Greetings, and welcome to Pulse Biosciences' Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer and session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Philip Taylor. Thank you. You may begin.

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, August 10, 2023, only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations and other similar 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 U.S. Securities and Exchange Commission. Our SEC filings can be found on our website or 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, Kevin Danahy.

Thank you, Trip. Good afternoon, everyone, and thank you all for joining us. On today's call, I'm fitted to be joined by Darrin Uecker, Chief Technology Officer; Mitch Levinson, Chief Strategy Officer; and Mike Koffler, the Vice President of Finance. The full breadth of our expert and experienced leadership team will be on display today to highlight the robust progress we are making. In the second quarter, we were appropriately focused on the continued validation of nanosecond pulsed field ablation, and we continue to build on the science behind CellFX technology to clearly differentiate nsPFA, nanosecond pulse field ablation, from all current PFA technologies, emphasizing the potential for meaningful improved safety and efficacy with nsPFA. First, I would like to discuss our core opportunity and top priorities. Then I will hand the call over to Darrin Uecker to discuss specific cardiac device development and noteworthy performance achievements. Then Mitch Levinson will describe our business development progress and provide exciting news on our first-in-human experience with benign thyroid nodules, our company's first surgical application for nsPFA. Then Mike Koffler will review our second quarter financial results before I conclude and open the call for a question-and-answer session. As a reminder, our primary focus is on developing a cardiac ablation catheter and surgical ablation clamp utilizing nsPFA for the treatment of atrial fibrillation or AF. Clamps will be used during open or minimally invasive heart surgery by cardiac surgeons and the catheter will be navigated into the heart using standard minimally invasive catheter techniques through large blood vessels by electrophysiologists in the EP lab. There is a clear emerging consensus from treating physicians that PFA is safer and faster than RF in cryo. And we intend to take this a step further with nsPFA by creating a more advanced treatment that has…

Thank you, Kevin. We have been very active in the lab over the last several months as we build the foundation of preclinical study data on the path towards potential human clinical use for both our cardiac surgical clamp and catheter devices. I am pleased to report that our confidence in the performance capabilities of these devices has evolved with each step in the process. The results of the preclinical studies we are conducting have our expectations as well as those of the physicians we are honored to work with. By pairing our novel and proprietary nsPFA energy, with our custom and effector device designs that exploit the tissue ablation capabilities of nsPFA uniquely for each application, we are achieving results that indicate potential market-leading safety and efficacy and prospective durability in the treatment of atrial fibrillation. Specifically, in our recent preclinical studies using our nsPFA cardiac ablation clamp, we are generating exceptional results relative to the energy modalities currently in use, including radio frequency, or RF, and cryosurgery ablation. The goal of cardiac ablation is to consistently produce continuous full thickness also referred to as transmural ablations in cardiac muscle as quickly as possible. With our nsPFA cardiac clamp, we are consistently achieving transmural ablations in 1.25 seconds independent of tissue thickness, even when treating tissue thicknesses up to approximately 25 millimeters. This is compared to RF ablation, which requires approximately 10 to 40 seconds per ablation depending on the tissue thickness, which is generally limited to 10 millimeters. Endocryoablation, which can require several minutes per ablation. The ability of our nsPFA cardiac clamp to produce consistently transmural ablation through tissue of varying thickness in 1.25 seconds is enabled by the nsPFA mechanism of action, our novel surgical clamp design and proprietary delivery algorithms that automatically adjusts the nsPFA…

Thank you, Darren. I echo your excitement about the recent preclinical work in cardiac ablation, and I'm excited to share the early results from our first clinical study in a surgical application. The progress we're making with our cardiac programs is a testament to the platform nature of nsPFA and our CellFX System. The CellFX System was developed with the vision of pursuing multiple applications across various medical specialties with cardiac ablation being our top priority today. Since the company was founded, we've continued to research nsPFA's impact on different tissue types and how best to deliver the nsPFA energy to tissue. Today, we have an R&D team with expertise gained through experience in the use of nsPFA and how to develop end effectors that leverage the novel therapeutic benefits of nsPFA throughout the entire body. Part of my role as Chief Strategy Officer for Pulse Biosciences has been to lead the exploration and evaluation of applications across a wide range of clinical areas to determine where our platform technology can have the largest impact on patient care. One result of this effort was our decision to prioritize significant resources on cardiac ablation, and those efforts are now achieving great effects, as Darrin just explained. Over the past couple of years, we have shared high-level results from our feasibility work with stakeholders, physicians and potential strategic partners in applications, including gastroenterology, gynaecology, urology, cardiovascular, pulmonology, oncology and otolaryngology, the medical specialty focused on the ears, nos and throat. Our feasibility demonstrations and the clinical value propositions of nsPFA in multiple applications have attracted external organizations who've expressed interest in exploring opportunities of mutual interest. While we are evaluating stakeholder value-enhancing opportunities, we'll continue to remain acutely focused on our cardiac applications. As a means to further understand the effects and…

Thank you, Mitch. Moving down the income statement, I'll focus my comments on our non-GAAP results. I encourage you to review today's earnings release for a detailed reconciliation of non-GAAP measures to the most comparable GAAP measures. In the second quarter of 2023, we reduced non-GAAP total cost and expenses by $3.4 million to $8.8 million compared to $12.2 million in the prior year period. The decrease in operating expenses is driven by the prior headcount reduction and restructuring. Non-GAAP net loss quarter ended June 30, 2023, and was $8.5 million compared to $11.9 million for the quarter ended June 30, 2022. Cash, cash equivalents and investments totaled $58.7 million as of June 30, 2023, compared to $54.1 million as of March 31, 2023. Cash used in the second quarter of 2023 totaled $10 million and was reduced compared to $12.8 million used in the same period in the prior year and increased compared to $7.2 million used in the first quarter of 2023. We recognized the increase in our cash usage, largely resulting from the timing of certain nonrecurring payments, but maintain our expectation for quarterly cash burn to average approximately $9 million throughout 2023. In April, we entered into a stock purchase agreement with Robert Duggan, our majority shareholder and Executive Chairman for the purchase of 10,022,937 shares of the company's common stock at a price of $6.51 per share, a greater than 1% premium over the last reported sale price of the company's common stock on April 28, 2023, the immediately preceding trading day. In May, we successfully closed this private placement and sale of these securities, effectively canceling all prior indebtedness owned by the company to Mr. Duggan, including the principal balance of $65 million and accrued and unpaid interest of approximately $250,000. At the time of Mr. Duggan's original loan to the company in September 2022, the company stock is trading under $1.50 per share. Total transaction cost for this financing less than $6,000. Also in May, we delivered a notice of redemption to redeem all outstanding warrants to purchase shares of our common stock issued in connection with our June 9, 2022 rights offering. Prior to the redemption date, approximately 99% of the warrants still outstanding were exercised to purchase approximately 7.14 million shares of the company's common stock at $2.05 per share, generating approximately $14.6 million in gross proceeds in the second quarter. This brings total proceeds from the rights offering, including $15 million received in 2022 to approximately $29.9 million, with $14.9 million coming from the exercise of warrants in total. In addition, in July 2023, Robert Duggan exercised options to purchase an additional 133,800 shares of the company's common stock at prices ranging from $2.14 to $5.95, adding an additional $299,000 of cash to the company's balance sheet. We are pleased to see the continued support from our existing shareholders. I will now turn the call back over to Kevin.

Thank you, Mike. Now I will provide some closing remarks. We are encouraged by our preclinical results we have achieved in our cardiology devices. Our novel devices, combined with our unique mechanism of action are demonstrating the expected potential our engineers anticipated. We are confident in the breadth and depth of our leadership team can propel nsPFA technology to achieve a leadership position in this multibillion-dollar atrial fibrillation market. We look forward to providing a progress update on the next call. Joining me for a question-and-answer session today is Executive Chairman of the Board, Robert Duggan; Chief Technology Officer, Darrin Uecker; Chief Strategy Officer, Mitch Levinson, and Vice President of Finance, Mike Koffler. Operator, please open the call for questions.

[Operator Instructions]

Rob, this is Kevin. We have a couple of questions that came in online. So I will read these questions first, and you can put together the questions online. So the first question says congrats, progress in both the clamp and catheter and great news on your first-in-human cases in the results. Considering the new focus and success in cardiac and the time lines, why would you continue the thyroid study expansion if you have the validation you needed?

Yes, I'll take that one. Yes, this is Mitch. Thanks for that question. And yes, the color is right. The first human study has helped us to validate the safety, the patient tolerance, the tissue response of our nsPFA energy inside the body. Because these preliminary results look so promising and because there's outside interest in this application and others, we decided it was worthwhile expanding the number of subjects, and that will allow us to demonstrate our ability to optimize the treatment parameters.

The next question that came in is with regards to the clamp and catheter. You feel like you can compete these spaces? I will take this one and kick it off. Thank you for the question. And absolutely, we think we can compete in these spaces. As we stated, our command of nsPFA is rooted in 15 years of research, academic and science centers and our engineers have designed and understood nsPFA since 2015 and have been investigating nsPFA and cardiac application since 2016. We first understood the basic electropology level, like we said. And then we created the console to really generate and harness that energy of nsPFA and then took that knowledge and designed electro end of factors that we purposely built to have the appropriate tissue response. These results that we've talked in Darrin's section today shows our command of this energy and how we believe we can lead in the nsPFA space. Anything to add to that, Darrin?

Yes. I would just say, I mean, certainly, what Kevin said is accurate. And I think I talked about a lot of different numbers in terms of the speed and the other attributes of Nanosecond our devices. But I think the real proof of how competitive and how differentiated our devices are will come from physicians and their patients. And we spend a lot of time in the development process talking to physicians and getting physician feedback. We did that with Dr. Donnington, who then decided he liked it so much, he wanted to become our CMO for cardiac devices. So I think the proof is really in the end customers and the end stakeholders like physicians and patients. And so far, I think the feedback that we've gotten from them is that we're highly differentiated, and we're going to be very competitive in both of these spaces.

Thank you, Dan. Operator, questions online?

Yes, we do have an audio question. Our first question comes from Stephen Hammer with HC

Yes. And we've been great supporters of Pulse from the start. My question relates to the dermatological projects that, that is a firm abandoned. I'm curious, obviously, I would think the technology was working. Was the decision to leave that market on the basis of the physicians and other people in the industry to the long education cycle it took to teach them how to use the equipment?

Bob, do you want to jump in and then I'll come in and support.

Sure, Kevin. Steve, I appreciate your question. The device is not really difficult to use. Any digital electronic device modern in nature can take half a dozen hours and first can use a dozen or 2 times. And in this case, it's a fraction of the challenge that was experienced with the robotics. We affected excellent outcomes, and we were very pleased and exceeded all expectations in terms of ultimate patient benefit. The challenge was that the competing product was really pennies on the dollar. And while typically, it requires multiple and frequent revisits to the clinic, which are in effect profitable for the clinic. And that we didn't compete with that. So as we demonstrated safety on the tissue side, it became very, very obvious. We only had an FDA clearance for soft tissue that a more challenging and opportunistic ability to go inside the body was stares in the face. We had looked at that years ago. And -- but we felt we first needed to get the FDA approval that electricity use as we do in the human body would be considered safe by them. We think we've done a spectacular job. We have an excellent relationship now going forward. We're very proactive with the FDA. So we look forward to Then we run into preclinical studies and looked at similar tissues in the analyst side with the who's who in the profession in cardiac and in thyroid repair. And frankly, the results have been outstanding. The surgeon response has been somewhat one-off. I'm acclimated that when surgeons get excited about something as they did with prostate surgery and robotics, we think this is the match if not better than that. So we personally -- I personally could not be more excited with the opportunity. I think…

It sure does, Bob, and have followed your career for quite a number of years, and the first time I met you in Santa Barbara back in the Computer Motion Day. So thank you for the support for this company, and we're all very excited.

It's been a journey, and it all is well that ends well. I'm very, very positive on where we're going with this, but thanks for your patience.

And Steve, I'll just add. One of the things that I'm really impressed with is I know that we talked about dermatology, but this is the learnings that we had from that space and how we've developed the console going forward. And what's really unique for us is when we will this console and we're doing clamp cases or cardiac work, it's astonishing how people look at our console and see how polished it is and how well designed it is. And that goes back to the history of evolution as we went through the dermatology space. And we're proud of those milestones and those have gotten us to where we are today.

There are no further audio questions at this time.

Okay. Operator, thank you so much. Thank you, everyone, for joining this call. We are excited about the future. We have much more to report in the up and coming months, and we will keep you all informed. And thank you for your continued support and interest in Pulse Bioscience in the direction we're going.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.