Welcome to the Tivic Health Systems Second Quarter 2023 Shareholder Update Conference Call. [Operator Instructions] Please note, this conference is being recorded. Statements made during this call contain forward-looking statements about our business. You should not place any undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts and assumptions and are subject to significant risks and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue or the negative of these terms or other words or terms of similar meaning. Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements include, but are not limited to, the matters listed under the risk factors in our company's annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 31, 2022, as updated by the risk factors included in the registration statement on Form S-1 followed by the company equal with the Securities and Exchange Commission on October 26, 2022, and in our other filings with the Securities and Exchange Commission. Statements and information, including forward-looking statements speak only to the date that they are provided, unless an earlier date is indicated, and we do not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Now let me hand the call over to Jennifer Ernst, Tivic Health's Chief Executive Officer.

Hello, everyone, and thank you for joining us today. My name is Jennifer Ernst, I'm the CEO of Tivic Health. This is usually the part of the call where I will say I'm pleased to have this opportunity to review the business results with you. As you've seen from our advanced announcements and recent transactions, this has been a particularly challenging quarter, a particularly challenging time period for the company. So what this call today will focus on primarily is some of the steps that we've been taking to move the company forward and to position the company better as we move into the next coming quarters and year. I also am joined today by our Interim CFO, Kimberly Bambach, who will be reviewing the financial performance and some of the internal restructuring steps that we've taken. Now when I prepare for these calls, I always find myself reflective about the current quarter on recent transactions and on the underpinnings of the business. I'd like to take a step back with our investor community in that light. In Q1 of this year, we entered the year with an open S-1, a failed transaction in an acquisition. And we had a real got touch on in February, a very challenging environment. We were looking to close the transaction of $10 million. We ended up well below that with a transaction that netted only $3.6 million to the company. Now since that time, we have actually closed that gap, additional transactions have brought in net proceeds to the company of approximately $4.8 million. The Q2 has done a particularly hard time. So when that came with some very tough decisions, decisions necessary to move the company forward. As part of being that going through that period, we held back on our marketing…

Thanks, Jennifer, and good afternoon, everyone. As Jennifer stated, the second quarter was a challenging one for the company and is reflected in the financial results for the quarter ending June 30, 2023. We posted second quarter revenue of $161,000, a decrease of $367,000 or 69.5% compared to the same quarter last year, primarily due to significant reductions in unprofitable marketing expense. This resulted in an 82% decrease in unit sales, offset by a 69% increase in the per unit average sales price. For the 3 months ended June 30, cost of sales decreased by $303,000 or 75% compared to the same period in 2022, primarily driven by the decrease in sales volume. Variable costs was $64 per unit for the 3 months ended June 30 compared to $80.20 per unit for the same period in 2022. The decrease in variable costs was primarily driven by lower manufacturing and fulfillment costs. Fixed costs were $6.48 per unit for the 3 months ended June 30 compared to $10.16 per unit for the same period in 2022. The increase in the fixed cost was due to the lower sales volume to absorb the fixed expenses. We expect to see that improve as sales increase. Our second quarter gross margin was 37.5% as compared to first quarter of 30.1% and 23.4% in the same quarter last year. We expect our gross margin to increase with increasing sales volume over which fixed and semi-fixed costs are allocated. Research and development expenses decreased by $29,000 compared to the same period in 2022. Research and development activities in 2023 are related to the Feinstein vagus nerve stimulation study, the segmentation study to identify additional incremental market segments for our products, product design for our next-generation device as well as enhancements of our intellectual property protection. Sales…

Now to recap, Q2 was a reset for the company. We have realigned the team, revamped the cost structure of the business, reduced overhead expenses, undertaken a more focused marketing strategy and continue to see improvements in gross margin. We have taken the first steps in opening new health care-focused channel and look to be increase in engagement with the health care community around uses of bioelectronic medicine, particularly in the management of inflammatory conditions. Our research pipeline will begin moving forward at a brisker pace after delays in clinical enrollment in 2022 and early '23 with a continued focus on new product outcomes and breakthrough opportunities. And we are continuing to evaluate M&A opportunities, but with an expanded lens to allow for stronger diversification. Now these measures involve some tough decisions, but they are important in setting the company on the track to rebuild shareholder value and trust.

So in that context, I'd like to move into the Q&A portion of the call. One of the key questions we've received in recent weeks has been around the series of back-to-back equity incentives. In one way, shape or form, the question has been along these lines. The company has recently done an unusual series of back-to-back equity issuances. Why have you raised capital this way? And what should investors expect going forward? So to answer this, I think it will be helpful for me to go back to earlier in the year, again, back to Q1. We entered the year with an open S-1 for a $10 million capital raise. The transaction that ended us, as I said earlier, closing only $5 million and netted the company only $3.6 million of that at a value at a share price value below the NASDAQ minimum listing price. This left us a bit of a [indiscernible] hardly, the place no CEO ever wants to be with not enough capital depend on building the sales funnel, executing R&D to develop stronger products and not particularly interesting yet as an acquisition target or as an acquirer, very difficult spot to be in. So the series of transactions we've just completed bringing us closer to the needs communicated at the start of the year. The new capital buffer restructuring, our cost reduction measures, the realignment of the team gives us the foundation from which to start rebuilding and executing on 3 legs of the turnaround strategy. I'll go into that a bit more. Now to the question of the structure, why did we do it in the format we did. That was really a multipart format was a result of various SEC and NASDAQ rule, which has to manage as we moved through the…

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.