Operations

Three Months Ended July 31, 2007 Compared to Three Months Ended July 31, 2006

          The following table contains selected statement of operations information, which serves as the basis of the discussion of our results of operations for the three months ended July 31, 2006 and 2007:

	Three Months Ended July						Three Months Ended July						Change 2007 Period to
	31, 2006						31, 2007						2006 Period
				As a % of						As a % of
	Amount			Revenues			Amount			Revenues			$ Change			% Change
Revenues	$	305,186			100	%	$	555,704			100	%	$	250,518			82	%
Cost of revenues		225,965			74			804,992			145			579,027			256
Gross profit (loss)		79,221			26			(249,288	)		(45	)		(328,509	)		(415	)
Operating expenses:
Product development costs		1,052,126			345			1,815,734			327			763,608			73
Selling, general and administrative costs		1,388,045			455			1,996,602			359			608,557			44
Total operating expenses		2,440,171			800			3,812,336			686			1,372,165			56
Operating loss		(2,360,950	)		(774	)		(4,061,624	)		(731	)		(1,700,674	)		72
Interest income, net		362,367			119			1,444,286			260			1,081,919			299
Foreign exchange gain		337,629			111			179,494			32			(158,135	)		(47	)
Net loss	$	(1,660,954	)		(544	)%	$	(2,437,844	)		(439	)%	$	(776,890	)		47

Revenues

          Revenues increased by $0.3 million in the three months ended July 31, 2007, or 82%, to $0.6 million as compared to $0.3 million in the three months ended July 31, 2006. The increase in revenues was primarily attributable to the following factors:

• Revenues relating to our utility PowerBuoy system increased by approximately $0.3 million due to work on the first phase of construction of a 1.39MW wave power station off the coast of Spain and work that commenced on the design, manufacture and installation of an OPT wave power station consisting of a

16

	single PB150 (150kW) PowerBuoy device in Orkney, Scotland.
•	Revenues relating to our autonomous PowerBuoy system remained constant primarily as a result of work commencing on our $1.7 million contract with the U.S. Navy to provide our PowerBuoy technology to a program for ocean data gathering and work completed on our contract with the Department of the Interior for Homeland Security.

Cost of revenues

          Cost of revenues increased by $0.6 million to $0.8 million in the three months ended July 31, 2007, as compared to $0.2 million in the three months ended July 31, 2006. The decrease in gross profit in the three months ended July 31, 2007 was due to several factors, including an increase of approximately $0.1 million of compensation expense recorded as cost of revenues under Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS 123(R), which requires companies to recognize compensation expense for all stock-based payments to employees. The gross loss recorded for the three months ended July 31, 2007 also reflected a decrease in gross profit of approximately $0.1 million recorded in connection with our U.S. Navy project in Hawaii, due to higher expected costs at completion of the project.

Product development costs

          Product development costs increased $0.8 million, or 73%, to $1.8 million in the three months ended July 31, 2007, as compared to $1.1 million in the three months ended July 31, 2006. The substantial increase in product development costs was primarily attributable to our work to increase the power output of our utility PowerBuoy system, including the 150kW PowerBuoy system. The increase in product development costs includes a $0.2 million increase in compensation expense recorded under SFAS 123(R). As a percentage of revenues, product development costs decreased slightly to 327% in the three months ended July 31, 2007 from 345% in the three months ended July 31, 2006. We anticipate that our product development costs related to the planned increase in the output of our utility PowerBuoy system will increase significantly over the next several years and that the amount of these expenditures will not necessarily be affected by the level of revenue generated over that time period. Accordingly, comparisons of product development costs as a percentage of revenue may not be meaningful.

Selling, general and administrative costs

          Selling, general and administrative costs increased $0.6 million, or 44%, to $2.0 million for the three months ended July 31, 2007, as compared to $1.4 million for the three months ended July 31, 2006. The increase was primarily attributable to an increase of $0.3 million related to additional marketing expenses and consulting costs and $0.3 million in professional fees and other related costs incurred as a result of our becoming a public company in the United States.

Interest income, net

          Interest income, net increased by $1.1 million to $1.4 million for the three months ended July 31, 2007, compared to $0.4 million for the three months ended July 31, 2006, due to the investment of the net proceeds of our United States initial public offering on April 30, 2007.

Foreign exchange gain

          Foreign exchange gain was $0.2 million for the three months ended July 31, 2007, compared to a foreign exchange gain of $0.3 million for the three months ended July 31, 2006. The difference was primarily attributable to the appreciation of the British pound compared to the U.S. dollar between the two periods and a decrease in foreign denominated currency for the three months ended July 31, 2007.

Liquidity and Capital Resources

          Since our inception, the cash flows from customer revenues have not been sufficient to fund our operations and provide the capital resources for the planned growth of our business. For the three years ended April 30, 2007, our revenues were $9.6 million, our net losses were $17.1 million and our net cash used in operating activities was

17

$13.5 million. Over that same period, we raised $90.3 million in financing activities, including $89.9 million from the closing of our United States initial public offering on April 30, 2007.

          At July 31, 2007, our total cash, cash equivalents and certificates of deposit were $112.0 million. Our cash and cash equivalents are highly liquid investments with maturities of three months or less at the date of purchase and consist primarily of time deposits, commercial paper, treasury bills and money market funds with large commercial banks. Our certificates of deposit as of July 31, 2007 are denominated in British pounds. The certificates of deposit generally have a fixed maturity date of more than 90 days but less than one year from the date of purchase.

          The primary drivers of our cash flows have been our ability to generate revenues and decrease losses related to our contracts, as well as our ability to obtain and invest the capital resources needed to fund our development.

          Net cash used in operating activities was $3.3 million for the three months ended July 31, 2007. This primarily resulted from a net loss for the period of $2.4 million, decreased by non-cash charges of $0.1 million in depreciation and amortization, $0.8 million of compensation expense related to stock option grants, a $0.8 million decrease in our accounts receivable and a $0.2 million increase in our unearned revenues. This was partially offset by a non-cash foreign exchange gain of $0.2 million, a $1.1 million decrease in our accrued expenses, a $0.4 million decrease in our accounts payable, a $0.3 million increase in unbilled receivables and a $0.7 million increase in other current assets. The decrease in receivables was due to decreased billable activity in the three months ended July 31, 2007, as compared to the three months ended April 30, 2007. The non-cash foreign exchange gain reflected our significant holdings of sterling-denominated certificates of deposit, which were impacted by the depreciation of the dollar against the British pound during the three months ended July 31, 2007. Decreases in accounts payable and accrued expenses in the three months ended July 31, 2007 primarily resulted from the payment of certain accounts payable and accrued expenses associated with incentive payments made to employees during the three months ended July 31, 2007. Net cash used in investing activities was $1.4 million for the three months ended July 31, 2007 resulting primarily from $9.0 million in purchases of certificates of deposit, partially offset by $7.7 million in maturities of certificates of deposit. Net cash used in financing activities was $0.8 million for the three months ended July 31, 2007, and primarily resulted from the payment of certain accrued expenses associated with our U.S. initial public offering.

          We expect to devote substantial resources to continue our development efforts for our PowerBuoy systems and to expand our sales, marketing and manufacturing programs associated with the commercialization of the PowerBuoy system. Our future capital requirements will depend on a number of factors, including:

• the success of our commercial relationships with Iberdrola, Total, the U.S. 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.

          We believe that our current cash and cash equivalents and certificates of deposit will be sufficient to meet our anticipated cash needs for working capital and capital expenditures at least through fiscal 2009. If existing resources are insufficient to satisfy our liquidity requirements or if we acquire or license rights to additional product technologies, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible securities could result in dilution to our stockholders. If additional funds are raised through the issuance of debt securities, these securities could have rights senior to those associated with our common stock and

18

could contain covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us. If we are unable to obtain required financing, we may be required to reduce the scope of our planned product development and marketing efforts, which could harm our financial condition and operating results.

Off-Balance Sheet Arrangements

          Since inception we have not engaged in any off-balance sheet financing activities.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Our primary exposure to market risk is currently confined to our cash, cash equivalents and certificates of deposit. None of these items that we hold have maturities that exceed one year. We currently do not hedge interest rate exposure. We have not used derivative financial instruments for speculative or trading purposes. Because the maturities of our cash equivalents and certificates of deposit do not exceed one year, we do not believe that a change in market rates would have any significant impact on the realized value of our investments. We do not have market risk exposure on our long-term debt because it consists of an interest-free loan from the New Jersey Board of Public Utilities.

          Management estimates that had the average yield on our cash, cash equivalents and certificates of deposit decreased by 100 basis points, our interest income for the three months ended July 31, 2007 would have decreased by approximately $0.3 million. This estimate assumes that the decrease occurred on the first day of the quarter and reduced the yield of each investment by 100 basis points. The impact on our future interest income of future changes in investment yields will depend largely on the gross amount of our cash, cash equivalents, and investments.

          We transact business in various countries and have exposure to fluctuations in foreign currency exchange rates. Foreign exchange gains and losses arise in the translation of foreign-denominated assets and liabilities, which may result in realized and unrealized gains or losses from exchange rate fluctuations. Since we conduct our business in U.S. dollars and our functional currency is the U.S. dollar, our main foreign exchange exposure, if any, results from changes in the exchange rate between the U.S. dollar and the British pound sterling, the Euro and the Australian dollar.

          We invest in certificates of deposit and maintain cash accounts that are denominated in British pounds, Euros and Australian dollars. These foreign denominated certificates of deposit and cash accounts had a balance of $15.0 million as of July 31, 2007, compared to our total certificates of deposits and cash account balances of $112.0 million as of July 31, 2007. These foreign currency balances are translated at each month end to our functional currency, the U.S. dollar, and any resulting gain or loss is recognized in our results of operations.

          In addition, a portion of our operations is conducted through our subsidiaries in countries other than the United States, specifically Ocean Power Technologies Ltd. in the United Kingdom, the functional currency of which is the British pound sterling, and Ocean Power Technologies (Australasia) Pty Ltd. in Australia, the functional currency of which is the Australian dollar. Both of these subsidiaries have foreign exchange exposure that results from changes in the exchange rate between their functional currency and other foreign currencies in which they conduct business. All of our international revenues for the quarter ended July 31, 2007 were recorded in Euros, British pounds or Australian dollars. If the foreign currency exchange rates had fluctuated by 10% as of July 31, 2007, our foreign exchange gain would have changed by approximately $1.5 million.

          We currently do not hedge exchange rate exposure. However, we assess the anticipated foreign currency working capital requirements and capital asset acquisitions of our foreign operations and attempt to maintain a portion of our cash, cash equivalents and certificates of deposit denominated in foreign currencies sufficient to satisfy these anticipated requirements. We also assess the need and cost to utilize financial instruments to hedge currency exposures on an ongoing basis and may hedge against exchange rate exposure in the future.

19

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

          As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, as of July 31, 2007, our Chief Executive Officer along with the Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the company required to be included in our periodic SEC filings.

Changes in Internal Control over Financial Reporting

          No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended July 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

          We are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. RISK FACTORS

          The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended April 30, 2007. These risk factors describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on July 30, 2007.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Use of Proceeds

          On April 30, 2007, we sold 5,000,000 shares of our common stock in our initial public offering in the United States at a price of $20.00 per share, pursuant to a registration statement on Form S-1 (File No. 333-138595), which was declared effective by the SEC on April 24, 2007. The managing underwriters in the offering were UBS Securities LLC, Banc of America Securities LLC, and Bear, Stearns & Co., Inc. The underwriting discounts and commissions and offering expenses payable by us aggregated $10.1 million, resulting in net proceeds to us of $89.9 million.

          From the effective date of the registration statement through July 31, 2007, we used approximately $0.3 million to fund the continued development and commercialization of our PowerBuoy system and approximately

20

$0.2 million to expand our sales and marketing capabilities. We have invested the balance of the net proceeds from the offering in short-term, investment grade, interest-bearing instruments, in accordance with our investment policy. We have not used any of the net proceeds from the offering to make payments, directly or indirectly, to any director or officer of ours, or any of their associates, to any person owning 10 percent or more of our common stock or to any affiliate of ours. There has been no material change in our planned use of the balance of the net proceeds from the offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act.

Item 3. DEFAULTS UPON SENIOR SECURITIES

          None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

Item 5. OTHER INFORMATION

          None.

Item 6. EXHIBITS

3.1	Restated Certificate of Incorporation of the Registrant
3.2	Amended and Restated Bylaws of the Registrant
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	Amendment to Contract for the Development and Application of a Sea Wave Energy Generating System in France, dated as of April 2, 2007, between Iberdrola Energias Renovables, S.A.S., Total Energie Development, S.A., Ocean Power Technologies Ltd. and Ocean Power Technologies, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

21

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 TECHNOLOGIES, INC. (Registrant)
By:	/s/ George W. Taylor
	George W. Taylor
	Chief Executive Officer
	(Principal Executive Officer)

Date: September 14, 2007

By:	/s/ Charles F. Dunleavy
	Charles F. Dunleavy
	Chief Financial Officer
	(Principal Financial Officer)

Date: September 14, 2007

22

EXHIBITS INDEX

3.1	Restated Certificate of Incorporation of the Registrant
3.2	Amended and Restated Bylaws of the Registrant
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	Amendment to Contract for the Development and Application of a Sea Wave Energy Generating System in France, dated as of April 2, 2007, between Iberdrola Energias Renovables, S.A.S., Total Energie Development, S.A., Ocean Power Technologies Ltd. and Ocean Power Technologies, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

23

EX-3.1

                                                                     Exhibit 3.1

                          CERTIFICATE OF INCORPORATION

                                       OF

                         OCEAN POWER TECHNOLOGIES, INC.

     FIRST: The name of the Corporation is Ocean Power Technologies, Inc.

     SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.

     THIRD: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.

     FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 110,000,000 shares, consisting of
(i) 105,000,000 shares of Common Stock, $0.001 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $0.001 par value per
share ("Preferred Stock").

     The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.

A COMMON STOCK.

     1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

     2. Voting. The holders of the Common Stock shall have voting rights at all
meetings of stockholders, each such holder being entitled to one vote for each
share thereof held by such holder; provided, however, that, except as otherwise
required by law, holders of Common Stock shall not be entitled to vote on any
amendment to this Certificate of Incorporation (which, as used herein, shall
mean the certificate of incorporation of the Corporation, as amended from time
to time, including the terms of any certificate of designations of any series of
Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled,
either separately or together as a class with the holders of one or more other
such series, to vote thereon pursuant to this Certificate of Incorporation.
There shall be no cumulative voting.



     The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

     3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend or other rights of any then
outstanding Preferred Stock.

     4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential or other rights of any then
outstanding Preferred Stock.

B PREFERRED STOCK.

     Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock that may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law.

     Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issuance of the shares thereof, to determine and fix the number of shares of
such series and such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions thereof,
including, without limitation thereof, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law.

     The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

     FIFTH: Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.

     SIXTH: In furtherance and not in limitation of the powers conferred upon it
by the laws of the State of Delaware, and subject to the terms of any series of
Preferred Stock, the Board of Directors shall have the power to adopt, amend,
alter or repeal the Corporation's By-laws. The


                                       -2-



affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present shall be
required to adopt, amend, alter or repeal the Corporation's By-laws. The
Corporation's By-laws also may be adopted, amended, altered or repealed by the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes that all the stockholders would be entitled to cast in any annual election
of directors, in addition to any other vote required by this Certificate of
Incorporation. Notwithstanding any other provisions of law, this Certificate of
Incorporation or the By-Laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the votes that all the
stockholders would be entitled to cast in any annual election of directors shall
be required to amend or repeal, or to adopt any provision inconsistent with,
this Article SIXTH.

     SEVENTH: Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. If the General Corporation Law of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.

     EIGHTH: The Corporation shall provide indemnification as follows:

     1. Actions, Suits and Proceedings Other than by or in the Right of the
Corporation. The Corporation shall indemnify each person who was or is a party
or threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was, or has agreed to become, a director or officer of
the Corporation, or is or was serving, or has agreed to serve, at the request of
the Corporation, as a director, officer, partner, employee or trustee of, or in
a similar capacity with, another corporation, partnership, joint venture, trust
or other enterprise (including any employee benefit plan) (all such persons
being referred to hereafter as an "Indemnitee"), or by reason of any action
alleged to have been taken or omitted in such capacity, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by or on behalf of Indemnitee in connection
with such action, suit or proceeding and any appeal therefrom, if Indemnitee
acted in good faith and in a manner that Indemnitee reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner that Indemnitee reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.


                                       -3-



     2. Actions or Suits by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party to or threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that Indemnitee is or was, or has agreed to become, a director or officer
of the Corporation, or is or was serving, or has agreed to serve, at the request
of the Corporation, as a director, officer, partner, employee or trustee of, or
in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan), or by reason of
any action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by or on behalf of
Indemnitee in connection with such action, suit or proceeding and any appeal
therefrom, if Indemnitee acted in good faith and in a manner that Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made under this Section 2
in respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Corporation, unless, and only to the extent, that
the Court of Chancery of Delaware shall determine upon application that, despite
the adjudication of such liability but in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for such
expenses (including attorneys' fees) that the Court of Chancery of Delaware
shall deem proper.

     3. Indemnification for Expenses of Successful Party. Notwithstanding any
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense
of any claim, issue or matter therein, or on appeal from any such action, suit
or proceeding, Indemnitee shall be indemnified against all expenses (including
attorneys' fees) actually and reasonably incurred by or on behalf of Indemnitee
in connection therewith. Without limiting the foregoing, if any action, suit or
proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to Indemnitee,
(ii) an adjudication that Indemnitee was liable to the Corporation, (iii) a plea
of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee
did not act in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and (v) with respect to any
criminal proceeding, an adjudication that Indemnitee had reasonable cause to
believe his conduct was unlawful, Indemnitee shall be considered for the
purposes hereof to have been wholly successful with respect thereto.

     4. Notification and Defense of Claim. As a condition precedent to an
Indemnitee's right to be indemnified, such Indemnitee must notify the
Corporation in writing as soon as practicable of any action, suit, proceeding or
investigation involving such Indemnitee for which indemnity will or could be
sought. With respect to any action, suit, proceeding or investigation of which
the Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to Indemnitee. After notice
from the Corporation to Indemnitee of its election so to assume such defense,
the Corporation shall not be liable to Indemnitee for any legal or other
expenses subsequently incurred by Indemnitee in connection with such action,
suit, proceeding or investigation, other than as provided below in this Section
4. Indemnitee shall have the right to employ his or her own counsel in
connection with such action, suit, proceeding or investigation, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Indemnitee unless


                                       -4-



(i) the employment of counsel by Indemnitee has been authorized by the
Corporation, (ii) counsel to Indemnitee shall have reasonably concluded that
there may be a conflict of interest or position on any significant issue between
the Corporation and Indemnitee in the conduct of the defense of such action,
suit, proceeding or investigation or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, suit, proceeding or
investigation, in each of which cases the fees and expenses of counsel for
Indemnitee shall be at the expense of the Corporation, except as otherwise
expressly provided by this Article. The Corporation shall not be entitled,
without the consent of Indemnitee, to assume the defense of any claim brought by
or in the right of the Corporation or as to which counsel for Indemnitee shall
have reasonably made the conclusion provided for in clause (ii) above. The
Corporation shall not be required to indemnify Indemnitee under this Article
EIGHTH for any amounts paid in settlement of any action, suit, proceeding or
investigation effected without its written consent. The Corporation shall not
settle any action, suit, proceeding or investigation in any manner that would
impose any penalty or limitation on Indemnitee without Indemnitee's written
consent. Neither the Corporation nor Indemnitee will unreasonably withhold or
delay its consent to any proposed settlement.

     5. Advance of Expenses. Subject to the provisions of Section 6 of this
Article EIGHTH, in the event of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by or on behalf of Indemnitee in defending
an action, suit, proceeding or investigation or any appeal therefrom shall be
paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by or on behalf of
Indemnitee in advance of the final disposition of such matter shall be made only
upon receipt of an undertaking by or on behalf of Indemnitee to repay all
amounts so advanced in the event that it shall ultimately be determined by final
judicial decision from which there is no further right to appeal that Indemnitee
is not entitled to be indemnified by the Corporation as authorized in this
Article; and further provided that no such advancement of expenses shall be made
under this Article EIGHTH if it is determined (in the manner described in
Section 6) that (i) Indemnitee did not act in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, or (ii) with respect to any criminal action or proceeding,
Indemnitee had reasonable cause to believe his conduct was unlawful. Such
undertaking shall be accepted without reference to the financial ability of
Indemnitee to make such repayment.

     6. Procedure for Indemnification and Advancement. In order to obtain
indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of
this Article EIGHTH, an Indemnitee shall submit to the Corporation a written
request. Any such advancement of expenses shall be made promptly, and in any
event within 60 days after receipt by the Corporation of the written request of
Indemnitee, unless (i) the Corporation has assumed the defense pursuant to
Section 4 of this Article EIGHTH (and none of the circumstances described in
Section 4 of this Article EIGHTH that would nonetheless entitle the Indemnitee
to indemnification for the fees and expenses of separate counsel have occurred)
or (ii) the Corporation determines within such 60-day period that Indemnitee did
not meet the applicable standard of conduct set forth in Section 1, 2 or 5 of
this Article EIGHTH, as the case may be. Any such indemnification, unless
ordered by a court, shall be made with respect to requests under Section 1 or 2
only as authorized in the specific case upon a determination by the Corporation
that the indemnification of Indemnitee is proper because Indemnitee has met the


                                       -5-



applicable standard of conduct set forth in Section 1 or 2, as the case may be.
Such determination shall be made in each instance (a) by a majority vote of the
directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) by a committee of disinterested
directors designated by majority vote of disinterested directors, whether or not
a quorum, (c) if there are no disinterested directors, or if the disinterested
directors so direct, by independent legal counsel (who may, to the extent
permitted by law, be regular legal counsel to the Corporation) in a written
opinion, or (d) by the stockholders of the Corporation.

     7. Remedies. The right to indemnification or advancement of expenses as
granted by this Article shall be enforceable by Indemnitee in any court of
competent jurisdiction. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct, nor an actual determination by the Corporation pursuant to Section 6
of this Article EIGHTH that Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct. In any suit brought
by Indemnitee to enforce a right to indemnification, or brought by the
Corporation to recover and advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that Indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article EIGHTH or
otherwise shall be on the Corporation. Indemnitee's expenses (including
attorneys' fees) reasonably incurred in connection with successfully
establishing Indemnitee's right to indemnification, in whole or in part, in any
such proceeding shall also be indemnified by the Corporation. Notwithstanding
the foregoing, in (i) any suit brought by Indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the Corporation to
recover an advancement of expenses) it shall be a defense that, and (ii) in any
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the Corporation shall be entitled to recover
such expenses upon a final adjudication that, Indemnitee has not met any
applicable standard for indemnification set forth in the General Corporation Law
of Delaware.

     8. Limitations. Notwithstanding anything to the contrary in this Article,
except as set forth in Section 7 of this Article EIGHTH, the Corporation shall
not indemnify an Indemnitee pursuant to this Article EIGHTH in connection with a
proceeding (or part thereof) initiated by such Indemnitee unless the initiation
thereof was approved by the Board of Directors of the Corporation.
Notwithstanding anything to the contrary in this Article, the Corporation shall
not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the
proceeds of insurance, and in the event the Corporation makes any
indemnification payments to an Indemnitee and such Indemnitee is subsequently
reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund
indemnification payments to the Corporation to the extent of such insurance
reimbursement.

     9. Subsequent Amendment. No amendment, termination or repeal of this
Article EIGHTH or of the relevant provisions of the General Corporation Law of
Delaware or any other applicable laws shall adversely affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.


                                       -6-



     10. Other Rights. The indemnification and advancement of expenses provided
by this Article EIGHTH shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in Indemnitee's
official capacity and as to action in any other capacity while holding office
for the Corporation, and shall continue as to an Indemnitee who has ceased to be
a director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of Indemnitee. Nothing contained in this Article
EIGHTH shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article EIGHTH. In addition, the Corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article EIGHTH.

     11. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article EIGHTH to indemnification by the Corporation for some
or a portion of the expenses (including attorneys' fees), judgments, fines or
amounts paid in settlement actually and reasonably incurred by or on behalf of
Indemnitee in connection with any action, suit, proceeding or investigation and
any appeal therefrom but not, however, for the total amount thereof, the
Corporation shall nevertheless indemnify Indemnitee for the portion of such
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement to which Indemnitee is entitled.

     12. Insurance. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of Delaware.

     13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.

     14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).

     NINTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided:


                                       -7-



     1. General Powers of Board. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.

     2. Number of Directors; Election of Directors. Subject to the rights of
holders of any series of Preferred Stock to elect directors, the number of
directors of the Corporation shall be established by the Board of Directors.
Election of directors need not be by written ballot, except as and to the extent
provided in the By-laws of the Corporation.

     3. Terms of Office. Subject to the rights of holders of any series of
Preferred Stock to elect directors, each director shall serve for a term ending
on the date of the Corporation's annual meeting; provided however, that the term
of each director shall continue until the election and qualification of his
successor and be subject to his earlier death, resignation or removal.

     4. Quorum. The greater of (a) a majority of the directors at any time in
office and (b) one-third of the number of directors fixed pursuant to Section 2
of this Article NINTH shall constitute a quorum. If at any meeting of the Board
of Directors there shall be less than such a quorum, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.

     5. Action at Meeting. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law or by this Certificate of Incorporation.

     6. Removal. Subject to the rights of holders of any series of Preferred
Stock, directors of the Corporation may be removed only for cause and only by
the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes that all the stockholders would be entitled to cast in any annual
election of directors.

     7. Vacancies. Subject to the rights of holders of any series of Preferred
Stock, any vacancy or newly created directorships in the Board of Directors,
however occurring, shall be filled only by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director and
shall not be filled by the stockholders. A director elected to fill a vacancy
shall hold office until the next election of directors, subject to the election
and qualification of a successor and to such director's earlier death,
resignation or removal.

     8. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.

     9. Amendments to Article. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes that all the stockholders would be entitled to cast in any annual election
of directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article NINTH.


                                       -8-



     TENTH: Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes that all the stockholders would be entitled to cast in any annual election
of directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article TENTH.

     ELEVENTH: Special meetings of stockholders for any purpose or purposes may
be called at any time by the Board of Directors, the Chairman of the Board, the
President or the Chief Executive Officer, but such special meetings may not be
called by any other person or persons. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting. Notwithstanding any other provision of
law, this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes that all the stockholders would be entitled to cast in any annual election
of directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article ELEVENTH.

     TWELFTH: The name and mailing address of the sole incorporator are as
follows:



NAME                  MAILING ADDRESS
- ----                  ---------------
                   
Charles F. Dunleavy   c/o Ocean Power Technologies, Inc.
                      1590 Reed Road
                      Pennington, NJ 08534


     EXECUTED at Pennington, NJ, on March 22, 2007.


                                        /s/ Charles F. Dunleavy
                                        ----------------------------------------
                                        Charles F. Dunleavy, Incorporator


                                      -9-

EX-3.2

                                                                     Exhibit 3.2

                                     BY-LAWS

                                       OF

                         OCEAN POWER TECHNOLOGIES, INC.

                        (Effective as of March 27, 2007)



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
ARTICLE I
STOCKHOLDERS.............................................................     1
   1.1  Place of Meetings................................................     1
   1.2  Annual Meeting...................................................     1
   1.3  Special Meetings.................................................     1
   1.4  Notice of Meetings...............................................     1
   1.5  Voting List......................................................     1
   1.6  Quorum...........................................................     2
   1.7  Adjournments.....................................................     2
   1.8  Voting and Proxies...............................................     2
   1.9  Action at Meeting................................................     2
   1.10 Nomination of Directors..........................................     3
   1.11 Notice of Business at Annual Meetings............................     5
   1.12 Conduct of Meetings..............................................     6
   1.13 No Action by Consent in Lieu of a Meeting........................     7
   1.14 Notice of Share Ownership........................................     8

ARTICLE II
DIRECTORS................................................................     8
   2.1  General Powers...................................................     8
   2.2  Number, Election and Qualification...............................     8
   2.3  Terms of Office..................................................     8
   2.4  Quorum...........................................................     8
   2.5  Action at Meeting................................................     8
   2.6  Removal..........................................................     8
   2.7  Vacancies........................................................     9
   2.8  Resignation......................................................     9
   2.9  Regular Meetings.................................................     9
   2.10 Special Meetings.................................................     9
   2.11 Notice of Special Meetings.......................................     9
   2.12 Meetings by Conference Communications Equipment..................     9
   2.13 Action by Consent................................................     9
   2.14 Committees.......................................................     9
   2.15 Compensation of Directors........................................    10

ARTICLE III
OFFICERS.................................................................    10
   3.1  Titles...........................................................    10
   3.2  Election.........................................................    10
   3.3  Qualification....................................................    10



                                        i



                                                                         
   3.4  Tenure...........................................................    10
   3.5  Resignation and Removal..........................................    11
   3.6  Vacancies........................................................    11
   3.7  Chairman of the Board............................................    11
   3.8  Chief Executive Officer..........................................    11
   3.9  President........................................................    11
   3.10 Vice Presidents..................................................    11
   3.11 Secretary and Assistant Secretaries..............................    12
   3.12 Treasurer and Assistant Treasurers...............................    12
   3.13 Salaries.........................................................    12
   3.14 Delegation of Authority..........................................    12

ARTICLE IV
CAPITAL STOCK............................................................    13
   4.1  Issuance of Stock................................................    13
   4.2  Certificates of Stock............................................    13
   4.3  Transfers........................................................    13
   4.4  Lost, Stolen or Destroyed Certificates...........................    14
   4.5  Record Date......................................................    14

ARTICLE V
GENERAL PROVISIONS.......................................................    14
   5.1  Fiscal Year......................................................    14
   5.2  Corporate Seal...................................................    14
   5.3  Waiver of Notice.................................................    14
   5.4  Voting of Securities.............................................    14
   5.5  Evidence of Authority............................................    15
   5.6  Certificate of Incorporation.....................................    15
   5.7  Severability.....................................................    15
   5.8  Pronouns.........................................................    15

ARTICLE VI
AMENDMENTS...............................................................    15




                                       ii



                                    ARTICLE I

                                  STOCKHOLDERS

     1.1 Place of Meetings. All meetings of stockholders shall be held at such
place as may be designated from time to time by the Board of Directors, the
Chairman of the Board or the Chief Executive Officer or, if not so designated,
at the principal office of the corporation.

     1.2 Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date and at a time designated by
the Board of Directors, the Chairman of the Board or the Chief Executive Officer
(which date shall not be a legal holiday in the place where the meeting is to be
held). If no annual meeting is held in accordance with the foregoing provisions,
a special meeting may be held in lieu of the annual meeting, and any action
taken at that special meeting shall have the same effect as if it had been taken
at the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.

     1.3 Special Meetings. Special meetings of stockholders for any purpose or
purposes may be called at any time by the Board of Directors, the Chairman of
the Board or the Chief Executive Officer, but such special meetings may not be
called by any other person or persons. The Board of Directors may postpone or
reschedule any previously scheduled special meeting. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.

     1.4 Notice of Meetings. Except as otherwise provided by law, notice of each
meeting of stockholders, whether annual or special, shall be given not less than
10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. Without limiting the manner by which notice
otherwise may be given to stockholders, any notice shall be effective if given
by a form of electronic transmission consented to (in a manner consistent with
the General Corporation Law of the State of Delaware) by the stockholder to whom
the notice is given. The notices of all meetings shall state the place, date and
time of the meeting and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at
such meeting. The notice of a special meeting shall state, in addition, the
purpose or purposes for which the meeting is called. If notice is given by mail,
such notice shall be deemed given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the corporation. If notice is given by electronic
transmission, such notice shall be deemed given at the time specified in Section
232 of the General Corporation Law of the State of Delaware.

     1.5 Voting List. The Secretary shall prepare, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, for a period of at least 10 days prior to the meeting:
(a) on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with notice of the meeting, or
(b) during ordinary



business hours, at the principal place of business of the corporation. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.

     1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the holders of a majority in voting power of the
shares of the capital stock of the corporation issued and outstanding and
entitled to vote at the meeting, present in person, present by means of remote
communication in a manner, if any, authorized by the Board of Directors in its
sole discretion, or represented by proxy, shall constitute a quorum for the
transaction of business. A quorum, once established at a meeting, shall not be
broken by the withdrawal of enough votes to leave less than a quorum.

     1.7 Adjournments. Any meeting of stockholders may be adjourned from time to
time to any other time and to any other place at which a meeting of stockholders
may be held under these By-laws by the stockholders present or represented at
the meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
secretary of such meeting. It shall not be necessary to notify any stockholder
of any adjournment of less than 30 days if the time and place of the adjourned
meeting, and the means of remote communication, if any, by which stockholders
and proxyholders may be deemed to be present in person and vote at such
adjourned meeting, are announced at the meeting at which adjournment is taken,
unless after the adjournment a new record date is fixed for the adjourned
meeting. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.

     1.8 Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided by law or the
Certificate of Incorporation. Each stockholder of record entitled to vote at a
meeting of stockholders may vote in person (including by means of remote
communications, if any, by which stockholders may be deemed to be present in
person and vote at such meeting) or may authorize another person or persons to
vote for such stockholder by a proxy executed or transmitted in a manner
permitted by the General Corporation Law of the State of Delaware by the
stockholder or such stockholder's authorized agent and delivered (including by
electronic transmission) to the Secretary of the corporation. No such proxy
shall be voted upon after three years from the date of its execution, unless the
proxy expressly provides for a longer period.

     1.9 Action at Meeting. When a quorum is present at any meeting, any matter
other than the election of directors to be voted upon by the stockholders at
such meeting shall be decided by the affirmative vote of the holders of a
majority in voting power of the shares of stock present or represented and
voting on such matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority in voting power of the shares of stock of that class present or
represented and voting on such matter), except when a different vote is required
by law, the Certificate of Incorporation or these By-laws. When a quorum is
present at any meeting, any election by stockholders of directors shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
on the election.


                                        2



     1.10 Nomination of Directors.

          (a) Except for (1) any directors entitled to be elected by the holders
of preferred stock, (2) any directors elected in accordance with Section 2.9
hereof by the Board of Directors to fill a vacancy or newly-created
directorships or (3) as otherwise required by applicable law or stock market
regulation, only persons who are nominated in accordance with the procedures in
this Section 1.10 shall be eligible for election as directors. Nomination for
election to the Board of Directors at a meeting of stockholders may be made (i)
by or at the direction of the Board of Directors or (ii) by any stockholder of
the corporation who (x) complies with the notice procedures set forth in Section
1.10(b) and (y) is a stockholder of record on the date of the giving of such
notice and on the record date for the determination of stockholders entitled to
vote at such meeting.

          (b) To be timely, a stockholder's notice must be received in writing
by the Secretary at the principal executive offices of the corporation as
follows: (i) in the case of an election of directors at an annual meeting of
stockholders, not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 20 days,
or delayed by more than 60 days, from the first anniversary of the preceding
year's annual meeting, a stockholder's notice must be so received not earlier
than the 120th day prior to such annual meeting and not later than the close of
business on the later of (A) the 90th day prior to such annual meeting and (B)
the tenth day following the day on which notice of the date of such annual
meeting was mailed or public disclosure of the date of such annual meeting was
made, whichever first occurs; or (ii) in the case of an election of directors at
a special meeting of stockholders, provided that the Board of Directors has
determined that directors shall be elected at such meeting, not earlier than the
120th day prior to such special meeting and not later than the close of business
on the later of (x) the 90th day prior to such special meeting and (y) the tenth
day following the day on which notice of the date of such special meeting was
mailed or public disclosure of the date of such special meeting was made,
whichever first occurs. In no event shall the adjournment or postponement of an
annual meeting (or the public announcement thereof) commence a new time period
(or extend any time period) for the giving of a stockholder's notice.

     The stockholder's notice to the Secretary shall set forth: (A) as to each
proposed nominee (1) such person's name, age, business address and, if known,
residence address, (2) such person's principal occupation or employment, (3) the
class and number of shares of stock of the corporation which are beneficially
owned by such person, and (4) any other information concerning such person that
must be disclosed as to nominees in proxy solicitations pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act");
(B) as to the stockholder giving the notice (1) such stockholder's name and
address, as they appear on the corporation's books, (2) the class and number of
shares of stock of the corporation which are owned, beneficially and of record,
by such stockholder, (3) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (4) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the person(s) named in
its notice and (5) a representation whether the stockholder intends or is part
of a group which intends (x) to deliver a proxy statement and/or form of proxy
to holders of at least the percentage of the corporation's outstanding capital
stock required to elect the nominee and/or (y) otherwise to solicit proxies from
stockholders in support of such nomination; and (C) as to the beneficial owner,
if any, on whose behalf the nomination is being made (1) such beneficial owner's
name and address, (2) the class and number of shares of stock of the corporation
which are beneficially owned by such beneficial owner, (3) a description of all
arrangements or understandings between such beneficial owner and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made and (4) a representation whether the
beneficial owner intends or is part of a group which intends (x) to deliver a
proxy


                                        3



statement and/or form of proxy to holders of at least the percentage of the
corporation's outstanding capital stock requirement to elect the nominee and/or
(y) otherwise to solicit proxies from stockholders in support of such
nomination. In addition, to be effective, the stockholder's notice must be
accompanied by the written consent of the proposed nominee to serve as a
director if elected. The corporation may require any proposed nominee to furnish
such other information as may reasonably be required to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
A stockholder shall not have complied with this Section 1.10(b) if the
stockholder (or beneficial owner, if any, on whose behalf the nomination is
made) solicits or does not solicit, as the case may be, proxies in support of
such stockholder's nominee in contravention of the representations with respect
thereto required by this Section 1.10.

          (c) The chairman of any meeting shall have the power and duty to
determine whether a nomination was made in accordance with the provisions of
this Section 1.10 (including whether the stockholder or beneficial owner, if
any, on whose behalf the nomination is made solicited (or is part of a group
which solicited) or did not so solicit, as the case may be, proxies in support
of such stockholder's nominee in compliance with the representations with
respect thereto required by this Section 1.10), and if the chairman should
determine that a nomination was not made in accordance with the provisions of
this Section 1.10, the chairman shall so declare to the meeting and such
nomination shall be disregarded.

          (d) Except as otherwise required by law, nothing in this Section 1.10
shall obligate the corporation or the Board of Directors to include in any proxy
statement or other stockholder communication distributed on behalf of the
corporation or the Board of Directors information with respect to any nominee
for director submitted by a stockholder.

          (e) Notwithstanding the foregoing provisions of this Section 1.10, if
the stockholder (or a qualified representative of the stockholder) does not
appear at the annual or special meeting of stockholders of the corporation to
present a nomination, such nomination shall be disregarded, notwithstanding that
proxies in respect of such vote may have been received by the corporation. For
purposes of this Section 1.10, to be considered a qualified representative of
the stockholder, a person must be authorized by a written instrument executed by
such stockholder or an electronic transmission delivered by such stockholder to
act for such stockholder as proxy at the meeting of stockholders and such person
must produce such written instrument or electronic transmission, or a reliable
reproduction of the written instrument or electronic transmission, at the
meeting of stockholders.

          (f) For purposes of this Section 1.10, "public disclosure" shall
include disclosure in a press release reported by the Dow Jones New Service,
Associated Press or


                                        4



comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.

     1.11 Notice of Business at Annual Meetings.

          (a) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (1) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (2) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (3) properly brought before the
meeting by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, (i) if such business relates to the nomination of a
person for election as a director of the corporation, the procedures in Section
1.10 must be complied with and (ii) if such business relates to any other
matter, the business must constitute a proper matter under Delaware law for
stockholder action and the stockholder must (x) have given timely notice thereof
in writing to the Secretary in accordance with the procedures set forth in
Section 1.11(b) and (y) be a stockholder of record on the date of the giving of
such notice and on the record date for the determination of stockholders
entitled to vote at such annual meeting.

          (b) To be timely, a stockholder's notice must be received in writing
by the Secretary at the principal executive offices of the corporation not less
than 90 days nor more than 120 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 20 days, or delayed by more
than 60 days, from the first anniversary of the preceding year's annual meeting,
a stockholder's notice must be so received not earlier than the 120th day prior
to such annual meeting and not later than the close of business on the later of
(A) the 90th day prior to such annual meeting and (B) the tenth day following
the day on which notice of the date of such annual meeting was mailed or public
disclosure of the date of such annual meeting was made, whichever first occurs.
In no event shall the adjournment or postponement of an annual meeting (or the
public announcement thereof) commence a new time period (or extend any time
period) for the giving of a stockholder's notice.

     The stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (1) a brief
description of the business desired to be brought before the annual meeting, the
text relating to the business (including the text of any resolutions proposed
for consideration and in the event that such business includes a proposal to
amend the By-laws, the language of the proposed amendment), and the reasons for
conducting such business at the annual meeting, (2) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, and the name and address of the beneficial owner, if any, on whose
behalf the proposal is made, (3) the class and number of shares of stock of the
corporation which are owned, of record and beneficially, by the stockholder and
beneficial owner, if any, (4) a description of all arrangements or
understandings between such stockholder or such beneficial owner, if any, and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of the
stockholder or such beneficial owner, if any, in such business, (5) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting and (6) a
representation whether the


                                       5


stockholder or the beneficial owner, if any, intends or is part of a group which
intends (x) to deliver a proxy statement and/or form of proxy to holders of at
least the percentage of the corporation's outstanding capital stock required to
approve or adopt the proposal and/or (y) otherwise to solicit proxies from
stockholders in support of such proposal. Notwithstanding anything in these
By-laws to the contrary, no business shall be conducted at any annual meeting of
stockholders except in accordance with the procedures set forth in this Section
1.11; provided that any stockholder proposal which complies with Rule 14a-8 of
the proxy rules (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended, and is to be included in the corporation's
proxy statement for an annual meeting of stockholders shall be deemed to comply
with the requirements of this Section 1.11. A stockholder shall not have
complied with this Section 1.11(b) if the stockholder (or beneficial owner, if
any, on whose behalf the nomination is made) solicits or does not solicit, as
the case may be, proxies in support of such stockholder's proposal in
contravention of the representations with respect thereto required by this
Section 1.11.

          (c) The chairman of any meeting shall have the power and duty to
determine whether business was properly brought before the meeting in accordance
with the provisions of this Section 1.11 (including whether the stockholder or
beneficial owner, if any, on whose behalf the proposal is made solicited (or is
part of a group which solicited) or did not so solicit, as the case may be,
proxies in support of such stockholder's proposal in compliance with the
representation with respect thereto required by this Section 1.11), and if the
chairman should determine that business was not properly brought before the
meeting in accordance with the provisions of this Section 1.11, the chairman
shall so declare to the meeting and such business shall not be brought before
the meeting.

          (d) Notwithstanding the foregoing provisions of this Section 1.11, if
the stockholder (or a qualified representative of the stockholder) does not
appear at the annual meeting of stockholders of the corporation to present
business, such business shall not be considered, notwithstanding that proxies in
respect of such vote may have been received by the corporation. For purposes of
this Section 1.11, to be considered a qualified representative of the
stockholder, a person must be authorized by a written instrument executed by the
such stockholder or an electronic transmission delivered by such stockholder to
act for such stockholder as a proxy at the meeting of stockholders and such
person must produce such written instrument or electronic transmission, or a
reliable reproduction of the written instrument or electronic transmission, at
the meeting of stockholders.

          (e) For purposes of this Section 1.11, "public disclosure" shall
include disclosure in a press release reported by the Dow Jones New Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.

     1.12 Conduct of Meetings.

          (a) Meetings of stockholders shall be presided over by the Chairman of
the Board, if any, or in the Chairman's absence by the Vice Chairman of the
Board, if any, or in the Vice Chairman's absence by the Chief Executive Officer,
or in the Chief Executive Officer's absence, by the President (if the President
shall be a different individual than the Chief Executive


                                       6


Officer), or in the President's absence by a Vice President, or in the absence
of all of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen by vote of
the stockholders at the meeting. The Secretary shall act as secretary of the
meeting, but in the Secretary's absence the chairman of the meeting may appoint
any person to act as secretary of the meeting.

          (b) The Board of Directors may adopt by resolution such rules,
regulations and procedures for the conduct of any meeting of stockholders of the
corporation as it shall deem appropriate including, without limitation, such
guidelines and procedures as it may deem appropriate regarding the participation
by means of remote communication of stockholders and proxyholders not physically
present at a meeting. Except to the extent inconsistent with such rules,
regulations and procedures as adopted by the Board of Directors, the chairman of
any meeting of stockholders shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts as, in the judgment of
such chairman, are appropriate for the proper conduct of the meeting. Such
rules, regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as shall be determined; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with the rules of parliamentary procedure.

          (c) The chairman of the meeting shall announce at the meeting when the
polls for each matter to be voted upon at the meeting will be opened and closed.
If no announcement is made, the polls shall be deemed to have opened when the
meeting is convened and closed upon the final adjournment of the meeting. After
the polls close, no ballots, proxies or votes or any revocations or changes
thereto may be accepted.

          (d) In advance of any meeting of stockholders, the Board of Directors,
the Chairman of the Board or the Chief Executive Officer shall appoint one or
more inspectors of election to act at the meeting and make a written report
thereof. One or more other persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is present,
ready and willing to act at a meeting of stockholders, the chairman of the
meeting shall appoint one or more inspectors to act at the meeting. Unless
otherwise required by law, inspectors may be officers, employees or agents of
the corporation. Each inspector, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of such
inspector's ability. The inspector shall have the duties prescribed by law and
shall take charge of the polls and, when the vote in completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.

     1.13 No Action by Consent in Lieu of a Meeting. Stockholders of the
corporation may not take any action by written consent in lieu of a meeting.


                                       7



     1.14 Notice of Share Ownership. Any person who is the beneficial owner,
directly or indirectly, of three percent or more of the corporation's
outstanding common stock shall be an "AIM reporting person." For so long as
shares of common stock of the corporation are listed on the AIM market of the
London Stock Exchange plc, an AIM reporting person shall notify the corporation
of the number of shares of common stock owned by such stockholder promptly
following the event by which such stockholder becomes an AIM reporting person.
An AIM reporting person shall promptly notify the corporation of any aggregate
change of such stockholder's beneficial ownership equal to or greater than one
percent of the corporation's outstanding common stock. Information provided to
the corporation by an AIM reporting person shall be disclosed by the corporation
to the AIM market in accordance with the rules of the AIM market.

                                   ARTICLE II

                                    DIRECTORS

     2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation.

     2.2 Number, Election and Qualification. Subject to the rights of holders of
any series of Preferred Stock to elect directors, the number of directors of the
Corporation shall be established by the Board of Directors. Election of
directors need not be by written ballot. Directors need not be stockholders of
the corporation.

     2.3 Terms of Office. Subject to the rights of holders of any series of
Preferred Stock to elect directors, each director shall serve for a term ending
on the date of the corporation's annual meeting; provided however, that the term
of each director shall continue until the election and qualification of a
successor and be subject to such director's earlier death, resignation or
removal.

     2.4 Quorum. The greater of (a) a majority of the directors at any time in
office and (b) one-third of the number of directors fixed by the Board of
Directors shall constitute a quorum. If at any meeting of the Board of Directors
there shall be less than such a quorum, a majority of the directors present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present.

     2.5 Action at Meeting. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law or by the Certificate of Incorporation.

     2.6 Removal. Subject to the rights of holders of any series of Preferred
Stock, directors of the corporation may be removed only for cause and only by
the affirmative vote of the holders of at least 75% of the votes which all the
stockholders would be entitled to cast in any annual election of directors or
class of directors.


                                       8



     2.7 Vacancies. Subject to the rights of holder of any series of Preferred
Stock, any vacancy or newly-created directorships on the Board of Directors,
however occurring, shall be filled only by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director and
shall not be filled by the stockholders. A director elected to fill a vacancy
shall hold office until the next election of the class for which such director
shall have been chosen, subject to the election and qualification of a successor
or until such director's earlier death, resignation or removal.

     2.8 Resignation. Any director may resign by delivering a resignation in
writing or by electronic transmission to the corporation at its principal office
or to the Chairman of the Board, the Chief Executive Officer or the Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some later time or upon the happening of some later event.

     2.9 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall be determined from time to
time by the Board of Directors; provided that any director who is absent when
such a determination is made shall be given notice of the determination. A
regular meeting of the Board of Directors may be held without notice immediately
after and at the same place as the annual meeting of stockholders.

     2.10 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place designated in a call by the Chairman of the Board,
the Chief Executive Officer, two or more directors, or by one director in the
event that there is only a single director in office.

     2.11 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (a)
in person or by telephone at least 24 hours in advance of the meeting, (b) by
sending written notice via reputable overnight courier, telecopy, facsimile, or
electronic transmission, or delivering written notice by hand, to such
director's last known business, home or electronic transmission address at least
48 hours in advance of the meeting, or (c) by sending written notice via
first-class mail to such director's last known business or home address at least
72 hours in advance of the meeting. A notice or waiver of notice of a meeting of
the Board of Directors need not specify the purposes of the meeting.

     2.12 Meetings by Conference Communications Equipment. Directors may
participate in meetings of the Board of Directors or any committee thereof by
means of conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such meeting.

     2.13 Action by Consent. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent to the action in writing or by electronic transmission, and
the written consents or electronic transmissions are filed with the minutes of
proceedings of the Board of Directors or committee.

     2.14 Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board of


                                       9



Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of law, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-laws for the Board of
Directors. Except as otherwise provided in the Certificate of Incorporation,
these Bylaws, or the resolution of the Board of Directors designating the
committee, a committee may create one or more subcommittees, each subcommittee
to consist of one or more members of the committee, and delegate to a
subcommittee any or all of the powers and authority of the committee.

     2.15 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary entities in any other capacity and receiving compensation for such
service.

                                  ARTICLE III

                                    OFFICERS

     3.1 Titles. The officers of the corporation shall consist of a Chief
Executive Officer, a Secretary, a Treasurer and such other officers with such
other titles as the Board of Directors shall determine, including a President, a
Chairman of the Board, a Vice Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.

     3.2 Election. The Chief Executive Officer, Treasurer and Secretary shall be
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.

     3.3 Qualification. Any two or more offices may be held by the same person.

     3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws, each officer shall hold office until such
officer's successor is elected and qualified, unless a different term is
specified in the resolution electing or appointing such officer, or until such
officer's earlier death, resignation or removal.


                                       10



     3.5 Resignation and Removal. Any officer may resign by delivering a written
resignation to the corporation at its principal office or to the Chief Executive
Officer or the Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some later time or upon the happening
of some later event.

     Any officer may be removed at any time, with or without cause, by vote of a
majority of the directors then in office.

     Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following such officer's resignation or removal, or any right to
damages on account of such removal, whether such officer's compensation be by
the month or by the year or otherwise, unless such compensation is expressly
provided for in a duly authorized written agreement with the corporation.

     3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of Chief Executive Officer,
Treasurer and Secretary. Each such successor shall hold office for the unexpired
term of such officer's predecessor and until a successor is elected and
qualified, or until such officer's earlier death, resignation or removal.

     3.7 Chairman of the Board. The Board of Directors may appoint from its
members a Chairman of the Board, who need not be an employee or officer of the
corporation. If the Board of Directors appoints a Chairman of the Board, such
Chairman shall perform such duties and possess such powers as are assigned by
the Board of Directors and, if the Chairman of the Board is also designated as
the corporation's Chief Executive Officer, shall have the powers and duties of
the Chief Executive Officer prescribed in Section 3.8 of these By-laws. Unless
otherwise provided by the Board of Directors, the Chairman of the Board shall
preside at all meetings of the Board of Directors and stockholders.

     3.8 Chief Executive Officer. The Chief Executive Officer shall have general
charge and supervision of the business of the Corporation subject to the
direction of the Board of Directors. The Chief Executive Officer may, but need
not, also be the President.

     3.9 President. If the Chief Executive Officer is not also the President,
the President shall perform such duties and shall have such powers as the Board
of Directors or the Chief Executive Officer may from time to time prescribe.

     3.10 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer or the President (if the President is not
the Chief Executive Officer), the Vice President (or if there shall be more than
one, the Vice Presidents in the order determined by the Board of Directors)
shall perform the duties of the Chief Executive Officer and when so performing
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The Board of Directors may assign to any Vice President
the title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.


                                       11



     3.11 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to attend all meetings of stockholders and the Board of Directors and keep a
record of the proceedings, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.

     Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.

     In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the chairman of the meeting shall designate a
temporary secretary to keep a record of the meeting.

     3.12 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned by the
Board of Directors or the Chief Executive Officer. In addition, the Treasurer
shall perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.

     The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Treasurer, the Assistant Treasurer (or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.

     3.13 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.

     3.14 Delegation of Authority. The Board of Directors may from time to time
delegate the powers or duties of any officer to any other officer or agent,
notwithstanding any provision hereof.


                                       12



                                   ARTICLE IV

                                  CAPITAL STOCK

     4.1 Issuance of Stock. Subject to the provisions of the Certificate of
Incorporation, the whole or any part of any unissued balance of the authorized
capital stock of the corporation or the whole or any part of any shares of the
authorized capital stock of the corporation held in the corporation's treasury
may be issued, sold, transferred or otherwise disposed of by vote of the Board
of Directors in such manner, for such lawful consideration and on such terms as
the Board of Directors may determine.

     4.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
such holder in the corporation unless and until the Board of Directors adopts a
resolution permitting shares to be uncertificated consistent with the General
Corporation Law of the State of Delaware. Each such certificate shall be signed
by, or in the name of the corporation by, the Chairman or Vice Chairman, if any,
of the Board of Directors, or the Chief Executive Officer or a Vice President,
and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation. Any or all of the signatures on the certificate
may be a facsimile.

     Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, these By-laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.

     There shall be set forth on the face or back of each certificate
representing shares of such class or series of stock of the corporation a
statement that the corporation will furnish without charge to each stockholder
who so requests a copy of the full text of the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.

     4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-laws.


                                       13



     4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen or destroyed, upon such terms and conditions as the Board
of Directors may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving of such indemnity and posting of
such bond as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.

     4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.

     If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. If no record date is fixed, the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.

     A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

                                   ARTICLE V

                               GENERAL PROVISIONS

     5.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of May of each year and end on the last day of April in each year.

     5.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.

     5.3 Waiver of Notice. Whenever notice is required to be given by law, by
the Certificate of Incorporation or by these By-laws, a written waiver signed by
the person entitled to notice, or a waiver by electronic transmission by the
person entitled to notice, whether before, at or after the time stated in such
notice, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.

     5.4 Voting of Securities. Except as the Board of Directors may otherwise
designate, the Chief Executive Officer or the Treasurer may waive notice of, and
act as, or appoint any person or persons to act as, proxy or attorney-in-fact
for this corporation (with or without power


                                       14



of substitution) at any meeting of stockholders or securityholders of any other
entity, the securities of which may be held by this corporation.

     5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.

     5.6 Certificate of Incorporation. All references in these By-laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.

     5.7 Severability. Any determination that any provision of these By-laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.

     5.8 Pronouns. All pronouns used in these By-laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.

                                   ARTICLE VI

                                   AMENDMENTS

     These By-laws may be altered, amended or repealed, in whole or in part, or
new By-laws may be adopted by the Board of Directors or by the stockholders as
provided in the Certificate of Incorporation.


                                       15

EX-10.1

Exhibit 10.1

AMENDMENT TO THE CONTRACT FOR THE DEVELOPMENT AND
APPLICATION OF A SEA WAVE ENERGY GENERATION SYSTEM IN FRANCE

This Agreement is made in Madrid, on April 2, 2007.

BETWEEN

IBERDROLA ENERGIES RENOUVELABLES S.A.S., a company existing and organized under French law, domiciled at 9, rue Kerautret Botmel, 35000 Rennes, France, (hereinafter “IBERENOVA S.A.S.”), duly represented by Mr. Alberto Seisdedos Fernandez del Pino and Mr. Rafael De Icaza de La Sota, acting in their capacity as President and General Manager respectively.

And

TOTAL ENERGIE DEVELOPPEMENT, S.A. (hereinafter “TED”), a company existing and organized under French law, having its registered office at 92078 Paris la Defense Cedex 2, Place de la Coupole, La Defense 6, France, represented by Giles Cochevelou acting in his capacity as President.

And

OCEAN POWER TECHNOLOGIES Ltd. (hereinafter “OPT”) a company wholly owned by OPT Inc. existing and organized under the laws of England and Wales having its registered office located at Warwick Innovation Centre, Gallows Hill, CV34 6UW Warwick, England, United Kingdom, duly represented by Mr. Mark Draper, acting in his capacity as Chief Executive.

And

OCEAN POWER TECHNOLOGIES Inc. (hereinafter “OPT Inc.”) a company existing and organized under the laws of United States of America, having its registered office located at Pennington, New Jersey, United States of America, represented by Dr. George Taylor, acting in his capacity as Chief Executive officer of the company.

WHEREAS:

I.-	The Parties are the parties to a Contract entered into on June 17, 2005 for the development and application of a Sea Wave Energy Generation System in France (the “Contract”). IBERDROLA ENERGIES RENOUVELABLES SAS became a party to the Contract by substituting on July 18, 2006 its parent company IBERDROLA ENERGÍAS RENOVABLES, S.A. as party thereof.
II.-	The Parties are willing to modify clause 3 of the Contract in order to extend the period during which the Parties agreed to jointly conduct Feasibility Studies (as defined in the Contract).

Now, therefore, the Parties agree the following:

1.	To modify the first paragraph of clause 3 of the Contract referred to in Recital I above, and therefore as from the date hereof it shall read as follows:
	“During an initial period of 36 months from the execution date of this Agreement, the Parties will jointly conduct studies (the “Feasibility Studies”) in respect of the following aspects of the Project”
	And to modify the fourth paragraph of Clause 3 of the Contract as from the date hereof so it shall read as follows:
	“The Parties shall use reasonable efforts to complete the Feasibility Studies in accordance with the work program. If the Parties do not have sufficient information thirty six (36) months after signing this Agreement to make the decision contemplated in this section regarding the development of the Project, the Parties, through the Steering Committee, may agree to extend the initial phase up to a maximum of an additional six-month period.”
2.	Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meaning given to them in the Contract.
3.	This Amendment shall be incorporated as part of the Contract.
4.	Except as otherwise provided for in this Amendment, all the terms and conditions of the Contract shall continue being applicable.
5.	Any disputes related to this Amendment shall be settled in accordance with Clause 11 of the Contract.

In witness whereof, the Parties execute four original counterparts hereof in all its pages to one sole effect, on the date and at the place indicated above.

IBERDROLA ENERGIES RENOUVELABLES S.A.S.
Duly authorized by

/s/ Alberto Seisdedos	/s/ Rafael De Icaza de La Sota
Alberto Seisdedos	Rafael De Icaza de La Sota

TOTAL ENERGIE DEVELOPMENT, S.A.
Duly authorised by

/s/ Giles Cochevelou

OCEAN POWER TECHNOLOGIES Ltd.
Duly authorised by Mr. Mark Draper

/s/ Mr. Mark Draper

OCEAN POWER TECHNOLOGIES Inc.
Duly authorised by Dr. George Taylor

/s/ Dr. George Taylor

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, George W. Taylor, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ocean Power Technologies, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ George W. Taylor  

George W. Taylor 

Chief Executive Officer 

Date: September 14, 2007

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, Charles F. Dunleavy, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ocean Power Technologies, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Charles F. Dunleavy  

Charles F. Dunleavy 

Chief Financial Officer 

Date: September 14, 2007

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Ocean Power Technologies, Inc. (the “Company”) for the period ended July 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, George W. Taylor, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ George W. Taylor  

George W. Taylor 

Chief Executive Officer 

Date: September 14, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Ocean Power Technologies, Inc. (the “Company”) for the period ended July 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles F. Dunleavy, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles F. Dunleavy  

Charles F. Dunleavy 

Chief Financial Officer 

Date: September 14, 2007