Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics’ First Quarter 2017 Earnings Results Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Cytori’s future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section, included in Cytori’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time-to-time. Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. It is now my pleasure to turn the floor over to, Dr. Marc Hedrick, Cytori’s President and Chief Executive Officer. Sir, you may begin.

Good afternoon, everyone and thank you, Ian for that introduction. Welcome to our first quarter 2016 earnings call. As Ian said, my name is Marc Hedrick, President and CEO of Cytori and joining me on today's call is our Chief Financial Officer, Mr. Tiago Girão; and also on the phone is our VP and General Manager of Cell Therapy Business, Mr. John Harris. Here in brief is the agenda for today's call. First, I'll discuss our overall business clinical and regulatory progress, including key updates on our Cytori's Cell Therapy technology and our nanomedicine technology businesses. Then I'll turn it over to John will is going to discuss our commercial related activities and performance and then Tiago will update on financial performance and after that we'll have time for Q&A, and then thereafter I'll update on forthcoming milestones. So, to start off, let's talk about Cytori Cell Therapy and specifically our Habeo product continue to treat patients with scleroderma. In June 2016, we randomize the 88 patient in the U.S. STAR trial for scleroderma the hand. STAR is a randomized double-blind placebo-controlled trial with a cross over arm to treatment for placebo recipients after 48 weeks. The primary study endpoint for the trial is a Cochin Hand Function Score measured at 24 and 48 weeks after treatment. We have agreement on the statistical analysis plan with the FDA. In one note about that plan, is that the Hartford procedure will be used as a multiplicity adjustment when reviewing the results from ANCOVA for the Cochin score at 24 and 48 weeks. This approach may enable us to obtain approval on potentially either the 24 or 48-week time point without related alpha spent. The key secondary endpoints are Raynaud's condition score at 48 weeks and the scleroderma health assessment questionnaire or…

Thanks Mark it's a pleasure to be here today. We have two primary goals for the commercial team in 2017 one is preparatory activities for two product launches that include Habeo cell therapy which we anticipate FDA approval in late 2018, our intention is to commercialize this product ourselves in the U.S. and seek partnerships elsewhere. And two, the ATI-0918 and as Mark mentioned the EU approval has anticipated in 2019 and will be seeking a commercial partnership there. The other area of emphasis is continued focus on sales growth and double-digit utilization growth led primarily by Japan. I will address these two items in more detail later in my remarks, but first allow me to highlight our results for the first quarter. 2017 Q1 product revenues were $591,000, $700,000 less than 2016. The primary reason is that capital equipment sales were behind our internal target as two planned installations were delayed in Q1. I will address this later in the call however, in similar utilization was on target relative to our growth objectives for the quarter. Notably Japan's Q1 consumable utilization was up 21% year-on-year. We anticipate this trend to continue in 2017 while revenue is our key metric in consumable utilization and maintenance of ASP's or average selling prices are important metrics that we track as a leverage our installed base of systems and the resulting contribution margin is important to our overall operation. We anticipate achieving our full year product revenue growth mostly from Japan with continued double-digit consumable utilization growth. Next, I will provide some more color regarding our commercial activities in Japan, Europe and ROW for both Cytori cell therapy and Cytori Nanomedicine. First Cytori cell therapy, we've elected to focus our current commercial efforts in Japan where the market and regulatory dynamics are most…

Thank you, John and good afternoon, everyone. Our primary focus is on the development of our late stage clinical pipeline and related commercial preparatory activities which should drive shareholder value in parallel we seek to widely manage our resources and improve our operating performance despite the recent acquisition of Azaya asset we reduced our operating cash burn to $4.8 million in Q1 2017 from $5.1 in Q1 2016. The reduction in cash burn was mostly related to working capital improvement. Net losses when adjusted for non-cash charge of $1.7 million associated with an IP R&D charge far off the Azaya asset acquisition was $5.9 million in Q1 or $0.26 per share as compared to $5.3 million or $0.41 per share in Q1 2016. For research and development expenses in Q1 our R&D expenses excluding share-based compensation were $3.2 million versus a $4 million expand in Q1 2016. The decrease R&D spend is related to completion of the enrollment in the Phase 3 STAR clinical trial offset by our initial investment into the ATI-0918 or nanoparticle doxorubicin. As a percentage of overall expense R&D spend for Q1 was 53% of total operating expense when excluding share-based compensation this is in line with our plans and supports our focus in late stage clinical programs. Further to clarify following the accounting literature we accounted for a non-cash charge of $1.7 million related to in-process R&D intangibles acquired as part of the Azaya acquisition. Thus, such intangibles would otherwise have been capitalize on our balance sheet if we had determined the transaction was to be accounted for as a business combination and to be clear this is a one-time non-cash R&D charge. Now on our sales and marketing our sales and marketing activities and related expenses slightly decrease in Q1 2017 to $0.9 million…

Great, John and thank you. Ian do we have any questions queued up.

The floor is now open for questions. [Operator Instructions] Thank you. Our first question is coming from Andrew D'Silva from B Riley and Company.

Good afternoon, everyone. Thanks for taking my questions. I just got a few here you answer most of them on the call. As far as just gross margins go for your product sales what should we figure as an appropriate gross margin level, it was negative with amortization this period obviously revenues were for less than you think anybody anticipated. Where would you expect it to shake out for the full year based on your guidance?

Thanks Andy for the call. This is Tiago here. I expect gross profits to be in the 50% plus, 50% to 70% range. As you noted, we did have a very small revenue base this quarter that significantly impacts our capacity in the idle capacity of the manufacturing. So, because COGS is overloaded and as you mention it does include an amortization of intangibles in the tune of $300,000 that caused the margin to be negative. But for the full year we expect a 50% plus gross profit. Most of that comes from Japan, which has a very healthy gross profit history.

Okay. And then related to product revenue consumables more specifically, is there any sort of seasonality there that we should be made aware of? I think just back of the envelope looking at the fourth quarter product consumable revenue versus the first quarter result, pretty steep deep decline, is there a way that we should think about that?

Andrew it’s Marc, I would say it is variable -- fourth quarter often times is pretty strong Q3 because of the summer can be weak quarters one and two are a little bit up and down. So that's some guidance that's in precise, but I think it's so related to capital equipment and that kind of come in ways and it’s hard to predict.

Okay, fair enough. And then moving over to the U.S. payroll trial for Habeo, when you start thinking about potential hick-ups or risks related to positive data, is the biggest one just the potential for placebo effect that didn't exist in the European pilot trial or is there something else that maybe keeps you awake at night related that we should be thinking about as potential overhangs?

I think we were blinded to the outcome. We don't know what the data will show. We think we’re sufficiently is not overpowered to shown an effect even in fact half the size seen in the pilot trial. There could be some placebo effect although other scleroderma trials have really not shown too much of a placebo effect. So, I think it could be naïve that there won't be any but we think we're sufficiently powered to show that. Actually, the trial was originally powered for 80 patients we actually over-enrolled by 10%. And we feel like we’re going to lose very few patients as part of the trial. So, I think having said that, we always worry about the outcome of the data but I think we're very optimistic about the result. We think that there a lot of patients out there that want this are routing for it. Doctors are rooting for it. We know shareholders are rooting for it. So, I think we are just -- we’re planning for success and as John mentioned, we are absolutely 100% on track with our commercial plan, and we're going to be ready to execute once we have data.

Okay. Great to here that. And then that $1.7 million non-cash R&D charges that you recognized in the first quarter Tiago, was that the same working capital approximately $2 million hit that we were supposed to be expecting or are those two separate things?

They are separate completely different things Andy. The $1.7 million charge relates to an allocation of value that we paid as consideration to Azaya for evaluation of intangibles. So that's what the 1.7 relates to. Think about it, if we were doing a business combination, we would capitalize that the charge into the balance sheet that will be evaluated for impairment every year. But because this is still in process in R&D phase, we have following the accounting guidance for asset acquisitions, we had to charge for the P&L. With respect to the assumed obligations or the liabilities that you and I discussed and that we talk about it on our previous call in I believe at the end of March that's $2 million is actually the number it's 1.8 to be precise and is mostly related to assets that Azaya prior to our acquisition had acquired manufacturing equipment and other type of asset that we assume the liabilities because we wanted the facility that we acquired and manufacturing facility that we acquired.

So those -- that $2 million in working capital changes that's already -- was that effect of last quarter?

I'm sorry, I do not understand that…

Were all the cash flow from operations impacts related to that recognize last quarter?

The majority of that was I believe we paid $1.5 million off the $1.8 million, it was paid out in Q1.

Okay. Great and just last couple of questions more related to your financing efforts. What’s the current principal pay down on the debt at this point and then just based on where you are right now, where do you feel is an appropriate time for us to start thinking about may be a follow-on offering to the one that you just did in April?

Sure, I'm going to address the first amortization of the debt and I'll give it back to Marc with respect to plans and you probably heard from my remarks. But with respect to the amortization of debt, it's a flat $590,000 a month that we are bringing that principle down and with that I'll turn it over to Marc to address the cash runway and what to expect.

Thank you, Tiago. Andy, I know that's a supported question. So, part of the reason we put to the capital markets recently as they gave us more flexibility and gave us more insurance as we tried to move forward as fast as possible, within the nanoparticle asset and get that drug filed with EMEA as soon as possible. Tiago answered I think the question very generally in his comments but we do have the current equity facilities they give us buffer and Tiago also mentioned that a lot of the spend that we anticipate related to commercial efforts come after data and we do have some legal room in terms of the timing with respect to that. As I mentioned on the last call, we've been very active on the business development front in a couple of tracks and we continue to be very active. There has been a lot of time on that and I think that's something that we're hoping will pay off in the interim that will forgo need to go back to the capital markets in a significant way. We have a lot of potential milestones coming up, which could be great catalysts for a number of positive things for so we're just focusing on executing those.

All right, well thank you very much for taking my call and I'll hop back in queue.

Great.

And our next question is from the line of Kenneth Grutman from Bio High Tech.

Yes, I'm just wondering if you guys have quantified the amount of market cap that's has been eroded over the past decade in your company and if you have any -- what your immediate plans are to improve the stock price. And I am seeing now that it's again under a dollar looks like it's getting set up for a reverse split again potentially and another 50% haircut if you would inline and finally is anyone going to resign over?

Well, I can answer some of your questions, thank you. In terms of how do we create shareholder value, I think that's right upfront in our press release and very clear. In the biotech space the way to create value is clinical data and so this company is now at a place where it's ever been before, where it's been it's to a point where we have a fully enrolled potential approval trial in the U.S. for a relatively large unmet medical need in the U.S. And so, I think that data comes forward if it looks good I think that will be a positive outcome for the company and I think will change the environment value for shareholders.

I heard you say though that or it sounded like all the reagent sales were down across the Board and I thought we had hired new guys eyes from maybe working in Asia or something like that, it sound like he was very good. I'm surprised to hear that the reagents were down this quarter why?

I’m not sure what you're talking about consumable utilization is up in Japan, John you want to comment on consumable utilization there?

Yes, I'm happy to Marc and thanks for the question. As mentioned in the call consumable utilization is a very important metric for us to track and our performance for the quarter were spot on where we had anticipated to be. And in fact, in Japan the year-on-year growth was at 21% and so and to be clear when we refer to consumable utilization that also includes the reagents and so rest assured that the consumable utilization including reagents is on track and growing.

[Operator Instructions] Our next question is line of Jason Kolbert from Maxim.

Hi guys, thank you. I promise I won't ask any accounting questions. But in all seriousness, what I'd like to understand a little bit better as the expedited access program. It seems to me a little bit like a double edged something that I hadn't considered in the past and I think what I hear you saying is that it might be just as expeditious to go through the Class III devices pathway versus the EAP am I reading that correctly?

So, Jason, I appreciate the question. The reason I brought it up is because we've been asked repeatedly as we got closer and closer to data about the regulatory path and people have asked about the orphan status humanitarian device exemption breakthrough status and so forth. And none of those really applied particularly in this case, but there is a new program called the CAP that I mentioned and I think we're actively looking at it, we think we potentially apply, this potentially applies to our technology. The benefits would be that it might allow us to get to the market more quickly the downside being that we would likely be -- would have to do a Phase 4 trial a post marketing trial. But it may actually get us to market more quickly. So, depending on what the data shows, we think this may be an option for us and we have a number of secondary endpoints that might come into play in terms of the effect on Raynaud's and so forth. And this might provide a pathway that we could potentially expand the claim. So, I bring it up only so that we’ve been asked about it and to be complete is something we're looking at, but we’re going to wait until we have the data until we decide whether this is going to be better for the company or whether to proceed directly to the PMA route as the Class III product is actually the more -- the better approach.

Thank you, Marc and can you talk a little bit about what the secret is going to be unlocking value around the Azaya acquisition? How active has BD been, what kind of inbound interest you're seeing and I know you've been focusing a lot on being manufacturing ready. So just give me an update on what your expenses in terms of timing for a potential partnership there?

Partnerships are always difficult to time and however with respect to the 0918 product and the 1123 also aside for a moment where there's a real market today we've already shown to our satisfaction that bioequivalent to the reference product we need to have a partner in place in Europe by the time that we hopefully have approval. So that's a more systematic outreach but there's been inbound interest as well as there's been press coverage of the acquisition, but there are also some potential opportunities outside of Europe and the U.S. including China in particular, which is undergoing quite a change in terms of the CFDA related to similar products and we think there may be an opportunity there. And in the U.S. the U.S. is a little bit -- there is work to be done with the FDA because of the relatively recent change in the reference drug and J&J's product being off the market now back on and Sun Pharma is the reference drug but RLD is now Doxil which is J&J's product. So, we have some work to do with the FDA to better understand what the regulatory path is and I think that'll clarify the partnering situation in the U.S. as well. Under no circumstances are we planning on taking this direct. We will commercialize the partners and likely it will be regionally-based partners and it's as I mentioned, it's an area of focus.

And at this time, I'm showing no further audio questions. I'll now turn the call back to you Dr. Marc Hedrick.

Thank you, Ian. We actually have two email questions that I'll address. The first question is about the precise timing with respect to the readout on the STAR trial and can I be more specific about that other than Q3? And what I can tell you about the timing is that as I mentioned in the call, the 48-week was the last follow-up. It's approaching 88 patient was randomized in June 2016. So, you can do the math and if the patients are on time to their appointments and there has been strong patient commitment to the trial and follow-up as I mentioned before, then as we've gotten closer and closer to data readout, we've now the focus from Q3 down to early Q3. It could be before Q3 and it just depends on the mechanics of when that last patient comes in, how quickly we can clean the data, lock it, turn it and assess the statistical analysis. So, we're trying to be conservative with an early Q3 date, but our goal would be to have that data in our hands as fast as possible and then at that point we'll get it out. There's one more question, so the other question is that it's asking about Kerastem and their clinical trial and its related results. So, this question is about to remind those of you on the call we will back licensed the rights for alopecia to a private company called Kerastem. They have the worldwide rights to alopecia and in the fall of 2016, I believe we announced that they completed enrollment in a Phase 2 randomized four group double-blind trial here in the U.S. investigating early female and male pattern baldness. So that trial is fully enrolled. I think the target enrollment was 70 patients here…

Thank you. This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.