Welcome to the Tivic Health Systems 2023 Year-End Shareholder Update Conference Call. All participants will be in listen-only mode. Please note that the conference is being recorded. Statements made during this conference contain forward-looking statements about Tivic's business. You should not place undue reliance on forward-looking statements as these statements are based upon management's 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 Tivic's actual results to differ materially from those set forth in any forward-looking statements include, but are not limited to, the matters listed under Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 25, 2024, as well as the company's subsequent filings with the SEC. Statements and information, including forward-looking statements, speak only to the date that they are provided unless an earlier date is indicated, and Tivic does 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 over the call to Jennifer Ernst, Tivic Health's Chief Executive Officer.

Hello, everyone, and thank you for joining us today. I'm Jennifer Ernst, CEO of Tivic. And I'm joined today not only by our Interim CFO, Kimberly Bambach, but also by our Chief Scientific Officer, Blake Gurfein. So, before Kim goes over the details of the 2023 financial performance, I'd like to go through a few of the business developments for the year, and I'd like to have Blake Gurfein introduce the new area of vagus nerve research that we have been conducting with the Feinstein Institute for Bioelectronic Medicine. So, let's start with looking at 2023. Over the past year, I have to say that our focus has been largely on the idea of stabilization and optimizing efficiency. No secret that 2021 and 2022 were turbulent years, not only for us, but also for the industry as a whole, and a major focus for us has been on the stabilization and optimization. We started by stabilizing our supply chain after the significant disruptions and price fluctuations that we saw in 2022. We created new supply chain partnerships, and those have resulted in lower materials costs, lower assembly costs and lower fulfillment costs. Those new partnerships are critical component of increasing gross profitability of the business as a whole. In the first quarter of 2023, we also completed a 2,000-person marketing segmentation and pricing study. That study allowed us to take a very hard look at the areas where improvements were possible in the business. So, in Q2, we undertook a price increase. That increase was nearly 50%. And I have to admit that, that change negatively impacted the unit volume, and it did give us a temporary suppression in revenue. However, it is an important step that allowed us to then greatly improve our gross profit for 2023. Simultaneously, we…

Thank you, Jennifer. My name is Blake Gurfein, and I'm the CSO for Tivic Health. Since I have not previously presented on these calls, I will share some of my professional background. I'm a neuroscientist and immunologist, and maintain an appointment as Adjunct Faculty in the Department of Neurosurgery at UC San Francisco. My work in the industry has focused on developing non-invasive neurotechnology to stimulate the brain and peripheral nerves to treat a variety of conditions with limited therapeutic options. The ClearUP device was one of the technologies I had the privilege to help develop. As Jennifer mentioned, moving into the development of vagus nerve stimulation technology is very exciting and a promising direction for Tivic. The vagus nerve is an important target for clinical development because it's a key component of the autonomic nervous system, which controls cardiovascular activity, respiration, digestion, and many other critical functions in the body. Clinical use of vagus nerve stimulation has frequently employed implantable devices that require surgery. Vagus nerve stimulation has been proven effective for conditions including treatment-resistant depression, epilepsy and migraine headache, and is currently being investigated to treat inflammatory diseases like rheumatoid arthritis and multiple sclerosis. There is a significant opportunity to develop safe and effective vagus nerve devices that can be applied non-invasively. Tivic has developed a proprietary non-invasive approach to vagus nerve stimulation based on our experience building evidence-based bioelectronic therapies. One of the key goals of this work is to more precisely target stimulation of the vagus nerve and more carefully control the types of physiologic effects that result from the stimulation. In collaboration with The Feinstein Institute for Medical Research, a leader in vagus nerve research, we recently completed enrollment for a 20-person study evaluating the biological effects of our proprietary approach to vagus nerve stimulation. Analysis of the magnitude of the treatment effects and how they compare to clinically meaningful biological changes is an important stepping stone as we accelerate this program toward product development for large market clinical use cases. I personally am looking forward to completing the study and sharing the results in the coming weeks. Now, let me hand the call over to Kim to go over the 2023 financial results.

Thanks, Blake, and good afternoon, everyone. I am pleased to report the financial results for the year ending December 31, 2023. Revenue, net of returns, for the year ended December 31, 2023 was $1.2 million compared to $1.8 million for the year ended December 31, 2022. The decrease of $664,000 or 36% was due to a 52% decrease in ClearUP unit sales, offset by 46% higher average selling price per unit. Greater than 90% of our sales were direct-to-consumer in 2023. Returns as a percentage of product revenue was approximately 12% for the year ended December 31, 2023 and 10% for the year ended December 31, '22. We expect with the improved battery circuitry and ClearUP 2.0 that returns will decline. Cost of sales for the year ended December 31, 2023 was $889,000 compared to $1.5 million for the year ended December 31, 2022, a decrease of $652,000 or 42%. The decrease was due to the 52% decrease in overall unit sales offset by $172,000 of costs related to the write-off or reserves on old inventory and components, primarily related to our ClearUP 1.0 unit, as the ClearUP 2.0 unit began shipping in December of 2023. We do not expect to incur similar costs in 2024. Therefore, gross profit for the year ended December 31, 2023 was $287,000 compared to a gross profit of $299,000 for the year ended December 31, 2022. Research and development expenses were $1.7 million for the year ended December 31, 2023, and December 31, 2022. The emphasis of our research and development activities in 2023 was primarily related to our work with The Feinstein Institute. Activities in 2022 were primarily focused on product research and design in the migraine therapeutic area, initiation of a double-blind randomized controlled trial for postoperative pain relief following sinus surgery,…

Thank you, Kim, thank you, Blake, both for sharing your insights with our investor community. So, this year, I think everyone is hearing, is one of resetting, rebuilding and recovery. As part of our commitment to fiscal responsibility, we've decreased our expenses, we've reduced internal headcount, we focused the team on profitably building the ClearUP product line, and at the same time, enhancing our R&D efforts to build new value for our shareholders. We revamped the administrative cost structure of the business. We reduced our overhead expenses. We've undertaken a more focused marketing strategy, and we continue to see improvements in both gross and contribution margins. And as you've heard from me before, we continue to evaluate business combinations, licensing opportunities, both inbound/outbound and M&A, that may help to enrich our product portfolio with complementary offerings. We recognize though that those type of initiatives must be taken -- must be the right opportunities at the right time. So, we remain vigilant in assessing the opportunities that may provide significant disproportionate benefit to our shareholders. Our research pipeline is beginning to mature, and it's becoming an even more important part of our strategy to build shareholder value. We believe that the VNS opportunity as well as the medical extensions of our trigeminal nerve stimulation have the potential to be of great significance to the company. So, 2023 involves hard decisions and very strict prioritization of spending. I am appreciative of our team and of the measures they have undertaken to control costs, while continuing to improve the business performance. And with that, I thank all of you for taking the time with us today. Look forward to speaking with you more as we make progress through the year and continue to report out on both the financial and research programs that you heard about today. Thank you to everyone, and we look forward to speaking with you at the next quarterly earnings call.

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