Good day, ladies and gentlemen, and welcome to the Ocean Power Technologies' Fiscal Year 2012 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 the Chief Financial Officer of Ocean Power Technologies, Mr. Brian Posner.

Thank you. Welcome to Ocean Power Technologies' Earnings Conference Call for the First Quarter ended July 31, 2011. OPT issued its earnings press release earlier today, and later today we'll file the company's quarterly report on Form 10-Q 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 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 to everyone for being with us today. Brian and I will be available to answer questions following our prepared statements. Turning to Slide 3. The company reported sales of $1.9 million for the fiscal first quarter ended July 31, 2011, up nearly 40% compared to the first quarter of fiscal 2011. This improvement reflects revenue recognized for the U.S. Navy's LEAP program, as well as for the development of our next-generation PB500. In addition, ocean trials of our PB150 off the coast of Scotland delivered better-than-expected results, and OPT ended the quarter with a backlog of $7.1 million and cash on hand of $43.1 million. Shortly after the end of the quarter, we announced the successful deployment of our unique autonomous PowerBuoy for the LEAP program. Now let me get into more detail on our major initiatives. Moving to Slide 4. We have very good news to report on our project under the U.S. Navy's Littoral Expeditionary Autonomous PowerBuoy, or LEAP program. We deployed the LEAP PowerBuoy on August 11, 2011 ahead of schedule. The buoy is stationed about 20 miles off the coast of New Jersey, undergoing testing and analysis in conjunction with Rutgers University's Institute of Marine and Coastal Sciences, which provided the radar network and communications infrastructure. Our LEAP PowerBuoy can generate power at the lower levels needed for the sophisticated vessel detection and tracking system, enabling maritime surveillance along coasts, harbors and littoral zones worldwide. By contrast, systems currently using remote power at sea are often powered by diesel generators, which require frequent maintenance and fuel replenishments. The LEAP system has performed extremely well since its launch a month ago, and most notably, was not impacted at all by Hurricane Irene. The buoy not only survived the extreme ocean conditions, but…

Thank you, Chuck. As noted on Slide 9, OPT reported revenue of $1.9 million for the first quarter of fiscal 2012, as compared to revenue of $1.4 million for the 3 months ended July 31, 2010. This increase primarily reflects revenue recorded for the U.S. Navy's LEAP program and for the development of the company's next-generation PB500. OPT's contract backlog as of July 31, 2011 was $7.1 million, compared to $8.9 million at April 30, 2011 and $6.5 million as of July 31, 2010. Backlog includes both funded and unfunded amounts that are expected to be funded in the future. Funded backlog at July 31, 2011 and 2010 was $5.1 million and $5.9 million, respectively. The operating loss for the 3 months ended July 31, 2011 was $5.1 million, as compared to a loss of $6.3 million for the 3 months ended July 31, 2010. The reduction in operating loss was primarily due to a decrease in product development costs, principally for the PB150 system in Scotland. In addition, we reflected an increase in gross profit, with gross profit for the 3 months ended July 31, 2010 having been negatively impacted by a reduction in revenue of $231,000 due to a change in estimated revenue recognized in connection with the company's project in Spain. The net loss was $5 million for the 3 months ended July 31, 2011, compared to $6.3 million for the same period in the prior year. This decrease in net loss was due primarily to the decrease in operating loss and a decrease in foreign exchange losses, partially offset by a decrease in interest income. Interest income for the quarter decreased to $121,000, compared with $238,000 for the same period last year. This decrease was largely due to the decline in average yield and in the total invested cash and marketable securities. Turning to Slide 10. On July 31, 2011, total cash, cash equivalents, restricted cash and investments were $43.1 million. Net cash used in operating activities was $4.9 million for the 3 months ended July 31, 2011, compared to $6.1 million for the same period last year. As previously announced, OPT expects the rate of its cash outflows to decrease in fiscal 2012, reflecting completion of significant milestones associated with the construction of its PB150 system for Oregon and the deployment of its PB150 off the coast of Scotland. Now I will turn the call back over to Chuck for some closing comments.

Thank you, Brian. Moving to Slide 11, and prior to turning the call over to questions, let me reiterate that Ocean Power Technologies is working aggressively to take the company to the next level of commercialization by focusing on 3 important areas: First, investing in technology, including the PB150 in Oregon, with its advanced power take-off system and our next-generation PB500; second, increasing the amount of in-ocean demonstration of our PowerBuoy systems, evidenced by our recent LEAP activity, as well as the PB150 in Scotland; and third, cementing partnerships and business development arrangements with large commercial entities which can help to accelerate demand and enhance our delivery capability for our PowerBuoy products and related services. We remain focused on achieving specific goals during this fiscal year 2012, including finalizing our ocean trials in Scotland, getting our PB150 in Oregon ready for deployment and reporting on the ocean performance of the LEAP autonomous PowerBuoy. In addition, we expect to report on our business development progress in North America, Europe, Australia and Japan. We'll continue to keep our investors updated on deployments, business development initiatives and technology enhancements during fiscal 2012, a year which we continue to see as one of significant accomplishment for OPT. As Hurricane Irene showed, our technology is durable and is increasingly recognized as a clean energy alternative that successfully harnesses the power of the sea. This concludes our prepared statement for the first quarter review, and we'll now open the call for questions. Please go ahead, operator.

[Operator Instructions] Your first question comes from the line of Jason Feldman of UBS.

It's actually Dan Silver in for Jason. I have a couple quick questions. First question, in terms of Australia, obviously we've been discussing for a couple quarters now the status of project financing. Do you have any feel for the time line of the status in terms of when we'll be able to move forward in terms of the roadmap?

I'm sorry, that -- just as a general statement, Dan?

In terms of the expected funding and term -- taking the commitments and what the government has already said. And then, actually, getting some dollars matching it and starting to move forward with it.

Sure. Well, the government -- the Commonwealth Government of Australia is firmly behind it. And certainly, our communications with them have shown that they're still very excited about the project. So their ardor remains very strong. We have spoken with potential power purchase agreement providers, counter-parties, who obviously are the ultimate revenue drivers for the project. That's very encouraging. So that's an important step forward in terms of putting together the project finance package. And we've also discussed with Leighton -- again, it's their primary responsibility to bring in the financing, drawing on their in-house investment banking team, as well as project finance team. That has been very successful in the past with infrastructure projects. So I think one factor I would add, and it goes right to your point about timing, is that the government is in the midst of trying to formalize there what's called the new climate change plan. I think that's how they refer to it, but others more colloquially refer to it as the carbon tax plan. It has some provisions in it that are expected to give some very strong effective price support to our project, when you come down to it, in that the carbon tax plan provides for a floor price for carbon. So there's been some uncertainty about exactly when that plan will kick into gear, and I would think that, that has had an impact although not a major one. But it had some effect on our efforts to bring in the financing, so no specific timing that I can give to you right now. I can say though that there's some very positive events, as I've just noted to you, or initiatives now ongoing to move it forward.

Sure, and obviously in the last quarter call, you provided some very helpful detail about Leighton's capabilities and their track record and what we should expect, at least in terms of their history in terms of project financing. And then, the Mitsui business is interesting because I think it raises an interesting question in the eyes of investors, and that's post the Japanese nuclear crisis. Obviously, there's greater interest in Japan. What have -- and we've heard a number of announcements from various European countries about shutting down and exiting nuclear power entirely. Have you actually received incoming calls, I wouldn't call it an RFP, supposedly, but a greater interest specifically in the technology as they search for new alternative energy means?

Absolutely. Yes, it's been very encouraging. Our marketing and business development efforts in Japan have now been ongoing for some number of years. And specifically with Mitsui, we've been working with them for a period of time. Absolutely a strong increase in interest, first of all, in renewables generally. But secondly, with respect to the specifics of wave energy, the sea is such an infused part of the culture of Japan, [indiscernible] the wave, and so it taps into something that I think resonates very positively with many people across different strata within Japan. But aside from that cultural point, I think to the specifics of the government's interest, we met with some senior officials in the government, specifically in the Ministry of the Economy, Trade and Investment (sic) [Ministry of the Economy, Trade and Industry], METI, about how OPT and Mitsui, as a team, can address some of the ongoing needs, first of all, for generating power but also mapping specifically into some of the more recently announced initiatives specifically targeting renewable energy. And so our talk and discussions with these officials was very positive. And with a strategic partner like Mitsui on site and talking on a very regular basis not only with the government but as well with some of the utilities, we see a very strong positive momentum towards renewable energy in Japan.

And in terms of the way investors think about that opportunity, would it make sense that as kind of a baseline to take something along the lines of the project demonstration in Portland -- or excuse me, Oregon, and assume something similar with your newer technologies? Obviously, the Scotland demonstration went very well. Potentially, Japan would be interested in deploying something like that to evidence the viability of a grid system on a smaller basis.

Quick answer is yes. Certainly, the notion of a demonstration power station is something we are discuss -- have discussed with both Mitsui, as well as with the government officials that I mentioned a few moments ago. And as a matter of fact, certain Japanese officials have visited some of our sites and with very positive response, not only Japan, by the way, but also officials in Australia and other areas of the world in which we have some business development activity now ongoing. So you're right. The news about our Scottish system, what's happening right now in Reedsport -- we're building systems in Reedsport right now. So along the way, we've had a number of visits which has helped, I think, in conveying our message. And not just a message for OPT, by the way, I think what we've done, as well as some of our colleagues elsewhere in the space has really, I think, come a long way over the last 12, 24 months in getting wave and marine energy more broadly into the dialogue when people think about strong alternatives to conventional power sources. So we've had very good dialogue and, yes, the kinds of sites and power stations that we are now working on, including in Oregon, very much are helpful as we're looking at opportunities in Japan as well as Australia and elsewhere.

And on that topic, one final question. Brian's comments related to the expected cash burn in 2012, obviously, their milestone payments play into that. With Oregon going as well as it has, would you expect that, that would be a meaningful contributor to cash? Or is there anything that you would want to kind of flag for investors in terms of milestone payments and the timing and/or lumpiness of those payments?

Yes. And they do seem to be kind of lumpy, so I don't want to get into kind of a quarter-by-quarter discussion. But in terms of the full fiscal year, again, the big driver of our cash burn has been product development expenses. And with this past quarter, the expense was down in Scotland, as you can imagine, as Chuck said with the guidance, the buoy's going to come out of the water at the end of our second fiscal quarter. The large part of the burn related to Scotland is behind us. Oregon is ongoing, as Chuck mentioned, but again, we see that burn under control. And it's also been helped with the fact that we got a $2.4 million DoE grant that will help fund some of the work that we're doing out in Oregon. So that's basically the underlying message behind our giving the investors some feel for what we expect our cash outflow to be this fiscal year.

Yes, I would add to that as well that, with the majority of the cash issues associated with Scotland behind us, our focus as we think about the major progenitors of cash burn going forward in turn are refocused or relate directly to Oregon, as Brian just said. There is a cyclicality, or a time phasing of it I think is a better word. And as we finish up our testing, we'll then be going into -- that is to say the land testing of the power take-off of the Reedsport, Oregon system. That's a moderate cash burn mode. Then we will be going into the final systems integration. Cash burn will heat up a little bit. And then, when weather permits and we put our system into the water, obviously associated with deployment, you have another time period where our cash burn associated with that project will increase. So it's very definitely tied to key milestones, and I think it's important for OPT to continue to keep our investors well-informed about how those milestones are playing out.

Again, congratulations on successfully navigating Hurricane Irene and demonstrating the scribability of the platform.

Your next question comes from the line of Kent Holden of Holden Asset Management.

First, I also wanted to congratulate you on the LEAP surviving Irene. I know it was pretty terrible out there. And then I was curious if you can offer some type of an estimate of the cost of the first Reedsport 150. And then, what should we anticipate the cost will be on the 9 additional ones as you gain scale?

Sure. We have not -- actually, I think a better way to phrase it, in terms of the first buoy, that is the first one in Oregon. It's our second PB150. So the Scotland and the Oregon systems are -- have a fair amount of nonrecurring engineering associated with them, hence our previous comments a while ago about the cash. So in addition, we have not articulated the precise costs associated with either of those systems. What we are very comfortable talking about is, with this technology in its current configuration as we move forward into production, which is I think part of your question when you start to scale up to large-size systems, in meaningful production, we see a capital cost for an all in. This is for the turnkey power station that is connected to the grid, an all-in cost of approximately $4 million per megawatt. And that's the way we are capturing and articulating our costs going forward, at least with respect to capital. And again, that's where -- that's what our customers see from the standpoint of that, not only the buoys but also the cabling, all up to -- and their deployment, all up to the point where that has been connected to the grid.

And that's kind of nameplate megawatt?

Yes.

And you had said that the current generation, what was it, 40% of nameplate?

30% is what we reported associated with Scotland. And that compares very favorably, we feel, to other -- and certainly to other renewable energy sources, very favorably with respect to solar and well also with respect to wind.

[Operator Instructions] And your next question comes from the line of Paul Bornaro [ph] of Morgan Stanley.

My first question, the burn rate issue was addressed. Second, very general, do you have or do you anticipate competition in the wave energy space?

Oh, sure. And I think it's a very positive thing. By the way, Paul, we see competition now. We have believed, since even before we opened our doors for operations in '94, that wave energy and the resource that it represents internationally is just a fabulous source of energy, renewable energy in this case. And it's the densest form of renewable energy. So from our view, just the basic premise of marine energy, and in this case specifically, wave energy, is one that surely should attract companies into this space, not only from the standpoint of developers and people with great ideas, but also customers. And so, very definitely, we think this is a multibillion dollar industry capability here. And we're looking to be a leader within that space. And from our view -- to round out my answer to your question, from our view, the only way that we're going to get there is to have a number of companies with competent performing technologies once you clearly are able to tap into the resource and to deliver energy at good price points. And so when you kind of add those points up, we think that it's good to have strong competitors within the space so that people realize this is not just a niche play, it's actually a huge source of potential energy that can satisfy the world's needs very well from the standpoint of just ocean energy alone.

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

Thank you all once again for attending today's call and for your continued interest in Ocean Power Technologies. If you have any further questions, please don't hesitate to contact us. Otherwise, we certainly look forward to speaking with you next quarter.

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