Good morning, ladies and gentlemen, and welcome to the Ocean Power Technologies Fiscal 2012 Fourth Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and webcast. I would now like to turn the conference over to Chief Financial Officer of Ocean Power Technologies, Mr. Brian Posner.

Thank you. Welcome to Ocean Power Technologies' earnings conference call for the fourth quarter ended April 30, 2012. OPT issued its earnings press release earlier today and we will soon file the company's annual report on Form 10-K with the Securities and Exchange Commission. All public filings can be viewed on the SEC website at sec.gov or you may go to the OPT website, oceanpowertechnologies.com. With me on today's call is Chuck Dunleavy, our Chief Executive Officer. Please advance to Slide 2 of our presentation. During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. As indicated in this slide, these forward-looking statements are subject to numerous assumptions made by management regarding future circumstances over which the company may have little or no control and involve risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. We refer you to the company's Form 10-K and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. I'll now turn the call over to Chuck Dunleavy, OPT's CEO.

Thank you, Brian, and thanks, everyone, for being with us today. Brian and I will be available to answer questions following our prepared remarks. First, turning to Slide 3, let me provide an update on fiscal 2012 and other recent developments in a very productive time here at Ocean Power Technologies. As I'll discuss further in a moment, we just signed an agreement with Lockheed Martin to enhance our efforts to bring a large-scale wave power station to Australia that leverages a AUD 66.5 million grant, which we have received from the Commonwealth. This is very exciting, and we're gratified to have the support of a strong company such as Lockheed Martin behind the initiative. In addition, building on the successful completion of ocean testing of OPT's first utility-scale PB150 off Scotland, we recently completed testing of the company's new advanced power take-off system for our PB150 PowerBuoy in Oregon. We're also making progress towards deployment of that system. We continue to work on our WavePort project in Spain and are accelerating our business development efforts in the autonomous PowerBuoy market after the very successful operation of the U.S. Navy's Littoral Expeditionary Autonomous PowerBuoy. At the same time, we reduced our annual operating loss and our cash usage as well during fiscal 2012. Now, let me go into more detail on some of our latest developments. Turning to Slide 4. A very important milestone for OPT in fiscal year 2012 was the ocean deployment of our LEAP autonomous PowerBuoy off New Jersey. This buoy, which is significantly smaller and more compact than our utility PowerBuoys, exceeded the project's specification for payload power delivery during ocean operations last fall. Our partners for this effort included Rutgers University's Institute of Marine and Coastal Sciences, CODAR Ocean Sensors and Mikros Systems Corporation. The…

Thank you, Chuck. As noted on Slide 8, OPT reported revenues of $1.4 million for the fiscal fourth quarter as compared to revenues of $1.9 million for the 3 months ended April 30, 2011. This decrease primarily reflects lower revenues related to the company's project in Reedsport, Oregon as well as the lower revenue project of the Navy's LEAP program on a year-over-year basis since that project was successfully completed in the fiscal 2012 third quarter. Each revenue declines were partially offset by an increase in revenue from the company's WavePort project and from development work related to the next-generation PowerBuoy. The operating loss for the 3 months ended April 30, 2012, was $4.2 million as compared to an operating loss of $5.4 million for the 3 months ended April 30, 2011. The reduction in operating loss year-over-year was due primarily to a decrease in product development cost, especially for the PB150 system that underwent successful Ocean trials off the coast of Scotland in 2011. In addition, the lower cost related to PB150 PowerBuoy in Reedsport, Oregon partially offset by cost related to the increased investment in advanced technology development. The net loss was $4.1 million for the 3 months ended April 30, 2012, compared to $5.3 million for the same period in the prior year. This decrease in net loss was due primarily to a decline in operating. For the full fiscal year ended April 30, 2012, OPT reported revenues of $5.7 million as compared to revenues of $6.7 million for fiscal 2011. This decrease primarily reflects lower revenues associated with the U.S. Navy's deepwater active detection system project and declines in revenue prior to the company's LEAP program as well as the project in Oregon. The fiscal 2012 revenue decline was partially offset by work on the company's…

Thanks, Brian. Turning to Slide 10. It's also important to note that during fiscal year 2012, we made some significant changes to our leadership team. Tim Stiven was appointed as Managing Director of Ocean Power Technologies Limited, OPT's U.K.-based fully owned subsidiary. Tim is responsible for all of OPT's U.K. and European operations. During his career, Tim has held a number of positions involving marine engineering and sustainable energy. At QinetiQ, an international defense and security company, he led new market ventures in the energy and environmental markets. In addition, as a Marine Engineer Officer in the Royal Navy, he specialized in leading complex technology development programs to meet the Navy's future equipment requirement. He holds Masters of Science degrees in Naval Architecture from University College in London and in Sustainable Energy Systems from the University of Edinburgh. He's also a Chartered Engineer. We further announced in fiscal 2012 2 new members of our Board of Directors, David Davis and Bruce Peacock. David is the Vice President of PJM Grid Development for the independent power producer NRG Energy. PJM International is the largest independent system operator in North America. They would bring strong relationship with regulators, legislatures and other stakeholders within both the renewable and conventional energy sectors, with over 20 years of applicable experience. Bruce Peacock, currently the Chief Business Officer of Ophthotech, a bio-pharmaceutical company, has over 30 years experience at companies with international operations, bringing new products to commercial status in regulatory-driven markets. Both of these individuals have already played active roles in shaping our strategy for fiscal 2013 and beyond. Turning now to Slide 11. I'd like to state our near-term goals over the coming months. We completed our goal stated in the third quarter earnings call to complete land testing of the power take-off for our Oregon PB150. And as I mentioned earlier, we're on track to be ready to deploy our first Oregon PB150 late this summer, the first step in OPT's plans to build up to a 1.5-megawatt power station in Reedsport. We will also continue to provide further updates on our ongoing business initiatives in Australia and Japan, as well as our PowerBuoy for the WavePort project in Spain. In addition, we expect fiscal 2013 will include developments with regard to commercialization of our autonomous and utility PowerBuoys and growth opportunities around the globe. We continue to believe the company is well positioned for a very active year and look forward to keeping our investors posted on milestones and order flow going forward. This concludes our prepared statement for the year-end review. We'll now open the call for questions. So operator, would you please go ahead.

[Operator Instructions] And your first question comes from Jason Feldman of UBS.

So, it certainly sounds positive that you have this teaming agreement with Lockheed. But I was hoping you could explain a little bit more about exactly what it means and what it doesn't mean. What else still needs to happen to get the project really started? Is this still just a question of securing financing?

Jason, it's Brian. I'll take a shot. Basically, what it means is we have combined expertise in OPT and Lockheed Martin to work on this project and move it forward. Basically, using our wave power technology with their expertise in such areas as design, production, system integration and overall program management. So, it gives a validation to the project that perhaps wasn't there before we entered into this teaming agreement. What we're working on very hard now, in the next critical steps, are working on getting a power purchase agreement as well as financing. It's our responsibility at OPT to do that but we'll also have the support of Lockheed Martin in this process as well. So, those are the next major milestones on this project. We're also doing a -- Chuck had mentioned in his prepared remarks, community consultation, we're in contact with the Commonwealth quite a bit there as well. So, it's -- again, the next critical milestone for power purchase agreement and financing to move this project forward.

Okay. So...

I'd just add -- excuse me, Jason, just a couple of quick points to what Brian just said. It's maybe not well known that Lockheed Martin does have a significant presence in Australia already and when you take that into consideration, along with the fact that they've articulated a very clear strategy with respect to its presence in energy security and renewable energy, that I think makes a very strong statement to the very stakeholders that we're talking to, as Brian just said, in connection with financing and also the power purchase agreement.

Okay. So, is it fair to characterize it as to, say, the expectation is that this agreement should help, I guess, in 2 primary areas. One is, when hopefully you actually start manufacturing and delivering on this, they'll obviously help with the logistics and manufacturing, enterprising, et cetera, as you've described. But second, the fact that you have this agreement essentially gives you additional credibility in your attempts to get financing?

I think that's a very good way of describing the case.

Okay. And potentially, they have contacts as well, which should be a plus. And is this a replacement? I think your previous relationship in Australia was with Leighton? Is this...

You're spot on, good recollection. We'd previously announced that we were working with Leighton. They continue to be a potential supplier in connection with this project. But as to that, the leadership role, which they had assumed with respect to this project, that now is being taken by Lockheed.

Okay, got it. And then last question, I make -- cash at the current burn rate, I know that you said very directly that you expect the cash burn rate to be lower next year, but I mean at the current rate, it's a little bit more than 2 years of cash remaining. Do you see that as sufficient time to kind of further commercialize your product? And wind up being in a different position? Or at what point do you need to start thinking about alternative financing options for the company?

Sure. That's a really important point and one which our board and management spends a lot of time on, this very key strategic point. First of all, we do believe that our cash is sufficient to get it to a point where we really are generating internal cash, and that's a really important point. It's one of the reasons why we're significantly accelerating our resources to selling very actively out there, selling and marketing the autonomous product because it has much shorter cycle time, not only to getting the order but also fulfilling the order, completing the revenue cycle for it. And we believe it has some substantial foster opportunities for the company, again, speaking to these, what we refer to as autonomous PowerBuoy markets, still very much dedicated as well to the developing the utility side of this marketplace. But with that all said, we very much are looking at and considering other ways to bring capital into the company. Not just from the more traditional sense, which is go to market, hire a banker, et cetera, but other ways which include actively talking with prospective strategic partners and as well at the project finance level. And this is, I think, exactly the path that we're pursuing in Australia, which is to say, the formation of the special purpose vehicle. When that will enable funding to be attractive to it stands on its own, OPT's revenue generation opportunity is to sell product and services to that special purpose vehicle. That's another way to generate profit and funds internally for the company but without specifically going to a more archetypal bank-based financing. So, we're looking at all of those and really accelerating our efforts to driving from the standpoint of organic profit generation as soon as we can.

Your next question comes from Mr. Rob Stone, Cowen and Company.

I have a couple of questions about Australia, as well. One is with respect to the ability to sign PPAs. To what extent is the government involved in requiring or incenting the local players in the power market to work with you on this?

Sure. I think one important thing that the government has done is not only articulated a general strategy and policy which is very supportive of renewable energy, but in addition, in 2011, they passed so-called Carbon Tax -- or Carbon Act, which set a price for carbon, if I remember correctly, AUD 23 per ton of CO2, which is a substantial price, especially if you look at other worldwide conditions on this point. But I think those 2 points are very essential to the level of support from the government and it manifested not only in, again the articulation policy and the carbon law, but -- or regulations rather, but you also see it in the number of actual programs at both the federal and state levels in Australia to foster the growth of renewable energy projects. So, there have been recent announcements about some other companies within marine renewable energy space and other renewables, solar and wind, who have enjoyed various forms of actual grant from the Commonwealth, and in some cases the state government. So very, very active market, one which we find very attractive and one in which we hope to gain a lot of traction.

Okay. And for a project of this size, how close to the goal line does the initial grants get you? Say, what's the scope of the funding that's needed overall?

What we've said in the past is the grant represents about 30% of the total budget of cost for the project.

That's a very substantial piece of it, no doubt, and it's a great support to the project.

Okay. My next question is on Reedsport. You'll hopefully float the boat by sometime in the summer. What's your expectation in terms of project timeline going from one PowerBuoy to the second one or multiple unit deployment?

Sure. I think quick answer is we've not articulated an exact timeline associated with the build out or scale up of that site, Rob, and I'll take a pass on in terms of anything specific. But, we're clearly on a force to leverage this particular launch and deployment. We've been very grateful for the support of both DOE, U.S. Department of Energy, as well as PNGC Power, as we noted a little bit early in our prepared remarks. And we are talking with other potential customers for the build out, for the scale up, and I think, though, the quickest answer to your question is we'll have to stay tuned. We are definitely working on that and I think it's fair to say that the progress that we make with this first system will also be an important step or milestone in trying to bring home that goal of funding for the build out of the system. So, we're right now actively involved with trying to deliver that.

Okay. I guess to put a slightly finer point on the question then, how long do you think, roughly, you would need that system in the water to validate performance and then be in a position to take that data to seek additional investment?

Sure. Well, I guess with bringing a new technology to market, there's never enough time in the field or within which your installed prime phase [ph] is out there performing in customer's hands but that's kind of -- more of a flip than anything. But it is true, I think, in some respects. A little more specifically, though, to answer your question. Number one, the contract that we have with the DOE for this system is for a total of 18 months' performance of the system. We believe that we can demonstrate strong performance in less than that period of time in a way that will help facilitate our looking to bring in orders for the scale up. So it's not a month or 2. I think that, in general, people are going to be looking, as we will, and our engineers are looking at -- very closely at this. It's a great opportunity to expand our knowledge of the PB150 pipeline. Remember, this is the second one we're putting in the water at that -- meaning that it follows from the one we had put in the water last year in Scotland. And that was about 6 months, we did a lot of learning on that. We had very good results which we announced in press release, I think it was in June of 2011, about the results of that system. But in general, I would say that we'd like to get some good performance, especially over the rigorous storm conditions that you have and that we anticipate off Oregon this winter. I think it'll be a very important time for us to demonstrate our technology.

You're on schedule, a hurricane or 2?

Well, we spent a lot of time preparing for real severe conditions. You never know what nature will provide. But we -- our system was certified by Lloyd's Register for performance in very, very high waves, basically waves up to 28 meters, so that's, what, 80- to 90-feet -- foot high waves. So we have that comfort level which is generated by that certification. But again, there's nothing like being out there in the ocean and seeing what nature has to put your way.

Okay. My last question, if you don't mind, is on the autonomous PowerBuoys. You mentioned that you're in active discussions with potential commercial partners. Other than taking an order, is there something else that needs to happen to start commercial activity for that product?

No. We're out there looking to sell multiple buoys, multiple autonomous PowerBuoys right now. So, the shape of discussions and meetings that we have range from, "Okay, I'd like one," to, "All right, let me start off with maybe a small number." In most cases of our discussion, the ball our eyes on, as it has been articulated by the customer is, if it goes well, we could see prospects for some significant volumes here. But it ain't done until we get a purchase order and so we're really keeping our heads down. I think -- I'd mentioned that in the prepared comments about accelerating our resources. It really comes down to more feet on the street representing OPT in the marketplace. So, we have a pretty broad amount of effort associated with the autonomous marketing selling effort.

And you mentioned in your prepared remarks specifically targeting this activity because it's a shorter order cycle, a shorter time to cash conversion. In theory -- and I know producing the first units of a new commercial product is always a maiden voyage kind of exercise, but assuming you got an order this month, let's say, how long would it take to turn that into first revenue, roughly, do you think?

Sure. Well, I'll give you the exact example of what transpired with -- under our first system. Remember, that was the first article, first system that we did, which was last year. This is for the LEAP PowerBuoy, the Littoral Expeditionary Autonomous PowerBuoy system we built for the Navy. The build time for that system -- for that system, the build time was about 3 months and then we put it through, I would say, about another month, month and a half of additional testing before we put it in the water. And so that's a time frame that I expressed with respect to the first article. We expect that to decrease and I think that, in general, it has a very strong prospect to be turned around in large quantities in -- like on a quarterly basis, if you will.

[Operator Instructions] Our next question comes from George Santana.

Got a couple more questions on the Australian government grant. Does OPT, or OPT's special-purpose companies, face any timing deadlines in the near future or any other steps in the project's development?

Yes, I -- really we're shooting for the end of the year to be -- at least get some funding commitment for the first stage of the project. So, we're working very hard, as I said earlier, on the power purchase agreements and the -- getting some financing commitment for at least the first stage of the project by the end of the calendar year.

Is the structure of the government grant a cost share? Or can the grant money be the first dollar into the project?

No. Right now, the way the grant is written, it's a cost share. In other words, we have to get some additional funding. Now, it could be project financing, could be additional grants, we're looking obviously at different vehicles. But this government grant is contingent upon additional funding being received for the project.

Yes, but does it delineate whether the grant money can be the entire equity portion, so that all you have to raise is just for the project? Or do you also have to come in with equity?

It's a flexible structure.

Yes. They've -- actually, it's a -- the Commonwealth is, I think in general, we believe it's done a great job in structuring it because while it represents the interests of the taxpayers very strongly, requires cost sharing and some milestones. In addition though, from the standpoint of structuring the deal, which is I'd say from our standpoint, there's a level of flexibility that's most appreciated and it gives the flexibility to do what I think you have in your mind, which is to establish some more textbook-like project finance sources of capital which we would hope to be able to tap into, as well as more other forms of equity. So, there is that flexibility as much -- Brian just said.

Okay. This sounds like it's a better structure than what we've seen here in the United States, where yes, that's great that the cost share, but you have to go ahead and raise equity and they can't be all of it, then you're really tripped up. 30% is a very -- that's a very generous loan.

Yes, true.

Another question, can you [indiscernible] this process that Lockheed Martin conducted? So, if I recall correctly, you have an experience working together in Oregon. Is it the same team that's now -- has provided that expertise now in Australia, implying that this is really now a unit working with you globally? Or is it just kind of by country?

Sure. They, as I said a little bit earlier, articulate a very strong policy as a corporate entity, which arcs over all of their operations, but a strong policy and strategy with respect to energy security including renewable energy, sustainability, demand management, et cetera. And that is, I think, something that includes or reaches out to their entity in Australia, which is the primary entity that we'll be working with in Australia. But in addition to that, yes, at the earlier part of your question, some of the people who are involved with the Reedsport project will also be adding value to what we do in Australia. And from our standpoint that is fantastic. You have that opportunity to draw on the breadth of Lockheed's operation, but in a way that just capitalizes on the learning that's already been done. They're -- Lockheed's learning as well as our own, by the way. So, I think they're doing a really strong -- taking a very strong approach to this in applying the breadth of Lockheed's resources, not being constrained by any kind of artificial org chart aspects. They're showing great flexibility in wanting to facilitate the introduction of wave energy. And that was picked up, I think, in the quote in our press release, by Dan Heller. And Dan, specifically, is part of their new business ventures group, particularly within what they call the Systems & Sensors. But there's a great amount of dialogue that occurs between that group and what's going on, on the street, on the ground in Australia. But really good communications and again speak to the breadth of the resources they're putting into this. So, we are very appreciative of that.

Thank you. That concludes our questioning period. Mr. Dunleavy, you may proceed with any closing remarks.

Thank you, and thanks to all of you once again for attending today's call. If you have any further questions, please don't hesitate to contact us. Otherwise we look forward to speaking with you next quarter.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.