Perimeter Medical Imaging AI, Inc.

Greetings. Welcome to the Perimeter Medical Q1 2022 conference call. At this time, all participants are in a 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 telephone keypad, and please note that this conference is being recorded. I will now turn the conference over to Mark Komonosky, Investor Relations. Thank you, sir. You may begin.

Good afternoon. Thank you for joining us on this call and webcast today to provide the first quarter 2022 update for Perimeter Medical Imaging AI or Perimeter. On the call with me today is Jeremy Sabota, Perimeter's Chief Executive Officer, who will provide a financial summary and business update. Following Jeremy's prepared remarks, we will open up the call for questions. Please be advised that during this call, we will be making a number of statements that are forward-looking, including statements regarding the future financial position, the strategy and strategic goals, competitive conditions, research and development activities, projected cost and capital expenditures, research and clinical testing outcomes, the potential benefit of our products, including the Perimeter S Series OCT, Perimeter B Series OCT, and the perimeter image assist, the efficacy of our clinical trial designs, the timing and anticipated enrollment in our clinical trials, and the timing of potential publications or presentations of future clinical data. Forward-looking statements are subject to numerous risk and uncertainties, many of which are beyond our control, including the risk and uncertainties described from time to time in our CDAR filings. Our results may differ materially from those projected on today's calls. We undertake no obligation to publicly update any forward-looking statement. For additional information about the risks facing our business, I encourage you to review our public filings and press releases, which are posted on CDAR at www.cdar.com. Today's press release summarizing this business update will be made available under the Investors section of our website, at www.perimetermed.com and filed with CDAR. Now I'd like to turn the call over to Jeremy Sabota.

Jeremy. Thank you, Mark, and good afternoon, and thank you, everyone, for joining us today. Yesterday we issued a press release summarizing our first quarter 2022 results, and I will start today's call with a financial overview of the first quarter. After that, I'll move into an overview of our industry and business. And lastly, we'll open up the call, and I will be happy to take any questions you may have. Before we begin with the Q1 results, you may have seen the additional announcement we put out this morning regarding the appointment of Chris Scott as Perimeter's new CFO. I would like to take this opportunity to officially welcome Chris to the team. Chris is a collaborative leader who brings a wealth of experience directly relevant to Perimeter as we continue to execute on our commercial, clinical, and corporate development goals. Most recently, Chris served as Chief Financial and Operating Officer of Eradimen, a NASDAQ-listed company that designs, manufactures, and sells MRI-compatible medical devices, disposables, and related services. He was with them since 2013 and played a key role in leading them through their IPO and subsequent scale-up, achieving revenue CAGR of over 20% during his tenure, five times headcount growth, and growing market capitalization from a pre-IPO value of approximately $10 million to over $600 million at the end of 2021. Previous to that, Chris held a management position at Darden Restaurants Incorporated from 2010 to 2013, where he provided accounting and reporting oversight. And from 2002 to 2010, Chris was with KPMG. Again, Chris is a collaborative leader who builds great teams and brings both a depth and breadth of experience in our space, and I look forward to his contribution supporting Perimeter's mission of transforming cancer surgery. Chris is based out of our Dallas office with me, and as this is his first official day, I would like to welcome him. Chris has joined us on the call today and will be available for questions in the Q&A session. Now turning to Q1. Yesterday we reported our Q1 results, and I'll quickly provide a financial overview here. Unless otherwise noted, I'll state the financial figures in Canadian dollars. Operating expenses for the three months ended March 31, 2022, were $4.8 million compared to $3.8 million during the same period in 2021, primarily reflecting the increased activity on both the commercialization and clinical fronts. The net loss for the three months ended March 31st, 2022 was $6.4 million compared to a net loss of $4 million from the three months ended March 31, 2021, which in addition to the expanded operating costs just mentioned, included a $1.7 million non-cash expense from the change in fair value of liabilities associated with the warrants issued as part of the private placement we closed in January. Given the nature of these financial instruments, they are categorized as fair value through profit and loss in our financial statements. From a cash flow perspective, the three months ended March 31, 2022. Cash used in operating activities was $3.6 million. The cash used during the quarter was mainly driven by costs associated with expenditures supporting our growing commercial operations as well as research and development activities. Additionally, in the same period, we used $7.7 million in investing activities attributed to the purchase of OCT equipment. And finally, as of March 31, 2022, our cash and cash equivalents were approximately $50 million. With that, I'll turn to a Q1 overview. And although we did just have a call weeks ago, I would certainly like to reiterate the transformative nature of the progress we made in the quarter. As previously mentioned, having a strong balance sheet through these next phases of the company's development was absolutely critical as it provides a foundation from which we can react to our customers' needs while ensuring we remain focused on taking action to create long-term stakeholder value for patients, for our customers, for our employees, and for our shareholders. January's private placement closing provided just that with net proceeds after transaction costs of nearly $50 million And comparing that to the previously mentioned use of cash from operating activities in the quarter of $3.6 million, we're very comfortable with our runway. From an industry perspective, Q1 started to show signs of a transition for our customers. As you have heard several of the larger medical device players mention in their conference calls, procedure volume has been closely watched, particularly elective or procedures that are considered deferable in light of the changing COVID level in hospitalizations. And what seems to be a consistent theme is that during Q1, pockets of therapeutic areas started to show signs of procedure volumes normalizing. I say pockets because it appears that there are some areas experiencing a lag. For example, one recent survey on women's health found that nearly 50% of women ages 16 to 54 had not seen a medical professional in the prior year. And this is worrisome for some of the earlier stage detection and screening procedures that, when performed regularly, can help enable a less invasive path of care for those patients. Thankfully, it sounds like our customers are seeing indicators of that trend starting to turn, and we believe that backlog places even more emphasis on our customers' ability to be as effective as possible in the first surgery for their patients as volumes do normalize. And I mention these macro trends really to set the context for what felt like a turning point for our early commercialization efforts on the S-series devices. Exiting Q1 and early into Q2, we had a very busy industry conference season, which gave us the opportunity to engage with our customers at scale in a manner that we really hadn't experienced since launching the product. Many of these were the first time those particular customer communities had returned for a large industry event since the onset of the pandemic, and it was really invigorating to feel the energy and excitement across the board. There was certainly a pent-up demand to hear about the latest research in the communities and see what new innovations have come to market since last getting together with industries. Now, that said, there's a lot of scale that can be unlocked with virtual interactions, and our commercial team has certainly done very well in that environment. But the quality of the physical interaction with our device, particularly after the educational content that our key opinion leaders presented at these conferences, was just a different level. And while it takes time for the impact of these activities to materialize while we're working through the standard typical sales cycle process with those customers, we left Q1 with significant optimism about the rest of the year, and we reaffirm our guidance for the full-year installation numbers of 15 to 20 units. Next, our Atlas AI project, which includes the pivotal clinical trial on our SDA breakthrough device-designated Perimeter B Series OCT combined with Image Assist Artificial Intelligence also continue to make solid progress. The engagement from our investigators is high, and the various site startup activities are going well, with five of the eight clinical sites officially activated, and we remain on track to complete patient enrollment by the end of the year. As a reminder, the trial, when fully enrolled, will consist of over 300 patients undergoing breast conserving surgery across eight U.S. clinical sites with the aim of assessing unaddressed positive margin rates of surgeries utilizing perimeters technology compared to the standard of care. We certainly believe that this further enhancement of our technology is going to empower surgeons with an incredible tool set to help them improve healthcare outcomes, and we look forward to updating you on progress of the study as it moves towards completion. The team here at Perimeter is committed to transforming cancer surgery with advanced imaging, AI, and machine learning tools to improve patient outcomes and lower costs within the healthcare system. And as always, I would like to thank all of our employees and stakeholders for everything they do. I'm excited for what we're building here, and I look forward to updating you on our progress and future calls. And now I'd like to turn the call over to the operator and open up our line for questions for either myself or Chris. Operator.