Good afternoon and welcome to the Pulse Biosciences' Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to, Philip Taylor, Investor Relations. Please go ahead.

Thank you operator. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today March 31, 2022 only and will include forward-looking statements and opinion statements including, predictions, estimates, plans, expectations, and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, can be found in the press release. Please note, that this conference call will be available for audio replay on our website at pulsebiosciences.com on the News and Events section on our Investor Relations' page. With that, I would now like to turn the call over to President and Chief Executive Officer, Darrin Uecker.

Hello and thank you all for joining us on today's call. I will highlight Pulse Biosciences 2021 developments, discuss our 2022 growth strategy including the evolution of our commercial focus, and cover plans to advance our clinical and regulatory pipeline. Sandy will detail the financial results then I will conclude and open the call for Q&A. In 2021, we achieved regulatory approvals for the CellFX System in the U.S., Europe, Canada and Australia, initiated the control launch program and onboarded [ph] 70 participants, closed our first commercial system sales, continued to generate clinical data illustrating the capabilities of Nano-Pulse Stimulation Technology and engaging the scientific community while advancing additional applications for the CellFX system. On the corporate side, we strengthened our commercial leadership team, board of directors and balance sheet. These accomplishments have laid the foundation to drive CellFX System adoption and utilization in dermatology and other medical specialties. We believe the CellFX System presents an attractive opportunity for clinics to pioneer a new solution to address the clearance of benign lesions they previously did not treat because of the lack of treatment options that could produce aesthetically pleasing outcomes. Clinics are motivated to cultivate new business opportunities. Based on the number of patients with benign lesions, the patient's perceived value of treatments, and the time required for dermatologists to perform treatments. We feel this category is positioned to be a significant revenue and profit generating service line in their practice. To introduce the CellFX System to aesthetic dermatologists, in early 2021, we initiated a control launch program across the U.S, Europe and Canada 70 key opinion leading aesthetic dermatologists committed to participate in a controlled launch program. In exchange for sharing extensive data and observations about our patients and their own experience with treatments, clinics earned credits towards the…

Thank you, Darrin. Hello everyone. For the fourth quarter of 2021, revenue was $844,000. Revenue was driven by the conversion of 17 control launch participants opting to purchase their CellFX Systems following completion of the program, as well as the first two commercial sales of the CellFX System. System sales were $699,000 approximately $600,000 recognized on a non-cash basis and $100,000 recognized as cash. Revenue related to cycle units was $145,000 per cycle units purchase for commercial systems. Revenue in North America was $777,000 representing 92% of total revenue. For the year ended December 31, 2021 revenue was $1.4 million. Revenue was driven by the conversion of 29 control launch participants opting to purchase their CellFX Systems following completion of the program as well as two additional commercial sales. System sales were $1.2 million, while revenue related to cycle units was $229,000. Revenue in North America was $1.2 million representing 83% of total revenue. Moving down the income statement, I'll focus my comments on our adjusted or non-GAAP results to provide insights into the underlying trends in our business. Please refer to today's press release for a detailed reconciliation of non-GAAP measures with the most comparable GAAP measures. Since our shift to a commercial organization in the third quarter of 2021, all un-capitalized manufacturing operation costs have been recorded in cost of revenue. Previously, these costs were recorded in research and development expense. Non-GAAP gross loss in the fourth quarter of 2021 was $302,000. For the year ended December 31 2021 non-GAAP gross loss was $415,000. Gross loss is calculated as total revenues less cost of revenues. For the fourth quarter of 2021, non-GAAP operating expenses representing research and development, sales and marketing and general administrative expenses were $11.2 million, compared to $11.1 million for the prior year period. The…

Thank you, Sandy. Looking back on 2021 we had success with regulatory approvals in the U.S., Europe, Canada and Australia onboarding 70 controlled launch program participants converting 29 clinics to commercial clinics and our first commercial sales. Entering 2022, we will remain focused on partnering with our CellFX commercial clinics to increase their utilization and create CellFX reference centers that will further validate the development of the benign lesion market and set a foundation for future growth. We have a better understanding of the requirements to help clinics develop the benign lesion market and are creating a strategy for them to establish viable CellFX franchises. We remain committed to developing new applications for NPS technology and dermatology and beyond. We are dedicated to bringing this proprietary technology to more physicians and clinics across various fields within healthcare. This requires calculated investments that we believe can unlock additional large market opportunities, where NPS technology can become standard-of-care. There are always challenges introducing a category creating technology. We have learned an incredible amount in the past year and these learning’s will be important for future success. We believe the opportunity for Pulse Biosciences and the capability of our novel NPS technology to improve patients’ lives is immense, and we are excited to execute and deliver value to all our stakeholders in 2022. On a final note, I would like to personally thank our team members whose positions have been eliminated through our expense reductions for their contributions to Pulse Biosciences, and wish them future success. And with that, joining me for Q&A is Sandy Gardiner, Executive Vice President & Chief Financial Officer. Operator, please open the call for questions.

[Operator Instructions] And our first question comes from Chris Cooley of Stephens. Please go ahead.

Good afternoon, Darrin and Sandy, thanks for taking the questions. Two for me to start off if I may. First, you guys provided a great deal of detail about not only the accomplishments you achieved during 2021, launching the CellFX System, but also how you're now going to move forward based upon the learning to the accumulated throughout the course of the year. So hoping you could just maybe start us a little bit with I guess a little bit greater clarity as I'm trying to better understand driving utilization, what kind of specific goals you have at these practices before we should start to think about an expansion from a systems or an installed base perspective. And similarly, if anything has changed, and we just think about the cadence for the various indications that you were previously working on, and sounds like you still are, but I just want to make sure that all of the initially outlined indications are still kind of tracking as expected. And then I have one quick follow up on OpEx.

Sure, yes. Thanks, Chris. Thanks for the questions and for listening in. So as your first question, just in summary, I think, yes, so we've been going through the control launch, as you know through 2021, and converting clinics to, to commercial and we ended the year with 29 of those having converted, and then two commercial sales for a total of 31 entering the first quarter. And as we progress through the first quarter, I think what we realized was that we needed to focus more on driving utilization at those commercial clinics. And in order to get them to levels that we felt they needed to be at to be productive, that we wanted them to be at, and that they would then be reference centers for new clinics. And I think, what we've observed and I tried to touch on was that I think, while the control launch allowed many of the clinics to treat patients and see clinical outcomes, it was really less focused on how best to integrate the CellFX System into the clinic from a commercial perspective. And so I think our focus now is really going to be on these commercial centers and working very closely with them to increase our retraining, as we said, in education and marketing, to help them with integration into the clinic workflow, to more efficiently be able to use the CellFX System. I think one of the things I touched on are, these clinics are extraordinarily busy. Lots of patients every day are going through the clinics. And so a new technology, and in many ways, a new category of treating benign lesions requires them to develop kind of a new workflow for those patients. And so I think one of the things we recognized in the…

Thanks Darrin, appreciate all that color. And just maybe just quickly, if we could shift gears, maybe a question for you, Sandy. I appreciate the additional color there on the 20% from the OpEx reduction, getting you basically flat with calendar 21 levels, and clearly a step up, sequentially there in the 1Q but then starting to drop down. Just curious, from a cash burn perspective, do you think there are other opportunities with this shift in the model to free up some cash from either a balance sheet from like a working capital perspective, or a requirement to carry less inventory, maybe on the capital side, just trying to kind of get to a cash burn number for the year, taking into consideration not only the reduction in OpEx, but maybe a little bit more efficient deployment of the balance sheet. Thanks so much.

Sure Chris, thanks very much on that. I think you're exactly right. So the additional leverage there would be on the inventory side. We closed the year, having $5.8 million of inventory on the balance sheet. And with the realignment that we have here, focusing on utilization, we'll look to, conserve that cash, so that we're not, building additional inventory. And we do feel that the inventory levels that we have certainly will support the near term usage that we that we need.

Thank you both.

Thanks, Chris.

The next question comes from Anthony Vendetti of Maxim Group. Please go ahead.

Yes, thanks. Just wanted to talk a little bit more about the controlled launch. So the 70K wells. Can you can you talk about where exactly they're at, you said was you thought to be about seven months. Some have acquired the system, right? So we have 17 that acquired them in the in the fourth quarter, 10 more in the first. So it's up to 39. And then you had 11 opt out. So if we do the math, there's like 20 left that haven't made a decision one way or another? What's the expectation for those 20? Is that is that a, a second quarter, by the end of the second quarter all 20 of them should make a decision one way or another. And then can we talk a little bit more about once that happens, what the commercial launch will look like? And I'll have a follow up after that. Thanks.

Yes. Okay. Yes. Thanks, Anthony. And thanks for listening in. So you got the numbers exactly right, which is great. And so the 20 that are now entering the second quarter, it's I wouldn't want to guess at whether or not all of those will go through and complete the requirements in the second quarter. Certainly those are all clinics that have been in the crew in the program since the latter part of last year, so they're already well into the program. I would expect that, a good majority of those will likely get through the program in the second quarter. And our expectations is, are and continue to be that, a good number of those are good proportion of those will convert to commercial, and some of those, may opt out, kind of along the lines of the percentages that, that we have today. So, I think those will continue and, will trend likely the way we've seen the trend thus far.

And just to follow up on that, Darrin. So the ones that are opting out, is it, is it because, and I'm sure there's various reasons, but are they just not utilizing it enough? And before they opt out is there, before they officially opt out, if they're thinking about opt out, opting out, is there a Pulse clinical team that goes there or, to say, hey, this is how maybe you could be using this more effectively for these lesions, other lesions, or, or training them, or even market helping them market so that their utilization could increase to the point where maybe they decide not to opt out?

Yes, yes, that's a great. That's a great question. So I think what we saw early on, and I'm, I think we talked about this, on some previous calls, is that initially, clinics that opted out, it was often because the control launch program is what or was for them too burdensome, meaning that, in the control launch we require a lot of work of the clinic in the form of data collection, because surveys, the physician does survey patients do surveys, we collected a lot of data in the clinic itself from the staff, kind of as they're working through the control launch program. And that's, that's, as we said, is in exchange for credits that they can use to purchase the system. So, so early on, a number of the clinics opted out. And we see this also a little bit recently, simply because they were, their expectations in terms of how much work would be required. We're not sort of aligned with how much time they had and how much they wanted to invest in a new technology like this. So they just simply were a bit overwhelmed by the requirements of the control launch and just said, it's not a good time for them, that maybe they don't have the staff to support it. And they, and they would like to, perhaps circle back when the CellFX System is available commercially, and not in the control launch. So I would say that's a significant portion of it. I think the other thing we've learned through the control launches that, not all clinics. And I alluded to this a little bit in the prepared remarks is that any, not all clinics have the right makeup for the CellFX today. So by makeup, I mean, kind of mix of cosmetic and medical DERM procedures going on. So as an example, if the clinic is a 100%, cosmetic, in one of our leading indications these days is non-cutaneous words, they may not see a lot of work patients, and really may not appreciate the value of treating work patients in that setting. And so I think we've had some that felt like, their patient and procedure mix just wasn't aligned with this idea of treating benign lesions. And in terms of where we're at. And so, I think it helped us refine the clinics that, we think are the appropriate targets. And that's just, just an example, I think of a couple of those situations that have happened.

Okay, and then lastly, for Sandy, maybe on the 15% to 20% workforce reduction. Is that kind of across the board, and are there any reductions in the in the salesforce, or with the salesforce number and what's the goal? What should that number look like, throughout this year?

So it is across the board, the 15% to 20% reduction is across the board. But I would say it is with the realignment and the focus on utilization, in lieu of new system sales, if you were to look at the different categories, cells and marketing in general administrative would have the larger impact of those reductions. So as we go into, as we report on the Q1 will actually give a bit more detail in terms of restructuring costs and where we are, at that point in time. We're beginning to implement this now.

Okay. And then just the salesforce just remind me what's the salesforce number at right now? And is whatever number that is, is that kind of what you think you need for the rest of this year at this point?

So what we're doing is we are actually making reductions to the commercial organization as it is today, because we had individuals from regional directors, what I would say capital equipment, folks, territory managers, and then the clinical application specialist that were focused on utilization with our strategy to where we're only focusing or giving a primary focus, I should say to utilization, and not the capital equipment sales, the ones that would be impacted the most in the realignment would be the the new system sales folks and the capital equipment individual.

Okay, great. That makes sense. Okay, thanks for that color. Appreciate it. I'll hop back in the queue.

The next question comes from [Indiscernible] of H.C. Wainwright. Please go ahead.

Thank you. Good afternoon Darrin and Sandy.

Hi, RK.

Got a couple of quick questions. The first one, as part of the control launch you are collecting data from all these different clinics that were that were using the CellFX? When would you be able to collate the data into a format that you can publish, whether as oral presentations are in print publications?

Yes, it's good question RK. I don't have a time for that. I mean, we're continuing to correlate that survey data, and we'll look for an opportunity to do that in the future. It's, it's not clinical data in the sense of controlled clinical data, in terms of lesions, and so on and so forth. It's, it's much more about the experience of the clinic and the physician and the patient experience. But we're certainly going to look for opportunities to, to get that data out there.

Thank you. And then for you to get the utilization increased from current 10 sessions per month to 40 sessions per month. What do you think, is some of the key criteria, or key factors that you got to promote to these physicians? Is it just purely workflow? Is it more than that? Is it advertising dollars by these individual physicians? What sort of things are you thinking about? And how much can you help? And how much does the clinic itself need to need to spend time and effort?

Yes, good question. I think this always comes down to education and training. And then we also think marketing is a component of this in terms of helping the clinic, create demand in their patients, and create demand in patients and have them come in into the clinic. So we will help, certainly will partner with clinics on the marketing piece. And we're starting to do that more and more. And on the training and education side, I think we're, we're it is a lot about the clinic workflow. But it's also, just going back and making sure that we sufficiently trained, everybody in the clinic who is looking for CellFX, potential CellFX patients, and insufficiently training and educating any provider within the clinic that may be using the CellFX system. And so I think it's across the board. We think there are opportunities to help the clinics on the training and education side, both in terms of identifying, identifying those, those patients, and how to efficiently treat those patients and those lesions within the clinic. But also, just simply training, we're continuing to provide education and training to the clinic staff on, how to efficiently treat using the technology. So I think we feel like it's an across the board, training and education that we can play a large role on and we take responsibility for, it's up to us to help those clinics be successful. And we believe that by doing that, we can drive that utilization to those levels.

Alright, good. Thank you very much for taking my questions. And I'll talk to you soon.

Alright, thanks RK. Appreciate it.

Our next question is a follow up from Chris Cooley of Stephens. Please go ahead.

Oh, good afternoon. Appreciate you taking the follow up. Just two quick clarifying questions for me if I may. First, on the utilization target of 40 procedures per month I'm assuming that is an exit rate. I just wanted to clarify that, that's what you're anticipating exiting the calendar year versus the full year average. And then secondly, we just when we're thinking about this, additional support at the clinical level or the practice level to integrate the technology. I think as I listened to your responses here to the questions, it really sounds like this is more of a workflow type issue. More so than maybe an absolute training on the procedural side, I just want to make sure I'm picking that up correctly. And if not, I want to get on the right path. Thanks so much.

Yes, thanks, Chris. So on your first question, I think our goal, as I mentioned is to get the clinics to 40 patient treatment sessions per month, and to do that this year. So yes, I think it is a goal to get to that, by the end of the year, so, exit at that. But really, our goal is to do that as quickly as we can. And that's our focus. As to the question in the clinic, I think it can be both. I mean, I think there is certainly a clinic workflow component, where clinics are determining how best to integrate the CellFX as patients are coming through the clinic. So for example, if a patient is getting a whole body check, are they going to, if they identify a lesion, and the patient is interested in CellFX, are they going to treat at that time? Or are they going to schedule that patient later, perhaps, perhaps on a CellFX day, where they're going to do a whole bunch of treatments in one day. I think, those kinds of workflow implementations and questions depend a lot on the clinic, and how the clinic is organized. And so, part of what we're doing is working with all of our clinics to help them optimize for their clinic, and then using those kind of best practices across other clinics. And as it relates to training on use of the system, I think we will always work towards improved training of utilization of the system. And that just may mean that we're figuring out ways that they can treat faster, so they can get a patient in and out faster. If there are ways we can improve the system or improve the training to do that, that, in fact, could affect their clinic workflow. So, I think, I think we're looking at it from all points of view and all angles in terms of how we can improve the process and improve our system in any way to help drive utilization. I think the things that we see today, probably do focus more on the workflow side, but, but if, if we're not doing a good enough job training on how to use the system that will, that will certainly impact that. So I think there are multiple factors that we'll be focused on as we do this.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over Darrin Uecker, for any closing remarks.

Thanks, operator and thank you, everybody for your participation and support. We look forward to communicating again very soon.

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.