Rockley Photonics Holdings Limited Ordinary Shares

Greetings, and welcome to the Rockleaf Photonics third quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gwen Lauber, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and welcome, everyone. This is Gwen Lauber, Vice President of Investor Relations at Rockleaf Photonics. Today, we released the results for the third quarter and it's September 30th, 2022. A copy of the earnings press release is available on the Investor Relations section of our website at investors.rockleafphotonics.com. With me on today's call are Dr. Andrew Rickman, OBE, Chairman and Chief Executive Officer, and Randy Meyer, President and Chief Financial Officer. This call is being webcast and will be archived on the investor relations section of Rockley's website. Before I turn the call over to Andrew, I'd like to note that today's discussion will contain forward-looking statements. These forward-looking statements include but are not limited to the anticipated features, benefits, scope, focus, status, and goals of our platform, technology, products, studies, and partnerships with third parties, our ability to bring and the timing of bringing our products to market, our product development schedules, our strategies, our research and development plans, our customers, our commercial and market opportunities and trends, our debt obligations, our costs and expenses, our cash resources, cash burn, revenue guidance, financial projections, and financial performance, and outlook and factors affecting the full going. These forward-looking statements are subject to risks and uncertainties, which may cause actual results to vary materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those discussed in our earnings press release and in the risk factors section of our annual report on Form 10-K, as well as our other filings with the SEC. Any forward-looking statements that are made on this call are based on assumptions as of today. We undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, Rockley reports certain non-GAAP financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations of these GAAP and non-GAAP measures are included in the tables found in our earnings press release. Now I'll turn the call over to Andrew.

Thank you, Gwyn, and thank you all for joining us for our third quarter 2022 earnings conference call. Today, I'll start by briefly discussing our results before turning to our business highlights. In the third quarter, we generated revenues of approximately $556,000. Our gap net profit for the third quarter was $12 million, reflecting a fair value adjustment of certain notes and warrants. We ended the quarter with $4.9 million in cash, cash equivalents, and investments. In the fourth quarter, we completed a private placement retaining up to $24.5 million of incremental funding with $10 million received at closing plus an additional $14.5 million of proceeds placed in an escrow account for release at the direction of the note holders. A full summary of our financial statements is available on our website. I'd like to start by introducing Randy Meyer, our new president and CFO. Randy joins us from Intersect EMT, a medical device company that was recently acquired by Medtronic. He brings experience in finance and operations leadership with healthcare therapeutics and medical device companies. Randy will focus on our financial and commercial strategies and will lead our finance, supply chain, quality, regulatory, and compliance functions. He will ensure our cash efficient performance while enabling our ramp towards commercial production. I'm delighted that Randy chose to join us as I believe that he brings the discipline needed ahead of our commercial ramp. Today, I'll talk briefly about three aspects of our business, our customers, our technology, and our human studies. Then I'll turn the call over to Randy. As you know, we have 19 customers in the consumer wearables and medtech markets, representing six of the 10 largest wearable companies and two of the five largest medtech companies. We are working with all of our customers on increasing our engagement with them, and in doing so, we will enable them to run trials using our products solidifying their product requirements for Rocky and our solution. We are working with our customers on several use cases, including patient monitoring, clinical trials, health and wellness monitoring, lifestyle management, pharmaceutical, and fitness. Recently, we received our first bioptics band from our manufacturing partner. This near final version will provide the core biomarkers for our solution. Our first solution will be for general health and wellness and sold to customers for certain use cases, including general health and wellness, clinical trials, fitness, loan worker, and other non-diagnostic applications. In terms of our regulatory strategy, initially, we plan to introduce general health and wellness solutions to our customers. as we believe there's a market for non-clinical use cases. This will make our products available to our customers sooner, satisfying their needs for solutions that are non-invasively monitoring key vital signs. Working in consultation with our MedTech customers, we plan to pursue regulatory approval for our solutions in the US by seeking 510 clearance for those biomarkers with existing predicates. and de novo classification grants for our novel biomarkers without existing presicates. During the quarter, we advanced our development of the bioptics and bioptics pro versions of our solutions. I believe we are on track with both. We continue to work on next generation biosensing technology as well. In the quarter, we announced our next gen, higher density laser spectrophotometer chip We believe that this is the world's first microtransfer printed lasers on silicon photonics for commercial applications. In the future, we believe this capability will allow us to further increase the density and reduce the size of our photonic chips, as well as lowering manufacturing costs. This breakthrough will allow us to create even smaller solutions, opening up even more opportunities for ultra small wearables for health monitoring. including AR and VR headsets, clothing, glasses, and other form factors. We received funding support for this work from the Science Foundation Ireland and the Disruptive Technologies Innovation Fund. Now I'll talk about our human trials. In the third quarter, we expanded our studies of core body temperature, hydration, and blood pressure. with larger follow-on studies of these key biomarkers. We recently announced that following promising initial results, we are expanding our free living study to larger sample population. These free living studies continue to test the capability of our bioptics biosensing band to remotely monitor and measure biomarkers outside a laboratory and control setting. These studies should be completed in the fourth quarter of 2022. Finally, we recently announced the results of our internally controlled blood pressure human study where we demonstrated what I believe are very important results for our company and also for individuals who will benefit from a device that provides regular, effortless monitoring of blood pressure. Many people suffer from hypertension, often without knowing it, making it a risk factor for serious health problems such as heart disease and strokes. This quarter, we will begin our first third-party control blood pressure human study, which will monitor 200 participants and will include isometric and aerobic exercise-based protocols. Additionally, an inline arterial study with an accurate pressure monitoring catheter reference with 30 participants is also planned in the period. Turning to the future, we have three priorities for the remainder of 2022. Our first priority is to sample the bioptics units to our customers for their trials. The next we plan to complete third-party controlled human studies for blood pressure, which will form the basis for the design of a FDA study. And finally, we plan to utilize our Bioptics Pro module for in-house human studies on alcohol, glucose, and lactate biomarkers. The initial study will utilize our Pro module in benchtop-based human studies, which will lead to studies utilizing a wearable device in the future. These priorities will form the foundation for 2023 as we scale our technologies. I am very pleased with the tremendous work that we've been doing and what we've been able to achieve. I believe that our work is truly extraordinary and has the potential to change people's lives for the better. What we've been doing isn't easy. And I know that some may wonder if we will achieve our goals. As I sit here today, I believe that we will succeed due to the increased body of evidence gathered from our human studies, which validate the performance of our technology. We are at the point where we will soon have commercial products in our customers' hands, and I'm confident that this will be a game changer for us. Now I'd like to introduce you to Randy Meyer, our president and CFO. Randy.