Good morning, ladies and gentlemen, and welcome to the Ocean Power Technologies Fiscal 2013 First 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 Mr. Chris Witty of the company's investment relations firm, Darrow Associates. Please go ahead, sir.

Thank you. Welcome to Ocean Power Technologies earnings conference call for the first quarter ended July 31, 2012. OPT issued its earnings press release earlier today and the company will soon file its quarterly report on Form 10-Q with the Securities and Exchange Commission. All public filings can be viewed on the SEC website at www.sec.gov or you may go to the OPT website at oceanpowertechnologies.com. With me on today's call from the company is Brian Posner, our Chief Financial Officer; and Phil Hart, Chief Technology Officer. Chuck Dunleavy, OPT's Chief Executive Officer, could not be here today due to business travel overseas. Advancing 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 or 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. Now let me turn the call over to Brian Posner. Brian?

Thanks, Chris, and good morning, everyone. I'll briefly review our quarterly results, and then Phil will discuss our ongoing technology initiatives and latest developments related to our Autonomous PowerBuoy business. Phil and I will be available to answer questions following our prepared remarks. Turning to Slide 3, let me briefly provide an update of OPT's recent accomplishments. OPT got off to a strong start in fiscal 2013, making progress with both our utility and our Autonomous PowerBuoy. We are very pleased to have signed a teaming agreement with Lockheed Martin for the development of a proposed 19-megawatt energy project in Australia, and we are working actively with them to this end. In August, we also announced that the U.S. Federal Energy Regulatory Commission approved a full buildout of OPT's proposed 1.5 megawatt grid-connected wave power station off Reedsport, Oregon. Importantly, this is the first such license to be issued for a wave power station in the U.S. OPT is in the process of final assembly and inland testing of the initial PowerBuoy to be installed at the Reedsport site. In addition, we've made progress with our Autonomous PowerBuoy, entering into a Cooperative Research and Development Agreement or CRADA with the U.S. Department of Homeland Security to enhance the technology for ocean surveillance. In conjunction with the CRADA, OPT was awarded a grant from the Maryland Technology Development Corporation to demonstrate how the APB can be used with multiple surveillance technology. We also reported a reduction in our net loss and cash earned during the first quarter of fiscal 2013 as compared to the first quarter of fiscal 2012. Now, let me go into detail on some of our latest developments. As noted on Slide 4, OPT reported revenue of $1 million for the first quarter as compared to revenue of…

Thanks, Brian, and good morning, everyone. Turning to Slide 8. Let me start by emphasizing that all of our projects are not only meant to bring OPT's products to various markets to the world, but in each case, to advance the efficiency and capability of our technology and maximize power production. As an example, in Oregon, we're fielding a new direct drive power take-off, or PTO, that we will -- that we believe will result in greater energy output, higher system efficiency, increased reliability and lower maintenance costs as compared with our previous hydraulic PTOs. Similarly, in Spain, our WavePort initiative is focused on demonstrating significant improvements to OPT's proprietary electronic tuning system, which will enable the PowerBuoy to enhance its energy conversion efficiency by using wave prediction and control system enhancements to increase power output. This PowerBuoy will include our first modular PTO, a design which gives us a production-ready, cross-platform PTO system, which will result in more efficient PowerBuoy development, streamline our testing and increase or improve our manufacturability of PTOs going forward. Our home in New Jersey, we continue to work on the larger next generation PowerBuoy, which we expect to be more efficient, provide more power per ton and more robust than any of our previous model. Technology is a core focus of what we do, and we continually strive to achieve lower energy production costs compared to with other renewable energy and any -- with other renewable energies, as well as with traditional sources of energy. Now turning to Slide 9, I'd like to provide an update on our Autonomous PowerBuoy system, interesting developments in this business. We recently announced the OPT events [ph] into what is called a Cooperative Research and Development Agreement or CRADA with the U.S. Department of Homeland Security. Through this…

Thanks, Phil. Now turning to Slide 10, let me just reiterate our near term goal. First, we remain on track to deploy our first Oregon PB-150 off Reedsport in October. The actual timing of the deployment is dependent on weather conditions, as I mentioned. But we look forward to achieving this important milestone and are delighted to have recently received the 35-year FERC license. We are also spending a great deal of time in our business and development initiatives in Australia, where we see increasing progress moving this project forward with the help of our partner, Lockheed Martin. At the same time, we continue our work on an advanced PowerBuoy for the WavePort project in Spain and are focused on new market opportunities for Autonomous PowerBuoy, highlighted by the recent interest shown by the Department of Homeland Security. Overall, we are excited by the recent level of activity and the ongoing demand for the clean, reliable, renewable energy that waves can provide, where OPT is paving a path to commercialization. We are focused, disciplined and positive about the future. This concludes our prepared statements for the first quarter review. We will now open the call for questions. Please go ahead, operator.

[Operator Instructions] And the first question we have comes from Rob Stone.

Brian, I wanted to touch on Australia for a minute. Could you provide a little more color on what size would be the first phase of the project? And how much funding do you need to raise in order to get that going?

Sure, Rob. Yes, basically, right now, the way phase 1 is planned or proposed would be 3 buoys, as well as infrastructure connected to a grid, as well as some -- also some development work on our next generation buoy, which would be the buoys that would be implemented in stages 2 and 3. The budget right now is approximately $40 million, and we're assuming the grant would pay for half of that, 50%, so that would leave a funding gap right now of about $20 million.

Okay. And can you say what types of funding structures are looking after that?

Sure. We're looking -- we're talking to a strategic type of companies, you know other corporations that might be interested in this project. We're talking to project financing entities and we're also, quite frankly, trying to get additional grant, which obviously would help the internal rate of return on the project.

A question for Phil please. You mentioned that -- working on a modular PTO design. So across what range of platforms would that then be able to be applied?

The modular PTO concept was driven by a desire to have 1 PTO that would go across many different power levels of buoy. So what we're doing is building a PTO that consists -- or that would generate about -- well, it's between 40 and 80 kilowatts of power. And then if you put into a 150 for instance, you would put 2 of them in there. If you put into something like a 0.5 megawatt device, you would end up with 6 of those. So it's purpose is to avoid the need to redesign the power take-off for each new device and to just got -- multiples or singles of a standard type of power take-off in whatever device we build in the future.

So that would imply a greater scale of economies on manufacturing and so forth?

That's exactly right. So it cuts down development time, allows us to standardize on the component choices within it and it allows us to learn a lot more about building that particular power take-off, so hopefully, it cuts down the time when we get to a production run to build each device.

Great. A final question. You mentioned under the creative program that you're going to be looking at deploying lots of different types of sensors, vessel detection, etc. On the commercial side, are the applications that potential customers are looking at more about security for offshore assets or are they looking for power for other uses? Where is the greatest emphasis of likely early deployment for commercial customers?

It really goes right across the board. We're talking -- if we go through that particular market segment, obviously military and defense are interested in long term surveillance, both on the water and underneath the water. Oil and gas are interested in perimeter monitoring, so vessel detection and stuff like that, but also environmental monitoring around the oil wells and occasionally, in certain specific circumstances, using that power to do -- to actuate subsea valves and things like that. Academic oceanography is mostly in the sensors, but the -- I guess the niche for that is the drive in academic oceanography has been towards cabled observatory where you run a cable from shore out into the sea and then put a load of sensors onto the end of that. We are offering the chance to avoid the very, very high cost of putting that cable in and just putting the sensors and then putting a buoy on the surface and running an umbilical cable from it to those sensors to power it. Desalination, we're looking at direct power for that, so I consider it a fairly large buoy fitting power directly to shore and running at desal plant. So it really is a very wide variety of application.

So what else, if anything, might you need to demonstrate at this point before you can begin gathering in first low-volume orders? I assume customers who want to start out with a few of these before they go to large-scale deployment.

Yes, most people that were talking at the moment are looking for demonstrator units, so 1s or 2s [ph]. But I think that the path to a volume market will be getting more buoys out into the water and getting everybody comfortable at it so that long term it's survivable and capable technology. We did a good job of that last year when we put the LEAP PowerBuoy out and it performed better than we had possibly hoped and got run over by a hurricane and carried on producing power without any problems. So I think we're planning on putting the LEAP buoy out again into the water later on this year, and I think it's just a matter of time served [ph] for those buoys, which gains confidence for people and then getting [ph] hopefully that the floodgates open.

So this is the third question then again, wasn't so much about the volume ramp, I know that depends on customers deciding they're satisfied, but what else, if anything, is on your to-do list before we kick at the first demonstration commercial unit out there?

Technologically, the product is pretty much ready. There's always ways to improve it, but we've got a product that's pretty much ready to go.

You're taking [ph] orders for it?

Sorry?

You just need to take those first orders then?

That's right. It's a matter of getting [ph] the first couple of orders in and growing [ph] the volume.

The next question comes from Michael Legg of Roth Capital.

Just when you look at phase 1 on the Australia project, could you just comment on if you -- do you need to raise the full amount of capital? Or I should say do you have secured the full amount of capital before any of the grant will be released on phase 1? And then second, once you do have the financing in place for phase 1, what's the timing to actually get the PowerBuoys into the water and operational? And then third, what would the economic scenario be on that one piece?

Okay. Mike, I'll take that one. Bottom line, I think, we do need to get funding for stage 1 to be able to pull some of the grant money down, okay, which will be a little bit different. There's more flexibility now under this grant, at least that's been communicated to us from the Commonwealth. In the past, the grant -- way the grant was written was we had to get funding for the entire project. So now there's flexibility that we can get the funding for stage 1 and start pulling down the grant money. In terms of -- and that's what we're focused on, stage 1 [ph], and obviously, getting some -- hopefully some commitments [ph] in for stage 2 and stage 3 that would be likely dependent on achieving milestones in stage 1. In terms of timing, well, that obviously depends on the timing of the funding. Assuming, for the purpose of this conversation, we got funding at the end of the year probably we wouldn't get the buoys in the water until sometime in 2014. I think that's a reasonable time frame. And Mike, I wasn't clear on your third question there.

Okay. Once you have the 3 PowerBuoys for phase 1, in the water, what's the economic -- the operational economics of that? Will it be making money? Will you lose money? How will that flow through?

One has to look at the first stage of this project as a validation, further validation of our technology, which sets the stage for stages 2 and 3, which is really where the greater return on an equity investment is. So I will get stage 1 as getting these buoys in the water, performing as -- hopefully performing as we expect them to and reducing the technology risk would also, I think, would open other possible sources of capital for us or for the project for stages 2 and 3 because the technology risk will have been reduced by the demonstration of these PowerBuoys performing and connecting power to a grid over a period of time.

Okay. And would you use any of your balance sheet, your cash to help fund this phase?

That's not the plan right now. Obviously, we're exploring all different kinds of options.

The next question comes from George Santana of Ascediant.

Can you provide any update on the progress in Japan?

Yes. Yes, we didn't have a slide on that. All I can is we're still talking to Mitsui. There's still a lot of ongoing conversations there, and we hope to have some news out in the coming months. And basically, that's where we're at. Phil, do you have anything to add on that?

We continue to do things like wave tank test to investigate the technology and make them comfortable with it. And in certain areas, we're trying to push the development forward using their expertise in their facilities, but that's it from the technology side of it.

I see. And just to clarify on Australia, so I think at the last quarter's call, that was really the hitches you had to have the funding for, I guess all 19 megawatts or something like that. Now they're going to let you have the grant money with just 3 buoys.

Yes, there's flexibility on that. There's flexibility in a couple of ways here. The funding, firstly -- we have to get funding for stage 1 and also, the grant basically, the way it's set up right now, it reimburses 30% of the eligible costs, up to 30% of the eligible cost of the project. There's also been some flexibility expressed by the Commonwealth that perhaps we can front end stage 1 in terms of the grant and maybe go up to about 50%. So those are things that obviously help get this project moving. Again, in order to have the stages 2 and 3, we have to have a stage 1.

And now stage 1 defined by just 3 buoys?

At this point. Again, it's fluid. It could change, but that's right now as we're talking today, 3 buoys and an infrastructure, so that would be -- those 3 buoys would be generating power to a grid.

And there are no further questions at the moment. [Operator Instructions] There are no further questions in queue. I'll now turn the call back over to Mr. Posner for any closing remarks.

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

Thank you, everyone. That concludes your call. You may now disconnect.