Greeting and welcome to the Pulse Biosciences' First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure, to introduce your host, Mr. Philip Taylor. Thank you, sir. 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, May 10, 2021 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 at 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 under News and Events section of our Investor Relations page. With that, I would now like to turn the call over to President and Chief Executive Officer, Darrin Uecker.

Thank you, everyone for joining us this afternoon at this exciting juncture for Pulse Biosciences. On today's call, I'm pleased to discuss our recent accomplishments and business updates, including the commercial, regulatory and clinical progress we have made so far in 2021. And we'll provide details from the field on our initial commercial experience with the sell CellFX system, then Sandy will share the first quarter of 2021 financial results. I will then conclude and we will open up the call for a question-and-answer session. From the beginning, at Pulse Biosciences our mission has been to offer bioelectric medical solutions that make meaningful differences for the betterment of patients and clinicians. This is now a reality. In February, we received FDA clearance to market our product with CellFX system with CloudConnect services for use in dermatology. Just 10 days prior we had received CE Mark regulatory approval to market the system in Europe. These achievements have advanced the company into our next chapter of growth. In 2021, we have two priorities that inform our current corporate strategy. Our focus on the top priorities are executing a controlled large program to drive adoption of CellFX system utilization, among key opinion leading aesthetic dermatologists, to set the foundation for a full commercial launch in late 2021 into 2022 and expanding the CellFX systems commercial potential, by continuing to develop new applications that address the needs of patients. We are confident that disciplined focus and resource allocation to these objectives will maximize the value of the CellFX system in the market over the long term. Before diving into clarity specifically, I would like to describe and remind everyone about the uniqueness of our technology and its opportunity to address unmet needs of clinicians and patients alike. The CellFX system is a multi-application platform…

Thanks, Darrin. First of all, I want to say it is just great for the growing commercial team of 15, nine in North America and six in Europe to be in the field in the US and Europe helping our first customers onboard the CellFX Controlled Launch experience. Our team is continuously gaining practical experience with both physicians and patients. The anticipated warm reception for our unique itself specific technology among these KOLs has exceeded our expectations in the early going, as intended are controlled once participants are contributing to our knowledge base on uses for the CellFX system. Our scientific advisors have done a great job setting a high bar and a clinical profile for NPS technology. And our first Controlled Launch participants are thrilled to now have an advanced technology solution in-hand that addresses unmet needs in aesthetic medicine, offering this unique non-thermal CellFX procedure to patients with lesions that are difficult to clear with older technologies that use heat or cold. While our plan Controlled Launch experience is still in its very early stages with an initial group of KOLs, we are pleased and excited to report on our Controlled Launch progress, as well as a continued engagement with the scientific community with our clinical research projects in support of new applications for the CellFX platform. As we have noted, our experience, and marketing research in the aesthetic procedure specialty market has shown that the acceptance and adoption of new energy modalities, like the CellFX system is heavily impacted by the influence of key opinion leaders or KOLs in anesthetic medicine. For that reason, we designed our Controlled Launch program to partner with these clinics and ensure very early positive clinician and patient experiences, as we optimize the commercial learnings that are required for new CellFX system…

Thank you, Ed. For the first quarter of 2021 operating expenses were $18.5 million, compared to $12 million for the prior year period, and approximately $6.5 million increase year-over-year. Operating expenses to the three months ended March 31, 2021 included $7 million of non-cash stock based compensation versus $2.6 million in the prior year period, representing $4.3 million, or 66% of the year-over-year increase in operating expenses. The additional year-over-year increase in operating expenses was primarily driven by the expansion of commercial and operational infrastructure, including increased headcount to support commercialization activities. As I move into the discussion of our operating expenses, 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. Research and development expenses consists of salaries and related expenses for manufacturing, research and development personnel, as well as clinical trials and consulting costs related to the design, development and enhancement of our potential future products. Non-GAAP research and development expenses increased by approximately $600,000 to $5.9 million for the three month period ended March 31, 2021, from $5.3 million during the same period in 2020, primarily due to increases in personnel, facility related costs and consulting and outside services in support of our SBA submissions and new application development. All partially offset by reductions in clinical trial expenses, sponsored research, prototype material and devices and travel expenses from a year ago. We expect to incrementally elevated research and development expenses compared to the prior year period to remain at approximately these levels for the year, as we continue to invest in the CellFX system application expansion initiatives, Darrin previously discussed. Sales and marketing expenses consists of salaries and…

Thank you, Sandy. Over the past months, we have gained exciting momentum as a commercial organization. We're executing our strategy to achieve regulatory approvals, onboard KOLs as the initial Controlled Lunch participants, all while growing a library of positive clinical data to support current and future CellFX system applications. The significant project progress made by the Pulse Biosciences team is establishing a foundation from which we can drive widespread adoption and utilization of the CellFX system and NPS technology. Joining me now for Q&A are Ed Ebbers, Executive Vice President and General Manager Dermatology, and Sandy Gardiner, Executive Vice President and Chief Financial Officer. Operator, please open the call for questions.

Thank you. Ladies and gentlemen, we will now have our question-and-answer session. [Operator Instructions] And our first question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.

Thanks. I was just wondering on the 15 KOLs that are on board now. Have you had any feedback in terms of the protocol or how the patients that are being treated by the 15 KOLs? Any update on that at this point? Or is it too early?

Hey, Anthony. Its Darrin. Yeah, thanks for the question, for listening in. So yeah, we had 15 by the end of the first quarter. So that was, you know, sort of roughly mid February, until the end of March. And then we've continued in this quarter. And I think overall, like you heard from Ed and I'll let Ed jump in here, in just a second. The feedback has been very positive, in terms of the whole program, implementation of the training, getting physicians and their staff up to speed, initial treatments of patients. And, you know, I don't know if we mentioned in the script, but certainly all of the installations have treated patients at this point and are moving forward. So it's been very positive. We're really pleased from an execution perspective. Our ability to get systems out to the clinics, get them trained up and get them rolling. So I think thus far it's been great. Ed, if you want to jump in and provide a little additional color there.

I’ll add to that, it really is a collaborative process between us and the physicians that we asked to participate. And that was our understanding right from beginning. While we certainly had very successful clinical trials, those are far different clinical conditions than what one might encounter in everyday clinical practice, in terms of a diversity of lesions, a diversity of patients. So we really continue to learn from them on a daily basis. And in some ways, they've added to our understanding of the wide range of potential lesions that we believe are treatable, and they are treating in ways that we weren't able to evaluate from clinical trials because of the diversity of patients and lesions that they've allowed us to observe and get even steeper in our learning curve in terms of new lesions that we hadn't treated before.

Okay, great. And then and then Ed, did you say, another 30 or 40 by the end of the second quarter, so that you'll be at 45 to 55 in total by the end of the second quarter?

Yeah, that's right. Anthony so added 15. And then, as I mentioned, we'll probably be somewhere between 45 and 55 at the end of this second quarter, and then we'll finish it up in the third quarter in the US and Europe.

Okay. That's helpful. And so sebaceous hyperplasia, hyperplasia by end of second quarter should be submitted to the FDA. And did you say non-genital warts by the end of the year, by the end of 4Q ’21?

Yeah. So that's right, sebaceous hyperplasia here in the next several weeks, we're just finishing up that 510(k). And then with cutaneous non-genital warts, we expect enrollment to be completed, kind of late this quarter, early next. And then that puts us in we think good position to get to 510(k) by the end of the year.

And then just an overall general question on revenues. I know these are out to the KOLs. So there's not a lot of, you know, near term revenues, because there's some - they're going to be earning some of the ability to have the system by providing detailed feedback. But some revenue generation by the third quarter is still - is that still feasible, reasonable at this point?

Hey, Anthony. This is Sandy. So you know, they'll come online after they have finished the course their 40 patient commitment. But we continue to feel that revenue will be minimal in the first three quarters. It won't be until the fourth quarter that we would actually see - after we complete the Controlled Launch systems and the process here, that's when we would expect additional commercial revenues.

Okay. And then in terms of commercialization, just to stay on that, before I turn it back over. If commercialization could happen in the fourth quarter where you roll it out beyond the KOLs, if all the KOLs are onboarded by the end of the third quarter, correct?

That is correct.

Okay, great. All right. I'll hop back in the queue. Thank you.

Thanks, Anthony.

Thank you. Our next question comes from Sean Kang with H.C. Wainwright. Please proceed with your question.

Hi. Thank you for taking my question. So my first question is regarding Canadian market. So first of all, how large is the - how big is the Canadian market? And also, if you obtain the Canadian approval on time, would you expand your current Controlled Lunch program to include Canada?

Yeah. Let me touch on the first part. So yeah, as I mentioned, in the prepared remarks, we've been in this process with Health Canada, to gain approval for the CellFX system. We think that at this point, based on guidance documents from Health Canada that we have answered the final question. And we're in sort of the final stage of the review. So given that we take the review we’ll complete before the end of the quarter, just again, based on timing that isn't sort of their standard guidance. So if we get an approval at that time, then yes, we would expect to expand our Controlled Lunch program into Canada, it would be in a relatively small with regard to the additional number of clinics. And I don't think we've settled on an exact number yet, but I think it would be relatively, incrementally relatively small when compared to the US and Europe. And in terms of sort of overall market, Ed, do you want to make any comments on that in terms of Canada?

Yeah. The rule of thumb is, it's somewhere between one fifth and one seventh the US total in the aesthetic market. Now, having said that, there are some very fine top key opinion leaders in Canada, with whom we've already begun talking about their interest in participating and we also hired a regional director based in Canada to manage those Controlled Launch sites with the same kind of high quality that we've come to expect in Europe and the US. So we're definitely locked and loaded and ready to roll with proven training programs, a well trained person, and physicians who are very enthusiastic about governance. We're very optimistic about our future in Canada.

Actually, that's helpful. So one more question regarding the basal cell carcinoma study. So would you say - would you share any data from the study before you go for the pivotal study?

Yeah. Thanks, Sean. Well, we'll see when we get there, I mean, I think our intention is always to be very open and transparent with our clinical data. It wouldn't I'd surprise anybody who's followed us to see that we would have exposure to that data in scientific meetings, if applicable. And so we would certainly look for opportunities to do that. Now, this is, you know, this is an FDA IDE Approved study. So we have to be respectful of how we use that data, both with FDA, you know, for that pivotal study and the public release of it. But I think, you know, we've always tried to get our clinical data out in scientific meetings, as we're able, as that data gets finalized, and as those meetings come around, and our investigators desire to publish some of that information. So I think you can expect for us to, you know, to get that data out just as soon as we're able to do that. And I think, you know, I didn't talk about it much during the prepared remarks. But we're very pleased now its our third IDE Approved study with FDA. So I think, you know, it's a demonstration that we have a good collaboration with FDA. And these studies, I think, as we sequence them, you know, through FDA, and to get their good collaboration and sort of agreement on these studies, we'd be able to go from a couple of benign lesions, as you know, with sebaceous hyperplasia, and cutaneous non-genital warts, and now to something that is non-benign and to get FDAs approval for that study, we think is, you know, a real feather in our cap and speaks very highly of our team of the CellFX system and our technology, and our ability to work with FDA on advancing this technology further into the clinic. So we're very pleased to be moving forward in this particular indication.

That's helpful. Thank you.

All right, Sean. Thank you very much for your questions.

Thank you. There are no further questions. At this time, I'd like to turn the floor back over to management for any closing remark.

Yeah, thank you very much, operator. And thank you, everybody, for joining us on this very important update call. We're excited about where we are today with our Controlled Launch, and getting the CellFX system out into aesthetic dermatologists hands. And we very much appreciate all of the support that we've received from all of our stakeholders. And we continue to move forward on our strategy and get the CellFX system out into more and more applications. So thank you very much. Look forward to talking to you all soon.

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.