Good day, ladies and gentlemen and welcome to the Pulse Biosciences Investor Update Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Brian Dow, Pulse Biosciences' Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you and good afternoon, everyone. Welcome to Pulse Biosciences fourth quarter 2018 investor and analyst update call. On the call with me today are Darrin Uecker, our President and Chief Executive Officer and Ed Ebbers, our Executive Vice President and General Manager of Dermatology. Before we begin, I would like to remind you that on today's call, we will be making forward-looking statements. These include statements regarding our plans, intentions and expectations relating to our commercial, operational, scientific, clinical and financial projections, financing plans, products including the uses and applications of such products and other future events. You should not place undue reliance on such forward-looking statements, as they are subject to a number of assumptions, risks and uncertainties, and may differ materially from actual results. These risks and uncertainties are more fully described in our Securities and Exchange Commission filings including our annual report on Form 10-K and most recently filed quarterly report on Form 10-Q. Investors are encouraged to reference these risks, uncertainties and other disclosures in those reports. Pulse Biosciences undertakes no obligation to update forward-looking statements as a result of new information or future events. In addition, today's call is being recorded and will be available for audio replay on the investor section of our website at www.pulsebiosciences.com, shortly after the conclusion of the live call. Investors electing to use the audio replay are cautioned that forward-looking statements made on today's call may differ or change materially after the completion of the live call. I would now like to turn the call over to our President and Chief Executive Officer, Darrin Uecker.

Thanks, Brian. Good afternoon, everyone, and thank you for taking time to join us on today's call. 2018 was a very productive and important year in our mission to become a viable company at Pulse Biosciences. Before reviewing our progress in 2018 and how this is driving our milestones in 2019, the most important thing we want our shareholders and partners to understand today is that we have a clear vision for the commercialization of our CellFX System and aesthetic dermatology in 2019 and we believe this provides us a clear path to viability. Our vision for CellFX System and aesthetic dermatology is clear. Our CellFX System is a platform and we will deliver a growing array of valuable applications through the CellFX platform that patients will desire and aesthetic dermatology clinics will be excited to deliver for their patients. Our initial commercial applications will be in seborrheic keratosis, a common rays benign pigmented lesion on the skin and sebaceous hyperplasia, a small rays lesion caused by overactive sebaceous glands typically on the face. These are both significant opportunities and where we have generated compelling clinical data. We have a growing pipeline of potential future applications including warts, acne and Basal Cell Carcinoma to take advantage of the mechanism of our NPS technology, build on the success of the early clinical results, entering different stages of clinical development. We believe the unique mechanism of our CellFX System provides the potential for many high value applications in this field and we will continue to develop applications at a rapid pace through our clinical development progress. We're building a world class team of experienced executives with successful track records in the field of aesthetic dermatology who understand the business and have close relationships with the key opinion leaders in the field. We'll…

Thank you, Darrin. I am very pleased to report on our progress in planning a world class launch for our CellFX System in this aesthetic procedures market. This large and growing market is composed of a concentrated group of dermatologists, plastic surgeons and other skincare specialists with a known history of purchasing and using energy based devices to perform various procedures on the skin for both aesthetic and clinical application. The economic trends and demographics of an aging population and the associated conditions of aging skin provide a significant opportunity for launching a new technology in this category. The foundation of a commercialization strategy for our CellFX System to this growing market is composed of three major components. First, build a sales and marketing team with a proven track record in launching devices and increasing device utilization over time in true collaboration with the key opinion leader specialty physicians that have a history of successful clinical and commercial excellence in adopting new technologies in this aesthetic procedure market. Second, create a first wave of key opinion leader acceptance and advocacy of CellFX system then validate high patient satisfaction and proven commercial success. This successful CellFX adoption of the first wave of key opinion leaders or KOLs leads to a rapid uptick for the next wave of early adopters with a highly efficient sales and marketing investment. Third, continue generating high quality scientific evidence that proves as a superior profile for both current and anticipated future clinical applications that increase the utilization revenue that Pulse earns with early use of its device. First, let's discuss building a world class sales and marketing team. We recently announced the hiring of Robert Tyson as Vice President of North American Sales. Bob is one of the most experienced and successful sales executives in this…

Great thanks, Ed. Shortly before today's call, we announced our financial results for the fourth quarter and year ended December 31, 2018. Our financial results for the quarter and the full year reflect the progress achieved in our development in clinical programs accompanied by the requisite support infrastructure of those endeavors and operations of a public company. Cash in investments at December 31, 2018 totaled $59.6 million compared to $21 million at the end of the third quarter and $38.1 million at the end of 2017. The 2018 year-end balance reflects the proceeds from our recently completed rights offer. During December, we successfully completed a $45 million financing in which we received $44.8 million from the sale of 3.6 million shares of common stock at a price per share of approximately $12.57. We pursue the rights offering as a mechanism for this capital raises as it provided an efficient stockholder friendly path from the company. Through this offering, all stockholders were afforded the right to participate and it avoided a number of the customary transaction expenses of a traditional financing. The success of this financing affords the resources necessary to accelerate our progress towards commercialization and enhancing the utility and value of our CellFX System. During the fourth quarter of 2018, our ongoing development activities, advancement of our clinical studies, the introduction of the CellFX Systems into those clinical studies and the continued growth of our business drove our fourth quarter cash use of $6.4 million, bringing the total cash use for the year to $23.5 million, slightly below our previous guidance of $24 million for the year. Turning now to operating results for the fourth quarter and for the year ended 2018, net loss for the fourth quarter of 2018 totaled $9 million, reflecting a $300,000 or 3% increase…

Thanks, Brian. In 2018, we made significant progress in demonstrating that our proprietary NPS technology can produce compelling clinical data in difficult to treat skin applications, in particular in SK and SH lesions. We are more confident than ever that there are many applications that will be well served by our CellFX System. In fact, there are several that we discussed on this call and are currently under development. In 2019, our focus is on bringing our CellFX System to the aesthetic dermatology market. As I mentioned in the opening remarks, a vision for our CellFX System in aesthetic dermatology is clear. Our CellFX System is a platform and we will deliver a growing array of valuable applications or apps that patients will desire and aesthetic dermatology clinics will be excited to deliver for their patients. We will develop a network of our CellFX systems that will allow us to provide best in class training and service to our customers. In 2019 we'll be focused on the successful commercial launch of our CellFX system and to laying the foundation for future growth of the business. An important milestone will be an FDA regulatory Clarence and as I mentioned previously, we expect to submit the 510(k) with FDA this quarter and based on review timing we're targeting a Q3 clearance. Once we receive a regulatory clearance, we will proceed with our launch through key KOLs as described by Ed on this call. We plan to announce when the 510(k) is submitted, and we will provide updates as appropriate. We will also continue our developments of applications in 2019. We anticipate our wart study and BCC study data to be available by the end of Q1 and we anticipate moving those programs forward in Q2. In warts, we are planning a follow…

Thank you. [Operator Instructions] And the first question comes from the line of [indiscernible]. Your line is open.

Thank you. Thank you for taking my questions.

Good afternoon.

Good afternoon. The hyperplasia data certainly looks impressive. My question here is, what are the physicians offering at this point to this - these sets of - these set of patients and what competition does CellFX System face when it enters the market with these physicians who are offering - now whatever they're offering today to the hyperplasia patients?

Yes, this is Ed. I have peppers [ph] answering your question. The sebaceous hyperplasia market currently has no reasonable choices for physicians to employ to patients who have these problems. By and large the available tools cause more damage than the original problem, so patients are displeased with any potential cosmetic outcome. So by and large, the physicians avoid the treatment of the sebaceous hyperplasia. This is because most technologies are thermal and these thermal technologies have to reach deep sebaceous glands in order to achieve an effect and because they are thermal they cause damage on the way down. Because of our unique ability to affect the cells of the sebaceous gland we're able to safely reduce these glands without damaging the surrounding dermis. So this ability to target the gland without causing collateral damage provides unique efficacy, but also unique cosmetic outcomes once the lesions have been removed. To our knowledge, there are no other available technologies studying sebaceous hyperplasia at this time. And to our knowledge, we have a unique effect that no one's been able to duplicate with other forms of energy technology or pharmaceutical intervention.

Thank you. Thank you, Ed for that answer. Regarding back acne, could you help us understand the dynamics of that market and how big of a market back acne is as such?

Hey Eric, this is Darrin. Yeah, I think what we would say right now is kind of what we said in the prepared remarks which is the acne was something that was very strongly recommended by our key opinion leaders, our scientific advisory board as something that we should go after based on the results that they saw from our SH study. And again the link there is the sebaceous gland. What I would say right now is that this back acne study is a feasibility study, we treated our first patient today, so the effect that we have and where that opportunity may guide us, I think we'll reserve for future discussion as that data starts to come in. I think if you talk to dermatologists they obviously - acne is a big problem and where we fit in that problem, I think will be borne out from the data and our early feasibility data perhaps. So I think until we get a little further down the road we wouldn't talk too much about the specific opportunity. It's more that based on our observations of treating the sebaceous hyperplasia, we feel like this is something that we can definitely have an impact on.

Great, thank you both. Thanks for taking my questions.

Yeah, thanks. Thanks a lot. Yeah, thanks a lot for listening in and good questions. Okay.

Thank you. [Operator Instructions] And our next question comes from the line of Dick [indiscernible] with Pulse Biosciences. Your line is now open.

Hello.

Hello.

Hello.

Hi, Dick we can hear you.

Okay. Thank you. I would like to talk about instead of CellFX a little bit about your research into cancer specifically your dog liver treatment was announced a couple of years ago, but we haven't heard anything about it since. And I would like to know what the progress has been on the treatment of dog liver, the canine program.

Okay, thanks. Thanks a lot for listening in Dick and thank you for the question. So in 2018, we started a veterinary medicine study. It wasn't in the liver cancer; it was actually in stage I, II canine oral melanoma. So this is a study that we started in, I believe in the second half of the year. So we entered into that study to continue to explore the use of NPS and our technology in an oral lesion and to continue to build data on the safety profile of our technology in the treatment of that oral lesion. At the time that we started or announced that we were going to be in that study, we communicated our intent was to start to study and would provide additional data, as sufficient data became available. This study is ongoing, it's currently enrolling, I would say it's enrolling a bit slower than we had anticipated, but that being said, we expect to report on that data when we have sufficient data to report any definitive results. So at this time, we're not reporting on that. I expect we will be able to report more definitive data in the upcoming calls perhaps in the Q1 call.

Okay. Well, in your recent option program you were to sell half of the company to existing shareholders as I understand it for $45 million and effectively that told us that the whole company was worth 90 million. And what I like to know is do you have any kind of internal information concerning the future of treatment of internal cancer that would make the value of the company more than that 90 million?

Okay. Dick this is Brian. I'm going to jump in here for just a second. It wasn't 50% of the company. We sold 3.6 million shares out of what at the time was roughly 17 million shares, so you're really looking more in the 15% to 20% value of the company. And when we're looking now, we're looking at 20 million shares outstanding. And with the current market conditions, we're looking at a market capitalization in the neighborhood of 300 million. So I'm not sure where the 50% and 90 million numbers are coming from, so that's -

All right, but when - selling stock for - my problem is that I wonder if the value of the company was increased by that 45 million because of the -

Okay. Operator maybe we should prompt to see if there are any other questions.

Yeah, thank you. [Operator Instructions] And we have our next question from the line of Andrew Savvas [ph] a private investor. Your line is now open.

Hey guys, well done.

Hey Andy, thank you. Good to hear from you.

Yeah, I see yeah. It is cool. I have a question on future revenue. As I see it and correct me if I'm wrong or just hopefully I'm right. This should be three to four different ways to receive once you're commercially approved and your sales team starts going closing sales and expanding. One will be the Cell or the list of the CellFX System. Two would be per application, am I my correct so far and three would be continued supplies and service. Would that all those four items be a source of income? Am I right or wrong on that stuff?

Okay.

Hey, Andy its Brian. Thanks for your question. Yeah the revenue streams are going to be predominantly from two main sources. First, it's going to be from the initial placement of the CellFX Systems. So in Ed's remarks he discussed the target clinicians that will be going - will be pursuing and placing systems with. Two, subsequent to that and more importantly to that will be the procedure revenue. We've designed the system and we're implementing a business plan that is oriented toward aligning Pulse Biosciences with the interest of the clinic so that for each use of the system we're generating revenue off of those systems. Thereby every - when we make investments into these additional applications, the utility of the system is increased and the number of procedures that the system can be used for increase. So it's a per click revenue model.

Okay. Now, when you do a procedure, do you need to replace a –I'm basing this on - into the surgery model. They either sell or lease their machines and they get the - they make a lot of money from replacing whatever they need for the application supplies and also service. Do you need to replace anything or add on to anything in that CellFX Systems that would generate revenue or it's just per application?

Great, thank you for giving us the chance to clarify along those lines. First, on the initial placement, just for clarity we will be actually selling the systems. At this time we're going to be - it will be a purchase from the clinicians on the upfront side. Now, on the back end, yes there are consumables that will be used in the process, but we are actually using a different model where in it is a - the CellFX System will be networked and from that the clinician will download treatment cycles or cycled units to the system and utilize those cycle units in treating patients and it is those cycle units that will be the source of revenue for Pulse Biosciences. It will not be purely the consumable and selling a consumable.

That's fine. I like that. Thank you very much. The other thing, do you also - we have a service contract with the - where you can actually make money on the machine if necessary.

There are opportunities for that at this point. The key attributes that really are going to be the value drivers are going to be in the procedure revenues that will be driven by the system placements.

Okay. Do you have any idea what these systems will be selling for any range or you haven't decided yet?

Well, we have previously announced that we're expecting to place these systems in the neighborhood of 45,000 to 50,000 in the initial launch.

Thank you for that. And approximately how much per procedure or is it - each procedure is different in quote?

We'll be in a position where we'll be giving additional transparency and resolution to what we'll be doing on the commercialization standpoint from a pricing and revenue standpoint as we get closer to the introduction into the commercial market.

Okay, then I have one more personal question. I have a friend who has few clinics. He is a plastic surgeon, but I would hope to put him in touch with and when you're ready to launch?

Okay.

Andy, this is Ed. Please feel free to drop me an email with his name and contact information. I will make sure he's on the contact list once we proceed in our commercials launch mode. Thank you.

Yeah, he's in Manhattan and I'll - he was wanting me to find out proximate timing. I told him probably; maybe my guess was late summer. But that's my guess. Okay.

Thank you.

You're welcome.

Thank you. Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Darrin Uecker for any closing remarks.

Thank you, operator. Thank you for joining us on today's call everyone. It's an exciting time for Pulse Biosciences as we drive to the commercial introduction of our CellFX System. We look forward to sharing our progress with you on our next call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.