Kim Golodetz - Investor Relations, LHA Carl Schwartz - Chief Executive Officer Bob Myers - Chief Financial Officer James Garvin - Chief Executive Officer, CytoBioscience Peter Alex - Vice President of Sales.

Ben Reed - Maxim Group.

Welcome to the Skyline Medical Business Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session [Operator Instructions]. As a reminder, this conference is being recorded, August 15, 2017. I would now like to turn the conference over to Kim Golodetz.

Please go ahead..

Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call to discuss the definitive merger agreement between Skyline Medical and CytoBioscience, and Skyline Medical's financial results for the second quarter of 2017. Joining me from Skyline Medical are Dr.

Carl Schwartz, Chief Executive Officer and Bob Myers, Chief Financial Officer. And from CytoBioscience we've Dr. James Garvin, Chief Executive Officer. Joining us for the Q&A portion of today's call, we also will have Peter Alex, Skyline Medical's Vice President of Sales.

Last week, Skyline Medical issued a news release announcing the signing of a definitive merger agreement with CytoBioscience and yesterday afternoon Skyline issued a news release announcing 2017 Second Quarter Financial Results.

If you have not received these news releases or if you would like to be added to the Company's email distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

Please note that there are slides to accompany management’s prepared remarks this morning, and they can be found at the top of the home page of Skyline Medical’s Web site at www.skylinemedical.com. The link is titled Merger Conference Call overview. So that’s at the top of the home page.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Skyline Medical and CytoBioscience.

I encourage you to review the Company's filings with the Securities and Exchange Commission, including, without limitation, its Forms 10-K and 10-Q which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Also, the Company filed the Form 8-K report on August 2, 2017 that included an updated set of risk factors as exhibit 99.3, including risks related to the proposed merger with CytoBioscience. Please refer to that Form 8-K report, which is available on Skyline Medical’s Web site under Investor information.

With that said, I would like to turn the call over to Dr. Carl Schwartz.

Carl?.

Thank you, Kim, and my thanks to each of you for joining us this morning. It’s a busy time at Skyline and we are very excited to have signed the definitive merger agreement with CytoBioscience.

This merger is a transformational event for Skyline and capped a number of achievements in recent weeks, including the receipt of our CE Mark to sell STREAMWAY Systems in Europe and the engagement of consultants and distributors with deep reach into both governmental facilities and private hospitals to gain additional tracking for the STREAMWAY.

As indicated in our press releases and as Kim mentioned, we have slides to accompany our remarks this morning. Starting with slide one, I would like to draw your attention of the statements that encapsulates commitment between Skyline Medical and CytoBioscience, a commitment that will drive our operations and our strategic planning.

We are both committed to providing products and services that ensure the best optimal patient outcomes. Both companies have been upholding this commitment and at certain of the terrific overarching theme for how we view our businesses and decision making going forward together.

We are committed to maximizing patient outcomes, whether that’s in the operating room, the procedure room, or the recovery room and the therapies used by patients or when it comes to infection control, safety for patients and the hospitals staff. Slide two, is that Safe Harbor statement Kim already covered.

Turning to slide three, you will see today’s speakers of agenda. I will provide some thoughts on the merger and then Bob Myers will provide a brief run-down on our second quarter financial results and Jim Garvin will provide an overview of CytoBioscience and describe its growth opportunities and outlook. After that, we will take your questions.

Turning to slide four, let’s discuss the transaction rationale. At Skyline, we had said for some time that we are committed to broadening our Company’s business by making acquisitions.

In no way that’s expanding our business footprint by lessening of our commitments; the STREAMWAY or our optimism for that product potential, but it's prudent for any business to diversify its revenue stream.

And this transaction with CytoBioscience brings immediate and meaningful revenue and a deep pipeline of compelling patented products and services, including $6 million backlog. It also brings a network of important customers and relationships in healthcare facilities, as well as in pharmaceutical industry.

These relationships, as well as others by CytoBioscience Executives, Investors and Directors, will help to broaden awareness of the STREAMWAY System and drive future sales.

Kim Golodetz will tell you more about this company enrollment with CytoBioscience, which has approved through with pharmaceutical product developments that we can leverage to increase awareness of the STREAMWAY Systems. More than 50 million has been invested in CytoBioscience to-date.

This has provided the Company with an exceptional patent of state that represents formidable barriers to entry to competitors; a particular note is ion channel testing business, is expected to expand with FDA's new requirements that all drugs be tested for cardiac safety and CytoBioscience's contract research business has been growing rapidly will allow Skyline investors to participate in this exciting sector.

It's important to note that the FDA has chosen CytoBioscience's technology for its own cardiac safety testing line of preclinical new drug compound. We are ready to bring all these capabilities and relationships to Skyline, and we are very excited about the potential product standard operations.

For CytoBioscience's stockholders, the transaction provides unending number of benefits. Through the merger, CytoBioscience gains the benefits of a public company currency to provide both liquidity and capital markets optionality.

This also adds executive management the expertise to support operational excellence and pursue growth opportunities, and the transaction enhances industry awareness of all products and services with a larger commercial portfolio; greater awareness will help in our success across the Board. So let's get to the terms of the agreement.

On slide five we have summarized the key ones; as payment, Skyline will issue to CytoBioscience owners 19.8% of our currently outstanding common shares or 1,234,086 shares; the current value of those shares is approximately $1.9 million; Skyline will also [issue] Series C, D and E convertible non-voting preferred stock with a total liquidation preference of $24.9 million.

More information about preferred stock is available in an 8-K we filed with the SEC last Friday afternoon. The anticipated close date of this merger is September 30, 2017, or earlier. Jim Garvin will be named President of the combined company once the merger closes, and he also will be appointed to the Skyline Medical Board of Directors.

In addition, one other Skyline Medical Director will be named by CytoBioscience, that will be Alan Dean, and increases the size of the Board to seven directors compared with six currently. Moving onto the slide six, let's discuss the next steps planned for integration and milestones.

Following the fulfillment of customary conditions, the merged entity will offer under the Skyline Medical corporate name with CytoBioscience as a subsidiary. Shares of our common stock will continue to trade on NASDAQ stock market under the symbol SKLN.

The existing Skyline Medical staff is 16 and our facilities will remain intact in Minneapolis, while the CytoBioscience's 24 person staff and their facilities will remain intact in San Antonio. We have no plans for a layoff of our facilities and foundations.

We'll begin SEC reporting of the financial results and business performance of the merged entity as of the closing date.

As I mentioned, CytoBioscience has an order backlog that total $6 million, most of that about $5 million, is for contract services; revenues from those agreements is spread out over the life of the contract and typically about 20% paid up-front.

As we work through the existing backlog over the next six to nine months or so, we also will be adding to the backlog and generating further sales. Our plans and milestones include current product development for our complementary product continuous improvement.

We are now presenting our products to European distributors and have been contacted by the Australian Department of Health about bringing STREAMWAY there. In the next week or so, the STREAMWAY is being presented to a large hospital system in Cutter who has expressed interest in our product.

We are also looking into opportunities to showcase that STREAMWAY at the European Association for Cardio Thoracic Surgeons Meeting in Vienna, in October. In August, Skyline Medical signed an agreement with the Alliant Healthcare products, a prominent Service Disabled Veteran Owned Small Business that represents leading large medical device companies.

Alliant Healthcare is a Federal contracting expert that is globally represented and can partner with Skyline’s sales effort in every U.S. Federal hospital. This is as an important as the U.S.

Supreme Court rules in June of 2016 under the Kingdomware decision that VA Hospitals and their procurements for veterans-first by utilizing Service Disabled Veteran Owned Small Businesses where they’re purchasing when the rule to apply.

The expected plans for our combined company were getting ready to lead, and bring the teams together and develop a comprehensive long-term plan next steps and milestones. Now, I’ll turn the call over to Bob Myers, who will provide a brief overview of Skyline Medical’s second quarter financial results.

Bob?.

Thank you, Carl. And thank you to everyone participating on this call. I do want to echo Carl’s remarks about how excited we are bringing CytoBioscience into the Skyline fold. I’ll turn now to our second quarter financial results, which we filed with the SEC last night.

Revenue for the three months ended June 30, 2017 was $106,822 and this compares with $85,422 for the three months ended June 30, 2016. Revenue was derived from the sale of extremely disposable products during each of these periods.

We are encouraged by the progress we have made in broadening awareness for the STREAMWAY System, and by the reception we’re getting from increased participation at important medical conferences.

This visibility, along with a newly hired sales team of five professionals, has resulted in a substantial increase in a number of potential customers seeking demonstrations of the STREAMWAY and in its requests for quotes.

We did not sell any STREAMWAY Systems during the second quarter, but we continue to present STREAMWAY at a record pace to potential customers, and completed the last of our installed base upgrades through the STREAMWAY generation too.

Although, our sales cycle is long, we have already started to see success with STREAMWAY System sales in the third quarter, which included a new operating room build-out where the STREAMWAY became part of the state-of-the art histology room.

Our awareness campaign to improve the use of disposable filters and cleaning products is starting to take hold, and represents an important source of recurring revenue that is resulting in tremendous STREAMWAY performance improvements within our install base.

Gross profit for the three months ended June 30, 2017 was $84,812 or 79.4% of revenue, and this compares with gross profit of $48,656 or 57% of revenue for the same period in 2016. The increase is largely due to reduced margins in the 2016 period as we’ve replaced STREAMWAY units with our next-generation model at no cost to our customers.

Total operating expenses for the three months ended June 30, 2017 were $2.6 million, which was in line with the prior year.

General and administrative expenses and operating expenses were slightly lower year-over-year but were offset by higher sales and marketing expenses with the addition of sales reps and increased participation at medical conferences.

The net loss available to common shareholders for the three months ended June 30, 2017 was $2.5 million or $0.41 per share on $6.2 million weighted average shares outstanding.

This compares with a net loss available to common shareholders for the three months ended June 30, 2016 of $2.6 million or $0.95 per share on $2.7 million weighted average shares outstanding. The Company had cash, cash equivalents, and marketable securities of $3.9 million as of June 30, 2017 compared with $2.1 million as of December 31, 2016.

With that review, I'll turn the call over to Jim Garvin now who'll provide an overview of CytoBioscience.

Jim?.

Thank you, Bob. And certainly, thank you Carl. And let me echo everybody's sense of excitement about the two companies coming together. My remarks start on slide eight.

I want to say a couple of introductory things; first of all, it's important to recognize that a company is made up of people and this particular company is a science company; and without the scientists, without the engineers and without a patient and skillful Board, you don't have much; we have great scientists, great engineers and we've had a very skillful and very patient Board and they're excited about this opportunity as I'm.

The other thing is that biotech is really not for the faint of heart. As you heard Carl talk about, a great deal of money has been spent developing this technology. Now he did state of the art technology is the best technology in the world, and we're very proud of that.

But it takes time to get there and we’re now getting there and we're really excited about that. And I'd like to talk to you about who we are and what we are and what that technology is. Everybody always ask me what is an ion channel. And if you look at the pores that you have on your skin, those pores -- your skin has pores.

Well, cell has pores as well and they're actually small tubes in which little nano-molecules with a positive or negative charge pass through in and out of that cell. And as they pass through that negative or positive charge, they give off a signal.

By reading that signal, you can tell not only what is happening to a cell but why it's happening to the cell. So I explained that in these slides that come up.

But why is that important? Because if you're trying to develop a drug, if you're trying to develop a therapeutic, whether it'd be for cancer or Alzheimer’s or diabetes, the first thing you want to know is will that compound harm a human cell. So first, do no harm.

The second thing you want to know is, is it effective in treating the condition and will that cell respond to what it's doing, that's its efficacy. So we're really excited about this. So our scientists have designed, I didn't designed this, by the way; I'm not the inventor of this; Dr.

Knott who is on our staff and invented this technology; our scientists invented this technology. So we have been making instrument that takes that single cell holds it in place, inserts a probe and reads what's going on inside that cell. So if you go through the slides that we have, you can -- I talk about the ion channels.

But what's really fascinating is if you flash down to the slides, you're going to see that at the heart of our technology is a little microchip, and it's photographed next to a penny; so that microchip is a 150 layers stick; it's got four glass coated channels and at the bottom of it has this little opening where the cell is held and the probe is inserted.

It is unbelievably fantastic interesting technology; I always love for people to come visit the labs and see what we're doing, because it really is a jaw dropping experience to see what's going on in the labs.

The issue that stands before us, whether we are a private company or now a public company, is the big so what and what's the market for all of this. The market for all of this is absolutely enormous. They're projecting in the next five years that the market will grow to be over $80 billion.

In the midst all of that is this thing that Carl referred to, which was the FDA initiative, which is called the CIPA initiative; it’s a comprehensive in vitro proarrhythmia assay initiative.

That is a very long phrase and a mouthful of words that says that when you’re developing a new compound, one of the first things the FDA wants to understand is whether or not that compound will impact the heart in a negative way.

And so this initiative has a number of ion channels, there are literally thousands of ion channels in a cell; but there are seven in particular that the FDA is looking at. And so all these new compounds, as this initiative comes on board, are going to have to be investigated. We are the ones that have the technology that can do that investigation.

Now, there a number of other instruments that do this investigation, but none of them are as accurate as we are. We’re 99.9% accurate. We are the instrumentation that was selected by the FDA for their own-work in ion channel regulatory investigation and being able to set all that out.

I think the other thing that’s important is to understand who we have done business with. So we are a client and do business with the FDA with Amgen, with Victor Chang, with Envigo, with [Weil] Research, with Pfizer, with Xenometrics, in Japan with the STC. So we have a long list of clients who love our technologies, love working with us.

Our business is growing now at an exponential rate. We went through some difficult times in ’15 and ’16. And certainly as we redesigned our instrument and put in robotics, the first quarter I think of 2017 was rather slow. Now, all the sudden and it's not all of a sudden, we’re beginning to see the fruits of that label.

We now have a backlog of research work of over $6 million. We just added another $800,000 of contract research work in the last 10 days. So it's really now beginning to come forward in a very nice way, and we’re really excited about that. We like the idea of coming together with Skyline.

They’ve got a wonderful board and when you talk about people like Rich Gabriel and Mel Engle and Tim Krochuk, I mean, there are some really super people that are better on that board; so I am very excited about this; I am very excited about our technology; and I really look forward to what’s ahead for all of us. So Carl, back to you..

Thank you, Jim. Hope you all are excited for this merger to be completed. We covered a lot of ground this morning, and I am sure you have some questions. So now Kim, Bob, Pete and I, will be happy to answer them.

Operator?.

[Operator Instructions] Your first question comes from Ben Reed with Maxim Group..

I just had a question on that last part that 800k that was added in the last 10 days.

So is that included on the $6 million of backlog orders, or is now up to $6.8 million total?.

That's an add-on..

And then one other thing, you said the number of -- for STREAMWAY the number of demonstrations have increased and the sales have increased dramatically or not sales yet, but interest.

Could you give us an idea of like a number of how many -- of what that increase looks like?.

Yes, I can [multiple speakers] I can answer that. The second quarter live demos increased to a number to over 100. One of the things that was the focus since first quarter we added five RSM; in the second quarter, the field activity generated these sorts of demos; so across the five regions that were over 100 individual demos of the STREAMWAY System.

In addition to that, we're taking a very high level approach with our demo activity using some reference centers to bring in some very large IDNs to witness this unit first hand, live installed environment. So that activity is underway as well and that’s coupled with some larger opportunities across all the regions.

Typically, we had unit sales in the average range and request of one to two units; we're now seeing requests in the range of eight units plus. So this activity we feel, coupled with a demo activity and the investments in our sales team, will generate some positive results heading into the third quarter..

And what was the number of demonstrations in the first quarter before that?.

It was in the neighborhood of about 10..

[Operator Instructions] And your next question is from Steve [indiscernible] with Stonebridge Investment..

Couple of questions, first one for Dr. Garvin.

What are -- for Q1, can you give us some sense of top line bottom line numbers at the company?.

Q1 '17 or projected for Q1 '18..

I’ll start with actual from '17 and happy to hear projections for '18?.

Well, there's a big difference. We're actually a little bit seasonal. So for Q1 '17, I think our revenue probably was around $300,000 and we burned through about that much money of $350,000 a month.

Now for '17, our monthly revenue based on the stuff that's coming through the system now probably approximate $600,000 to $700,000, so it'd be fairly dramatic hockey-stick increase, but that's because we’ve got this wave coming through..

So you’re saying if your revenue double or your expenses staying similar, so you actually are cash flow positive based on what you have going on?.

One of the great things about our Company is that we may have to add one or two people, but we don't have to -- if we double our revenue, we don't have to double our overhead. The technology that we have allows us to do a fair amount of contract research work on our technology without having to add a lot of people.

That’s one of the beauties of it that’s one of the reasons that pharmaceutical industry likes it is because you don’t have to add a lot of people using this technology. In the old days to do this work, you would probably need, as an example, eight people. Now, you can do that same volume of work with one..

So in addition to the money that Skyline has advanced you because of this ramp up in revenue in the way your business scales, you’re not going to have significant cash needs, going forward, assuming your business stays at the levels you expect?.

In ’18, I think that’s absolutely correct..

Two question for Skyline side, to Dr. Schwartz and Bob. On a lot of the prior calls, the topic of insider buying has come up and we’re told you guys were in blackout periods after the last Q; we were told within a couple of days that blackout period was up and we were going to see insider buying.

We’ve seen a lot of auction grants, but other than some legacy positions from Dr. Schwartz, the insider and the board seem to own almost no stock and have bought nothing.

Where are we on that?.

Well, I know that from my perspective that -- and I think you know this that I’ve been a stockholder in this company since about 2008 or 2009; so I have suffered through as much or more than most of you; and seen my position diluted and fill my confidence in the Company in little bit of compensation; I agreed to take stock options; and that, as an indication of my faith in the Company, going forward.

And so that’s where I stand.

Bob, you want to comment on this?.

Yes, unfortunately and we had every plan of investing in the Company. But most of those blackout periods kept overlapping each other and then we got involved with the merger plans with CytoBioscience and that puts us under different regulations.

So everything that we intended to do in terms of an investment, we couldn’t do; we are very, very involved in this Company; we work day and night at it, Steve, literally, through weekends; we have just stretched ourselves as much as we can to make this Company a success; and we have the re-intention, believe me, of wanting to invest; and that’s why those options also was very important to us, because it provides us an incentive to make this company successful, to increase the shareholder price, to increase the earnings per share; so that only do our shareholders make out but then we have an additional incentive as well.

So it did not come to fruition, and I apologize for that, but it was not necessarily our fault that we couldn’t do it..

Last question, as to the Skyline side again and as a follow up to the question from to Dr. Garvin; it does not seem that [indiscernible] these things play out according to their plan still have significant cash needs, it seems like Skyline still have some.

Do you guys have a sense of what the combined Company cash burn over the next 12 months will be?.

Yes. I am not at liberty to necessarily answer that, because we’re just first putting our consolidated numbers together and we haven’t made that public.

However, I will say that we’ll fall within the realm of the revenue that will be earned by Cyto alone just about; and we have big expectations in terms of what our second half of this year and beginning half of next year is going to be; we’ve already, as Pete has indicated in terms of our sales what he hasn't said and what we will announce over the next few weeks is that we've had some sales this past week; and we've had some major potential sales in the next week or two that we're working on; we have hired an independent rep that is very-very experienced in the field and is covering two states for us; and this deal with Alliant Healthcare is absolutely major as they're throughout the country; and we've already identified a number of prospects.

So I think that our cash flow situation is going to only become more-and-more favorable.

We've been very religious about our cash at least the past couple of months, actually six months or so, with Skyline trying to select where we put our money appropriately to support our sales and marketing; and yet we had kept our average burn down to about $350,000 a month..

So going forward, you probably do some small top-up financing, million here and million there, but no need for any significant financing based on your plans?.

Not at this point..

This is all the time we have for today. Please proceed with your presentation or any closing remarks..

I want to thank all of you for your time today and for your interest in our Company. I'm sorry we ran out of time. We are looking forward to completing this transaction and executing on our milestones in 2017. We are more optimistic than ever before about our future. Have a good day. Good bye..

This does conclude today's conference. You may now disconnect..