Good morning, ladies and gentlemen, and welcome to the Ocean Power Technologies Fiscal 2013 Second 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 Investor Relations firm, Darrow Associates. Please go ahead, sir.

Thank you. Welcome to Ocean Power Technologies Earnings Conference Call for the Second Quarter ended October 31, 2012. OPT issued its earnings press release earlier today, and the company will soon file its quarterly report on Form 10Q with the Securities and Exchange Commission. All public filings can be viewed at the SEC website at sec.gov, or you may go to the OPT website at www.oceanpowertechnologies.com. With me on today's call from the company are Brian Posner, Chief Financial Officer; and Phil Hart, Senior Vice President and Head of the Autonomous PowerBuoy business unit. Chuck Dunleavy, OPT's Chief Executive Officer, could not be here today due to business travel in Asia. Now please advance to Slide 2 of our presentation on the website. 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 on 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 risk and uncertainties and other factors that may cause actual results to differ or -- results to be materially different from any future results expressed or implied by such forward-looking statements. We refer you to 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 call over to Brian Posner. Brian?

Thanks, Chris, and good morning, everyone. I'll briefly review our quarterly and 6 months results, and then Phil will discuss the 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 first provide an update on OPT's recent accomplishment. This past quarter, OPT made several important steps to strengthen the company to provide more focus on specific road barriers and to expand our business development opportunities. First, we created a separate Autonomous PowerBuoy business unit and in tandem, named Phil Hart to lead this new group. As I'll discuss more in a moment, the organizational change highlights the importance of the potential markets for the company's non-grid connected PowerBuoy and the associated opportunity for Ocean Power Technologies. Furthermore, this quarter, we hired Dr. Mike Mekhiche as our new Vice President of Engineering. Mike joins OPT from BAE Systems, where he most recently held the position of Director of Program. Mike will oversee all of our engineering activity and the development of the next-generation PowerBuoy system in conjunction with the company's technology partners around the globe. In addition, we added Terry Cryan to our Board of Directors. Mr. Cryan is the Co-founder and Managing Director at Concert Energy Partners, a New York-based private equity investment firm. Mr. Cryan brings strong experience from the energy and natural resources sectors, and has worked firsthand with organizations commercializing new groundbreaking technologies. We also we won a contract from Mitsui Engineering & Shipbuilding for further work towards development of wave energy opportunities in Japan. And we continued our efforts to bring our application to Australia. I'll talk more about Japan and Australia in a moment. Overall, we continue to see a growing level of interest around the globe…

Thanks, Brian. Good morning, everyone. And I'm turning to Slide 8. So let me start by saying how pleased I am by OPT's move to create a separate business unit, solely focused on the Autonomous PowerBuoy. I've been keen on expanding our presence here and now have a mandate to oversee all markets that can benefit from this unique offering. Over the last few weeks, I've been busy building and setting up the team, and we've been taking an in-depth, rigorous look at the markets and opportunities which we could and should address, with a goal of generating revenue and profit through product sales as soon as possible. We now have a clearer view of how we're going to move forward and which markets and with which product. The current fiscal conditions in the USA and Europe will make this a challenging task as we seek to develop the business. But our studies have confirmed the opportunity for the right products in the right price across multiple industries. I do see a potential cast to solid growth over the medium term, and we have already established a credible pipeline of sales opportunities. In particular, we're both seeing opportunities within oil and gas, defense and homeland security and academia. By academia, I mean, various oceanographic studies currently being planned or contemplated that measure and analyze the waters of our world, be it for global warming or weather prediction or other purposes. This builds in our already successful work with Rutgers and that U.S. Navy last year on the LEAP program, and it also expands the application and center requirements significantly using a full suite of OPTs Autonomous technology. Within the oil and gas market, we're focusing on remote field applications for environmental monitoring near subsea wells. And we have successfully uncovered some new and specific applications where our technology can be -- can also very compelling economics and we're actively working with a number of companies to develop those applications. Spanning into this market is challenging. But we're hopeful that once we have a foothold and successfully demonstrated the value add of our technology, then it will gain wider acceptance and see other applications development. Within the Homeland Security market, as previously discussed, Ocean Power Technologies was awarded a Cooperative Research and Development Agreement or CRADA, which will utilize our APB-350 Autonomous PowerBuoy that was developed off -- that was deployed off the coast of New Jersey in 2011 under the LEAP program. We expect this unit will be in the water early next year. We're excited by that prospect of showcasing the buoy of New Jersey to the Department of Homeland Security. And we have tentative indications that could lead to similar deployments in other locations, demonstrating the flexible capability of our PowerBuoy and its potential use for advanced vessel detection and ocean surveillance systems. This concludes our prepared statements for the second quarter review. We'll now open the call for questions. Please go ahead, operator.

[Operator Instructions] Your first question comes from the line of Rob Stone of Cowen & Company.

So my first question is on the Oregon deployment. Can you comment how much additional funding you may need? And just to be sure, I understood you correctly, this is -- you're hoping to get this in the form of additional grants or support as opposed to having to inject funds that you would raise for the company.

Rob, it's Brian. Yes, I won't give a specific amount but obviously, there is risk when you're trying to deploy Buoy in the ocean, the weather being one of them, it's obviously, you can't control. I think the answer to your question is, basically, yes, we're seeking additional grants, but we don't rule out other sources of funding for the project as well. Again, we're dedicated to the project. It's our plan to deploy the Buoy, as I've stated, in 2013. But we have, right now, a very keen eye on our balance sheet as well.

Okay. With respect to the ARENA review in Australia, what are the potential outcomes of that? Is this sort of a milestone review or what's the -- what is it meant to do?

Well, ARENA is a new agency. It was formed by the Commonwealth in the spring, our spring, of this year. So what they're doing is reviewing grants that were awarded in the past, under the past agency that's no longer around, so to speak. So they're going to be looking at the status of our grant and the things that we've done to get a handle on -- should the grant go forward, the momentum we have, and again, we believe we do have a lot of momentum. We've taken control of the special purpose entity, we've entered into a teaming agreement with Lockheed Martin, we have some expression of interest from potential financing partners and we've also hired a financial adviser. So this is, again, part of their process of just reviewing the grants, their portfolio that they've inherited.

Okay. And finally, my question has to do with the new business unit, which certainly seems like the right strategy getting to revenue faster. But some of the comments make it sound, perhaps, a little less imminent than it was before. And I'm wondering, what are the obstacles? It would seem like your technology is capable of doing things that are either difficult, impossible or require greater cost for operation and maintenance for batteries or any kind of liquid fuel generation that's out on the water. So what's the obstacle? I would think if you can convince them that the product does what you say it does, you should have ready buyers for at least the first few units.

Rob, it's Phil. You're right, there are some things that our technology can do that is completely unique. Take, for instance, a comparison in the academic world. The only way of long-term monitoring a site up until now has been to layer a really expensive cabled observatory system from the shore. And that's -- you can rough that out as maybe $1 million a mile or so, something like that, for that cable. We can obviously do that much more competitively. The challenge for us, really, is to get our message out there, and people have not understood very well the capabilities that the technology can offer. We've got to essentially tell them that this capability exists. And we've been working on that very heavily over the last couple of months, and it's resulted in a much larger pipeline of opportunities than we had going into this. So a couple of things that we've got to do. We've got to let people know that the capability exists, and then we've got to push that desire that we create through to contracts. And that's going to take us a little while to do. But counter to that, we've got a couple of things that we're working on that should, if things go well, generate significant revenue within the next 6 months. So I think it's a matter of -- we're in early stage in the business unit. We know we've got some good technology that solves problems that people have. We're just going to tell them that we've got the solution.

So turning for a moment to the commercial applications for this, Phil, you mentioned in the prepared remarks that the fiscal situation might be an impediment, and I can certainly see that that's an issue with any kind of new government-funded activities and government organizations, by their nature, are ponderously slow getting things going, usually. I would expect some contracts with the oil and gas potential customers where you're offering something that has immediate commercial benefits. Can you put any color on what your conversations have been like with those potential customers and what are their potential concerns?

Yes, sure. We've spoken extensively with the oil and gas guys both in the Gulf of Mexico and in the North Sea, using both our American and the U.K. operations. And I think the way that it's going at the moment, the North Sea seems to be a little bit more open to new technologies. The guys in the Gulf of Mexico are being a little bit more conservative. And what -- the applications that we're looking at avoid us, if you like, touching the product or touching oil, it's all around remote monitoring and environmental monitoring and that sort of thing. And there's a couple of niche applications where we can replace cables, either run from shore or run from platforms, and do the job much better. And that's where we're seeing the beginnings of some, what I hope will be reasonably significant traction. And we've, for instance, we're putting in our proposal in the next week or so for -- I'll probably avoid telling you these exact applications, but for an application that would otherwise have cost approaching $100 million, and we can do it for significantly deeper than that. So I think if we can find those niches, we've got a very compelling offering, and that's what the guys are working on at the moment.

And why do you say your strategy that you've initiated to avoid touching the oil? I'm puzzled by that. Is that because the customers consider that a core area and they don't want to try new technologies there or do you have some other version?

Yes. It's to do with -- well, there's 2 things: the level of conservatism and the level of risk. If your product directly involves the flow of oil, then the amount of safety cases and trials and just general engineering and convincing that we would have to do, is probably a few years away. If we avoid touching oil, our products can't possibly either interrupt the flow or cause an oil spill or stuff like that, then the level of risk to the customer goes way down, and their conservatism for adopting a new technology goes down. So what we're -- the strategy we're using is to introduce product without touching the oil, which gets them confident in the technology and gets us to a more rapid route to selling. And then once they're confident in the technology, then moving it to other applications, regardless of whether it touches oil or not, is much easier because we've got a track record to understand the technology and it's much easier for them to adopt. It's a path. We start with stuff that doesn't touch oil, and then move out and, hopefully, pervade the industry from there.

We ultimately don't view this as a niche application at all. It's going to be much broader.

I think it's one of those -- each application that fills within the oil and gas would be a niche, but there'll be lots of them.

[Operator Instructions] There are no further questions in the queue. I will now turn the call back over to Mr. Posner for 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 our call. You may now disconnect and have a great week.