(

)

Summary of Significant Accounting Policies

(a)

Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Participation of stockholders other than the Company in the net assets and in the earnings or losses of a consolidated subsidiary is reflected as a non-controlling interest in the Company's Consolidated Balance Sheets and Statements of Operations, which adjusts the Company's consolidated results of operations to reflect only the Company's share of the earnings or losses of the consolidated subsidiary

September 2015,

the Company re-purchased the non-controlling interest (consisting of

11.8%

) of the Company's Australian subsidiary, Ocean Power Technologies (Australasia) Pty. Ltd. (“OPTA”) for nominal consideration and now has

100%

ownership of OPTA. OPTA owns

100%

of Victorian Wave Partners Pty. Ltd. (“VWP”), which is also organized under the laws of Australia. As of

April 30, 2017

and

2016,

there were

such entities.

The Company also periodically evaluates its relationships with other entities to identify whether they are variable interest entities, 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. As of

April 30, 2016,

there were

such entities.

(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; fair value of warrant liabilities; valuation allowances for receivables and deferred income tax assets; estimated costs to complete projects and percentage of completion of customer contracts for purposes of revenue recognition. Actual results could differ from those estimates. The current economic environment, particularly the macroeconomic pressures in certain European countries, has increased the degree of uncertainty inherent in those estimates and assumptions.

(c)	Revenue Recognition

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

The Company has

two

types of fixed price contracts, firm fixed price and cost-sharing. Under firm fixed price contracts, the Company receives an agreed-upon amount for providing products and services specified in the contract, a profit or loss is recognized depending on whether actual costs are more or less than the agreed upon amount. Under cost-sharing contracts, the fixed amount agreed upon with the customer is only intended to fund a portion of the costs on a specific project. Under cost sharing contracts, an amount corresponding to the revenue is recorded in cost of revenues, resulting in gross profit on these contracts of zero. The Company’s share of the costs is recorded as product development expense.

Generally, revenue under fixed price or cost plus contracts is recognized using the cost to cost percentage-of-completion method, measured by 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 the customer acknowledges that such criteria have been satisfied. If an arrangement involves multiple deliverables, the delivered items are considered separate units of accounting if the items have value on a stand-alone basis. Amounts allocated to each element are based on its objectively determined fair value, such as the sales price for the product or service when it is sold separately or competitor prices for similar products or services.

In addition, recognition of revenue (and the related costs)

may

be deferred for fixed price contracts until contract completion if the Company is unable to reasonably estimate the total costs of the project prior to completion. These contracts are subject to interpretation and management

may

make a judgment as to the amount of revenue earned and recorded. Because the Company has a small number of contracts, revisions to the percentage-of-completion determination, management interpretation or delays in meeting performance and

contractual criteria or in completing projects

may

have a significant effect on revenue for the periods involved. Upon anticipating a loss on a contract, the Company recognizes the full amount of the anticipated loss in the current period.

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 and cash collections exceed costs incurred plus applicable profit margin, they are recorded as unearned revenues.

(d)	Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of

three

months or less when purchased to be cash equivalents. The Company invests excess cash in an overnight U.S. government securities repurchase bank account and a money market account. In accordance with the terms of the repurchase agreement, the Company does

not

take possession of the related securities. The agreement contains provisions to ensure that the market value of the underlying assets remain sufficient to protect the Company in the event of default by the bank by requiring that the underlying securities have a total market value of at least

100%

of the bank’s total obligations under the agreement. The following table summarizes cash and cash equivalents for the years ended

April 30, 2017

and

2016:

	April 30, 2017		April 30, 2016
	(in thousands)

Checking and savings accounts	$	4,241	$	4,535
Overnight repurchase account		4,180		2,195
	$	8,421	$	6,730

(e)	Marketable Securities

Marketable securities with original maturities longer than

three

months but that mature in less than

one

year from the balance sheet date are classified as current assets. Marketable securities that the Company has the intent and ability to hold to maturity are classified as investments held-to-maturity and are reported at amortized cost. The difference between the acquisition cost and face values of held-to-maturity investments is amortized over the remaining term of the investments and added to or subtracted from the acquisition cost and interest income. As of

April 30, 2017

and,

2016,

all of the Company’s investments were classified as held-to-maturity.

(f)	Restricted Cash and Credit Facility

As of

April 30, 2017

and

2016,

a portion of the Company’s cash was restricted under the terms of

three

security agreements.

One agreement was between the Company and Barclays Bank. Under this agreement, the cash was on deposit at Barclays Bank and served as security for letters of credit and bank guarantees that were issued by Barclays Bank on behalf of OPT LTD,

one

of the Company's subsidiaries, under a credit facility established by Barclays Bank for OPT LTD. The credit facility is approximately

€0.3million

(

$0.3

million) and carries a fee of

per annum of the amount of any such obligations issued by Barclays Bank. The credit facility does

not

have an expiration date, but is cancelable at the discretion of the bank. As of both

April 30, 2017

and

2016,

there was

€0.3

million (

$0.3

million) in letters of credit outstanding under this agreement.

The

second

agreement is between the Company and Santander Bank. Under this agreement, the cash is on deposit at Santander Bank and serves as security for letter of credit issued by Santander Bank for the lease of new warehouse/office space in Monroe Township, New Jersey. The agreement cannot be extended beyond

January 31, 2025,

but is cancelable at the discretion of the bank.

The

third

agreement was between the Company and the New Jersey Board of Public Utilities (“NJBPU”). The Company received a

$0.5

million recoverable grant award from the NJBPU, repayable over a

five

-year period beginning in

November 2011.

The agreement also required the Company to annually assign to the NJBPU a certificate of deposit in an amount equal to the outstanding grant balance. As of

April 30, 2017,

the grant was fully repaid and therefore there was

certificate of deposit.

The following table summarizes restricted cash for the years ended

April 30, 2017

and

2016:

	April 30, 2017		April 30, 2016
	(in thousands)

Barclay's Bank Agreement	$	334	$	250
Santander Bank		154		-
NJBPU agreement		-		50
	$	488	$	300

(g)	Property and Equipment

Property and equipment consists primarily of equipment, furnishings, fixtures, computer equipment and leasehold improvements and are recorded at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets. Expenses for maintenance and repairs are charged to operations as incurred. Property and equipment is also 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 in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Description	Estimated useful life (years)

Equipment		5	-	7
Computer equipment & software			3
Office furniture & fixtures		3	-	7
Equipment under capitalized lease		Over the life of the lease
Leasehold improvements		Shorter of the estimated useful life or lease term

(h)	Foreign Exchange Gains and Losses

The Company has invested in certain certificates of deposit and has maintained cash accounts that are denominated in British pounds sterling, Euros and Australian dollars. These amounts are included in cash, cash equivalents, restricted cash and marketable securities on the accompanying consolidated balance sheets. 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)” in the accompanying consolidated statements of operations.

(i)

Patents

External costs related to the filing of patents, including legal and filing fees, are capitalized if expenses related to the filing of a patent are significant. The Company continually re-assesses the remaining useful lives of its long-lived assets and costs are expensed when it is

longer probable that such technology will be utilized. Patents are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the patent

may

not

be recoverable.

new patents were granted in fiscal years

2017

and

2016.

There was

amortization of patents recorded during the years ended

April 30, 2017

and

2016,

as the patents are fully amortized.

(j)	Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances, bank certificates of deposit and trade receivables. The Company invests its excess cash in highly liquid investments (principally, short-term bank deposits, Treasury bills, Treasury notes and money market funds) and does

not

believe that it is exposed to any significant risks related to its cash accounts, money market funds or certificates of deposit.

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 at least

one

of the periods indicated:

	2017			2016

Mitsui Engineering & Shipbuilding		80	%		14	%
U.S. Department of Defense Office of Naval Research		20	%		0	%
U.S. Department of Energy		0	%		28	%
EU (WavePort Project)		0	%		58	%
		100	%		100	%

The loss of, or a significant reduction in revenues from a current customer could significantly impact the Company's financial position or results of operations. The Company does

not

require its customers to maintain collateral.

(k)	Warrant Liabilities

The Company's warrants to purchase shares of its common stock are classified as warrant liabilities and are recorded at fair value. The warrant liabilities are subject to re-measurement at each balance sheet date and the Company recognizes any change in fair value in its consolidated statements of operations within “(Change in fair value of warrant liabilities”. The Company will continue to adjust the carrying value of the warrants for changes in the estimated fair value until such time as these instruments are exercised or expire. At that time, the liabilities will be reclassified to “additional paid-in capital”, a component of “stockholders' equity” on the consolidated balance sheets.

(l)	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 and non-vested performance-based shares, were excluded from the diluted loss per share calculation due to their anti-dilutive effect.

In computing diluted net loss per share, options to purchase shares of common stock, warrants on common stock and non-vested restricted stock issued to employees and non-employee directors, totaling

657,078

and

129,311

for the years ended

April

30,

2017

and

2016,

respectively, were excluded from each of the computations as the effect would be anti-dilutive due to the Company's losses.

(m)	Share-Based Compensation

Costs resulting from all share-based payment transactions are recognized in the consolidated financial statements at their fair values. The aggregate share-based compensation expense recorded in the consolidated statements of operations for the years ended

April

30,

2017

and

2016

was approximately

$1.2

million and

$0.3

million, respectively. The following table summarizes share-based compensation related to the Company’s share-based plans by expense category for the years ended

April 30, 2017

and

2016:

	Year ended April 30,
	2017		2016
	(in thousands)

Product development	$	525	$	131
Selling, general and administratvie		707		206
Total share-based compensation expense	$	1,232	$	337

Valuation Assumptions for Restricted Stock and Options Granted During the Years Ended

April

30,

2017

and

201

Restricted Stock

Compensation expense for non-vested restricted stock is recorded based on its market value on the date of grant and recognized ratably over the associated service and performance period. If the vesting requirement of performance-based grants is tied to the Company's total shareholder return (TSR) relative to the total shareholder return of alternative energy Exchange Traded Funds as measured over a specific performance period then the compensation expense for these awards with market-based vesting is calculated based on the estimated fair value as of the grant date utilizing a Monte Carlo simulation model and is recognized over the service period on a straight-line basis.

Options

The fair value of each stock option granted, for both service-based and performance-based vesting requirements during the year ended

April 30 2017,

was estimated at the date of grant using the Black-Scholes option pricing model, assuming

dividends, and using the weighted average valuation assumptions noted in the below 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 SEC’s Staff Accounting Bulletin

No.

110,

Share-Based Payment.

Expected volatility was based on the Company’s historical volatility during the

twelve

months ended

April 30, 2017.

	Twelve months ended April 30,
	2017			2016

Risk-free interest rate		1.3	%		1.6	%
Expected dividend yield		0.0	%		0.0	%
Expected life (in years)		5.50			5.5
Expected volatility		96.2	%		85.7	%

The above assumptions were used to determine the weighted average per share fair value of

$2.52

and

0.58

for stock options granted during the years ended

April

30,

2017

and

2016,

respectively.

(n)	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 carry forwards. 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 carry forwards 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.

The Company recognizes the effect of income tax positions only if those positions are more likely than

not

of being sustained upon examination. Recognized income tax positions are measured at the largest amount that is greater than

50%

likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses, to the extent incurred.

(o)	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.

(p)	Recently Issued Accounting Standards

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2014

09,

“

Revenue from Contracts with Customers (Topic

606

)

.”

ASU

2014

outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a

five

-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The FASB subsequently issued additional clarifying standards to address issues arising from implementation of the new revenue standard, including a

one

-year deferral of the effective date for the new revenue standard. Public companies should now apply the guidance in ASU

2014

to annual reporting periods beginning after

December

15,

2017

and interim periods within those annual periods. Earlier application is permitted only as of annual reporting periods beginning after

December

15,

2016,

including interim periods within that annual period. Companies

may

use either a full retrospective or a modified retrospective approach to adopt ASU

2014

09.

The Company has

not

yet completed its final review of the impact of this guidance; however the Company anticipates applying the modified retrospective method upon adoption of ASU

2014

May 1, 2018.

The impact to the Company could be affected by the nature and terms of potential future contracts with customers, as those contracts

may

have terms that differ from the company’s current contracts.

August 2014,

the FASB issued ASU

2014

15,

“Disclosure of Uncertainties about an Entity’s Ability

to Continue as a Going Concern”,

which describes how an entity should assess its ability to meet obligations and sets rules for how this information should be disclosed in the financial statements. The standard provides accounting guidance that will be used along with existing auditing standards. The new standard applies to all entities for the

first

annual period ending after

December 15, 2016,

and interim periods thereafter. Early application is permitted. The Company adopted ASU

2014

for the fiscal year

2017.

The Company’s addition of the standard did

not

have a material impact on its disclosures.

See section (b) “Liquidity/Going Concern” within Note (

) “Background and Liquidity” of these financial statements for further discussion on the Company’s ability to continue as a going concern.

January 2016,

the FASB issued ASU

No.

2016

01,

“Recognition and Measurement of Financial Assets and Financial Liabilities”,

which makes limited amendments to the guidance in U.S. GAAP on the classification and measurement of financial instruments. The update significantly revises an entity's accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The update will take effect for public companies for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. The Company will evaluate the effect of ASU

2016

for future periods as applicable.

February 2016,

the FASB issued ASU

No.

2016

02,

“Leases (Topic

842

).” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU

2016

is effective for annual periods beginning after

December

15,

2018,

including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the effect ASU

2016

will have on its consolidated financial statements and disclosures and has

not

yet determined the effect of the standard on its ongoing financial reporting at this time.

March 2016,

the FASB issued ASU

No.

2016

09,

“Compensation - Stock Compensation (Topic

718

)

”

The amendments of ASU

No.

2016

were issued as part of the FASB's Simplification initiative focused on improving areas of GAAP for which cost and complexity

may

be reduced while maintaining or improving the usefulness of information disclosed within the financial statements. The amendments focused on simplification specifically with regard to share-based payment transactions, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. The guidance in ASU

No.

2016

is effective for fiscal years beginning after

December 15, 2016,

and interim periods within those annual periods. Early adoption is permitted. The Company will evaluate the effect of ASU

2016

for future periods as applicable.

August 2016,

the FASB issued ASU

2016

15,

“Statement of Cash Flows (Topic

230

): Classification

of Certain Cash Receipts and Cash Payments”,

providing additional guidance on

eight

specific cash flow classification issues. The goal of the ASU is to reduce diversity in practice of classifying certain items. The amendments in the ASU are effective for

fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years and early adoption is permitted. The Company is evaluating the effect ASU

2016

will have on its consolidated financial statements and disclosures and has determined the standard will have

impact on its ongoing financial reporting at this time.

November 2016,

the FASB issued ASU

2016

18,

“Statement of Cash Flows (Topic

230

): Restricted

Cash”,

providing additional guidance on specific restricted cash flow classification on the cash flow statement. Cash flow should include restricted cash in total cash, and an entity is required to provide a disclosure indicating the reconciliation of all cash accounts. The amendments in the ASU are effective for

fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years and early adoption is permitted. The Company is evaluating the effect ASU

2016

will have on its consolidated financial statements and disclosures and believes the effect of the standard on its ongoing financial reporting will

not

have a material impact.

January 2017,

the FASB issued ASU

2017

03,

“Accounting Changes and Error Corrections (Topic

250

) and Investments- Equity Method and Joint Ventures (Topic

323

)”, providing guidance on how a company should evaluate ASUs that have

not

yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted.

The Company is currently evaluating the effect ASU

2017

will have on its consolidated financial statements and disclosures.