(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant’s Principal Executive
Offices)
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Law Offices of Aaron A. Grunfeld & Associates
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
ABOUT THIS PROSPECTUS
The registration statement we filed with the
Securities and Exchange Commission, or SEC, includes exhibits that provide more detail of the matters discussed in this prospectus.
You should read this prospectus and the related exhibits filed with the SEC, together with the additional information described
under the headings “Where You Can Find More Information” and “Incorporation by Reference” before making
your investment decision.
You should rely only on the information provided
in this prospectus or in a prospectus supplement or amendment thereto. We have not authorized anyone else to provide you with different
information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an
offer to sell these securities in any state where the offer or sale is not permitted. You should assume that the information in
this prospectus is accurate only as of the date hereof. Our business, financial condition, results of operations and prospects
may have changed since that date.
Unless the context otherwise requires, references
in this prospectus to “Second Sight,” “the Company,” “we,” “us” and “our”
refer to Second Medical Products, Inc. Second Sight
®
the Second Sight logo and Argus
®
are registered
trademarks, and Orion is a trademark of Second Sight Medical Products, Inc. Argus and Orion are referred to throughout this prospectus
as Argus II and Orion I respectively. All other product and company names are trademarks of their respective owners.
QUESTIONS AND ANSWERS RELATING TO THE RIGHTS
OFFERING
The following are examples of what we anticipate
will be common questions about the Rights Offering. The answers are based on selected information included elsewhere in this prospectus.
The following questions and answers do not contain all of the information that may be important to you and may not address all
of the questions that you may have about the Rights Offering. This prospectus and the documents incorporated by reference into
this prospectus contain more detailed descriptions of the terms and conditions of the Rights Offering and provide additional information
about us and our business, including potential risks related to the Rights Offering, the Units offered hereby, common stock and
warrants underlying the units, and our business. We urge you to read this entire prospectus and the documents incorporated by reference
into this prospectus.
Why are we conducting the Rights Offering?
We are conducting the Rights Offering to raise
additional capital:
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to improve performance of the Argus II so as to allow
treatment of better-sighted RP patients and thereby enlarge our current markets;
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to continue funding the ongoing development of Orion I, a visual prosthesis for cortical stimulation that we expect will be able to treat nearly all forms of blindness;
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to continue funding the ongoing clinical study of Argus
II in patients with age-related macular degeneration (AMD); and
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for general corporate purposes, including working capital, research and development, business development and operational purposes.
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What is the Rights Offering?
We are distributing, at no charge, to
record holders of our common stock, non-transferable Subscription Rights to purchase Units at the lesser of $2.00 or the
closing price of our share on the Expiration Date, per Unit, which we refer to as the Subscription Price. Each Unit consists
of one share of common stock and a Warrant representing the right to purchase one share of common stock at an exercise price
equal to the Subscription Price. Each Warrant expires five years from the Expiration Date. The Subscription Rights will not
be tradable. We intend to list the Warrants for trading on Nasdaq, but we cannot assure you that our
listing application will be approved. Even if our listing application is approved, we cannot guarantee that a trading market
for the Warrants will develop.
Holders of our shares have the right to invest
$0.47 for each share of common stock owned at 5:00 p.m., New York City Time, on [ ], 2017
or the Record Date. Upon valid exercise of the Subscription Rights, the common stock and Warrants included in the Units will separate
and will be issued as separate securities. You will receive Subscription Rights for each share of common stock that you owned as
of 5:00 p.m. Eastern time on the Record Date.
What are the Basic Subscription Rights?
For each whole share of common stock
you owned as of the Record Date, you will receive Subscription Rights which give you the opportunity to invest $0.47 for
each share of our common stock that you owned on the Record Date. Each Unit consists of one share of our common stock and
a five-year Warrant to purchase one additional share of our common stock at an exercise price equal to the Subscription
Price. For example, if you owned 1,000 shares of our common stock as of the Record Date, you would have the right to invest
$0.47 for each share of Common Stock you own as of the Record Date, or $470, at the Subscription Price. If you invest $470,
and if on the Expiration Date the closing price of our common stock as reported by Nasdaq is $2.03 per share, the
Subscription Price will be $2.00 (which constitutes the lesser of $2.00 or the closing price per share on the Expiration
Date), you would receive 235 Units consisting in the aggregate of 235 shares of our common stock and Warrants to purchase 235 shares of our common stock. If you invest $470, and on the Expiration Date the closing price of our common
stock is $1.90 per share, the Subscription Price will be $1.90 and you would receive a rounded down 247 Units and a refund of
$0.70. You may exercise all or a portion of your Basic Subscription Rights or you may choose not to exercise any Basic
Subscription Rights at all. Subscription Rights may only be exercised in aggregate for whole numbers of shares of our common
stock; no fractional shares of our common stock or warrants exercisable for fractional shares will be issued in the Rights
Offering.
If you are a record holder, the amount that
you may invest pursuant to your Basic Subscription Rights is indicated on the enclosed Rights Certificate. If you hold your shares
in the name of a broker, dealer, bank, or other nominee who uses the services of the Depository Trust Company, or DTC, you will
not receive a Rights Certificate. Instead, DTC will issue one Subscription Right to your nominee record holder for each share of
our common stock that you own as of the Record Date. If you are not contacted by your nominee, you should contact your nominee
as soon as possible.
What is the Over-Subscription Privilege?
If you exercise your Basic Subscription Rights
in full, you may also choose to exercise your Over-Subscription Privilege to invest additional amounts that the other record holders
do not subscribe for through the exercise of their Basic Subscription Rights. You should indicate on your Rights Certificate, or
the form provided by your nominee if your shares are held in the name of a nominee, how much of an additional investment you would
like to make pursuant to your Over-Subscription Privilege.
Subject to stock ownership
limitations, if a sufficient number of Units is available after determining the Subscription Price, we will seek to honor
your Over-Subscription request in full. If Over-Subscription requests result in exceeding the amounts available for
investment, however, we will allocate the available Units pro-rata among the record holders exercising the Over-Subscription
Privilege in proportion to the number of shares of our common stock each of those record holders owned on the Record Date. If
this pro rata allocation results in any shareholder receiving a greater number of Units at the Subscription Price than the
shareholder subscribed and paid for pursuant to the exercise of the Over-Subscription Privilege, then such shareholder will
be allocated only that number of Units at the Subscription Price for which the shareholder was entitled to oversubscribe, and
the remaining Units will be allocated among all other shareholders exercising and investing in the Over-Subscription
Privilege on the same pro rata basis described above. The proration process will be repeated until all Units have been
allocated or all over-subscription exercises have been fulfilled, whichever occurs earlier. Although Gregg Williams, a member
of our Board of Directors has advised us that he intends to exercise Subscription Rights, including Over-Subscription
Privileges subject to availability, to acquire Units at the Subscription Price, for an aggregate investment of
up to $10 million, Mr. Williams is under no obligation to do so.
Mr. Williams, at his discretion, may seek to subscribe for more or less than the foregoing amount. The exact number of Units
which Gregg Williams may acquire will be subject to allocations of Units pro rata among the record holders exercising
the Over-Subscription Privilege as indicated above.
To properly exercise your Over-Subscription
Privilege, you must deliver to the Subscription Agent the subscription payment related to your Over-Subscription Privilege before
the Rights Offering expires. Because we will not know the total number of Units that may be issued prior to the expiration of the
rights offering, if you wish to maximize the number of Units you purchase pursuant to your Over-Subscription Privilege, you will
need to deliver payment in an amount equal to the aggregate subscription price for the maximum amount you wish to invest at the
Subscription Price, assuming that no shareholder other than you has exercised Basic Subscription Privileges and Over-Subscription
Privileges.
Fractional Units resulting from the exercise
of the Subscription Rights will be eliminated by rounding down to the nearest whole Unit, with the total subscription payment being
adjusted accordingly. See “The Rights Offering—The Subscription Rights—Over-Subscription Privilege.” To
the extent your investment amount results in exercising your Over-Subscription Privilege for an amount of Units that exceeds the
number of unsubscribed Units available to you at the Subscription Price, any excess subscription payments will be returned to you
approximately within 10 business days after the expiration of the Rights Offering, without interest or penalty.
Broadridge Inc., our Subscription Agent, will
determine the Over-Subscription allocation based on the formula described above.
What are the limitations on the exercise of the Basic Subscription
Rights and Over-Subscription Privilege?
In the event that the exercise by a shareholder
of the Basic Subscription Right or the Over-Subscription Privilege could, as determined by the Company in its sole discretion,
potentially result in a limitation on the Company’s ability to use net operating losses, tax credits and other tax attributes,
which we refer to as the “Tax Attributes,” under the Internal Revenue Code of 1986, as amended, which we refer to as
the “Code”, and rules promulgated by the Internal Revenue Service, the Company may, but is under no obligation to,
reduce the exercise by such shareholder of the Basic Subscription Right and/or the Over-Subscription Privilege to such number of
Units as the Company in its sole discretion shall determine to be advisable in order to preserve the Company’s ability to
use the Tax Attributes.
What are the terms of the Warrants?
Each Warrant entitles the holder to purchase one share
of common stock for each whole share of common stock purchased in the Rights Offering at an exercise price equal to
the Subscription Price for five years following the issuance of the Warrant. The Warrants will be exercisable by paying
the exercise price in cash. We intend to list the Warrants for trading on Nasdaq, but we cannot assure you that our
listing application will be approved. Even if our listing application is approved, we cannot guarantee that a trading market
for the Warrants will develop. The Board of Directors of the Company at its discretion may call the Warrants for redemption
on 30 days’ notice under certain market conditions following the two year anniversary of this offering at a redemption
price of $0.01 per warrant. Holders will be able to sell or exercise warrants prior to any announced redemption date. See
“Description of Securities- Warrants Included in Units Issuable in the Rights Offering”.
Will fractional shares be issued upon exercise of Subscription
Rights or upon the exercise of Warrants?
No. We will not issue fractional shares of common
stock in the Rights Offering. Rights holders will only be entitled to purchase a number of Units representing a whole number of
shares of common stock, rounded down to the nearest whole number of Units a holder would otherwise be entitled to purchase. Any
excess subscription payments received by the Subscription Agent will be returned as soon as practicable after expiration of the
Rights Offering, without interest or penalty. Similarly, no fractional shares of common stock will be issued in connection with
the exercise of a Warrant.
What effect will the Rights Offering have on our outstanding
common stock?
Based on 42,696,000 shares of common stock
outstanding as of December 30, 2016, assuming no other transactions by us involving our common stock prior to the Expiration Date,
if the Rights Offering is fully subscribed at a Subscription Price of $1.97 per Unit, which was the closing share price on that
date, we will issue approximately 10,186,000 shares of common stock to shareholders who exercise their Subscription Rights, and
we will thereafter have approximately 52,882,000 shares of our common stock issued and outstanding and Warrants to purchase
approximately 10,186,000 additional shares of our common stock will be outstanding (excluding currently outstanding warrants).
The exact number of shares and Warrants that we will issue in this Rights Offering will depend on the number of Units that are
subscribed for in the Rights Offering. In the event of further volatility and market or price declines, then notwithstanding full
subscription we may elect, at our discretion, to limit units that we sell in the Rights Offering to no more than 15 million Units.
See "The Rights Offering" below on page [ ].
How was the Subscription Price determined?
In determining how to establish the Subscription
Price, the directors considered, among other things, the following factors:
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the current and historical trading prices of our common stock;
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the price at which shareholders might be willing to participate
in the Rights Offering;
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the value of the Warrant being issued as a component of the Unit;
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our need for additional capital and liquidity;
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the cost of capital from other sources; and
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comparable precedent transactions, including the percentage of shares offered, the terms of the subscription rights being offered, the Subscription Price and the discount that the Subscription Price represented to the immediately prevailing closing prices for those offerings.
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In conjunction with the review of these factors,
the board of directors also reviewed our history and prospects, including our past and present earnings and cash requirements,
our prospects for the future, the outlook for our industry and our current financial condition and further considered recent volatile
markets as well as the possible continued volatility of our stock during the period commencing on the Record Date and extending
through the Expiration Date. The board of directors believes that the Subscription Price should be designed to provide an incentive
to our current shareholders to participate in the Rights Offering and exercise their Basic Subscription Rights and their Over-Subscription
Privileges.
The Subscription Price does not necessarily
bear any relationship to any established criteria for value. You should not consider the Subscription Price as an indication of
actual value of our company or our common stock. We cannot assure you that the market price of our common stock will not decline
during the Rights Offering or after the Expiration Date. You should obtain a current price quote for our common stock before exercising
your Subscription Rights and make your own assessment of our business and financial condition, our prospects for the future, and
the terms of this Rights Offering. Once made, all exercises of Subscription Rights are irrevocable, unless we amend the rights
offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the
terms of the Rights Offering set forth in this prospectus.
Am I required to exercise all of the Basic Subscription Rights
I receive in the Rights Offering?
No. You may exercise any number of your Basic
Subscription Rights, or you may choose not to exercise any Basic Subscription Rights. If you do not exercise any Basic Subscription
Rights, the number of shares of our common stock you own will not change. However, if you choose to not exercise your Basic Subscription
Rights in full, your proportionate ownership interest in our company will decrease. If you do not exercise your Basic Subscription
Rights in full, you will not be entitled to exercise your Over-Subscription Privilege.
How soon must I act to exercise my Subscription Rights?
If you received a Rights Certificate and elect
to exercise any or all of your Subscription Rights, the Subscription Agent must receive your completed and signed Rights Certificate
and payment for both your Basic Subscription Rights and any Over-Subscription Privilege you elect to exercise, including final
clearance of any uncertified check, before the Rights Offering expires on [ ] __, 2017, at 5:00 p.m., New York City Time.
If you hold your shares in the name of a broker, dealer, custodian bank, or other nominee, your nominee may establish a deadline
before the Expiration Date by which you must provide it with your instructions to exercise your Subscription Rights, along with
the required subscription payment.
May I transfer my Subscription Rights?
No. The Subscription Rights may be exercised
only by the shareholders to whom they are distributed, and they may not be sold, transferred, assigned or given away to anyone
else, other than by operation of law. As a result, Rights Certificates may be completed only by the shareholder who receives the
certificate. The Subscription Rights will not be listed for trading on any stock exchange or market and are not transferable.
Will our directors and executive officers participate in the
Rights Offering?
To the extent they hold common stock as of
the Record Date, our directors and executive officers will be entitled to participate in the Rights Offering on the same terms
and conditions applicable to other Rights holders. While none of our directors or executive officers has entered into any binding
commitment or agreement to exercise Subscription Rights received in the Rights Offering, Gregg Williams, a member of our Board
of Directors and a principal shareholder of the Company, has advised us that he intends to exercise his Basic Subscription Right
and will also elect to exercise Over-Subscription Privileges to purchase Units at the Subscription Price for a total investment
that may amount to $ 10 million. Mr. Williams, nevertheless, may seek to subscribe for more or less than this indicated amount.
The actual number of Units he acquires, if any, and any amount that he invests will also be dependent on the level of shareholder
participation in this offering and the amount that Mr. Williams elects to invest. Certain other directors and executive officers
also have indicated an interest in participating, but no assurance of any investment amount from them can be given.
Has the board of directors made a recommendation to shareholders
regarding the Rights Offering?
No. Our board of directors makes no recommendation
regarding your exercise of the Subscription Rights. Shareholders who exercise Subscription Rights will incur investment risk on
new money invested. We cannot predict the price at which our shares of common stock will trade after the Rights Offering. On December
30 2016, the closing price of our common stock was $1.97 per share. The market price for our common stock may be above the
Subscription Price or may be below the Subscription Price following Expiration Date. If you exercise your Subscription Rights,
you may not be able to sell the underlying shares of our common stock, or shares received from exercise of the Warrants, in the
future at or above the Subscription Price. You should make your decision based on your assessment of our business and financial
condition, our prospects for the future, the terms of the Rights Offering and the information contained in this prospectus. See
“Risk Factors” for discussion of some of the risks involved in investing in our securities.
How do I exercise my Subscription Rights?
If you are a shareholder of record (meaning
you hold your shares of our common stock in your name and not through a broker, dealer, bank, or other nominee) and you wish to
participate in the Rights Offering, you must deliver a properly completed and signed Rights Certificate, together with payment
of the amount you wish to invest for both your Basic Subscription Rights and any Over-Subscription Privilege you elect to exercise,
to the Subscription Agent before 5:00 p.m., New York City Time, on [ ] __,
2017. If you are exercising your Subscription Rights through your broker, dealer, bank, or other nominee, you should promptly contact
your broker, dealer, bank, or other nominee and submit your subscription documents and payment of the amount you wish to invest
and subscribe for in accordance with the instructions and within the time period provided by your broker, dealer, bank or other
nominee.
What if my shares are held in “street name”?
If you hold your shares of our common stock
in the name of a broker, dealer, bank, or other nominee, then your broker, dealer, bank, or other nominee is the record holder
of the shares you own. The record holder must exercise the Subscription Rights on your behalf. Therefore, you will need to have
your record holder act for you.
If you wish to participate in this Rights Offering
and purchase Units, please promptly contact the record holder of your shares. We will ask the record holder of your shares, who
may be your broker, dealer, bank, or other nominee, to notify you of this Rights Offering.
What form of payment is required?
You must timely pay the full Subscription Price
for the full amount you wish to invest and subscribe for pursuant to the exercise of Subscription Rights by delivering to the Subscription
Agent a:
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personal check drawn on a U.S. bank;
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cashier’s or certified check drawn on a U.S. bank;
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U.S. Postal money order; or
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If you send payment by personal uncertified
check, payment will not be deemed to have been delivered to the Subscription Agent until the check has cleared.
The payment received will be applied to exercise
your Subscription Rights to the fullest extent possible based on the amount of the payment received when measured against the Subscription
Price after its determination.
When will I receive my new shares of common stock and Warrants?
The Subscription Agent will arrange for the
issuance of the common stock and Warrants as soon as practicable after the expiration of the Rights Offering, payment for the Units
subscribed for has been received, and all prorating calculations and reductions contemplated by the terms of the Rights Offering
have been effected. If you hold your shares in the name of a broker, dealer, bank, or other nominee, DTC will credit your account
with your nominee with the securities you purchase in the Rights Offering. If you are a holder of record of shares, all shares
that you purchase in the Rights Offering together with the Warrants will be issued in book-entry, or uncertificated, form meaning
that you will receive a direct registration (DRS) account statement from our transfer agent reflecting ownership of the common
stock and Warrants.
After I send in my payment and Rights Certificate to the Subscription
Agent, may I cancel my exercise of Subscription Rights?
No. Exercises of Subscription Rights are irrevocable
unless the Rights Offering is terminated or we amend the Rights Offering to allow for an extension of the Rights Offering for a
period of more than 30 days or make a fundamental change to the terms of the Rights Offering set forth in this prospectus, in which
case you may cancel your subscription and receive a refund of any money you have advanced, even if you later learn information
that you consider to be unfavorable to the exercise of your Subscription Rights. You should not exercise your Subscription Rights
and remit any amount unless you are certain that you wish to purchase Units at the Subscription Price, a price that will not be
determined until after Expiration Date.
How much will our company receive from the Rights Offering?
Assuming that Rights Offering is fully subscribed,
through a combination of our shareholders exercising their Basic Subscription Rights and Over-Subscription Privileges, we estimate
that the proceeds from the Rights Offering based on shares outstanding at September 30, 2016, will be approximately $19,856,000,
before deducting estimated expenses of $410,000 payable by us in connection with this offering.
Are there risks in exercising my Subscription Rights?
Yes. The exercise of your Subscription Rights
involves risks. Exercising your Subscription Rights involves the purchase of additional shares of our common stock and Warrants
to purchase common stock, at a Subscription Price that will be determined as of the Expiration Date, and you should consider this
investment as carefully as you would consider any other investment. We cannot assure you that the market price of our common stock
will exceed the Subscription Price, nor can we assure you that the market price of our common stock will not further decline during
or after the Rights Offering. We also cannot assure you that you will be able to sell shares of our common stock purchased in the
Rights Offering or obtained upon the exercise of the Warrants at a price equal to or greater than the Subscription Price. In addition,
you should carefully consider the risks described under the heading “Risk Factors” for discussion of some of the risks
involved in investing in our securities.
Can the board of directors terminate or extend the Rights Offering?
Yes. Our board of directors may decide to terminate
the Rights Offering at any time and for any reason before the expiration of the Rights Offering. We also have the right to extend
the Rights Offering for additional periods in our sole discretion. We do not presently intend to extend the Rights Offering. We
will notify shareholders if the Rights Offering is terminated or extended by issuing a press release.
If the Rights Offering is not completed or is terminated, extended
or amended, will my subscription payment be refunded to me?
Yes. The Subscription Agent will hold all funds
it receives in a segregated bank account until completion of the Rights Offering. If we do not complete the Rights Offering, all
subscription payments received by the Subscription Agent will be returned within 10 business days after the termination or expiration
of the Rights Offering, without interest or penalty. If we extend the Rights Offering for a period of over 30 days or make a fundamental
change to the terms of the Rights Offering set forth in this prospectus, you may cancel your subscription and receive a refund
of any money you have advanced.
If you own shares in “street name,”
it may take longer for you to receive your subscription payment because the Subscription Agent will return payments through the
record holder of your shares.
How do I exercise my Rights if I live outside the United States?
The Subscription Agent will hold Rights Certificates
for shareholders having addresses outside the United States. To exercise Subscription Rights, foreign shareholders must notify
the Subscription Agent and timely follow other procedures described in the section entitled “The Rights Offering –
Foreign Shareholders.”
What fees or charges apply if I purchase Units in the Rights
Offering?
We are not charging any fee or sales commission
to issue Subscription Rights or shares and Warrants underlying Subscription Rights if you exercise your Subscription Rights. If
you exercise your Subscription Rights through a broker, dealer, custodian bank, or other nominee, you are responsible for paying
any fees your broker, dealer, bank, or other nominee may charge you.
What are the U.S. federal income tax consequences of exercising
my Subscription Rights?
For U.S. federal income tax purposes, we believe
you should not recognize income or loss in connection with the receipt or exercise of Subscription Rights in the Rights Offering.
You should consult your tax advisor as to the tax consequences of the Rights Offering in light of your particular circumstances.
For a detailed discussion, see “Material U.S. Federal Income Tax Consequences.”
To whom should I send my forms and payment?
If your shares are held in the name of a broker,
dealer, bank, or other nominee, then you should send your subscription documents and subscription payment to that broker, dealer,
bank, or other nominee. If you are the record holder, then you should send your subscription documents, Rights Certificate, and
subscription payment to the Subscription Agent hand delivery, first class mail or courier service to:
By mail:
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By hand or overnight courier:
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Broadridge, Inc.
Attention: BCIS Re-Organization Dept.
P.O. Box 1317
Brentwood, New York 11717-0693
(855) 793-5068 (toll free)
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Broadridge, Inc.
Attention: BCIS IWS
51 Mercedes Way
Edgewood, New York 11717
(855) 793-5068
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You or, if applicable, your nominee are solely responsible for completing
delivery to the Subscription Agent of your subscription documents, Rights Certificate and payment. You should allow sufficient
time for delivery of your subscription materials to the Subscription Agent and clearance of payment before the expiration of the
Rights Offering at 5:00 p.m. New York City Time on [ ] __, 2017.
Whom should I contact if I have other questions?
If you have other questions or need assistance,
please contact the Information Agent:
Broadridge Corporate Issuer Solutions, Inc.
Attention: BCIS IWS
51 Mercedes Way
Edgewood, New York 11717
(855) 793-5068 (toll free)
PROSPECTUS SUMMARY
This summary contains basic information
about us and this offering. Because it is a summary, it does not contain all of the information that you should consider before
investing. Before you decide to invest in Units, you should read this entire prospectus carefully, including the section entitled
“Risk Factors” and any information incorporated by reference herein.
OUR COMPANY
Overview
Second Sight was founded
in 1998 with a mission to develop, manufacture, and market prosthetic devices that restore useful vision to blind individuals.
Our principal offices are located in Sylmar, California, approximately 25 miles northwest of downtown Los Angeles. We also have
an office in Lausanne, Switzerland, that manages our commercial and clinical operations in Europe, the Middle East, Latin America
and Asia-Pacific.
Our current product, the
Argus
®
II System, treats outer retinal degenerations, such as retinitis pigmentosa, also referred to as RP. RP is
a hereditary disease, affecting an estimated 1.5 million people worldwide including about 100,000 people in the United States,
that causes a progressive degeneration of the light-sensitive cells of the retina, leading to significant visual impairment and
ultimately blindness. The Argus II System is the only retinal prosthesis approved in the United States by the Food and Drug Administration
(FDA), and was the first approved retinal prosthesis in the world. By restoring a form of useful vision in patients who otherwise
have total sight loss, the Argus II System can provide benefits which include:
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improving patients’ orientation and mobility, such as locating
doors and windows, avoiding obstacles, and following the lines of a crosswalk,
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allowing patients to feel more connected with people in their surroundings,
such as seeing when someone is approaching or moving away
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providing patients with enjoyment from being “visual”
again, such as locating the moon, tracking groups of players as they move around a field, and watching the moving streams
of lights from fireworks, and
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improving patients’ well-being and ability to perform activities
of daily living.
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The Argus II System provides
an artificial form of vision that differs from the vision of people with normal sight. It does not restore normal vision and it
does not reverse the progression of the disease. Results vary among patients: while the majority of patients receive significant
benefit from the Argus II, some patients report receiving little or no benefit.
Our major corporate, clinical
and regulatory milestones include:
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In 1998, Second Sight was founded.
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In 2002, we commenced clinical trials in the US for our prototype product, the Argus I retinal prosthesis.
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In 2007, we commenced clinical trials in the US for the Argus II System, which later became our first commercial product.
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In 2011, we received marketing approval in Europe (CE Mark) for the Argus II System.
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In 2013, we received marketing approval in the United States (FDA) for the Argus II System.
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In 2014, we launched the Argus II in the US, completed our initial public offering (“IPO”), and began trading on
Nasdaq under the symbol “EYES.”
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In 2015, we commenced a clinical trial in the UK for an expanded indication for the Argus II System in individuals with dry
AMD.
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In
2016, we successfully implanted and activated a wireless cortical visual prosthesis.
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Currently, after more
than 18 years of research and development, more than $180 million of investment and over $36 million of grants awarded in support
of our technology development, we employ over 100 people in the development (research, engineering and clinical), manufacture,
and commercialization of the Argus II System and future products.
Our Technology
The Argus II System employs
electrical stimulation to bypass degenerated photoreceptor cells and to stimulate remaining viable retinal cells thereby inducing
visual perception in blind individuals. The Argus II System works by converting video images captured by a miniature camera housed
in a patient’s glasses into a series of small electrical pulses that are transmitted wirelessly to an array of electrodes
that are implanted on the surface of the retina. These pulses are intended to stimulate the retina’s remaining cells, resulting
in a corresponding perception of patterns of light in the brain. Following the implant surgery, patients learn to interpret these
visual patterns thereby regaining some useful vision, allowing them to detect shapes of people and objects in their surroundings.
We believe the Argus
II System (including its implantable components) possesses several unique technological advancements compared to other neurostimulation
devices including a hermetic package with the smallest size and largest number of individually programmable electrodes, and a
patented electrode material that allows high charge densities and small electrode size. Several other engineering challenges,
including device reliability, extended lifetime, and a safe and effective bio-interface, were overcome durin
g
the development of the product and these solutions have been protected both by patents and by trade secrets. As of December 31,
2016, we have 381 issued patents and 126 pending patent applications worldwide. Additionally, from a competitive standpoint, the
Argus II System possesses attractive technical and other features that include:
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a unique patented design that allows for a demonstrated lifetime and
benefit of over 9.5 years,
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surgical implantation that can be performed in three to four hours
using standard vitreoretinal techniques,
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a relatively large field of view (20 degrees),
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implanted patients can undergo MRI procedures, and
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individually programmable electrodes on the prosthesis
which can permit further optimization of the device after implantation
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We have demonstrated the ability to design products with long-term
reliability. The Argus I retinal prosthesis, a proof of concept device that was a predecessor to the Argus II, was implanted in
six patients in the United States. Argus I patients were implanted an average of almost six years, with one patient having used
the device for over 10 years. The Argus II System has been implanted in over 200 patients. The average implant duration for these
patients is nearly three years with several users continuing to use the system almost 10 years following implantation.
We are developing another
product that stimulates the visual part of the brain rather than the retina, which we refer to as the Orion I visual prosthesis
system. Our objective in designing and developing the Orion I visual prosthesis system is to bypass the optic nerve and directly
stimulate the part of the brain responsible for vision, the visual cortex. This has the potential to help many more patients whose
optic nerves are damaged by trauma or disease. As currently under development, the Orion I visual prosthesis system is based on
technology that we utilize in our Argus II system, thereby reducing engineering investment costs and risks, and leveraging the
reliability of the Argus II platform. By limiting the changes to the FDA approved Argus II system, we can progress relatively
quickly to human trials.
Our Markets
Retinitis Pigmentosa (RP)
RP is a group of inherited
disorders that affect the retina. The retina is a layer of nerve cells at the back of the eye. RP is a disease that gradually robs
relatively young people of their vision over time. Onset of RP is often noted in the teen years or early twenties, typically as
night blindness. This is followed by a period of peripheral vision loss, until the patient is left with a tunnel of vision and
then no remaining sight. Although there are various genetic causes (over 100) and thus variability in the disease progression,
many people with advanced RP have lost all functional vision by their 40s or 50s. The Argus II System works by bypassing rods and
cones which are defunct in these patients, and sending electrical signals directly to the retina’s remaining healthy cells.
Although there are reported
trials for other treatments underway, to our knowledge the Argus II System remains the only approved therapeutic option for end-stage
RP in the US, and to our knowledge it is the only treatment option generally available to commercial patients anywhere in the world.
Worldwide, an estimated 1.5 million
people suffer from RP
1
,
which includes about 100,000 in the US
2
.
Pan-European data is not readily available, but we believe it is reasonable to estimate
that the average prevalence throughout Europe is similar to the average prevalence within the US, and so the ratio of populations
could be used to estimate the number of Europeans affected as 167,000 in the 28 EU countries
3,4
.
Approximately
25% of people with RP in the US have vision that is 20/200 or worse (legally blind)
5
.
Since
the bare light perception or worse vision criterion for the US indication is worse than 20/200, we know the subset of patients
that can be treated by the Argus II System is less than 25,000 in the US. Reliable market data estimating the actual number of
patients with bare light perception or worse vision is unavailable. We believe that the majority of patients with vision 20/200
or worse have vision that is better than bare light perception and thus, are not currently candidates for Argus II. In Europe,
the indicated vision loss for Argus II patients is severe to profound which, while better than bare light perception, remains somewhat
worse than 20/200. An estimated 42,000 patients in Europe with RP have vision worse than 20/200 and we estimate that the subset
of RP patients that can be treated in Europe to be somewhat smaller than this number. As in the US, reliable market data estimating
the actual number of patients with severe to profound vision loss or worse is unavailable. We believe that the majority of patients
with vision 20/200 or worse in Europe have vision that is too good to be considered a candidate for Argus II with current clinical
indications and physician practice. Worldwide, we estimate that 375,000 people are legally blind due to RP, and that a portion
of these would be candidates for the Argus II System.
As we improve the quality of vision that the
Argus II can produce, we expect to be able to treat a higher percentage of the legally blind population by treating better sighted
patients.
1
Weleber, R.G. and Gregory-Evans, K. (2001) ‘Retinitis Pigmentosa and allied disorders.’
In Ryan, S.J. (ed.), Retina. Mosby, St. Louis, pp, 362-470.
2
Foundation Fighting Blindness estimates that about 100,000 Americans are affected by RP or similar
diseases. (http://www.ffb.ca/documents/File/rp_guide/Guide_to_RP_and_Other_Related_Diseases.pdf)
3
Eurostat. Retrieved 1 January 2013.
4
Haim M. Epidemiology of Retinitis Pigmentosa in Denmark. Acta Ophthalmol Scand Suppl 2002; 1-34.
5
Grover et al., ‘Visual Acuity Impairment in Patients with Retinitis Pigmentosa at Age 45 Years or Older’, Ophthalmology.
1999 Sept; 106(9):1780-5.
Age Related Macular Degeneration (AMD)
AMD is a relatively common
eye condition and the leading cause of vision loss among people aged 65 and older
1
. The macula is a small spot near
the center of the retina and its damage results in loss of central vision. AMD can start as a blurred area near the center of vision
and over time it can grow larger until loss of central vision occurs. Central vision is extremely important for everyday tasks
such as reading, writing, and face recognition.
There are three stages
of AMD defined in part by the size of drusen (yellow deposits) under the retina. Early and intermediate stage AMD has few symptoms
or vision loss. These earlier stages of the disease are usually left untreated or dealt with using diet supplementation. People
with advanced AMD have vision loss from damage to the macula. There are two types of late stage AMD:
Dry AMD: There is a breakdown of light sensitive
cells in the macula that send visual information to the brain, and the supporting tissue beneath the macula. This damage causes
vision loss.
Wet AMD: Blood vessels grow underneath the
retina. These vessels might leak blood which may lead to swelling and damage of the macula. This damage may be severe and can progress
quickly.
Worldwide,
between 20 and 25 million people are estimated to suffer from vision loss due to AMD
2
, and of these about two
million have vision that is considered legally blind, or worse
3
.
In the
US, just over two million people experience vision loss due to AMD according to a 2010 study by the National Eye Institute. Of
the 1.3 million legally blind Americans
4
, we estimate that 42.5% (or 552,500) are due to AMD
5
.
Applying
this percent of legally blind due to AMD (42.5%) to the total number of legally blind people in Europe (2.55 million)
6
,
we
estimate the population of legally blind individuals from AMD to be about 1.08 million individuals in Europe. We believe the Argus
II System may be able to help a subset of these legally blind AMD patients who have severe to profound vision loss. To date, though
clinical testing has produced subjective improvements, we have not yet demonstrated objective benefits. The challenge in demonstrating
objective benefits in these patients is that they maintain residual peripheral vision. Thus, we must demonstrate that the quality
of the vision we produce is better than their residual vision, which is much more challenging than demonstrating benefit for the
RP patients we are currently treating, which have completely lost all vision.
Other diseases resulting in blindness that may be treated
by Orion I cortical visual prosthesis system
Many diseases outside
of RP and AMD can also cause blindness. Many of the largest causes of visual impairment (i.e. refractive error and cataracts)
are avoidable or curable, and their prolonged or untreated impact on vision is largely observed in developing nations and are not
part of our target market. Some other causes of blindness, such as brain trauma, may also not be suitable for treatment by a cortical
stimulator. However, the remaining causes of severe vision loss which include glaucoma, diabetic retinopathy, eye trauma, retinopathy
of prematurity and many others can result in severe visual impairment that we anticipate to be treatable by an Orion I visual prosthesis
system.
According to the
World Health Organization (WHO)
7
, 285
million people suffer from vision loss worldwide. Of these, 39 million people are considered legally blind. The WHO further
estimates that 80% of legal blindness is avoidable, leaving 7.8 million legally blind individuals, including those blind due
to AMD and RP, or 5.8 million excluding AMD and RP. In the US, 1.3 million people are legally blind
8
, of
which we estimate 44.3%, or 575,900, are legally blind due to causes other than preventable/treatable conditions, RP or
AMD
9
. Applying the same logic, we
estimate 1.13 million individuals are legally blind in Europe due to causes other than preventable/treatable conditions, RP
or AMD. As with Retinitis Pigmentosa, we believe the initial Orion I will treat a subset of these legally blind
individuals, likely starting with the ones who are completely blind and moving to better sighted patients as the technology
improves.
1
The Eye Diseases Prevalence Research Group, 2004a; CDC, 2009.
2
Choptar, A., Chakravarthy, U., and Verma, D. ‘Age Related Macular Degeneration’. BJM 2003;326:485.
3
Global Data on Visual Impairments 2010, World Health Organization.
4
National Eye Institute (http://www.nei.nih.gov/eyedata/blind.asp).
5
Congdon N, O’Colmain B, Klaver CC, et al. Causes and prevalence of visual impairment among adults in the United States.
Arch
Ophthalmol.
Apr 2004;122(4):477-485. This percent amount
was derived from the rates of different causes of blindness by different races and racial demographic data from 2010 US Census
data.
6
Global Data on Visual Impairments 2010, World Health Organization.
7
WHO Fact Sheet number 282, updated October 2013.
8
National Eye Institute (http://www.nei.nih.gov/eyedata/blind.asp).
9
Congdon N, O’Colmain B, Klaver CC, et al. Causes and prevalence of visual impairment among
adults in the United States.
Arch Ophthalmol.
Apr
2004;122(4):477-485. This percent amount was derived from the rates of different causes of blindness by different races and racial
demographic data from 2010 US Census data.
Our Strategy
Second Sight’s strategy can be summarized as follows:
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Establish surgical Centers of
Excellence (COE) and expand reimbursement coverage to reach a larger percentage of eligible patients,
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Improve Argus II performance and significantly
expand use in the larger RP population by treating better-sighted RP patients
and thereby also enlarge
the markets which we currently serve,
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Leverage proven ARGUS technology to restore
useful vision with cortical stimulation and expand addressable market to include a portion of the almost 6 million patients who
are blind from eye trauma, optic nerve disease, and other unpreventable causes, and
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Continue clinical testing of Argus II in AMD patients
with new software to demonstrate benefit and provide necessary data to inform further clinical trials and/or R&D efforts.
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Establish Centers of Excellence (COE) and expand reimbursement
coverage to reach a larger percentage of eligible patients
We launched the Argus
II System in Italy and Germany at the end of 2011; in Saudi Arabia, France, the Netherlands and England in 2013; in Switzerland,
Spain, the US and Canada in 2014; and Austria and Turkey in 2015. We are employing a refined Centers of Excellence sales strategy,
deploying the Argus II at prominent, reputable eye centers which are equipped to handle all aspects of an Argus II program including
patient recruitment, surgery, fitting and rehabilitation. We believe this strategy represents an efficient use of our capital after
giving consideration to the following factors:
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Size of the RP patient population that is currently treatable
by Argus II,
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Complexity
of the technology, surgery, post-surgery programming and rehabilitation, and
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Cost of selecting,
qualifying, training and building qualified Centers of Excellence.
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When selecting new sites,
we focus on high quality health providers considering the following factors:
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Facility and surgeon skill and reputation
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Willingness of the site to recruit and
screen for eligible patients,
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Established regulatory and reimbursement
pathways,
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Desire and capability of institution to
perform a significant number of surgeries annually,
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Ability of site to perform post-surgery
programming of Argus technology, and
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Capability of site and/or local resources to direct
artificial vision rehabilitation
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As
of December 31, 2016, we have 15 qualified centers in the United States and Canada that are actively implanting the Argus II.
Ultimately, we anticipate serving the North American RP market with approximately 35 implanting centers across the US and Canada. In
Europe and the Middle East, we currently have 21 centers that are actively implanting the Argus II (eight in Germany, three in
France, one in Saudi Arabia, four in Turkey, two in Spain, and three in Italy). We believe that we will be able to serve
the European and Middle East markets for RP by having approximately 50 centers across Europe and the Middle East.
To date, we have employed
direct sales and clinical specialists to service our markets in the US and Canada. The majority of our markets in Europe
are also serviced by a direct sales and clinical specialist team. As of December 31, 2016, the sales/clinical specialist team
for North America numbered four
persons and the sales team for Europe and the Middle East numbered seven persons.
In some cases, we believe that we can more efficiently expand our reach by securing distributors in key markets. To date, we have
appointed distributors in Spain, Turkey, Saudi Arabia, South Korea, Taiwan, and Argentina. We expect that our distributors will
commit to providing support services that include marketing, market access, sales, surgical support, post-surgery programming,
rehab coordination and service.
The Company is evaluating
potential new markets including countries in Latin America or Asia Pacific regions. We will selectively enter markets based on
multiple factors including: the presence of RP patients, skilled surgeons, a facility with the necessary support infrastructure,
a reliable source of funding or reimbursement along with the assurance that needed clinical, rehab and surgical support can be
provided.
Centers of
Excellence
Our revised COE strategy
in the US market is designed to help our centers more effectively manage Argus II patients and achieve better, more consistent
patient outcomes. The COE strategy consists of four major initiatives: (1) financial, (2) patient recruitment, education and screening,
(3) post-surgery programming, and (4) patient support and artificial vision rehab.
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First,
there are the financial considerations. As reported, the CMS hospital outpatient final
rule assigned a payment rate of $150,000 for the Argus II and the associated surgical
procedure beginning January 1, 2017. Physician fees continue to be reimbursed separately.
Our current pricing strategy should generally ensure full reimbursement coverage of hospital
surgical procedure costs including the Argus II system. We are also pleased that effective
July 1, 2017, CPT codes for post-surgery programming will be available. These developments
should ensure a favorable economic analysis for any center evaluating an Argus II program.
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Second, regarding patient recruitment,
education and screening, we will focus our outreach efforts around select centers to ensure a steady flow of patients. We have
upgraded the pathways by which we screen prospective patients so that individuals who are referred to hospitals have a higher probability
of being a candidate for surgery. In addition, we have a significant number of eligible, motivated patients that don’t currently
have access to Argus because they must travel hundreds of miles to a center, for screening, for surgery, and for post-surgery programming
and rehabilitation. We are working closely with a few of our most experienced centers to provide highly qualified treatment for
these patients.
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Third, in terms of the post-surgery programming,
our recent and future product improvements are aimed at simplifying the programming procedure for the site and for the patient.
In fact, we’ve recently reduced the expected time to program our system from two days down to a half day. As with the surgery,
repetition will make the programming more routine for the institution. And, as mentioned earlier, we have secured CPT codes to
allow sites to submit for reimbursement when they program an Argus system.
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Finally, the last pillar of this initiative
- patient support and artificial vision rehab - is extremely important. We have been working with various sites to identify and
document best practices related to rehab with the goal being an improved, comprehensive rehab guide. Our new rehabilitation program
will include certification level training to our dedicated customers and rehab providers in the U.S. We are now proactively coordinating
with our customers to ensure their Argus II patients complete this rehab curriculum, with attention to the important first three
to four months post-surgery.
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In summary, the aim
of the COE program is to establish implanting centers and physician clinics that are more intimately knowledgeable, self-sufficient,
and confident, enabling them to be able to treat a higher volume of patients. We also feel the COE program is important development
work that prepares the Company and our customers for the support requirements necessary to serve expanded patient populations in
the future such as better-sighted RP patients.
Global Reimbursement
Obtaining reimbursement from governmental and private insurance companies is critical to our commercial success. Due
to the cost of the Argus II System, our sales would be limited without the availability of third party reimbursement. In the US,
coding, coverage, and payment are necessary for the surgical procedure and Argus II system to be reimbursed by payers. Coding has
been established for the device and the surgical procedure. Coverage and payment vary by payer. The majority of Argus II patients
are eligible for Medicare, and coverage is primarily provided through traditional Medicare (sometimes referred to as Medicare Fee-for-Service
(FFS) or Medicare Advantage. A small percentage of patients are covered by commercial insurers.
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Medicare
FFS patients
– Coverage is determined by Medicare Administrative Contractors
(MACs) that administer various geographic regions of the US. As of January 1, 2017, positive
coverage decisions for the Argus II are effective in five of 12 MAC jurisdictions (comprising
17 states). Effective January 1, 2017, CMS established a New Technology Ambulatory Payment
Class (APC) 1906, Level 51, with a payment rate of $150,000 for both the procedure and
the Argus II Retinal Prosthesis System.
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Medicare
Advantage patients
– Medicare Advantage plans are required to cover the same
benefits as those covered by the MAC in that jurisdiction. For example, if a MAC in a
jurisdiction has favorable coverage for the Argus II, then all Medicare Advantage plans
in that MAC jurisdiction are required to offer the same coverage for the Argus II. Individual
hospitals and ASCs may negotiate contracts specific to that individual facility, which
may include additional separate payment for the Argus II implant system. In addition,
procedural payment is variable and can be based on a percentage of billed charges, payment
groupings or other individually negotiated payment methodologies. Medicare Advantage
plans also allow providers to confirm coverage and payment for the Argus II procedure
in advance of implantation. In 2015 and 2016 combined, 93% of all Medicare Advantage
pre-authorization requests for Argus II procedures were granted.
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Commercial
insurer patients
– Commercial insurance plans make coverage and payment rate
decisions independent of Medicare, and contracts are individually negotiated with facility
and physician providers.
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In the first nine
months of 2016, 10 individuals in the US and Canada were implanted with the Argus II technology. Of the 10 patients, seven
were Medicare FFS patients, one was a Medicare Advantage patient, one was a Veteran’s Administration patient and the remaining
one was a privately funded patient in Canada.
Second Sight employs
dedicated employees and consultants with insurance reimbursement expertise engaged to expand and enhance coverage decisions. Currently,
five MAC jurisdictions comprising 17 states have agreed to cover the Argus II System when medically necessary for the FDA approved
indications. The MACs now covering the Argus II include First Coast Service Options (Florida, Puerto Rico and U.S.V.I.), CGS Administrators,
LLC (for the states of Ohio and Kentucky), Palmetto GBA (for the states of North and South Carolina, West Virginia and Virginia,
other than the counties of Arlington and Fairfax in Virginia and the City of Arlington in Virginia), National Government Services,
Inc. (NGS), Jurisdiction 6 (for the states of Illinois, Minnesota and Wisconsin), and NGS, Jurisdiction K (for the states of Connecticut,
New York, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont). We are actively engaged with the remaining MACs and are
committed to supporting their requests for additional information and clinical evidence. We expect that additional positive coverage
decisions will be issued over time but cannot predict timing or ultimate success with each MAC.
Within Europe, we
have obtained reimbursement approval or funding in Germany, France and one region of Italy. On December [22], 2016, NHS England
announced it would cover 10 Argus implantations as part of a Commissioning through Evaluation (CtE) program. The CtE program is
especially designed for treatments that show significant promise for the future, while new clinical and patient experience data
are collected within a formal evaluation program. This program is similar to the Forfait Innovation program in France. NHS England
is known to be under significant financial pressure and also highly selective in adopting innovative technologies – which
must demonstrate sufficient value for the cost expended.
We are seeking reimbursement
approval in other countries including Belgium, Switzerland, Turkey and we are also seeking reimbursement approval in additional
regions of Italy. In France, Second Sight was selected to receive the first "Forfait Innovation" (Innovation Bundle)
from the Ministry of Health, which is a special funding program for breakthrough procedures to be introduced into clinical practice.
As part of this program, Second Sight is conducting a post-market study in France which has enrolled a total of 18 subjects and
will follow them for two years. The French program will fund implantation of up to 18 additional patients that will not be
part of the post-market study. After review of the study’s results, we expect Argus II therapy to be covered and funded through
the standard payment system in France, however, we can provide no assurance that the French government will continue to fund the
Argus II after the first 36 implants.
To date, we have not
faced traditional sales challenges in any of our markets, largely due to the currently unmet clinical need and the lack of any
other commercially available device or competitive treatment for RP-caused profound blindness. Our marketing activities have focused
on raising awareness of the Argus II System with potential patients, implanting physicians, and referring physicians. Our marketing
activities include exhibiting, sponsoring symposia, and securing podium presence at professional and trade shows, securing journalist
coverage in popular and trade media, attending patient meetings focused on educating patients about existing and future treatments,
and sponsoring information sessions for the Argus II System. In the US, our efforts in 2017 will focus on media ads dedicated to
RP patients and their families. These ads will be placed in geographic areas where we have Centers of Excellence committed to Argus
II.
Improve Argus II performance and significantly expand
use in the RP population by treating better-sighted patients
The Argus II System
is currently approved for RP patients with bare or no light perception in the US, and in Europe for severe to profound vision loss
due to outer retinal degeneration, such as from retinitis pigmentosa, choroideremia, and other similar conditions. The number of
people who are legally blind due to RP is estimated to be about 25,000 in the US, 42,000 in Europe, and about 375,000 total worldwide.
As discussed above, a subset of these patients would be eligible for the Argus II System since the approved baseline vision for
the Argus II System is worse than legally blind (20/200). Scarce epidemiological data on visual acuity below legal blindness make
it difficult to determine a precise estimate of the potential patient population for this device, but resulting from our commercial
efforts thus far we believe most legally blind patients have vision too good for Argus II’s current clinical indications.
The Company
believes an opportunity exists to expand the use of its technology to better sighted individuals with RP who are currently
not being treated. In order to achieve this market expansion, the Company plans to start collecting clinical data in 2017 and
is undertaking multiple development efforts to improve the technology’s performance. Our clinical and R&D plans for
this market segment can be summarized as follows:
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Clinical trials with better-sighted individuals
– The Company intends to start
collecting clinical data at multiple sites in Europe and the U.S. during 2017 to determine if the Argus II provides
sufficient clinical benefit to these better-sighted patients. If successful, the Company would proceed with the various
required steps to obtain regulatory approval and reimbursement coverage for treatment of this expanded patient group.
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Retinal stimulation protocols
– We believe that we can achieve improved
resolution by adjusting retinal stimulation protocols. An example is the use of current steering to cause perception of
pixels between electrodes. By producing these ‘virtual’ pixels, we may be able to increase the effective
resolution of the Argus II beyond the physical number of electrodes (which today total 60). We began testing these protocols
in patients during Q4 2016 and have obtained some encouraging initial results, but testing is still in early stage and no
assurance can be given that we will be successful. We
expect to continue patient testing in 2017, and assuming successful clinical results, would target commercial
implementation of these revised retinal stimulation protocols in 2018. Given the initial positive results with our retinal
stimulation protocol testing, we have prioritized this work ahead of our next-generation external hardware.
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External hardware
– We continue
our development of a new external system. The new externals will include redesigns of the head mounted telemetry system (glasses),
camera and video processing unit (VPU). The new VPU will possess processing power many times greater than the current Argus II
system, which will enable enhanced image processing and support for the commercial implementation of the new retina stimulation
protocols discussed above. We anticipate that the new external system will be commercially available in 2018.
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Other longer-term R&D efforts
– We are developing even more advanced software to improve the quality and usefulness of the Argus II vision delivered to
patients. If successful, we expect that these software packages will run on the new external system described above. As part of
this effort, we recently signed an exclusive license and funding agreement for issued and future patents with a commercial partner,
providing funding to Second Sight for research including two research grants, totaling more than $450,000, from the National Eye
Institute. This research will be related to distance filtering and thermal imaging. The development of advanced software packages
is in the early phases and no assurance can be made that our efforts will be successful nor can we predict commercialization dates.
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Leverage proven ARGUS technology to restore some vision
with cortical stimulation and expand addressable market to include a portion of the almost 6 million patients who are blind from
eye trauma, optic nerve disease, and other unpreventable causes
We believe we can
further expand our market to include nearly all profoundly blind individuals, other than those who are blind due to preventable
diseases or due to brain damage, by developing a visual cortical prosthesis. We refer to this product as the Orion
TM
I visual prosthesis system. We estimate that there are approximately 5.8 million people worldwide who are legally blind due to
causes other than preventable conditions, RP or AMD. If approved for marketing, the FDA and other regulatory agencies will determine
the subset of these patients who are eligible for the Orion I.
Our objective in designing
and developing the Orion I visual prosthesis system is to bypass the optic nerve and directly stimulate the part of the brain responsible
for vision. As currently under development, the Orion I visual prosthesis system is based on technology that we utilize in our
Argus II system, thereby reducing engineering investment costs and risks, and leveraging the reliability of the Argus II platform.
We plan to submit an IDE application to the FDA in 2017 to begin a human feasibility study of the Orion I visual prosthesis system.
We also expect to implant and activate our Orion I visual prosthesis system in human subjects during 2017. This study will confirm
initial findings in our human pilot study we announced in Q4 2016 and provide the first human data of a fully functional wireless
visual cortical stimulator system including the external video camera system. This initial study in a small number of subjects,
if successful, should also form the basis for an expansion to a pivotal clinical trial in 2018.
In Q4 2016 the Company
announced the successful implantation and activation of a wireless visual cortical stimulator in a human subject. In the UCLA study
supported by Second Sight, a 30 year old patient was implanted with a wireless multichannel neurostimulation system on the visual
cortex and was able to perceive and localize individual phosphenes or spots of light with no significant adverse side effects.
While the technology implanted was not the Orion I, the study is significant in our efforts to advance our technology and is providing
valuable data to support the ongoing development and subsequent clinical trial of our Orion I. This important clinical result so
far confirms our hypothesis that the Orion I will function similarly to the Argus II and has increased the priority of this program.
Continue clinical testing of Argus II in AMD patients
to demonstrate benefit and provide necessary data to inform further clinical trials and/or R&D efforts
We began a five-subject
pilot study in the United Kingdom in June 2015, to determine the utility of the Argus II System for use in persons suffering from
dry AMD. In Q2 2016 we completed enrollment and continue to track the subjects via the site in Manchester. The subjects have reported
the ability to integrate their native peripheral vision with their artificial central vision. Subjects also report that they enjoy
using their Argus system. To date, however, the subjects have not demonstrated significant objective benefit over their residual
vision when using the Argus II. We plan to continue testing these subjects and will submit a revised clinical protocol in early
2017. Our approaches to improving the effective resolution in RP patients may also work in AMD patients, which could help us demonstrate
objective benefit over their residual vision. The revised protocol will request approval to test new retinal stimulation techniques
with the existing subjects with the belief they will benefit. If this clinical testing is successful, we plan to enroll additional
patients in our pursuit of a solution for this large patient population.
We estimate the population of people who are legally blind due
to AMD to be about 552,500 in the US, 1.08 million in Europe, and two million worldwide. If Argus II is approved for AMD, we believe
that a subset of these patients would be eligible for the Argus II. Because of the clinical uncertainly, we are not yet prepared
to predict a timeline to commercialize our technology for this large patient population .No assurance can be given that we will
be successful in any of these endeavors.
Our Competition
The US life sciences industry is highly
competitive and well-positioned for future growth. The treatment of blindness is a significant clinically unmet need and others
continue to make progress. There are several approaches to treating blindness including:
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·
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Retinal Prostheses (including the Argus II): aimed at giving more visual ability to a blind patient via implanting a device
in the eye to stimulate remaining retina cells. Electrical neurostimulation technology has seen growing use in recent years for
numerous applications– such as chronic pain, Parkinson’s, Essential tremor, Epilepsy, and others.
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·
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Transplants: transplanting retinal tissue to stimulate remaining retina cells.
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·
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Stem Cells: generally involves implanting immature retinal support cells aimed at slowing retinal degeneration. A single patient
with wet AMD was implanted in London in 2015 with an embryonic stem cell line in a study sponsored by Pfizer. Patients with dry
AMD are also being recruited in Los Angeles for a similar study.. No data is yet available as to safety or efficacy of these implantations.
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·
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Genetics and
Gene Therapy: involves identifying a specific gene that is causing retinal problems (there
are over 120 for retinitis pigmentosa alone) resulting in visual impairments and blindness;
and inserting healthy genes into an individual’s cells using a virus to treat the
diseases. A company recently announced phase 3 data for a 21 patient study with a median
age of 11 for a gene that affects a very small percentage of retinitis pigmentosa patients,
RPE65. That company reportedly met its primary endpoint (completing a maze test) but
did not report improved visual acuity. That company is expected to apply for FDA approval
in 2017. If this product garners FDA approval (which would make it the first gene therapy
ever approved by the FDA), we believe that there is no overlap with our current market
since our patients are generally older (Argus II is indicated for an age minimum of 25
in the US) while the other company injects better sighted patients since it is attempting
to show an improvement in residual vision rather than restoring vision that is completely
lost which is our objective for Argus II market.
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·
|
Optogenetics Therapy: aimed at slowing down, reversing, and/or eliminating the process by which photoreceptors in the eye are
compromised. This therapy also requires infecting the patient’s cells with a virus. However, instead of fixing a gene defect,
this approach would cause cells within the eye to become light sensitive. Animal work has shown that these cells are not sensitive
enough to respond to ambient light, so this approach currently also requires a light amplifier outside the body to increase light
delivered to the retina.
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·
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Nutritional
Therapy: involves diets or supplements that are thought to prevent or slow the progress
of vision loss.
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|
·
|
Implantable
Telescope: VisionCare, Ophthalmic Technologies, Inc. offers an FDA approved implantable
miniature telescope for AMD, a magnifying device that is implanted in the eye. The VisonCare
telescope is approved for use in patients with severe to profound vision impairment (best
corrected visual acuity of 20/160 to 20/800) due to dry AMD.
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|
·
|
Wicab’s
The BrainPort® V100 includes a video camera mounted on a pair of sunglasses, a hand-held
controller, and tongue array. The tongue array contains 400 electrodes and is connected
to the glasses via a flexible cable. White pixels from the camera are felt on the
tongue as strong stimulation, black pixels as no stimulation, and gray levels as medium
levels of stimulation. This device is indicated for the profoundly blind.
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|
·
|
There
are currently no treatments for AMD after the disease has caused severe to profound vision
loss nor are there any established treatments that delay or reverse the progression of
Dry AMD other than supplements.
|
|
·
|
Therapies
exist for Wet AMD that delay the progression of visual impairment or slightly improve
the vision, rather than completely curing or reversing its course. These therapies are
approved in many regions throughout the world, including the US and EU.
|
Commercial efforts to develop retinal
implants by others include:
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·
|
Retina Implant AG: A privately held German company that is developing the Alpha IMS, a
wireless sub-retinal implant. Although this company had obtained CE Mark in 2013 and was expected to begin commercialization
during 2015 in the EU, to our knowledge this product is still not generally available to commercial patients Publications
from the company reported frequent device failures of the Alpha IMS in patients. The company has reportedly improved the
design and rebranded its system as the Alpha AMS. Two clinical trial patients are reported to have been implanted in the UK
during 2015 and/or 2016. Other reports of implants are unconfirmed. To our knowledge, Retina Implant has not obtained FDA
approval to begin a clinical trial in the US but has announced that it plans to advance commercialization efforts that
include obtaining reimbursement and opening new implanting centers.
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|
·
|
Pixium Vision S.A.: A publicly held French company
that is developing the IRIS (Intelligent Retinal Implant System) that is surgically
placed into the eye and attached to the surface of the retina. Similar to our Argus
II technology, its system uses a camera and a wireless transmitter. Pixium is in
clinical studies with IRIS and received CE Mark in 2016. Pixium has indicated it plans to begin commercialization of
its product during 2017 in the EU. In a Q3-2016 financial statement, Pixium reported that it had implanted the IRIS in four
patients from February to October 2016. They had also reportedly planned
to implant a passive sub-retinal implant, the PRIMA, in AMD subjects in 2016, but have
not yet announced any implants. To our knowledge, Pixium Vision has not obtained FDA
approval to begin any clinical trial in the US.
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|
·
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NanoRetina
Inc., a company based in Israel, and several other early stage companies are reported
to have developed intellectual property or technology that may improve retinal prostheses
in the future, but to our knowledge none of these efforts has resulted in a completed
system that has been tested clinically in patients.
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|
·
|
Academic
entities are also working on vision restoring implants. These include Bionic Vision Australia
(an early prototype device has been developed and to our knowledge implanted in three
human subjects), Boston Retinal Implant project (preclinical phase), Stanford University
(preclinical), Monash Vision Group (preclinical phase) , and the Illinois Institute of
Technology (preclinical phase) . Of these projects, we believe most have not yet demonstrated
a working implant, only one has reportedly begun long-term clinical work in humans, and
to our knowledge none has received FDA approval to begin clinical trials in the US
|
No other retinal prosthesis
to our knowledge has been successful in long-term human trials, currently making the Argus II System the sole implant generally
available to commercial patients for treating RP in the US, Canada, EU, and Saudi Arabia. We anticipate that our competitors are
unlikely to obtain significant commercial traction in EU until they have developed in depth clinical data showing the reliability
and functionality of their products.
Risk Factors that affect us
See “Risk Factors” beginning on page 33
and other information included elsewhere in this prospectus for a discussion of factors you should carefully consider before
deciding to invest in our common stock.
Corporate Information
Second Sight Medical
Products, Inc. was incorporated in California in May 2003 as a successor to Second Sight LLC, a Delaware limited liability company
formed in 1998. Our principal executive offices and manufacturing facilities are located at 12744 San Fernando Road, Suite 400,
Sylmar, California 91342. Our telephone number is (818) 833-5000. Our European subsidiary, Second Sight Medical Products (Switzerland)
Sàrl, maintains offices at EPFL-PSE A, Route de Jean-Daniel Colladon, CH-1015 Lausanne, Switzerland.
Our website address
is www.secondsight.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus.
Unless otherwise indicated,
the terms “Second Sight,” “we,” “us” and “our” refer to Second Sight Medical Products, Inc.,
a California corporation, and our subsidiaries.
“Second Sight,”
“Argus”, “FLORA” and the Second Sight logo are our registered trademarks and, "Orion" is a trademark
in the US, EU and Switzerland.
Emerging Growth Company
The Jumpstart Our
Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the
United States and reducing the regulatory burden on newly public companies that qualify as “emerging growth companies.”
We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of certain
exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting
be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy
statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments.
We may take advantage of these exemptions until we are no longer an emerging growth company.
We will remain an
emerging growth company until the earliest to occur of
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·
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the last day of the fiscal year in which we have $1.0 billion or more in annual revenue;
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|
·
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the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;
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|
·
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the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or
|
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·
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the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
|
Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Securities Exchange Act) are required to comply with the new or revised financial
accounting standard. The JOBS Act also provides that a company can elect to opt out of the extended transition period
provided by Section 102(b)(1) of the JOBS Act and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. We have irrevocably elected to opt out of this extended transition period
provided by Section 102(b)(1) of the JOBS Act. Even though we have elected to opt out of the extended transition period,
we may still take advantage of all of the other provisions of the JOBS Act, which include, but are not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, the reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
SUMMARY CONSOLIDATED FINANCIAL
DATA
The following
summary consolidated statements of operations data for the years ended December 31, 2015 and 2014 and the consolidated balance
sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements that are
included in the documents incorporated by reference into this prospectus. The summary consolidated statements of operations data
for the nine-month periods ended September 30, 2016 and 2015 and the consolidated balance sheet data as of September 30,
2016 are derived from our unaudited consolidated financial statements that are included in the documents incorporated by reference
into this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future
periods, and the results for the nine-month period ended September 30, 2016 are not necessarily indicative of our operating
results to be expected for the full fiscal year ending December 31, 2016 or any other period. You should read the summary
consolidated financial data in conjunction with those financial statements and the accompanying notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in the documents incorporated by reference into
this prospectus. Our consolidated financial statements are prepared and presented in accordance with United States generally accepted
accounting principles, or U.S. GAAP. Our unaudited consolidated financial statements have been prepared on a basis consistent with
our audited financial statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary
for a fair presentation of the financial position and results of operations as of and for such periods.
|
|
Year Ended
|
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
Consolidated Statements of Operations Data (In thousands):
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
Net Sales
|
|
$
|
8,950
|
|
|
$
|
3,398
|
|
|
$
|
3,270
|
|
|
$
|
6,588
|
|
Cost of sales
|
|
|
5,293
|
|
|
|
3,558
|
|
|
|
6,768
|
|
|
|
3,622
|
|
Gross profit (loss)
|
|
|
3,657
|
|
|
|
(160
|
)
|
|
|
(3,498
|
)
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net of grants
|
|
|
3,036
|
|
|
|
5,041
|
|
|
|
3,266
|
|
|
|
2,490
|
|
Clinical and regulatory
|
|
|
3,510
|
|
|
|
2,622
|
|
|
|
1,955
|
|
|
|
2,543
|
|
Selling and marketing
|
|
|
8,935
|
|
|
|
6,845
|
|
|
|
6,473
|
|
|
|
6,425
|
|
General and administrative
|
|
|
8,223
|
|
|
|
6,565
|
|
|
|
7,635
|
|
|
|
6,079
|
|
Total operating expenses
|
|
|
23,704
|
|
|
|
21,073
|
|
|
|
19,329
|
|
|
|
17,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(20,047
|
)
|
|
|
(21,233
|
)
|
|
|
(22,827
|
)
|
|
|
(14,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2
|
|
|
|
9
|
|
|
|
19
|
|
|
|
1
|
|
Other income (expense), net
|
|
|
27
|
|
|
|
12
|
|
|
|
(1
|
)
|
|
|
25
|
|
Interest expense on convertible promissory notes and loan payable
|
|
|
-
|
|
|
|
(1,957
|
)
|
|
|
-
|
|
|
|
-
|
|
Amortization of discount on convertible promissory notes
|
|
|
-
|
|
|
|
(5,077
|
)
|
|
|
-
|
|
|
|
-
|
|
Write-off of unamortized discount on conversion of convertible promissory notes
|
|
|
-
|
|
|
|
(6,955
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(20,018
|
)
|
|
$
|
(35,201
|
)
|
|
$
|
(22,809
|
)
|
|
$
|
(14,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted
|
|
$
|
(0.56
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
(0.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average numbers of shares outstanding – basic and diluted
|
|
|
35,637
|
|
|
|
25,053
|
|
|
|
39,929
|
|
|
|
35,555
|
|
|
|
December 31,
|
|
|
September 30,
|
|
Consolidated Balance Sheet Data (In thousands):
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
Cash
|
|
$
|
239
|
|
|
$
|
619
|
|
|
$
|
277
|
|
Money market funds
|
|
$
|
15,721
|
|
|
$
|
34,000
|
|
|
$
|
17,546
|
|
Working capital
|
|
$
|
18,782
|
|
|
$
|
33,525
|
|
|
$
|
19,017
|
|
Total assets
|
|
$
|
28,245
|
|
|
$
|
43,069
|
|
|
$
|
26,265
|
|
Stockholders’ equity
|
|
$
|
20,263
|
|
|
$
|
34,618
|
|
|
$
|
20,599
|
|
SUMMARY OF THE RIGHTS OFFERING
Securities to be offered
|
We are distributing to you, at no charge, one non-transferable Subscription Right to invest $0.47 for every share of our common stock that you own on the Record Date, either as a holder of record or, in the case of shares held of record by brokers, banks, or other nominees, on your behalf, as a beneficial owner of such shares, to purchase Units, each consisting of one share of our common stock and one warrant to purchase one share of our common stock at the Subscription Price. Each Unit consists of one share of common stock and a Warrant representing the right to purchase one share of common stock.
|
|
|
Size of offering
|
Up to 15,000,000
Units. See “The Rights Offering-Limitation on the Purchase of Units”.
|
|
|
Subscription Price
|
The lesser of $2.00 or the closing price of our shares of common stock on the Expiration Date, per Unit. To be effective, any payment related to the exercise of a right must clear prior to the expiration date of the rights offering.
|
|
|
Warrants
|
Each Warrant entitles the holder to purchase, for five years
from the date of issuance, one share of common stock for each whole share of common stock purchased in the Rights Offering at the
price equal to the Subscription Price. The Warrants will be exercisable by paying the exercise price in cash only. The Warrant
may be called for redemption on 30 days’ notice at the discretion of the of the Company (i) 24 months after the date of issuance,
(ii) if the shares of the Company’s common stock are trading at 200% of the Subscription Price for 15 consecutive trading
days and (iii) all of the independent directors vote in favor of a call. Holders may be able to sell or exercise Warrants prior
to any announced redemption date and we will redeem outstanding Warrants not exercised by the announced redemption date for a nominal
amount of $0.01 per Warrant. We intend to list the Warrants for trading on the Nasdaq, although we cannot assure
you that our listing application will be approved. Even if our listing application is approved, we cannot guarantee that a trading
market for the Warrants will develop. Under the terms of the Warrant Agreement, we will maintain a registration statement with
the Securities and Exchange Commission so that you will be able to exercise your Warrant and receive shares of common stock that
will be freely tradable at the time of purchase and receipt. See
“
Description of Securities-Warrants Included in Units
Issuable in the Rights Offering”.
|
|
|
Record Date
|
5:00 p.m., New York City Time, [ ], 2017.
|
|
|
Subscription Right
|
Each Subscription Right consists of a Basic Subscription Right and an Over-Subscription Privilege.
|
|
|
Basic Subscription Rights
|
The Basic Subscription Right entitles you to invest $0.47 for each share of our common stock you own on the Record Date.
|
|
|
Over-Subscription Privilege
|
If you fully exercise your Basic Subscription Right and other shareholders do not fully exercise their Basic Subscription Rights, you may also exercise an Over-Subscription Privilege to invest an additional amount which will permit you to acquire additional Units at the Subscription Price, when that price is determined, that remain unsubscribed at the expiration of the Rights Offering, subject to the availability and pro rata allocation of Units among shareholders exercising this Over-Subscription Privilege. To the extent the number of the unsubscribed Units are not sufficient to satisfy all of the properly exercised over-Subscription Privilege requests based on the amounts invested by shareholders participating in this offering, then the available Units will be prorated among those who properly exercised Over-Subscription Privileges based on the number of Units each rights holder subscribed for under the Basic Subscription Right after that number is determined when measured against the Subscription Price. If this pro rata allocation results in any shareholder receiving a greater number of Units of common stock than the shareholder subscribed for pursuant to the exercise of the Over-Subscription Privilege, then such shareholder will be allocated only that number of Units for which the shareholder oversubscribed, and the remaining Units will be allocated among all other shareholders exercising the Over-Subscription Privilege on the same pro rata basis described above. The proration process will be repeated until all Units of common stock have been allocated or all over-subscription exercises have been fulfilled, whichever occurs earlier.
|
Limitations on Exercise
|
In the event that the exercise by a shareholder of the Basic Subscription Right or the Over-Subscription Privilege could, as determined by the Company in its sole discretion, potentially result in a limitation on the Company’s ability to use net operating losses, tax credits and other tax attributes, which we refer to as the “Tax Attributes,” under the Internal Revenue Code of 1986, as amended, which we refer to as the “Code”, and rules promulgated by the Internal Revenue Service, the Company may, but is under no obligation to, reduce the exercise by such shareholder of the Basic Subscription Right or the Over-Subscription Privilege to such number of Units as the Company in its sole discretion shall determine to be advisable in order to preserve the Company’s ability to use the Tax Attributes.
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|
|
Expiration Date
|
The Subscription Rights will expire at 5:00 p.m., New York City Time, on [ ], 2017. We reserve the right to extend the expiration date in our sole discretion.
|
|
|
Procedure for exercising Subscription Rights
|
To exercise your Subscription Rights, you must take the following steps:
|
|
|
|
If you are a record holder of our common stock, you must deliver a properly completed Rights Certificate to the Subscription Agent together with payment in cleared or good funds to be received before 5:00 p.m., New York City Time, on [ ], 2017. You may deliver the documents and payments by first class mail or courier service. If you use first class mail for this purpose, we recommend using registered mail, properly insured, with return receipt requested.
|
|
|
|
If you are a beneficial owner of shares that are registered in the name of a broker, dealer, custodian bank, or other nominee, you should instruct your broker, dealer, custodian bank, or other nominee to exercise your Subscription Rights on your behalf. Please follow the instructions of your nominee, who may require that you meet a deadline earlier than 5:00 p.m., New York City Time, on [ ], 2017.
|
|
|
Delivery of Shares and Warrants
|
As soon as practicable after the expiration of the Rights Offering, the Subscription Agent will arrange for the issuance of the shares of common stock and Warrants purchased pursuant to the Rights Offering. If you hold your shares in the name of a custodian bank, broker, dealer, or other nominee, DTC will credit your account with your nominee with the securities you purchased in the Rights Offering. If you are a holder of record of shares, all shares of common stock and Warrants that are purchased by you in the Rights Offering will be issued in book-entry, or uncertificated, form meaning that you will receive a direct registration (DRS) account statement from our transfer agent reflecting ownership of these securities.
|
Non-transferability of Subscription Rights
|
The Subscription Rights may not be sold, transferred, assigned or given away to anyone. The Subscription Rights will not be listed for trading on any stock exchange or market.
|
No board recommendation
|
Our board of directors makes no recommendation regarding your exercise of the Subscription Rights. You are urged to make your decision to invest based on your own assessment of our business and the Rights Offering. Please see “Risk Factors” for a discussion of some of the risks involved in investing in our securities.
|
|
|
No revocation
|
All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your Subscription Rights and even if the rights offering is extended by our board of directors. However, if we amend the rights offering to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms of the rights offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money you have advanced. You should not exercise your Subscription Rights unless you are certain that you wish to purchase additional Units at a subscription price that will not be determined or fixed until expiration of the Rights Offering period on , 2017.
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|
|
Use of proceeds
|
We intend to use the net proceeds we receive
from the offering to (i) improve performance of the Argus II which will permit us to enlarge markets by treating
better-sighted RP patients (ii) continue funding the ongoing development of the Orion I visual prosthesis, (iii)
continue funding the ongoing clinical study of Argus II in patients with AMD, and (iv) for other operating and
general corporate purposes. See “Use of Proceeds.”
|
|
|
U.S. Federal Income Tax Considerations
|
For U.S. federal income tax purposes, you generally should not recognize income or loss in connection with the receipt or exercise of subscription rights. You are urged, however, to consult your own tax advisor as to your particular tax consequences resulting from the receipt and exercise of Subscription Rights and the receipt, ownership and disposition of our common stock. See “Material U.S. Federal Income Tax Consequences”.
|
Extension, Cancellation and Amendment
|
We have the option to extend the rights offering and the period
for exercising your subscription rights for a period not to exceed 30 days, although we do not presently intend to do so. If we
elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than 9:00
a.m., New York City time, on the next business day after the most recently announced expiration time of the rights offering. We
will extend the duration of the rights offering as required by applicable law or regulation and we reserve the right to extend
it if we decide in our sole discretion to give our investors more time to exercise Subscription Rights in the Rights Offering.
If we elect to extend the rights offering for a period of more than 30 days, then holders who have subscribed for rights may cancel
their subscriptions and receive a refund of all money advanced. We have no current intention to extend the time period of the Rights
Offering.
Our board of directors may cancel the Rights Offering at any
time prior to the Expiration Date for any reason. In the event that the rights offering is cancelled, we will issue a press release
notifying shareholders of the cancellation and all subscription payments received by the subscription agent will be returned, without
interest or penalty, within 10 business days. In the event of further volatility and market or price declines we may elect to limit
securities that we sell in the Rights Offering to no more than 15 million Units.
|
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Our board of directors also reserves the right to amend or modify
the terms of the Rights Offering. If we should make any fundamental changes to the terms of the Rights Offering set forth in this
prospectus, we will file a post-effective amendment to the registration statement in which this prospectus is included, offer potential
purchasers who have subscribed for rights the opportunity to cancel such subscriptions and issue a refund of any money advanced
by such shareholder and recirculate an updated prospectus after the post-effective amendment is declared effective by the SEC.
In addition, upon such event, we may extend the Expiration Date to allow holders of rights ample time to make new investment decisions
and for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing
any changes with respect to the rights offering and the new expiration date. Although we do not presently intend to do so, we may
choose to amend or modify the terms of the rights offering for any reason, including, without limitation, in order to increase
participation in the rights offering. Such amendments or modifications may include a change in the Subscription Price, although
no such change is presently contemplated.
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Subscription Agent
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Broadridge Inc.
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Information Agent
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Broadridge Inc.
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Shares Outstanding Before the Rights Offering
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42,696,000 shares of our common stock were outstanding as of December 31, 2016
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Shares Outstanding After the Rights Offering
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Following the Rights Offering, without giving effect to shares issuable upon exercise of Warrants, we anticipate that we would have approximately [ ] shares of our common stock outstanding.
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Risk Factors
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You should carefully read
and consider the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and
in the “Risk Factors” section beginning on page 33 of this prospectus, together with all of the other information
included in or incorporated by reference into this prospectus, before you decide to exercise your subscription rights to purchase
Units. These risks include without limitation, the risks related to our growth strategy, risks related to our operating losses
and need for additional investment capital, risks related to our business and risks associated with the regulatory environment
to which we are subject.
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Fees and Expenses
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We will pay all fees charged by the Subscription Agent and the Information Agent in connection with the rights offering. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights.
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Nasdaq Trading
Symbol
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EYES
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Questions
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If you have any questions about the rights offering, including questions about subscription procedures and requests for additional copies of this prospectus or other documents, please contact Broadridge Inc., our subscription agent/information agent
at (855)793-5068 (toll free) or email at shareholder@broadridge.com.
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Summary Financial Information
The selected consolidated
financial data presented below should be read in conjunction with our consolidated financial statements and the notes to the consolidated
financial statements and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included
in our Annual Report on Form 10-K for the year ended December 31, 2015, which is incorporated herein by reference.
Our revenues, net loss
and comprehensive loss for the fiscal years ended December 31, 2015, December 31, 2014, and for the nine months ended September
30, 2016 (unaudited), and September 30, 2015 (unaudited), were as follows:
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Fiscal Years Ended December 31,
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Nine Months Ended September 30,
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(In thousands)
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2015
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2014
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2016
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2015
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Revenues
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$
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8,950
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$
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3,398
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|
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$
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3,270
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|
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$
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6,588
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Net loss
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$
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(20,018
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)
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$
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(35,201
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)
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$
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(22,809
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)
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$
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(14,545
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)
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Comprehensive Loss
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$
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(20,125
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)
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$
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(35,408
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)
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$
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(22,752
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)
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$
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(14,617
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)
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Material U.S. federal
income tax consequences
For U.S. federal income tax purposes, we do not believe
you should recognize income or loss upon receipt or exercise of a Subscription Right. You should consult your own tax advisor as
to the tax consequences of the Rights Offering in light of your particular circumstances. See "Material U.S. Federal Income
Tax Consequences."
RISK FACTORS
We are subject to various risks that
may materially harm our business, prospects, financial condition and results of operations. An investment in our common
stock is speculative and involves a high degree of risk. In evaluating an investment in the Units, you should carefully
consider the risks described below, together with the other information included in this prospectus.
If any of the events described in the
following risk factors actually occurs, or if additional risks and uncertainties that are not presently known to us or that we
currently deem immaterial later materialize, then our business, prospects, results of operations and financial condition could
be materially and adversely affected. In that event, the trading price of our common stock could decline, and you may
lose all or part of your investment. The risks discussed below include forward-looking statements, and our actual results
may differ substantially from those discussed in these forward-looking statements.
Your interest in our company may be diluted as a result
of this offering.
Common shareholders who do not fully exercise
their respective rights should expect that they will, at the completion of this offering, own a smaller proportional interest in
our company than would otherwise be the case had they fully exercised their Basic Subscription Rights.
The market price of our common stock is volatile and may
decline before or after the subscription rights expire.
The market price of our common stock could
be subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among
other things, actual or anticipated variations in our costs of doing business, operating results and cash flow, the nature and
content of our earnings releases and our competitors' earnings releases, customers, competitors or markets, changes in financial
estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market
for similar stocks, changes in capital markets that affect the perceived availability of capital to companies in our industries,
governmental legislation or regulation, as well as general economic and market conditions, such as continued downturns in our economy
and recessions.
We cannot assure you that the market price
of our common stock will not decline after you elect to exercise your subscription rights and obtain Units as computed with respect
to the Subscription Price when it is determined. Accordingly, we cannot assure you that following the exercise of your subscription
rights you will be able to sell your common stock at a price equal to or greater than the Subscription Price. Until shares are
delivered upon expiration of the rights offering, you will not be able to sell the shares of our common stock underlying Units
that you purchased in the rights offering. Certificates (physical, electronic or book entry from) representing shares of our common
stock purchased will be delivered as soon as practicable after expiration of the Rights Offering. We will not pay you interest
on funds delivered to the Subscription Agent pursuant to the exercise of Subscription Rights.
Completion of this offering is not subject to our raising
a minimum offering amount and therefore proceeds may be insufficient to meet our objectives, thereby increasing the risk to investors
in this offering.
Completion of this offering is not subject
to our raising a minimum offering amount. As such, proceeds from this rights offering may not be sufficient to meet the objectives
we state in this prospectus or other corporate milestones that we may set. Shareholders should not rely on the success of the Rights
Offering to address our need for funding. If we fail to raise capital by about the end of the second quarter of 2017, we would
anticipate having significantly to decrease our operating expenses, which will adversely affect our operations and materially curtail
the progress of our business.
The Subscription Rights are not transferable and there
is no market for the Subscription Rights.
You may not sell, transfer or assign your
Subscription Rights. The Subscription Rights are only transferable by operation of law. Because the Subscription Rights are non-transferable,
there is no market or other means for you to directly realize any value associated with the Subscription Rights. You must exercise
the Subscription Rights and acquire additional Units to realize any value that may be embedded in the Subscription Rights.
None of our officers, directors or
significant shareholders is obligated to
exercise
any
subscription
rights
and, as a result, the Rights Offering may be undersubscribed.
As a group, our officers and directors beneficially
own approximately 31% of our outstanding common stock as of December 31, 2016. In addition to shares beneficially owned by our
officers and directors, at December 31, 2016 the Alfred E. Mann Living Trust, a trust established by our late founder Alfred E.
Mann, beneficially owned approximately 20% of our outstanding shares as of December 31, 2016. To our knowledge there are no other
holders beneficially owning 5% or more of our common stock. We have received indications from Gregg Williams, a member of our Board
of Directors and one of our principal shareholders, that he intends to exercise all of his Subscription Rights and to invest an
aggregate of up to $10 million to purchase units at the Subscription Price to the extent that unsubscribed subscription rights
are available, although the actual amount he may seek to invest may be less or greater than this amount. None of our officers,
directors or significant shareholders is obligated to participate in the Rights Offering. We cannot assure that any of our officers
or directors or significant shareholders will exercise their basic or over-subscription rights to purchase any shares issued in
connection with this offering and there is no minimum amount required to be raised in this offering. As a result, the offering
may be undersubscribed and proceeds may not be sufficient to meet the objectives we state in this prospectus or other corporate
milestones that we may set.
This offering may cause the price of our common stock
to decline.
The Rights Offering may result in an immediate
decline in the market value of our common stock. This decline may continue after the completion of Rights Offering. Further, if
a substantial number of Subscription Rights are exercised and the holders of the Units choose to sell some or all of the shares
of common stock, including stock issuable upon exercise of Warrants, the resulting sales could depress the market price of our
common stock. The price of our common stock may also decline if new investors find our Warrants to be more attractive than a direct
investment in our shares. There is no assurance that, following the Expiration Date, you will be able to sell the common stock
you receive from the exercise of your Subscription Rights at a price equal to or greater than the Subscription Price.
If we terminate the Rights Offering
for any reason, we will have no obligation other than to return subscription monies promptly.
We may decide, in our discretion and for
any reason, to cancel or terminate the Rights Offering at any time prior to the Expiration Date. If this offering is terminated,
we will have no obligation with respect to rights that have been exercised except to return promptly, without interest or deduction,
the subscription monies deposited with the Subscription Agent. If we terminate this offering and you have not exercised any rights,
such rights will expire worthless.
Our common stock price may become more volatile as a result
of the Rights Offering.
The trading price of our common stock may
fluctuate substantially. The price of the common stock that will prevail in the market following the Rights Offering may be higher
or lower than the Subscription Price depending on many factors, some of which are beyond our control and may not be directly related
to our operating performance. These factors include, but are not limited to, the following:
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price and volume fluctuations in the overall stock market from time to time, including increased volatility resulting from uncertain domestic and global market conditions;
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significant volatility in the market price and trading volume of our securities, including increased volatility arising from investor pessimism and bearish sentiment which may accompany uncertain domestic and global market conditions;
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actual or anticipated changes or fluctuations in our operating results;
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material announcements by us regarding business performance, financings, mergers and acquisitions or other transactions;
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general economic conditions and trends;
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loss of key supplier or distribution relationships;
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departures of key personnel;
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adverse regulatory conditions; or
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adverse or inconclusive pilot programs for any of our products
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We will have broad discretion in the use of the net proceeds
we receive and may not use the proceeds effectively.
Although we plan to use the proceeds of
this offering primarily for working capital, we will not be restricted to such use and will have broad discretion in determining
how the proceeds of this offering will be used. Our discretion is not substantially limited by the uses set forth in this prospectus
in the section entitled “Use of Proceeds”. While our board of directors believes the flexibility in application of
the net proceeds is prudent, the broad discretion it affords entails increased risks to the investors in this offering. Investors
in this offering have no current basis to evaluate the possible merits or risks of any application of the net proceeds of this
offering. Our shareholders may not agree with the manner in which we choose to allocate and spend the net proceeds.
If you do not act on a timely basis and follow subscription
instructions, your exercise of rights may be rejected.
Holders of shares of common stock who desire
to purchase Units in this offering must act on a timely basis to ensure that all required forms and payments are actually received
by the Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration Date, unless extended. If you are a beneficial
owner of shares of common stock and you wish to exercise your rights, you must act promptly to ensure that your broker, dealer,
custodian bank, trustee or other nominee acts for you and that all required forms and payments are actually received by your broker,
dealer, custodian bank, trustee or other nominee in sufficient time to deliver such forms and payments to the Subscription Agent
to exercise the rights granted in this offering that you beneficially own prior to 5:00 p.m., New York City time on the Expiration
Date, as may be extended. We will not be responsible if your broker, dealer, custodian bank, trustee or other nominee fails to
ensure that all required forms and payments are actually received by the subscription agent prior to 5:00 p.m., New York City time,
on the expiration date, as may be extended.
If you fail to complete and sign the required
subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your
exercise in this offering, the subscription agent may, depending on the circumstances, reject your subscription or accept it only
to the extent of the payment received. Neither we nor the subscription agent undertakes to contact you concerning an incomplete
or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have the sole discretion
to determine whether a subscription exercise properly follows the subscription procedures.
If you make payment of the subscription amount by uncertified
check, your check may not clear in sufficient time to enable you to purchase Units in this rights offering.
Any uncertified check for an investment
amount intended for Units to be issued in this rights offering must clear prior to the expiration date of this rights offering,
and the clearing process may require five or more business days. If you choose to exercise your subscription rights, in whole or
in part, and to pay for Units by uncertified check and your check has not cleared prior to the expiration date of this rights offering,
you will not have satisfied the conditions to exercise your subscription rights and will not receive the Units you wish to purchase.
The tax treatment of the rights offering is somewhat uncertain
and could be treated as a taxable event to our shareholders.
If the rights offering is deemed to be part of a “disproportionate
distribution” under section 305 of the Internal Revenue Code, our shareholders may recognize taxable income for U.S. federal
income tax purposes in connection with the receipt of subscription rights in the rights offering depending on our current and accumulated
earnings and profits and our shareholders' tax basis in our common stock. A “disproportionate distribution” is a distribution
or a series of distributions, including deemed distributions, that has the effect of the receipt of cash or other property by some
shareholders or holders of debt instruments convertible into stock and an increase in the proportionate interest of other shareholders
in a company's assets or earnings and profits. It is unclear whether the fact that we have outstanding options and certain other
equity-based awards could cause the receipt of subscription rights to be part of a disproportionate distribution. Please see “Material
U.S. Federal Income Tax Consequences” for further information on the treatment of the rights offering.
The rights offering could impair or limit our net operating
loss carry forwards.
As of December 31, 2015 and September 30,
2016, we had net operating loss (which we refer to as “NOL”) carryforwards of approximately $119.1 million and $130.9
million (unaudited), respectively, for U.S. federal income tax purposes. Under the Internal Revenue Code, an “ownership change”
with respect to a corporation can significantly limit the amount of pre-ownership change NOLs and certain other tax assets that
the corporation may utilize after the ownership change to offset future taxable income, possibly reducing the amount of cash available
to the corporation to satisfy its obligations. An ownership change generally should occur if the aggregate stock ownership of holders
of at least 5% of our stock increases by more than 50 percentage points over the preceding three-year period. The purchase of Units
pursuant to the rights offering may trigger an ownership change with respect to our stock.
We may amend or modify the terms of the rights offering
at any time prior to the expiration of the rights offering in our sole discretion.
Our board of directors reserves the right
to amend or modify the terms of the rights offering in its sole discretion. Although we do not presently intend to do so, we may
choose to amend or modify the terms of the rights offering for any reason, including, without limitation, in order to increase
participation in the rights offering. Such amendments or modifications may include a change in the manner in which we determine
the Subscription Price, although no such change is presently contemplated. If we should make any fundamental changes to the terms
of the rights offering set forth in this prospectus, we will file a post-effective amendment to the registration statement in which
this prospectus is included, offer potential purchasers who have subscribed for rights the opportunity to cancel such subscriptions
and issue a refund of any subscription payments advanced by such shareholder and recirculate an updated prospectus after the post-effective
amendment is declared effective by the SEC. In addition, upon such event, we may extend the expiration date of the rights offering
to allow holders of rights ample time to make new investment decisions and for us to recirculate updated documentation. Promptly
following any such occurrence, we will issue a press release announcing any changes with respect to the rights offering and the
new expiration date. The terms of the rights offering cannot be modified or amended after the expiration date of the rights offering.
The Subscription Price determined
for this offering is not an indication of the fair value of our units or common stock.
In determining the method for obtaining
the Subscription Price at the expiration of the Rights Offering period, our board of directors considered a number of factors,
including, but not limited to, the price at which our shareholders might be willing to participate in the Rights Offering, historical
and current trading prices for our common stock including volatility, the amount of proceeds desired, the potential need for liquidity
and capital, potential market conditions, and the desire to provide an opportunity to our shareholders to participate in the Rights
Offering. In conjunction with its review of these factors, our board of directors also reviewed a range of discounts to market
value represented by the subscription prices in various prior Rights Offerings by other public companies. The Subscription Price
does not necessarily bear any relationship to the book value of our assets, results of operations, cash flows, losses, financial
condition or any other established criteria for value. You should not consider the Subscription Price as an indication of
the fair value of our common stock. After the date of this prospectus, our common stock may trade at prices above or below
the Subscription Price.
We cannot guarantee that the Warrants you receive will
be listed for trading on Nasdaq or that a trading market for the Warrants will develop.
While we intend to submit an application
to The Nasdaq Stock Market to list the Warrants you receive when you purchase the Units, we cannot guarantee that our listing application
will be approved. If our listing application is not approved, it may be difficult for you to sell or transfer the Warrants. Even
if our listing application is approved, we cannot guarantee that a trading market for the Warrants will develop. Therefore, you
may not realize any value from the Warrants by attempting to sell or otherwise transfer them for consideration.
The market price of our common stock may never exceed
the exercise price of the Warrants issued in connection with the Rights Offering.
The Warrants being issued in connection
with the Rights Offering become exercisable upon issuance and will expire five years after issuance. We cannot provide you any
assurance that the market price of our common stock will ever exceed the exercise price of the Warrants prior to their date of
expiration. Any Warrants not exercised by their date of expiration will expire worthless and we will be under no further obligation
to the Warrant holder.
The Warrants may create an overhang on the market and
have a negative effect on the market price for our common stock.
The Warrants will be outstanding for up
to five years following the exercise of the Rights. The Warrants may be used in arbitrage transactions and cause the market price
of the common stock to remain at or near the Warrant exercise price regardless of our performance.
For you to exercise your Warrant and receive tradable
shares, we must maintain a registration statement with the SEC.
For the exercise of the Warrants, we must maintain a registration
statement and current prospectus to be available at the time of the common stock underlying the Warrant. If we do not, then it
will be difficult for you to sell the underlying common stock, and your rights under the terms of the Warrant will be impaired.
As a consequence, your Warrants may be of little or no value at the time of exercise.”
The Warrants may be redeemed on short notice after they
have been outstanding for 24 months. This may have an adverse impact on their price and on the price of our shares.
We may call the Warrants
for redemption, in whole and not in part, at a price of $.01 per Warrant at any time following the two year anniversary
of issuance, upon not less than 30 days’ prior written notice of redemption to each Warrant holder, provided that, (i)
the closing price of the common stock equals or exceeds 200% of the Subscription Price, subject to adjustment, per share, for
15 consecutive trading days and (ii) all of our independent directors vote in favor of a call for redemption. If we give notice of
redemption, you will be forced to sell or exercise your Warrants or accept the redemption price. The notice of redemption
could come at a time when it is not advisable or possible for you to exercise the Warrants. As a result, you would be unable
to benefit from owning the Warrants being redeemed. A notice of redemption may also result in our stock becoming more
volatile and being subject to greater selling pressure which could result in further declines of our common stock share
price. As a consequence you may experience sharp declines and losses.
You may not receive all of the Units for which you subscribe.
Holders who fully exercise their Basic
Subscription Rights will be entitled to subscribe for additional amounts in the exercise of their Over-Subscription Privileges.
Under the terms of this Rights Offering, Over-Subscription Privileges will be allocated pro rata among Rights holders who over-subscribed,
based on the over-subscription amounts at the Subscription Price to which they have subscribed. We cannot guarantee that you will
receive at the Subscription Price any or the entire amount of Units for which you over-subscribed. Moreover, even if you would
otherwise have the opportunity to receive the entire amount of Units for which you over-subscribed, in the event of further volatility
and price declines we may elect to limit Units that we sell in the Rights Offering to no more than 15 million Units and should
that occur your total prorated allocation of Units could be reduced. If the prorated amount of Units allocated to you at the Subscription
Price in connection with your Over-Subscription Privilege is less than your Over-Subscription Request, then the excess funds held
by the Subscription Agent on your behalf will be returned to you, without interest, as soon as practicable after the Rights Offering
has expired and all prorating calculations and reductions contemplated by the terms of the Rights Offering have been effected, and
we will have no further obligations to you.
Unless we otherwise agree in writing, a
person or entity, together with related persons or entities, may not exercise Subscription Rights (including Over-Subscription
Privileges) to purchase Units that, when aggregated with their existing ownership, would result in such person or entity, together
with any related persons or entities, owning in excess of 50% of our issued and outstanding shares of common stock following the
closing of the transactions contemplated by this Rights Offering. If the number of Units allocated to you is less than your subscription
request, then the excess funds held by the Subscription Agent on your behalf will be returned to you, without interest, as soon
as practicable after the Rights Offering has expired and all prorating calculations and reductions contemplated by the terms of
the Rights Offering have been effected, and we will have no further obligations to you.
Risks Related to Our Common Stock
We have not been profitable to date and expect our operating
losses to continue for the foreseeable future; we may never be profitable.
We have incurred operating losses and generated
negative cash flows since our inception and have financed our operations principally through equity investments and borrowings.
At this time, our ability to generate sufficient revenues to fund operations is uncertain. For the fiscal year ended December 31,
2015, we had net revenue of $8,950,000 and incurred a net loss of $20,018,000. Our total accumulated deficit through December 31,
2015, was $ 172,682,000. For the nine months ended September 30, 2016 (unaudited) we had net revenue of $3,270,000 and incurred
a net loss of $22,809,000. Our total accumulated deficit (unaudited) through September 30, 2016, was $195,491,000.
As a result of our limited commercial operating
history, revenue is difficult to predict with certainty. Current and projected expense levels are based largely on estimates of
future revenue. We expect expenses to increase in the future as we expand our activities in connection with the further development
of Orion I and complete planned enhancements of Argus II. We cannot assure you that we will be profitable in the future. Accordingly,
the extent of our future losses and the time required to achieve profitability, if ever, is uncertain. Failure to achieve profitability
could materially and adversely affect the value of our Company and our ability to effect additional financings. The success of
the business depends on our ability to increase revenues to offset expenses. If our revenues fall short of projections, our business,
financial condition and operating results will be materially adversely affected.
Our financial statements for our fiscal year ended December
31, 2016 may be prepared assuming a going concern qualification by our auditors.
Our independent registered public accounting
firm in their report on the Company’s 2016 consolidated financial statements may express substantial doubt about our ability
to continue as a going concern if we do not have adequate capital to support our operations through at least the next 12 months.
Our ability to continue as a going concern is dependent upon our ability to obtain additional financing, obtain further operating
efficiencies, reduce expenditures, attain favorable gross margins and ultimately, create profitable operations. Such financings
may not be available or may not be available on reasonable terms.
Sales, or the availability for sale, of substantial amounts
of our common stock could adversely affect the value of our common stock.
No prediction can be made as to the
effect, if any, that future sales of our common stock, or the availability of our common stock for future sales, will have on the
market price of our common stock. The number of Units issuable in this Rights Offering is not fixed and will depend on both the
total amounts we receive from our shareholders of record in this Offering and the Subscription Price once it is determined. See
"Rights Offering-Shares of Our Common Stock Outstanding After The Rights Offering." Because the Subscription Price is
not fixed as of the date of this prospectus we cannot determine prior to completion of the Rights Offering the total number of
Units we might issue, however, notwithstanding the price of our shares on the date that the Subscription Price is fixed, in the
event of further volatility and market or price declines we may elect to limit stock that we sell in the Rights Offering to no
more than 15 million Units. The Alfred E. Mann Living Trust, a trust established by our late founder, and persons or entities affiliated
with it (the Mann Trust) have previously sold shares of our common stock. Sales of substantial amounts of our common stock in the
public market and the availability of shares for future sale, whether by the Mann Trust or others, could adversely affect the prevailing
market price of our common stock. This in turn could impair our future ability to raise capital through an offering of our equity
securities.
There may be future sales or other dilution of our equity,
which may adversely affect the market price of our common stock.
We are not restricted from issuing additional
shares of common stock. The market price of our common stock could decline as a result of sales of our common stock and Warrants
made after this offering or the perception that such sales could occur. We may issue and sell additional shares of our common stock
in private placements or registered offerings in the future. We also may conduct additional rights offerings in the future pursuant
to which we may issue shares of our common stock or other securities.
We will incur substantial expenses in connection with
the Rights Offering, which may not return adequate value if the Rights Offering is ultimately not consummated or successful.
The estimated expenses for the
Rights Offering payable by us are approximately $410,000. If the registration statement of which this prospectus is a part is
not declared effective, the Rights Offering is not commenced or the Rights Offering is not ultimately consummated or
successful, we will incur most of these expenses nonetheless.
We
have previously identified and reported on weaknesses in our internal control over financial reporting. If our internal control
over financial reporting remains not effective, investor confidence in our company may be adversely affected.
In response to identified, and
previously reported on, material weaknesses in our internal control over financial reporting, we are continuing to develop
and improve our system and process documentation necessary to perform the evaluation needed to comply with Section 404 of the
Sarbanes-Oxley Act. For example, in connection with the audit of our consolidated financial statements for fiscal 2015, our
independent registered public accounting firm identified material weaknesses in our internal control over financial
reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely basis. Our independent registered public accounting firm
identified the following material weaknesses during its audit:
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Control
over Financial Reporting
. We did not consistently perform timely reconciliation of
certain accounts, including revenue, deferred revenue, inventory, and stock-based compensation
expense. This resulted in the incorrect recording of certain revenue and expenses that
required various adjusting entries which we timely and fully recorded as part of the
audit process.
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Tracking
of Back-up Prosthesis Units
. For every surgery, we ship a back-up prosthesis unit
along with the primary unit in case the primary unit cannot be used for some reason.
Following the surgery the unused unit is returned to us. We did not consistently follow
internal procedures regarding the tracking and recordation of returned prosthesis units
and the exchange of primary units for back-up units with our customers. When uncorrected
this resulted in an understatement of cost of sales and an overstatement of inventory
that required various adjusting entries that we timely and fully recorded as part of
the audit process.
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We
are continuing our efforts to remediate these material weaknesses.
If
we continue to be unable to conclude that our internal control over financial reporting is effective, or if our independent registered
public accounting firm is unable to express an opinion on the effectiveness of our internal controls when it is required to do
so by the applicable rules, we could lose investor confidence in the accuracy and completeness of our financial reports, which
could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the regulatory authorities.
As
a result, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional
accounting or internal audit staff. Our remediation efforts may not enable us to avoid a material weakness in the future.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
This prospectus
contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of
future events. You can identify these statements by the fact that they do not relate strictly to historical or
current facts. You can find many (but not all) of these statements by looking for words such as
“approximates,” “believes,” “hopes,” “expects,” “anticipates,”
“estimates,” “projects,” “intends,” “plans,” “would,”
“should,” “could,” “may,” “views” or other similar expressions in this
prospectus. These statements may be found under the sections entitled “Risk Factors”,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Prospectus Summary” included in this prospectus, as well as in this prospectus generally. In particular,
these include statements relating to future actions, prospective products, applications, customers, technologies, future
performance or results of anticipated products, expenses, and financial results. These forward-looking statements
are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical
experience and our present expectations or projections. Factors that could cause actual results to differ from
those discussed in the forward-looking statements include, but are not limited to:
|
·
|
our limited cash and a history of losses,
|
|
·
|
our future financial and operating results
and our ability to achieve profitability,
|
|
·
|
our limited experience in marketing our
product at a sustainable commercial level and need to expand our domestic and international marketing programs,
|
|
·
|
emerging competition and rapidly advancing
technology or alternative therapies and treatments for persons suffering from blindness,
|
|
·
|
customer demand for the products we develop,
effective pricing and obtaining reimbursement under government and private insurance programs,
|
|
·
|
our
need to conduct and pay for additional clinical trials to determine efficacy of the Argus II System in treating patients with
AMD and for new products that we are planning on developing especially the Orion I product,
|
|
·
|
our ability to obtain adequate government
and private party insurance reimbursements for our products
domestically
and in foreign markets
|
|
·
|
the impact of competitive or alternative
products, technologies and pricing,
|
|
·
|
general economic conditions and events
and the impact they may have on us and our potential customers,
|
|
·
|
the adequacy of protections afforded to
us by the patents that we own and license and the cost to us of maintaining, enforcing and defending those patents and licenses,
|
|
·
|
our ability to obtain, expand and maintain
patent protection in the future, and to protect our non-patented intellectual property,
|
|
·
|
our exposure to and ability to defend
third-party claims and challenges to our patents, licenses and other intellectual property rights,
|
|
·
|
our ability to obtain adequate financing
in the future,
|
|
·
|
our ability to continue as a going concern,
|
|
·
|
our ability to develop, successfully test
and obtain FDA and other regulatory approvals for the Orion I,
|
|
·
|
our intentions, expectations and beliefs regarding anticipated growth,
market penetration and trends in our business,
|
|
·
|
the timing and success of our plan of
product commercialization,
|
|
·
|
the effects of market conditions on our
stock price and operating results,
|
|
·
|
our ability to timely and effectively
adapt our existing technology and have our technology solutions gain market acceptance,
|
|
·
|
our plans to use the proceeds from this
offering,
|
|
·
|
our ability to comply with evolving legal
standards and regulations, particularly concerning requirements for being a public company and United States export regulations,
|
|
·
|
the attraction and retention of qualified
employees and key personnel, and
|
|
·
|
other factors discussed in the “Risk
Factors” section of this prospectus.
|
Forward-looking statements
are based upon management’s beliefs and assumptions and are made as of the date of this prospectus. We undertake no obligation
to publicly update or revise any forward-looking statements included in this prospectus or to update the reasons why actual results
could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except
to the extent required by federal securities laws. Actual future results may vary materially as a result of various
factors, including, without limitation, the risks outlined under the section entitled “Risk Factors” and matters described
in this prospectus generally. In light of these risks and uncertainties, we cannot assure you that the forward-looking
statements contained in this prospectus will in fact occur.
You should not rely
upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances
described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking
statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our
expectations, except as required by law.
You should read this
prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as
exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results,
levels of activity, performance and events and circumstances may be materially different from what we expect.
USE OF PROCEEDS
If our shareholders
subscribe and invest for the full amount available, based on 42,247,000 shares outstanding as of September 30, 2016, we estimate
that the proceeds from the Rights Offering will be approximately $19,856,000 million, before deducting fees and expenses payable
by us estimated at approximately $410,000.
We intend to
use the net proceeds we receive from the offering to (i) improve performance of the Argus II which will permit us to
enlarge our current markets by also treating better-sighted RP patients (ii) continue funding the ongoing development
of the Orion I visual prosthesis, (iii) continue funding the ongoing clinical study of Argus II in patients with AMD,
and (iv) for other operating and general corporate purposes.
There is no minimum amount that must be
raised in the Rights Offering. Our management will retain broad discretion as to the allocation of the net proceeds from this offering.
Until we use the net proceeds of this offering, we intend to invest the funds in short-term, interest bearing investments.
CAPITALIZATION
The following table
presents our cash, cash equivalents, money market funds and capitalization as of September 30, 2016:
|
·
|
on
an actual basis; and
|
|
·
|
by
way of example, on a pro forma as adjusted basis to give effect to the sale by us in this Rights Offering of approximately
10,079,000
shares at the Subscription Price of
$
1.97
per share, which is based on the lower
of $2.00 or actual closing price of $
1.97
of
our common stock on Nasdaq as of December 30, 2016, and our receipt of the net proceeds from that sale after deducting our estimated
offering expenses of approximately $410,000 (including bonus compensation of $100,000 payable to Aaron Mendelsohn, one of our
directors, for his services on behalf of the board in connection with this offering).
|
The pro forma as adjusted
information set forth below is illustrative only and will be adjusted based on the number of shares sold and the Subscription Price.
The Subscription Price could be materially different than the price utilized herein as a result of future changes in the market
price of our common stock. You should read this information in conjunction with our consolidated financial statements and
notes thereto incorporated by reference into this prospectus.
|
|
As of September 30, 2016
|
|
|
|
Actual
|
|
|
Pro Forma as
Adjusted
|
|
(in thousands)
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Cash, cash equivalents and money market funds
|
|
$
|
17,823
|
|
|
$
|
37,269
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, no par value, 10,000 shares authorized; none issued and outstanding, actual or pro forma as adjusted
|
|
|
-
|
|
|
|
-
|
|
Common stock, no par value, 200,000 shares authorized; actual – 42,247 issued and outstanding, pro forma as adjusted – 52,326 issued and outstanding,
|
|
|
186,618
|
|
|
|
206,064
|
|
Common stock to be issued
|
|
|
87
|
|
|
|
87
|
|
Additional paid-in capital
|
|
|
29,911
|
|
|
|
29,911
|
|
Notes receivable to finance stock option exercises
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Accumulated other comprehensive loss
|
|
|
(524
|
)
|
|
|
(524
|
)
|
Accumulated deficit
|
|
|
(195,491
|
)
|
|
|
(195,491
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
$
|
20,599
|
|
|
$
|
40,045
|
|
The information above
is as of September 30, 2016 and excludes:
|
·
|
Approximately
10,079,000
shares of common stock issuable on exercise of Warrants
sold in this offering if fully subscribed at $1.97 per Unit;
|
|
·
|
3,669,000 shares of common stock issuable
upon the exercise of stock options outstanding at September 30, 2016 with a weighted average exercise price of $7.28 per share;
|
|
·
|
2,637,000 shares of common stock reserved
for future issuance to our employees under the Company’s 2011 Equity Incentive Plan;
|
|
·
|
142,000 shares of common stock issuable
upon the settlement of restricted stock units outstanding at September 30, 2016;
|
|
·
|
342,000 shares of common stock issuable
through Long Term Investor Rights issued in connection with the Company’s initial public offering;
|
|
·
|
1,840,000 shares of common stock issuable
upon the exercise of warrants outstanding at September 30, 2016 with a weighted average exercise price of $7.72 per share;
|
|
·
|
196,000 shares of common stock reserved
for future issuance to our employees under the Company’s Employee Stock Purchase Plan.
|
DILUTION
Purchasers of
our common stock in the Rights Offering (and upon exercise of the Warrants issued pursuant to this Rights Offering) will
experience an immediate dilution of the net tangible book value per share of our common stock. Our net tangible book value as
of September 30, 2016 was approximately $20,599,000, or $0.49 per share of our common stock (based upon 42.2 million shares
of our common stock outstanding). Net tangible book value per share is equal to our total net tangible book value, which is
our total tangible assets less our total liabilities, divided by the number of shares of our outstanding common stock.
Dilution per share equals the difference between the amount per share paid by purchasers of shares of common stock in the
Rights Offering and the net tangible book value per share of our common stock immediately after the Rights Offering.
By way of illustration,
based on the sale by us in this Rights Offering of approximately 10,079,000 shares at the Subscription Price of $1.97 per share,
which is the based on the lower of $2.00 or actual closing price of $1.97 of our common stock on Nasdaq as of December 30, 2016,
and after deducting estimated offering expenses and fees payable by us of approximately $410,000 (including bonus compensation
of $100,000 payable to Aaron Mendelsohn, one of our directors, for his services on behalf of the board in connection with this
offering) and the application of the estimated $19,446,000 of net proceeds from the Rights Offering, our pro forma net tangible
book value as of September 30, 2016 would have been approximately $40,045,000, or $0.77 per share. This represents an immediate
increase in pro forma net tangible book value to existing shareholders of $0.28 per share and an immediate dilution to purchasers
in the Rights Offering of $1.20 per share.
.
The pro forma dilution
in net tangible book value per share to purchasers set forth below is illustrative only and will be adjusted based on the number
of shares sold and the Subscription Price. The Subscription Price could be materially different than the price utilized herein
as a result of future changes in the market price of our common stock. You should read this information in conjunction with
our consolidated financial statements and notes thereto incorporated by reference into this prospectus.
The following table illustrates this per-share
dilution as of September 30, 2016:
Subscription Price
|
|
|
|
|
|
$
|
1.97
|
|
Net tangible book value per share as of September 30, 2016, before Rights Offering
|
|
$
|
0.49
|
|
|
|
|
|
Increase in net tangible book value per share attributable to Rights Offering
|
|
|
0.28
|
|
|
|
|
|
Pro forma net tangible book value per share as of September 30, 2016, after giving effect to Rights Offering
|
|
|
|
|
|
|
0.77
|
|
|
|
|
|
|
|
|
|
|
Dilution in net tangible book value per share to purchasers
|
|
|
|
|
|
$
|
1.20
|
|
The information above
is as of September 30, 2016 and excludes:
|
·
|
Approximately
10,079,000
shares of common stock issuable on exercise of Warrants
sold in this offering if fully subscribed at $1.97 per Unit;
|
|
·
|
3,669,000 shares of common stock issuable
upon the exercise of stock options outstanding at September 30, 2016 with a weighted average exercise price of $7.28 per share;
|
|
·
|
2,637,000 shares of common stock reserved
for future issuance to our employees under the Company’s 2011 Equity Incentive Plan;
|
|
·
|
142,000 shares of common stock issuable
upon the settlement of restricted stock units outstanding at September 30, 2016;
|
|
·
|
342,000 shares of common stock issuable
through Long Term Investor Rights issued in connection with the Company’s initial public offering;
|
|
·
|
1,840,000 shares of common stock issuable
upon the exercise of warrants outstanding at September 30, 2016 with a weighted average exercise price of $7.72 per share;
|
|
·
|
196,000 shares of common stock reserved
for future issuance to our employees under the Company’s Employee Stock Purchase Plan.
|
MARKET PRICE OF OUR COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is
traded on Nasdaq under the symbol “EYES.” The table below shows the high and low sales closing prices
for our common stock for the periods indicated, as reported by Nasdaq.
|
|
Price Ranges
|
|
|
|
High
|
|
|
Low
|
|
Fiscal Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
6.79
|
|
|
$
|
3.78
|
|
Second Quarter
|
|
|
5.85
|
|
|
|
3.18
|
|
Third Quarter
|
|
|
4.24
|
|
|
|
3.22
|
|
Fourth Quarter
|
|
|
3.48
|
|
|
|
1.76
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
17.44
|
|
|
$
|
8.43
|
|
Second Quarter
|
|
|
16.28
|
|
|
|
11.56
|
|
Third Quarter
|
|
|
14.45
|
|
|
|
5.93
|
|
Fourth Quarter
|
|
|
8.07
|
|
|
|
4.70
|
|
The
closing price of our common stock on December
30
,
2016 was $
1.97
per share and there were approximately
164 holders of record of our common stock, excluding shareholders for whom shares are held in “nominee” or “street
name” as of that date.
DIVIDEND POLICY
We have never declared or paid any cash
dividends on our common stock and we do not intend to pay cash dividends in the foreseeable future. We expect as of the date hereof
to retain any future earnings to fund the operation and expansion of our business.
THE RIGHTS OFFERING
The Subscription Rights
We
are distributing to holders of our common stock, at no charge, non-transferable subscription rights to purchase Units
consisting
of one share of our common stock and a Warrant to purchase one share of our common stock for each whole share of common stock you
purchase in the Rights Offering. In the Rights Offering, you will receive the right to invest $0.47 for each share of common stock
owned at 5:00 p.m., New York City Time, on [ ], 2017, the record date of the Rights Offering, or the Record Date. The Subscription
Rights will not be tradable. The price per Unit will be determined on [ ], 2017, which is the expiration date of our offering period,
or the Expiration Date, and will equal the lesser of $2.00 or the closing price of our shares as reported by Nasdaq on the Expiration
Date. We refer to the price as so determined as the Subscription Price.
Each Subscription Right will entitle you
to invest $0.47 towards the purchase of Units, which we refer to as the Basic Subscription Right, at the Subscription Price. If
you exercise your Basic Subscription Rights in full, and other shareholders do not fully exercise their Basic Subscription Rights,
you will be entitled to an Over-Subscription Privilege to purchase a portion of the unsubscribed Units at the Subscription Price,
subject to proration and ownership limitations, which we refer to as the Over-Subscription Privilege. Each Subscription Right consists
of a Basic Subscription Right and an Over-Subscription Privilege. The number of Units that you will obtain will equal the accepted
dollar amount of your investment divided by the Subscription Price rounded down to the nearest whole Unit. If all the Subscription
Rights were exercised, the total gross proceeds to us from the sale of Units offered in the rights offering would be approximately
$19,856,000.
Basic Subscription Rights
Your Basic Subscription Rights will entitle
you to invest $0.47 for each share of common stock you own on the Record Date. You may exercise all or a portion of your Basic
Subscription Rights, or you may choose not to exercise any of your Basic Subscription Rights. If you do not exercise your Basic
Subscription Rights in full, you will not be entitled to exercise your Over-Subscription Privilege.
For example, if you owned 1,000
shares of our common stock as of the Record Date, you would have the right to invest $0.47 for each share of Common Stock you
own as of the Record Date, or $470, at the Subscription Price. If you invest $470, and if on the Expiration Date the closing
price of our common stock as reported by Nasdaq is $2.03 per share, the Subscription Price will be $2.00 (which constitutes
the lesser of $2.00 or the closing price per share on the Expiration Date), you would receive 235 Units consisting in the
aggregate of 235 shares of our common stock and Warrants to purchase 235 shares of our common stock. If you
invest $470, and on the Expiration Date the closing price of our common stock is $1.90 per share, the Subscription Price will
be $1.90 and you would receive a rounded down 247 Units and a refund of $0.70. You may exercise all or a portion of your
Basic Subscription Rights or you may choose not to exercise any Basic Subscription Rights at all. Subscription Rights may
only be exercised in aggregate for whole numbers of shares of units; no fractional shares of our common stock or
warrants exercisable for fractional shares will be issued in the Rights Offering. If all the Subscription Rights were
exercised, the total gross proceeds to us from the sale of units offered in the rights offering would be
approximately $20 million. You may exercise all or a portion of your Basic
Subscription Rights or you may choose not to exercise any Basic Subscription Rights at all.
Over-Subscription Privilege
If you exercise your Basic Subscription
Rights in full, you may also choose to exercise your Over-Subscription Privilege. Subject to proration and stock ownership limitations,
and limitations on Unit sales we may impose that are described below, if applicable, we will seek to honor the Over-Subscription
Privilege requests in full. If Over-Subscription Privilege requests exceed the number of Units available, however, we will allocate
the available units pro rata among the record holders exercising the Over-Subscription Privilege in proportion to the number of
shares each of those record holders owned on the Record Date, relative to the number of shares owned by all record holders exercising
the Over-Subscription Privilege. If this pro rata allocation results in any record holder receiving a greater number of Units than
the record holder subscribed for pursuant to the exercise of the Over-Subscription Privilege, then such record holder will be allocated
only that number of Units for which the record holder oversubscribed, and the remaining Units will be allocated among all other
record holders exercising the Over-Subscription Privilege on the same pro rata basis described above. The proration process will
be repeated until all Units have been allocated.
Broadridge Inc., the Subscription Agent
for the Rights Offering, will determine the over-subscription allocation based on the formula described above.
To the extent the aggregate subscription
payment of the actual number of unsubscribed Units available to you at the Subscription Price pursuant to the Over-Subscription
Privilege is less than the amount you actually paid in connection with the exercise of the Over-Subscription Privilege, you will
be allocated, after the Subscription Price is determined, only the number of unsubscribed Units available to you, and any excess
subscription payments will be returned to you, without interest or penalty, within 10 business days after expiration of the Rights
Offering.
We can provide no assurance that, following
determination of the Subscription Price, you will actually be entitled to purchase the number of Units issuable upon the exercise
of your Over-Subscription Privilege in full at the expiration of the Rights Offering. We will not be able to satisfy any requests
for Units pursuant to the Over-Subscription Privilege if all of our shareholders exercise their Basic Subscription Rights in full,
and we will only honor an Over-Subscription Privilege to the extent sufficient Units are available following the exercise of Basic
Subscription Rights.
Limitation on the Purchase of Units
You may only purchase the number of Units
purchasable upon exercise of the number of Basic Subscription Rights distributed to you in the Rights Offering, plus the Over-Subscription
Privilege, if any. Accordingly, the number of Units that you may purchase in the Rights Offering is limited by the number of shares
of our common stock you held on the Record Date and by the extent to which other shareholders exercise their Basic Subscription
Rights and Over-Subscription Privileges, which we cannot determine prior to completion of the Rights Offering. However, due to
stock exchange restrictions, we will not issue shares in the Rights Offering to the extent that a holder would beneficially own,
together with any other person with whom such holder’s securities may be aggregated under applicable law, more than 19.9%
of our outstanding shares of common stock. Because the Subscription Price is not fixed as of the date of this prospectus (see below)
we cannot determine prior to completion of the Rights Offering on the Expiration Date the total number of shares we might issue
pursuant to Units, however, notwithstanding the price of our shares on the date that the Subscription Price is fixed and notwithstanding
the subscribed for amounts that we may receive, in the event of further volatility and market or price declines we may elect to
limit Units that we sell in the Rights Offering to no more than 15 million Units. See "Risk Factors."
Subscription Price
We recognize that prices of our
shares may fluctuate and that trading in our securities may be volatile during the period that this Rights Offering may be
open to our shareholders. As a result, we have elected to establish the Subscription Price immediately after the close of
trading on [ ], 2017, which is the Expiration Date of this offering, at a price per Unit that will be the
lower of (i) $2.00 or (ii) the closing price per share on that date. The Subscription Price as so determined does
not necessarily bear any relationship to our past or expected future results of operations, cash flows, current
financial condition, or any other established criteria for value.
Method of Determining Subscription Price
In establishing the method of determining
the Subscription Price, the board of directors considered a variety of factors including those listed below:
|
•
|
our need to raise capital in the near term to continue our operations;
|
|
•
|
the current and historical trading prices of our common stock and volatility of trading markets;
|
|
•
|
a price that would increase the likelihood of shareholder participation in the Rights Offering;
|
|
•
|
the value of the Warrant being issued as a component of the Unit
|
|
•
|
the cost of capital from other sources;
|
|
•
|
comparable precedent transactions, including the percentage of shares offered, the terms of the
subscription rights being offered, the Subscription Price and the discount that the Subscription Price represents to the immediately
prevailing closing prices for these offerings;
|
|
•
|
an analysis of stock price trading multiples for companies similar to us that, among other things,
did not need to raise capital in the near-term; and
|
|
•
|
our most recently forecasted revenue relative to our peer group.
|
The Subscription Price does not necessarily
bear any relationship to any established criteria for value. No valuation consultant or investment banker has opined upon the fairness
or adequacy of the Subscription Price. You should not consider the Subscription Price as an indication of actual value of our company
or our common stock. You should not assume or expect that, after the Rights Offering, our shares of common stock will trade at
or above the Subscription Price in any given time period. The market price of our common stock may decline during or after the
Rights Offering. We cannot assure you that you will be able to sell the shares of our common stock purchased during the Rights
Offering or pursuant to the exercise of Warrants at a price equal to or greater than the Subscription Price. You should obtain
a current price quote for our common stock before exercising your Subscription Rights and make your own assessment of our business
and financial condition, our prospects for the future, and the terms of this Rights Offering. Once made, all exercises of Subscription
Rights are irrevocable, unless set forth otherwise herein.
Non-Transferability of Subscription Rights
The Subscription Rights are non-transferable
(other than by operation of law) and, therefore, you may not sell, transfer, assign or give away your Subscription Rights to anyone.
The Subscription Rights will not be listed for trading on any stock exchange or market.
Expiration Date; Extension
The subscription period, during which you
may exercise your Subscription Rights, expires at 5:00 p.m., New York City, on [ ], 2017, which is the expiration date of
the Rights Offering. If you do not exercise your Subscription Rights before that time, your Subscription Rights will expire and
will no longer be exercisable. We will not be required to issue Units to you if the Subscription Agent receives your Rights Certificate
or your subscription payment after that time. We have the option to extend the Rights Offering in our sole discretion, although
we do not presently intend to do so. We may extend the Rights Offering by giving oral or written notice to the Subscription Agent
before the Rights Offering expires. If we elect to extend the Rights Offering, we will issue a press release announcing the extension
no later than 9:00 a.m., New York City Time, on the next business day after the most recently announced expiration date of the
Rights Offering.
If you hold your shares of common stock
in the name of a broker, dealer, custodian bank or other nominee, the nominee will exercise the Subscription Rights on your behalf
in accordance with your instructions. Please note that the nominee may establish a deadline that may be before 5:00 p.m., New York
City Time, on [ ], 2017, which is the Expiration Date that we have established for the Rights Offering.
In the event we amend the Rights Offering
to allow for an extension of the rights offering for a period of more than 30 days or make a fundamental change to the terms of
the Rights Offering set forth in this prospectus, you may cancel your subscription and receive a refund of any money you have advanced.
Termination
We may terminate the Rights Offering at
any time and for any reason prior to the completion of the Rights Offering. If we terminate the Rights Offering, we will issue
a press release notifying shareholders and the public of the termination.
Return of Funds upon Completion, Termination or Amendment
The Subscription Agent will hold funds
received in payment for Units in a segregated account pending completion of the Rights Offering. The Subscription Agent will hold
this money until the Rights Offering is completed or is terminated. To the extent you properly exercise your Over-Subscription
Privilege for an amount of Units that, following determination of the Subscription Price, exceeds the number of unsubscribed Units
available to you, any excess subscription payments will be returned to you within 10 business days after the expiration of the
Rights Offering, without interest or penalty. If the Rights Offering is terminated for any reason, all subscription payments received
by the Subscription Agent will be returned within 10 business days, without interest or penalty. If the Rights Offering is extended
for a period of more than 30 days or terms of the rights offering set forth in this prospectus are fundamentally changed you may
cancel your subscription and receive a refund of any money you have advanced by giving the Subscription Agent a written notice
of cancellation of subscription within two business days from the date of extension or fundamental change to the terms of this
rights offering has been disclosed to the public. Following the receipt of the written notice of cancellation, the Subscription
Agent will return all cancelled subscription payments received by the Subscription Agent within 10 business days, without interest
or penalty
Shares of Our Common Stock Outstanding After the Rights Offering
The number of shares of common stock outstanding
after the Rights Offering will depend on both (i) the total amount we receive in this offering from our shareholders of record
and (ii) the Subscription Price once it is established. For example, based on 42,696,000 shares of common stock outstanding as
of December 31, 2016, assuming no other transactions by us involving our common stock prior to the expiration of the Rights Offering,
and if the Rights Offering is fully subscribed and the Subscription Price is determined to be $2.00 per Unit, we will issue 10,034,000
shares and Warrants to purchase approximately 10,034,000 additional shares of our common stock will be outstanding (excluding the
currently outstanding warrants), then we will have 52,730,000 shares of common stock issued and outstanding.
Methods for Exercising Subscription Rights
The exercise of Subscription Rights is
irrevocable and may not be cancelled or modified. You may exercise your Subscription Rights as follows:
Subscription by Record Holders
If you are a shareholder of record,
the number of Units you may purchase pursuant to your Subscription Rights in indicated on the enclosed Rights Certificate.
You may exercise your Subscription Rights by properly completing and executing the Rights Certificate and forwarding it,
together with your full payment, to the Subscription Agent at the address given below under “Subscription Agent,”
to be received before 5:00 p.m., New York City Time, on [ ], 2017.
Subscription by Beneficial Owners
If you are a beneficial owner of shares
of our common stock that are registered in the name of a broker, dealer, custodian bank, or other nominee, you will not receive
a Rights Certificate. Instead, we will issue one Subscription Right to such nominee record holder for all shares of our common
stock held by such nominee at the Record Date. If you are not contacted by your nominee, you should promptly contact your nominee
in order to subscribe for Units in the Rights Offering and follow the instructions provided by your nominee.
To properly exercise your Over-Subscription
Privilege, you must deliver the subscription payment related to your Over-Subscription Privilege before the Rights Offering expires.
Because we will not know the total number of unsubscribed Units before the Rights Offering expires, if you wish to maximize the
number of Units you purchase pursuant to your Over-Subscription Privilege, you will need to deliver payment in an amount equal
to the aggregate subscription payment for the maximum amount that you wish to invest in the Rights Offering taking into consideration
that the number of Units you may acquire will not be fixed until after the Rights Offering has expired. See "Shares of Our
Common Stock Outstanding After the Rights Offering" above.
Payment Method
Payments must be made in full in U.S. currency
by personal check, certified check or bank draft, or by wire transfer, and payable to “Broadridge Inc., as Subscription Agent
for Second Sight Medical Products, Inc.” You timely must pay the full subscription payment, including payment for the Over-Subscription
Privilege, for the full number of Units you wish to acquired pursuant to the exercise of Subscription Rights by delivering a:
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cashier’s, certified or personal check drawn against a U.S. bank payable to “Broadridge, Inc., as Subscription
Agent for Second Sight Medical Products, Inc.”;
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U.S. Postal money order payable to “Broadridge Inc., as Subscription Agent for Second Sight Medical Products, Inc.”;
or
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wire transfer of immediately available funds directly to the account maintained by Broadridge Inc., as Subscription Agent,
for purposes of accepting subscriptions in this Rights Offering at [ ], ABA, [ ], Account [ ] FBO Second Sight Medical Products,
Inc., with reference to the name of the Rights holder.
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If you elect to exercise your Subscription
Rights, you should consider using a wire transfer or certified check drawn on a U.S. bank to ensure that the Subscription Agent
receives your funds before the Rights Offering expires. If you send a personal check, payment will not be deemed to have been received
by the Subscription Agent until the check has cleared. The clearinghouse may require five or more business days to clear a personal
check. Accordingly, holders who wish to pay the Subscription Price by means of a personal check should make payment sufficiently
in advance of the expiration of the Rights Offering to ensure that the payment is received and clears by that date. If you send
a certified check, payment will be deemed to have been received by the Subscription Agent immediately upon receipt of such instrument.
You should read the instruction letter
accompanying the Rights Certificate carefully and strictly follow it.
DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS DIRECTLY TO
US
. We will not consider your subscription received until the Subscription Agent has received delivery of a properly completed
and duly executed Rights Certificate and payment of the full subscription payment.
The method of delivery of Rights Certificates and payment of the subscription payment to the Subscription Agent will be at
the risk of the holders of Subscription Rights. If sent by mail, we recommend that you send those certificates and payments by
registered mail, properly insured, with return receipt requested, or by overnight courier, and that you allow a sufficient number
of days to ensure delivery to the Subscription Agent and clearance of payment before the Rights Offering expires.
Missing or Incomplete Subscription Forms or Payment
If you fail to complete and sign the Rights
Certificate or otherwise fail to follow the subscription procedures that apply to the exercise of your Subscription Rights before
the Rights Offering expires, the Subscription Agent will reject your subscription or accept it to the extent of the payment received.
Neither we nor our Subscription Agent undertake any responsibility or action to contact you concerning an incomplete or incorrect
subscription form, nor are we under any obligation to correct such forms. We have the sole discretion to determine whether a subscription
exercise properly complies with the subscription procedures.
The payment received will be applied to
exercise your Subscription Rights to the fullest extent possible based on the amount of the payment received after determination
of the Subscription Price. Any excess subscription payments received by the Subscription Agent will be returned, without interest
or penalty, within 10 business days following the expiration of the Rights Offering.
Issuance of Common Stock and Warrants
The shares of common stock and Warrants
that are purchased in the Rights Offering as part of the Units will be issued in book-entry, or uncertificated, form meaning that
you will receive a direct registration (DRS) account statement from our transfer agent reflecting ownership of these securities
if you are a holder of record of shares. If you hold your shares of common stock in the name of a custodian bank, broker, dealer,
or other nominee or purchase shares of common stock and Warrants that were subscribed for through the placement agent, DTC will
credit your account with your nominee with the securities you purchased in the Rights Offering.
Subscription Agent
The Subscription Agent for the Rights
Offering is Broadridge Inc. The address to which Rights Certificates and payments should be mailed or delivered by overnight
courier is provided below. If sent by mail, we recommend that you send documents and payments by registered mail, properly
insured, with return receipt requested, and that you allow a sufficient number of days to ensure delivery to the Subscription
Agent and clearance or payment before the Rights Offering expires. Do not send or deliver these materials to us.
By mail:
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By hand or overnight courier:
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Broadridge, Inc.
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Broadridge, Inc.
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Attention: BCIS Re-Organization Dept.
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Attention: BCIS IWS
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P.O. Box 1317
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51 Mercedes Way
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Brentwood, New York 11717-0693
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Edgewood, New York 11717
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(855) 793-5068 (toll free)
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(855) 793-5068
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If you deliver the Rights Certificates
in a manner different than that described in this prospectus, we may not honor the exercise of your Subscription Rights.
Information Agent
You should direct any questions or requests
for assistance concerning the method of subscribing for the Units or for additional copies of this prospectus to the Information
Agent as follows:
Broadridge, Inc.
Attention: BCIS Re-Organization Dept.
P.O. Box 1317
Brentwood, New York 11717-0693
(855) 793-5068 (toll free)
No Fractional Units
We will not issue fractional
shares of common stock or fractional warrants in the Rights Offering. Rights holders will only be entitled to purchase a
number of Units representing a whole number of shares of common stock, and a whole number of warrants, rounded down to the
nearest whole number of Units a holder would otherwise be entitled to purchase. Any excess subscription payments received by
the Subscription Agent will be returned within 10 business days after expiration of the Rights Offering, without interest or
penalty.
Notice to Brokers and Nominees
If you are a broker, dealer, bank, or other
nominee holder that holds shares of our common stock for the account of others on the Record Date, you should notify the beneficial
owners of the shares for whom you are the nominee of the Rights Offering as soon as possible to learn their intentions with respect
to exercising their Subscription Rights. If a beneficial owner of our common stock so instructs, you should complete the Rights
Certificate and submit it to the Subscription Agent with the proper subscription payment by the expiration date. You may exercise
the number of Subscription Rights to which all beneficial owners in the aggregate otherwise would have been entitled had they been
direct holders of our common stock on the Record Date, provided that you, as a nominee record holder, make a proper showing to
the Subscription Agent by submitting the form entitled “Nominee Holder Certification,” which is provided with your
Rights Offering materials. If you did not receive this form, you should contact our Subscription Agent to request a copy.
Validity of Subscriptions
We will resolve all questions regarding
the validity and form of the exercise of your Subscription Rights, including time of receipt and eligibility to participate in
the Rights Offering. Our determination will be final and binding. Once made, subscriptions are irrevocable; we will not accept
any alternative, conditional, or contingent subscriptions. We reserve the absolute right to reject any subscriptions not properly
submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions
before the expiration date of the Rights Offering, unless we waive them in our sole discretion. Neither we nor the Subscription
Agent is under any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered
accepted, subject to our right to withdraw or terminate the Rights Offering, only when the Subscription Agent receives a properly
completed and duly executed Rights Certificate and any other required documents and the full subscription payment including final
clearance of any personal check. Our interpretations of the terms and conditions of the Rights Offering will be final and binding.
Shareholder Rights
You will have no rights as a holder of
the shares of our common stock you purchase in the Rights Offering until shares are issued in book-entry form or your account at
your broker, dealer, bank, or other nominee is credited with the shares of our common stock purchased in the Rights Offering.
Foreign Shareholders
We will not mail this prospectus or Rights
Certificates to shareholders with addresses that are outside the United States or that have an army post office or foreign post
office address. The Subscription Agent will hold these Rights Certificates for their account. To exercise Subscription Rights,
our foreign shareholders must notify the Subscription Agent prior to 5:00 p.m., New York City Time, on [ ], 2017, the third business
day prior to the expiration date, of your exercise of Subscription Rights and provide evidence satisfactory to us, such as a legal
opinion from local counsel, that the exercise of such Subscription Rights does not violate the laws of the jurisdiction in which
such shareholder resides and payment by a U.S. bank in U.S. dollars before the expiration of the offer. If no notice is received
by such time or the evidence presented is not satisfactory to us, the Subscription Rights represented thereby will expire.
No Revocation or Change
Once you submit the Rights Certificate
or have instructed your nominee of your subscription request, you are not allowed to revoke or change the exercise or request a
refund of monies paid. All exercises of Subscription Rights are irrevocable, even if you learn information about us that you consider
to be unfavorable. You should not exercise your Subscription Rights unless you are certain that you wish to purchase Units at the
Subscription Price.
U.S. Federal Income Tax Treatment of Rights Distribution
For U.S. federal income tax purposes, we
do not believe holders of shares of our common stock should recognize income or loss upon receipt or exercise of a Subscription
Right. See “Material U.S. Federal Income Tax Consequences.”
No Recommendation to Rights Holders
Our board of directors is not making a
recommendation regarding your exercise of the Subscription Rights. Stockholders who exercise Subscription Rights risk investment
loss on money invested. We cannot assure you that the market price of our common stock will reach or exceed the Subscription Price,
and even if it does so, that it will not decline during or after the Rights Offering. We also cannot assure you that you will be
able to sell shares of our common stock or Warrants purchased in the Rights Offering at a price equal to or greater than the Subscription
Price. You should make your investment decision based on your assessment of our business and financial condition, our prospects
for the future and the terms of this Rights Offering. Please see “Risk Factors” for a discussion of some of the risks
involved in investing in our common stock.
Fees and Expenses
We will pay all fees charged by the Subscription
Agent and the Information Agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in
connection with the exercise of your Subscription Rights or fees and costs that may be charged by the Transfer Agent in connection
with issuing certificates out of your DRS account statement.
Listing
The Subscription Rights may not
be sold, transferred, assigned or given away to anyone, and will not be listed for trading on any stock exchange or market.
The shares of our common stock, including the shares to be issued in the Rights Offering, and the shares underlying the
warrants, are traded on Nasdaq under the symbol “EYES.” We have applied to have the warrants listed for trading
on Nasdaq under the symbol “EYESW.” No assurance can be given that a sufficient number of units will be sold so
that the warrants will meet the minimum listing criteria to be accepted for listing on Nasdaq.
Important
Do not send Rights Certificates directly
to us. You are responsible for choosing the payment and delivery method for your Rights Certificate and you bear the risks associated
with such delivery. If you choose to deliver your Rights Certificate and payment by mail, we recommend that you use registered
mail, properly insured, with return receipt requested. We also recommend that you allow a sufficient number of days to ensure delivery
to the Subscription Agent and clearance of payment prior to the expiration time.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of
material U.S. federal income tax consequences relating to the receipt and exercise (or expiration) of the Subscription Rights acquired
through the Rights Offering and the ownership and disposition of shares of our common stock and Warrants received upon exercise
of the Subscription Rights or shares of our common stock received upon exercise of the Warrants.
This summary deals only with Subscription
Rights acquired through the Rights Offering, shares of our common stock and Warrants acquired upon exercise of Subscription Rights
and shares of our common stock acquired upon exercise of the Warrants, in each case, that are held as capital assets by a beneficial
owner. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to such a beneficial owner
in light of the beneficial owner’s personal circumstances, including the alternative minimum tax and the Medicare contribution
tax on investment income. This discussion also does not address tax consequences to holders that may be subject to special tax
rules, including, without limitation, insurance companies, real estate investment trusts, regulated investment companies, grantor
trusts, tax-exempt organizations, employee stock purchase plans, partnerships and other pass-through entities, persons holding
Subscription Rights, shares of our common stock or warrants as part of a hedging, integrated, conversion or constructive sale transaction
or a straddle, financial institutions, brokers, dealers in securities or currencies, traders that elect to mark-to-market their
securities, persons that acquired Subscription Rights, shares of our common stock or warrants in connection with employment or
other performance of services, U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar, U.S.
expatriates, and certain former citizens or residents of the United States. In addition, the discussion does not describe any tax
consequences arising out of the tax laws of any state, local or foreign jurisdiction, or any U.S. federal tax considerations other
than income taxation (such as estate, generation skipping or gift taxation).
The discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended, or the Code, the United States Treasury regulations promulgated thereunder,
rulings and judicial decisions, as of the date hereof, and such authorities may be repealed, revoked or modified, perhaps retroactively.
We have not sought, and will not seek, any rulings from the Internal Revenue Service, or the IRS, regarding the matters discussed
below. There can be no assurance that the IRS or a court (if the matter were contested) will not take positions concerning the
tax consequences of the receipt of Subscription Rights acquired through the Rights Offering by persons holding shares of our common
stock, the exercise (or expiration) of the Subscription Rights, the acquisition, ownership and disposition of shares of our common
stock and the acquisition, ownership and disposition (or expiration) of Warrants acquired upon exercise of the Subscription Rights
that are different from those discussed below.
As used herein, a “U.S. Holder”
means a beneficial owner of shares of our common stock, Subscription Rights and shares of our common stock and Warrants acquired
upon exercise of Subscription Rights or shares of our common stock acquired upon exercise of the Warrants, as the case may be,
that is for U.S. federal income tax purposes: (1) an individual who is a citizen or resident of the United States; (2) a corporation
(or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States or any state thereof or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or (4) a trust (a) the administration of which is subject to the primary supervision of a court
within the United States and one or more United States persons as described in Section 7701(a)(30) of the Code have authority to
control all substantial decisions of the trust or (b) that has a valid election under the Treasury Regulations in effect to be
treated as a United States person. A “Non-U.S. Holder” is such a beneficial owner (other than an entity or arrangement
that is treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder.
If any entity or arrangement that is treated
as a partnership for U.S. federal income tax purposes is the record owner, the U.S. federal income tax treatment of a partner generally
will depend upon the status of the partner and the activities of the partnership. Holders that are partnerships (and partners in
such partnerships) are urged to consult their own tax advisors.
HOLDERS OF SHARES OF OUR COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND
THE CONSEQUENCES UNDER FEDERAL ESTATE AND GIFT TAX LAWS, FOREIGN, STATE, AND LOCAL LAWS AND TAX TREATIES OF THE RECEIPT, OWNERSHIP
AND EXERCISE OF SUBSCRIPTION RIGHTS AND THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF SHARES OF OUR COMMON STOCK AND WARRANTS
ACQUIRED UPON EXERCISE OF SUBSCRIPTION RIGHTS AND SHARES OF OUR COMMON STOCK ACQUIRED UPON EXERCISE OF WARRANTS.
Tax Consequences to U.S. Holders
Taxation of Subscription Rights
Receipt of Subscription Rights
Although the authorities governing transactions
such as this Rights Offering are complex and do not speak directly to the consequences of certain aspects of this Rights Offering,
including the inclusion of the right to purchase Warrants in the Subscription Rights (rather than the right to purchase only shares
of our common stock), we do not believe your receipt of Subscription Rights pursuant to the Rights Offering should be treated as
a taxable distribution with respect to your existing shares of common stock for U.S. federal income tax purposes. Pursuant to Section
305(a) of the Code, in general, the receipt by a shareholder of a right to acquire stock or warrants should not be included in
the taxable income of the recipient. The general rule of non-recognition in Section 305(a) is subject to exceptions in Section
305(b), which include “disproportionate distributions”. A disproportionate distribution is a distribution or a series
of distributions, including deemed distributions, that has the effect of the receipt of cash or other property by some shareholders
and an increase in the proportionate interest of other shareholders in a corporation’s assets or earnings and profits. During
the last 36 months, we have not made any distributions of cash or non-stock property with respect to: (i) our common stock or (ii)
our options or warrants to acquire common stock. Currently we do not intend to make any future distributions of cash or non-stock
property with respect to: (i) our common stock or (ii) our options or warrants to acquire common stock; however, there is no guarantee
that we will not make such distributions in the future.
Our position regarding the tax-free treatment
of the Subscription Rights distribution is not binding on the IRS or the courts. If this position is finally determined by the
IRS or a court to be incorrect, whether on the basis that the issuance of the Subscription Rights is a disproportionate distribution
or otherwise, the fair market value of the Subscription Rights would be taxable to holders of our common stock as a dividend to
the extent of the holder’s pro rata share of our current and accumulated earnings and profits, if any, with any excess being
treated as a return of capital to the extent thereof and then as capital gain. Although no assurance can be given, it is anticipated
that we will not have current and accumulated earnings and profits through the end of 2016.
The following discussion is based upon
the treatment of the Subscription Rights issuance as a non-taxable distribution with respect to your existing shares of common
stock for U.S. federal income tax purposes.
Tax Basis in the Subscription Rights
If the fair market value of the Subscription
Rights you receive is less than 15% of the fair market value of your existing shares of common stock (with respect to which the
Subscription Rights are distributed) on the date you receive the Subscription Rights, the Subscription Rights will be allocated
a zero dollar basis for U.S. federal income tax purposes, unless you elect to allocate your basis in your existing shares of common
stock between your existing shares of common stock and the Subscription Rights in proportion to the relative fair market values
of the existing shares of common stock and the Subscription Rights, determined on the date of receipt of the Subscription Rights.
If you choose to allocate basis between your existing common shares and the Subscription Rights, you must make this election on
a statement included with your timely filed tax return (including extensions) for the taxable year in which you receive the Subscription
Rights. Such an election is irrevocable.
However, if the fair market value of the
Subscription Rights you receive is 15% or more of the fair market value of your existing shares of common stock on the date you
receive the Subscription Rights, then you must allocate your basis in your existing shares of common stock between those shares
and the Subscription Rights you receive in proportion to their fair market values determined on the date you receive the Subscription
Rights.
The fair market value of the Subscription
Rights on the date that the Subscription Rights are distributed is uncertain, and we have not obtained, and do not intend to obtain,
an appraisal of the fair market value of the Subscription Rights on that date. In determining the fair market value of the Subscription
Rights, you should consider all relevant facts and circumstances, including any difference between the Subscription Price of the
Subscription Rights and the trading price of our shares of common stock on the date that the Subscription Rights are distributed,
the exercise price of the Warrants, the length of the period during which the Subscription Rights may be exercised and the fact
that the Subscription Rights are non-transferable.
Exercise of Subscription Rights
Generally, you will not recognize gain
or loss upon the effectiveness of the exercise of a Subscription Right in the Rights Offering. Your adjusted tax basis, if any,
in the Subscription Right plus the Subscription Price should be allocated between the new common stock and Warrant acquired upon
exercise of the Subscription Right. The basis in the stock upon which the Subscriptions Rights were issued which is allocated to
the Subscription Rights under the prior section entitled “Tax Basis in the Subscription Rights” would be further allocated
between the new common stock and the Warrant acquired upon exercise of the Subscription Right in proportion to their relative fair
market values on the date the Subscription Rights were distributed. The Subscription Price should be allocated between the new
common stock and Warrant acquired upon exercise of the Subscription Right in proportion to their relative fair market values on
the exercise date. These allocations will establish your initial tax basis for U.S. federal income tax purposes in your new common
stock and Warrants. The holding period of shares of common stock or a Warrant acquired upon exercise of a Subscription Right in
the Rights Offering will begin on the date of exercise. Soon after Closing, we intend to provide a calculation of the basis in
each new share of common stock and Warrant to assist those exercising to establish their initial tax basis for U.S. federal income
tax purposes.
If you exercise a Subscription Right received
in the Rights Offering after disposing of the shares of our common stock with respect to which such Subscription Right is received,
then certain aspects of the tax treatment of the exercise of the Subscription Right are unclear, including (1) the allocation of
the tax basis between the shares of common stock previously sold and the Subscription Right, (2) the impact of such allocation
on the amount and timing of gain or loss recognized with respect to the shares of our common stock previously sold and (3) the
impact of such allocation on the tax basis of the shares of our common stock and Warrants acquired upon exercise of the Subscription
Right. If you exercise a Subscription Right received in the Rights Offering after disposing of shares of our common stock with
respect to which the Subscription Right is received, you should consult with your own tax advisor.
Expiration of Subscription Rights
If you allow Subscription Rights received
in the Rights Offering to expire, you should not recognize any gain or loss for U.S. federal income tax purposes, and you should
re-allocate any portion of the tax basis in your existing common stock previously allocated to the Subscription Rights that have
expired to the existing common stock.
Taxation of Common Shares
Distributions
Distributions with respect to shares of
our common stock acquired upon exercise of Subscription Rights or upon exercise of the Warrants will be taxable as dividend income
when actually or constructively received to the extent of our current or accumulated earnings and profits as determined for U.S.
federal income tax purposes. We currently have a substantial accumulated deficit of over $195 million as of September 30, 2016.
Dividend income received by certain non-corporate
U.S. Holders with respect to shares of our common stock generally will be “qualified dividends” subject to preferential
rates of U.S. federal income tax, provided that the U.S. Holder meets applicable holding period and other requirements. Subject
to similar exceptions for short-term and hedged positions, dividend income on our shares of common stock paid to U.S. Holders that
are domestic corporations generally will qualify for the dividends-received deduction. To the extent that the amount of a distribution
exceeds our current and accumulated earnings and profits, such distribution will be treated first as a tax-free return of capital
to the extent of your adjusted tax basis in such shares of our common stock and thereafter as capital gain.
Dispositions
If you sell or otherwise dispose of shares
of common stock acquired upon exercise of Subscription Rights or upon exercise of Warrants in a taxable transaction, you will generally
recognize capital gain or loss equal to the difference between the amount realized and your adjusted tax basis in the shares. Such
capital gain or loss will be long-term capital gain or loss if your holding period for such shares is more than one year at the
time of disposition. Long-term capital gain of a non-corporate U.S. Holder is generally taxed at preferential rates of U.S. federal
income tax. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
You may be subject to information reporting
and/or backup withholding with respect to the gross proceeds from the disposition of Warrants, shares of our common stock acquired
through the exercise of Subscription Rights or through the exercise of Warrants, or dividend payments. Backup withholding (currently
at the rate of 28%) may apply under certain circumstances if you (1) fail to furnish your social security or other taxpayer identification
number, or TIN, (2) furnish an incorrect TIN, (3) fail to report interest or dividends properly or (4) fail to provide a certified
statement, signed under penalty of perjury, that the TIN provided is correct, that you are not subject to backup withholding and
that you are a U.S. person for U.S. federal income tax purposes on IRS Form W-9. Any amount withheld from a payment under the backup
withholding rules is allowable as a credit against (and may entitle you to a refund with respect to) your U.S. federal income tax
liability, provided that the required information is timely furnished to the IRS. Certain persons are exempt from information reporting
and backup withholding, including corporations and certain financial institutions, provided that they demonstrate this fact, if
requested. You are urged to consult your own tax advisor as to your qualification for exemption from backup withholding and the
procedure for obtaining such exemption.
Taxation of Warrants
Exercise of Warrants
Upon the exercise of a Warrant by paying
the exercise price in cash, in general, you will not recognize gain or loss for U.S. federal income tax purposes, except to the
extent you receive a cash payment for any such fractional share that would otherwise have been issuable upon exercise of the Warrant.
Your initial tax basis in common stock received will equal your adjusted tax basis in the Warrant exercised (as determined pursuant
to the rules discussed above), increased by the amount of cash paid to exercise the Warrant and decreased by the adjusted tax basis
allocable to any fractional share that would otherwise have been issuable upon exercise of the Warrant. Your holding period for
the shares of our common stock received on exercise generally will commence on the day of exercise.
Expiration of Warrants
If you allow a Warrant to expire, you will
generally recognize a loss for U.S. federal income tax purposes equal to your adjusted tax basis in the Warrant. In general, such
a loss will be a capital loss and will be a short-term or long-term capital loss depending on your holding period for the Warrant.
Certain Adjustments to the Warrants
Under Section 305 of the Code, an adjustment
to the number of common shares that will be issued on the exercise of the Warrants, or an adjustment to the exercise price of the
Warrants, may be treated as a constructive distribution to you if, and to the extent that, such adjustment has the effect of increasing
your proportionate interest in our earnings and profits or assets, depending on the circumstances of such adjustment (for example,
if such adjustment is to compensate for a distribution of cash or other property to our shareholders). Adjustments to the exercise
price of Warrants made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing dilution of the
interest of the holders of the Warrants should generally not be considered to result in a constructive distribution. Any such constructive
distribution would be taxable whether or not there is an actual distribution of cash or other property. See the more detailed discussion
of the rules applicable to distributions made by us under the heading “Taxation of Common Stock — Distributions”
below.
Sale, Exchange, Redemption or other
Taxable Disposition of Warrants
Upon the sale, exchange, redemption or
other taxable disposition of a Warrant, in general, you will recognize taxable gain or loss measured by the difference, if any,
between (i) the amount of cash and the fair market value of any property received upon such taxable disposition and (ii) your adjusted
tax basis in the Warrant as determined pursuant to the rules discussed above. Your gain or loss generally will be capital gain
or loss and generally will be long-term capital gain or loss if, at the time of the sale or other disposition, your holding period
for the Warrant is more than one year. The deductibility of capital losses is subject to limitations.
Tax Consequences to Non-U.S. Holders
Taxation of the Subscription Rights
Receipt, Exercise and Expiration of the Subscription
Rights
The discussion assumes that the receipt
of Subscription Rights will be treated as a nontaxable distribution. See “Tax Consequences to U.S. Holders – Taxation
of Subscription Rights – Receipts of Subscription Rights” above. You will not be subject to U.S. federal income tax
(or any withholding thereof) on the receipt, exercise or expiration of the Subscription Rights.
Exercise and Expiration of Warrants
and Certain Adjustments to Warrants
Exercise of Warrants
In general, a Non-U.S. Holder will not
recognize gain or loss for U.S. federal income tax purposes upon exercise of a Warrant, except to the extent the Non-U.S. Holder
receives a cash payment for any such fractional share that would otherwise have been issuable upon exercise of the Warrant, which
will be treated as a sale subject to the rules described under “Sale or Other Disposition of Common Stock or Warrants”
below.
Expiration of Warrants
In general, a Non-U.S. Holder will not
be able to utilize a loss recognized upon expiration of a Warrant against the Non-U.S. Holder’s U.S. federal income tax liability
unless the loss is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States
(and, if an income tax treaty so provides, is attributable to a permanent establishment in the United States) or is treated as
a U.S.-source loss and the Non-U.S. Holder is present 183 days or more in the taxable year of disposition and certain other conditions
are met.
Certain Adjustments to the Warrants
Under Section 305 of the Code, an adjustment
to the number of common shares that will be issued on the exercise of the Warrants, or an adjustment to the exercise price of the
Warrants, may be treated as a constructive distribution to a Non-U.S. Holder of the Warrants if, and to the extent that, such adjustment
has the effect of increasing such Non-U.S. Holder’s proportionate interest in our earnings and profits or assets, depending
on the circumstances of such adjustment (for example, if such adjustment is to compensate for a distribution of cash or other property
to our shareholders). Adjustments to the exercise price of Warrants made pursuant to a bona fide reasonable adjustment formula
that has the effect of preventing dilution of the interest of the holders of the Warrants should generally not be considered to
result in a constructive distribution. Any such constructive distribution would be taxable whether or not there is an actual distribution
of cash or other property. See the more detailed discussion of the rules applicable to distributions made by us under the heading
“Taxation of Distributions on Common Stock” below.
Taxation of Distributions on Common
Stock
Any
distributions of cash or property (including any adjustments to the Warrants described in the immediately preceding paragraph)
made with respect to our common stock generally will be subject to withholding tax to the extent paid out of our current or accumulated
earnings and profits as determined for U.S. federal income tax purposes, if any, at a rate of 30% (or a lower rate prescribed by
an applicable income tax treaty). In order to obtain a reduced withholding tax rate, if applicable, you will be required to provide
a properly completed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, certifying your entitlement to benefits under a treaty.
In addition, you will not be subject to withholding tax if you provide an IRS
Form W-8ECI certifying that the distributions
are effectively connected with your conduct of a trade or business within the United States (and, if an applicable income tax treaty
so provides, are attributable to a permanent establishment within the United States); instead, you generally will be subject to
U.S. federal income tax, net of certain deductions, with respect to such income at the same rates applicable to U.S. persons. If
you are a corporation, a “branch profits tax” of 30% (or a lower rate prescribed by an applicable income tax treaty)
also may apply to such effectively connected income.
Non-U.S. Holders may be required to periodically
update their IRS Forms W-8.
Any distribution will also be subject to
the discussion below under the heading “FATCA”.
Sale or Other Disposition of Our Common
Stock or Warrants
Subject to the discussion below regarding
backup withholding and FATCA, you generally will not be subject to U.S. federal income tax on any gain realized on a sale or other
disposition of shares of our common stock or Warrants unless:
·
the
gain is effectively connected with your conduct of a trade or business within the United States (and, if an applicable income tax
treaty so provides, is attributable to a permanent establishment in the United States);
·
you
are an individual, you hold your Subscription Rights, shares of common stock or Warrants as capital assets, you are present in
the United States for 183 days or more in the taxable year of disposition and certain other conditions are met (in which case
you will be subject to a 30% tax, or such lower rate as may be specified by an applicable income tax treaty, on the net gain derived
from the disposition, which may be offset by your U.S.-source capital losses, if any); or
·
we
are or have been a “United States real property holding corporation”, or USRPHC, for U.S. federal income tax purposes
unless an exception for 5% or less shareholders applies.
Gain that is effectively connected with
your conduct of a trade or business within the United States (and, if an applicable income tax treaty so provides, is attributable
to a permanent establishment within the United States) generally will be subject to U.S. federal income tax, net of certain deductions,
at the same rates applicable to U.S. persons. If you are a corporation, a “branch profits tax” of 30% (or a lower rate
prescribed in an applicable income tax treaty) also may apply to such effectively connected gain.
A domestic corporation is treated as a
USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of (1) the fair market
value of its United States real property interests, (2) the fair market value of its non-United States real property interests
and (3) the fair market value of any other of its assets which are used or held for use in a trade or business. We believe that
we are not currently, and have not been within the relevant testing period, a USRPHC. However, no assurance can be given that we
will not become a USRPHC in the future. If we are a USRPHC or become a USRPHC in the future, a Non-U.S. Holder may still not be
subject to U.S. federal income tax on a sale or other disposition if an exception for 5% or less shareholders applies. You are
urged to consult your own tax advisor regarding the U.S. federal income tax considerations that could result if we are, or become,
a USRPHC and with respect to the exception for 5% or less shareholders.
Information Reporting and Backup Withholding
Distributions on our common stock and the
amount of tax withheld, if any, with respect to such distributions will generally be subject to information reporting. If you comply
with certification procedures to establish that you are not a United States person, additional information reporting and backup
withholding should not generally apply to distributions on our common stock and information reporting and backup withholding should
not generally apply to the proceeds from a sale or other disposition of Warrants or shares of our common stock. Generally, a Non-U.S.
Holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN or W-8BEN-E, as applicable, (or other
applicable IRS Form W-8) or otherwise meets documentary evidence requirements for establishing that it is a Non-U.S. Holder, or
otherwise establishes an exemption. The amount of any backup withholding will generally be allowed as a refund or credit against
your U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Sale or Other Disposition of Our Common Stock
In
general, you will not be subject to U.S. federal income tax on any gain realized on a sale of shares of our common stock unless:
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the gain is effectively connected with your conduct of a trade or business within the United States (and, if an income tax treaty applies, is attributable to a permanent establishment in the United States);
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·
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you are an individual, you hold your Subscription Rights, shares of common stock as capital assets, you are present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
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·
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we are or have been a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes unless an exception for 5% or less shareholders applies.
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Gain that is effectively connected with your conduct of a trade
or business within the United States (and, if an income tax treaty applies, is attributable to a permanent establishment within
the United States) generally will be subject to U.S. federal income tax, net of certain deductions, at the same rates applicable
to U.S. persons. If you are a corporation, a “branch profits tax” of 30% (or a lower rate prescribed in an applicable
income tax treaty) also may apply to such effectively connected gain.
A domestic corporation is treated as a
USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of (1) the fair
market value of its United States real property interests, (2) the fair market value of its non-United States real property
interests and (3) the fair market value of any other of its assets which are used or held for use in a trade or business.
We believe that we are not currently, and have not been within the relevant testing period, a USRPHC. However, no assurance can
be given that we will not become a USRPHC in the future. If we are a USRPHC or become a USRPHC in the future, a Non-U.S. Holder
may still not be subject to U.S. federal income tax on a sale or other disposition if an exception for 5% or less shareholders
applies. You are urged to consult your own tax advisor regarding the U.S. federal income tax considerations that could result if
we are, or become, a USRPHC and with respect to the exception for 5% or less shareholders.
Information Reporting and Backup Withholding
Distributions on our common stock and the
amount of tax withheld, if any, with respect to such distributions will generally be subject to information reporting. If you comply
with certification procedures to establish that you are not a United States person, additional information reporting and backup
withholding should not apply to distributions on our common stock and information reporting and backup withholding should not apply
to the proceeds from a sale or other disposition of shares of our common stock. The amount of any backup withholding will generally
be allowed as a refund or credit against your U.S. federal income tax liability, provided that the required information is timely
furnished to the IRS.
FATCA
Payments of dividends on our common stock
to a Non-U.S. Holder will be subject to a 30% withholding tax if the Non-U.S. Holder fails to provide the withholding agent with
documentation sufficient to show that it is compliant with FATCA. Generally such documentation is provided on an executed and properly
completed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. If dividends are subject to the 30% withholding tax under FATCA,
they will not be subject to the 30% withholding tax described above under “Tax Consequences to Non-U.S. Holders-Taxation
of Distributions on Common Stock.” Starting in 2019, payments of the gross proceeds from a sale or exchange of our common
stock or other securities may also be subject to FATCA withholding absent proof of FATCA compliance prior to January 1, 2019.
THE PRECEDING DISCUSSION OF MATERIAL U.S.
FEDERAL INCOME TAX CONSEQUENCES IS NOT TAX ADVICE. HOLDERS OF SUBSCRIPTION RIGHTS AND SHARES OF OUR COMMON STOCK SHOULD CONSULT
THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES
UNDER FEDERAL ESTATE AND GIFT TAX LAWS, FOREIGN, STATE AND LOCAL LAWS AND TAX TREATIES OF THE RECEIPT, OWNERSHIP AND EXERCISE OF
SUBSCRIPTION RIGHTS AND THE ACQUISITION, OWNERSHIP AND DISPOSITION OF SHARES OF OUR COMMON STOCK AND WARRANTS ACQUIRED UPON EXERCISE
OF SUBSCRIPTION RIGHTS AND SHARES OF OUR COMMON STOCK ACQUIRED UPON EXERCISE OF THE WARRANTS.
DESCRIPTION OF SECURITIES
Common Stock
This section describes the general terms
and provisions of the shares of our common stock, no par value. This description is only a summary and is qualified in its entirety
by reference to the description of our common stock included in our restated certificate of formation and our amended and restated
bylaws which have been filed as exhibits to the registration statement of which this prospectus is a part. You should read our
restated certificate of formation and our amended and restated bylaws for additional information before you buy any of our common
stock or other securities. See “Where You Can Find More Information” and “Incorporation by Reference.”
We have 200,000,000 shares of authorized
common stock. As of December 31, 2016, there were 42,696,000 shares of common stock issued and outstanding, as well as:
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3,677,000 shares of common stock issuable upon the exercise of stock
options outstanding at December 31, 2016 with a weighted average exercise price of $7.21 per share;
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2,629,000 shares of common stock reserved for future issuance to our
employees under the Company’s 2011 Equity Incentive Plan;
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131,000 shares of common stock issuable upon the settlement of restricted
stock units outstanding at December 31, 2016;
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·
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1,840,000 shares of common stock issuable upon the exercise of warrants
outstanding at December 31, 2016 with a weighted average exercise price of $7.72 per share;
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·
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109,000 shares of common stock reserved for future issuance to our
employees under the Company’s Employee Stock Purchase Plan.
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The holders of common stock are entitled
to one vote per share on all matters submitted to a vote of our shareholders and cumulative voting rights in the election of our
directors. Under California law, in any election of directors, each shareholder is entitled to cumulative voting at such election.
This means that each shareholder may cast, in person or by proxy, as many votes in the aggregate as that shareholder is entitled
to vote, multiplied by the number of directors to be elected. A shareholder is entitled and can elect to cast all of his or her
votes for any director or for any two or more as the shareholder would choose. Subject to preferences that may apply to shares
of preferred stock outstanding at the time, the holders of outstanding shares of our common stock may be entitled to receive powers,
preferences and other rights of the preferred shares and to fix the qualifications, limitations and restrictions thereof that our
board of directors may determine from time to time. Holders of common stock have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock
are fully paid and nonassessable, and the shares of common stock offered, as well as shares acquired upon exercise of Warrants,
when issued, will be fully paid and nonassessable.
The shares of common stock that are purchased in the Rights
Offering will be issued in book-entry, or uncertificated, form meaning that you will receive a direct registration (DRS) account
statement from our transfer agent reflecting ownership of shares if you are a holder of record of shares. The Subscription Agent
will arrange for the issuance of the common stock as soon as practicable after the expiration of the Rights Offering, payment for
the shares subscribed for has cleared, and all prorating calculations and reductions contemplated by the terms of the Rights Offering
have been effected. If you hold your shares of common stock in the name of a custodian bank, broker, dealer, or other nominee,
DTC will credit your account with your nominee with the common stock you purchased in the Rights Offering.
Preferred Stock
We have 10,000,000 shares of authorized
preferred stock, no par value, none of which was issued or outstanding at December 31, 2016. We may issue preferred stock, in series,
with such designations, powers, preferences and other rights and qualifications, limitations or restrictions as our board of directors
may authorize, without further action by our shareholders.
Warrants Included in Units Issuable in the Rights Offering
The Warrants to be issued as a part of the Rights Offering and
sold by us will entitle the holder to purchase one share of common stock at an exercise price equal to the Subscription Price from
the date of issuance through its expiration five years after the date of issuance. We intend to apply to list the Warrants for
trading on The Nasdaq Stock Market, although we cannot guarantee that our listing application will be approved. Even if our listing
application is approved, we cannot guarantee that a trading market for the Warrants will develop.
We may call the Warrants for redemption,
in whole and not in part, at a price of $.01 per Warrant, at any time after their two year anniversary of issuance, upon not
less than 30 days’ prior written notice of redemption to each Warrant holder, provided that, (i) the closing price of
the common stock equals or exceeds 200% of the Subscription Price, subject to adjustment, per share, for 15 consecutive
trading days and (ii) all of our independent directors vote in favor of a warrants redemption. The Warrants will be issued in
book-entry, or uncertificated, form meaning that you will receive a direct registration (DRS) account statement from our
transfer agent reflecting your ownership of the Warrants. If you hold your shares of common stock in the name of a custodian
bank, broker, dealer, or other nominee or purchase shares of common stock, DTC will credit your account with your nominee with the securities you purchased in the Rights
Offering.
The Warrants will be exercisable by paying the exercise price
in cash only; the Warrants will not include a cashless exercise provision.
The exercise price of the Warrants and the
number of shares of common stock issuable upon exercise of the Warrants are subject to adjustment in certain circumstances, including
a stock split of, stock dividend on, or a subdivision, combination or recapitalization of the common stock or as a result of certain
Fundamental Transactions, as defined in the Warrant Agreement.
Under the terms of the Warrant Agreement, we have committed
to maintain a registration statement to permit the exercise of the Warrants and, therefore, be able to deliver free trading shares
upon the exercise of the Warrants. There is no assurance that we will be able to do so, and consequently we would be in breach
of the Warrant Agreement. If we are unable to maintain such a registration statement, we will not be able to permit the exercise
of the Warrants. As a consequence the Warrants may be of little or no value.
No public market currently exists for the Warrants. Therefore,
even if our application to list the Warrants on Nasdaq is approved, we cannot assure you that a trading market
for the Warrants will develop.
The Warrants do not confer upon the holder any voting or any
other rights of a shareholder of the Company. A holder of the Warrants will not have any rights as a shareholder until the Warrants
have been exercised in accordance with their terms and the shares of common stock purchased thereby have been issued.
The Warrants will be issued pursuant to
a warrant agreement by and between us and VStock Transfer, LLC, as the warrant agent. A copy of the Warrant Agreement and
form of warrant underlying the units will be available on SEC’s EDGAR database and copies of the Warrant are
available at the offices of the Company and warrant agent. The foregoing description of the Warrants is qualified by the
terms of the Warrant agreement.
Certain Provisions of our Charter and Bylaws
Certain provisions of our articles of incorporation
and our amended and restated bylaws described below may have the effect of delaying, deferring or discouraging another party from
acquiring control of us. Our articles of incorporation and amended and restated bylaws provide that:
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Our board of directors is authorized to issue preferred stock without shareholder approval; and
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We will indemnify officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.
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Transfer Agent and Warrant Agent
The transfer agent, warrant agent and registrar for our common
stock is VStock Transfer LLC, 18 Lafayette Place, Woodmere, New York 11598. VStock Transfer LLC will also act as transfer agent
and registrar for the Warrants.
PLAN OF DISTRIBUTION
On or about [
], 2017, we will distribute the Subscription Rights, Rights Certificates and
copies of this prospectus to the holders of our common stock on the Record Date. Subscription Rights holders who wish to
exercise their Subscription Rights and purchase Units must complete the Subscription Rights Certificate and return it with
payment for the Units to the Subscription Agent at the following address:
By mail:
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By hand or overnight courier:
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Broadridge, Inc.
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Broadridge, Inc.
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Attention: BCIS Re-Organization Dept.
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Attention: BCIS IWS
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P.O. Box 1317
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51 Mercedes Way
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Brentwood, New York 11717-0693
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Edgewood, New York 11717
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(855) 793-5068 (toll free)
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(855) 793-5068
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See “The Rights Offering—Methods
for Exercising Subscription Rights.”
If you have any questions, you should contact
our Information Agent for the Rights Offering:
Broadridge, Inc.
Attention: BCIS Re-Organization Dept.
P.O. Box 1317
Brentwood, New York 11717-0693
(855) 793-5068 (toll free)
Other than as described in this prospectus,
we do not know of any existing agreements between any shareholder, broker, dealer, underwriter or agent relating to the sale or
distribution of the underlying common stock and warrants.
EXPERTS
The financial statements of Second Sight
incorporated in this prospectus by reference to our Annual Report on Form 10-K for the year ended December 31,2015 have been
audited by Gumbiner Savett Inc., an independent registered public accounting firm, and are incorporated by reference in reliance
upon their report dated March 11, 2016, given upon such firm’s authority as experts in auditing and accounting.
LEGAL
MATTERS
The
validity of any securities offered by this prospectus will be passed upon for us by Law Offices of Aaron A. Grunfeld & Associates, Los Angeles, California. Aaron A. Grunfeld owns 39,848 shares of common stock and options
to purchase 30,000 shares of common stock. Certain matters regarding the material U.S. federal income tax consequences of the rights
offering have been passed upon for us by Herbert D. Sturman, Attorney At Law, Los Angeles, California. Herbert D. Sturman beneficially
owns approximately
196,376
shares of our common
stock.
WHERE YOU CAN FIND
MORE INFORMATION
We have filed a registration statement
on Form S-1 with the SEC under the Securities Act of 1933, as amended. This prospectus is part of the registration statement but
the registration statement includes additional information and exhibits. We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy the registration statement and any document we file with the SEC at the
public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains
reports, proxy and information statements and other information regarding companies, such as ours, that file documents electronically
with the SEC. The website address is www.sec.gov. The information on the SEC’s website is not part of this prospectus, and
any references to this website or any other website are inactive textual references only.
INCORPORATION BY
REFERENCE
The SEC permits us to “incorporate
by reference” the information contained in documents we file with the SEC, which means that we can disclose important information
to you by referring you to those documents rather than by including them in this prospectus. Information that is incorporated by
reference is considered to be part of this prospectus and you should read it with the same care that you read this prospectus.
We have filed with the SEC, and incorporate by reference in this prospectus:
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our Annual Report on Form 10-K for the year ended December 31, 2015
as filed with the SEC on March 11, 2016, as amended on August 8, 2016,
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our Proxy Statement as filed with the SEC on April 15, 2016,
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our Quarterly Report on Form 10-Q for the quarter and nine months
ended September 30, 2016 as filed with the SEC on November 4, 2016,
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our
Periodic Reports on Form 8-K as filed with the SEC on January 6, 2016, February 12, 2016,
February 22, 2016, February 25, 2016, February 26, 2016, March 25, 2016, May 11, 2016,
June 2, 2016, June 15, 2016, July 7, 2016, July 25, 2016, August 1, 2016, October 28,
2016, November 3, 2016, November 23, 2016, December 8, 2016, December 12, 2016, December
28, 2016 and January 6, 2017.
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We are not, however,
incorporating, any documents or information that we are deemed to furnish and not file in accordance with SEC rules. We
maintain a website at www.secondsight.com. The information on our website is not considered part of or incorporated by
reference in this prospectus or any other document we file with or furnish to the SEC.
You may request a copy of any or all of
the documents incorporated by reference but not delivered with this prospectus, at no cost, by writing or telephoning us at the
following address and number: Investor Relations, Second Sight Medical Products, Inc., 12744 San Fernando Road, Suite 400, Sylmar,
California 91342, telephone (818) 833-5000. We will not, however, send exhibits to those documents, unless the exhibits are
specifically incorporated by reference in those documents. We also maintain a website at www.secondsight.com. However, the information
on our website is not part of this prospectus and should not be relied upon with respect to this offering.
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the company, we have been
informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
SSMP LOGO
Second Sight Medical Products, Inc.
PROSPECTUS
Subscription Rights to Purchase Up
to 15 Million Units
each consisting of one share of Common
Stock and one Warrant to Purchase one share of Common Stock
at a Subscription Price that will be
lower of $2.00 or the closing market price per share on [ ], 2017
Per Unit
,
2017
PART II
Information Not Required In Prospectus
Item 13. Other Expenses of Issuance and Distribution.
The following is a statement of estimated
expenses in connection with the issuance and distribution of the securities being registered. All expenses incurred with respect
to the registration of the common stock will be borne by us. All amounts are estimates except the SEC registration fee.
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Amount to be Paid
$
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SEC Registration Fee
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4,652
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NASDAQ Fee
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50,000
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Filing and Printing Expenses
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20,000
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Legal Fees and Expenses
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155,000
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Accounting Fees and Expenses
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15,000
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Subscription Agent, Information Agent Fees and Expenses
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55,000
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Advisory Fee payable to board member
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100,000
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Miscellaneous Expenses
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10,348
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410,000
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Item 14. Indemnification of Directors and Officers.
Section 317 of
the California Corporations Code, or the California Code, authorizes a corporation to indemnify, subject to certain exceptions,
any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right
of the corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of the corporation,
as the term “agent” is defined in section 317(a) of the California Code, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in
a manner such person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding,
had no reasonable cause to believe the conduct of such person was unlawful. A corporation is further authorized to indemnify, subject
to certain exceptions, any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was
an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or
settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interests of the
corporation and its shareholders.
Section 204 of
the California Code provides that a corporation’s articles of incorporation may not limit the liability of directors (i) for
acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions
that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence
of good faith on the part of the director, (iii) for any transaction from which a director derived an improper personal benefit,
(iv) for acts or omissions that show a reckless disregard for the director’s duty to the corporation or its shareholders
in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director’s
duties, of a risk of a serious injury to the corporation or its shareholders, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director’s duty to the corporation or its shareholders,
(vi) under Section 310 of the California Code (concerning transactions between corporations and directors or corporations
having interrelated directors) or (vii) under Section 316 of the California Code (concerning directors’ liability
for distributions, loans, and guarantees).
Section 204 further
provides that a corporation’s articles of incorporation may not limit the liability of directors for any act or omission
occurring prior to the date when the provision became effective or any act or omission as an officer, notwithstanding that the
officer is also a director or that his or her actions, if negligent or improper, have been ratified by the directors. Further,
Section 317 has no effect on claims arising under federal or state securities laws and does not affect the availability of
injunctions and other equitable remedies available to a corporation’s shareholders for any violation of a director’s
fiduciary duty to the corporation or its shareholders.
The Registrant’s
Restated Articles of Incorporation provide for the elimination of liability for its directors to the fullest extent permissible
under California law and authorize it to provide indemnification to directors, officers, employees or other agents through bylaw
provisions, agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the California Code, subject only to the applicable limits with respect to actions for
breach of duty to the Registrant and its shareholders.
The Registrant’s
Amended and Restated Bylaws provide that it shall indemnify its directors and officers, employees and agents against expenses,
judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was its agent. As included in the Registrant’s Amended and Restated Bylaws, a “director”
or “officer” includes any person (a) who is or was a director or officer of the Registrant, (b) who is or
was serving at the request of the Registrant as a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the Registrant
or of another enterprise at the request of such predecessor corporation. The Registrant’s Amended and Restated Bylaws also
contain provisions expressing the intent that these bylaws provide indemnity in excess of that expressly permitted by Section 317
of the California Code to indemnify each of its employees and agents (other than directors and officers) against expenses, judgments,
fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of
the fact that such person is or was its agent. As included in the Registrant’s Amended and Restated Bylaws, an “employee”
or “agent” (other than a director or officer), includes any person who (a) is or was an employee or agent of the
Registrant, (b) is or was serving at the Registrant’s request as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (c) was an employee or agent of a corporation which was a predecessor corporation
of the Registrant or of another enterprise at the request of such predecessor corporation.
The Registrant’s
Amended and Restated Bylaws further provide that it may advance expenses incurred in defending any proceeding for which indemnification
is required or permitted, following authorization thereof by the board of directors, prior to the final disposition of the proceeding
upon receipt of an undertaking by or on behalf of the indemnified party to repay that amount if it shall be determined ultimately
that the indemnified person is not entitled to be indemnified as authorized by its Amended and Restated Bylaws. The indemnification
provided for in the Registrant’s Amended and Restated Bylaws for acts, omissions or transactions while acting in the capacity
of, or while serving as, a director or officer of the Registrant but not involving a breach of duty to the Registrant and its shareholders
will not be deemed exclusive of any other rights those seeking indemnification may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise, to the extent the additional rights to indemnification are authorized
in its Restated Articles of Incorporation.
In addition, the Registrant
has entered into indemnification agreements with each of its directors and officers, and maintains directors’ and officers’
liability insurance under which its directors and officers are insured against loss (as defined in the policy) as a result of certain
claims brought against them in such capacities.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
The exhibits to the registration statement
are listed in the Exhibit Index to this registration statement and are incorporated herein by reference.
(b) Financial
statement schedules
All schedules have been omitted because
either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related
notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration
statement; and
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(A) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
(5)
That for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to
by the undersigned registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to any charter provision, by law or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
(7)
The undersigned registrant hereby undertakes that:
(i) For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(I) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective; and
(ii) For
the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on January 9, 2017.
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SECOND SIGHT MEDICAL PRODUCTS, INC.
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By:
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/s/ Will McGuire
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Will McGuire
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President and Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS
,
that each person whose signature appears below hereby constitutes and appoints Will McGuire and Thomas B. Miller, or either of
them as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration
is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact, proxy and agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Name
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Title
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Date
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/s/ Will McGuire
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President, Chief Executive Officer and Director
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January 9, 2017
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Will McGuire
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(Principal Executive Officer)
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/s/ Thomas B. Miller
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Chief Financial Officer
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January 9, 2017
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Thomas B. Miller
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(Principal Financial and Accounting Officer)
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/s/ Robert J. Greenberg
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Chairman of the Board of Directors
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January 9, 2017
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Robert J. Greenberg M.D., Ph.D.
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/s/ Gregg Williams
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Director
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January 9, 2017
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Gregg Williams
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/s/ William J. Link
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Director
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January 9, 2017
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William J. Link
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/s/ Aaron Mendelsohn
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Director
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January 9, 2017
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Aaron Mendelsohn
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/s/ Matthew Pfeffer
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Director
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January 9, 2017
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Matthew Pfeffer
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EXHIBIT INDEX
Exhibit
No.
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Description
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3.1**
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Restated Articles of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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3.2**
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Amended and Restated By-laws, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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4.1**
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Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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4.2*
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Form of Non-Transferable Subscription Rights Certificate.
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4.3*
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Form of Warrant underlying the Units, included as an exhibit to the Warrant Agent Agreement, filed as Exhibit 4.4 hereto
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4.4*
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Form of Warrant Agreement between Registrant and the Warrant Agent
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4.5*
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Form of Subscription Agent Agreement between Second Sight Medical Products, Inc. and Subscription Agent.
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5.1*
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Opinion of Law Offices of Aaron A. Grunfeld & Associates.
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8.1*
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Opinion Of Herbert D. Sturman, Esq.
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10.1**
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Form of Indemnification Agreement between Registrant and each of its directors and officers (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.2**+
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2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.3**+
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2003 Form of Employee Option Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.4**+
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2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.5**+
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2011 Form of Employee Option Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.6**+
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2014 Option Issued to Robert Greenberg – Terms and Conditions (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.7**+
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2014 Executive Officer Option Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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Exhibit
No.
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Description
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10.8**
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Form of Convertible Promissory Note (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.9**
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Form of Warrant, as amended (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.10**
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Standard Multi-Tenant Office Lease – Net, dated April 15, 2014, between Registrant and Mann Biomedical Park LLC (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.11**
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Exclusive License Agreement between Registrant and John Hopkins University and Duke University (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.12**
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Cost Reimbursement Consortium Research Agreement between Registrant and Doheny Eye Institute (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.13**
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Form of Lock Up Agreement (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.14**
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Form of Shareholders’ Agreement dated September 5, 2003 (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.15**+
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Offer Letter to Thomas Miller dated May 21, 2014 (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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Exhibit
No.
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Description
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10.16**
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Form of Loan Agreement dated September 30, 2014 between Mann Group LLC and Registrant for $3,000,000, including form of promissory note as Exhibit A thereto (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.17**
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Joint Research and Development Agreement between The Johns Hopkins University Applied Physics Laboratory and Registrant (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 filed on August 12, 2014, File No. 333-198073, as amended).
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10.18**+
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Employment Agreement dated June 19, 2015 between Second Sight Medical Products, Inc. and Will McGuire (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2015).
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10.19**+
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Second Sight Medical Products, Inc. Equity Incentive Plan – Restricted Stock Units (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 4, 2015).
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10.20**+
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Second Sight Medical Products, Inc. Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 4, 2015).
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21.1**
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List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K filed on March 17, 2015).
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23.1*
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Consent of Independent Registered Public Accounting Firm Gumbiner Savett Inc.
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23.2*
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Consent of Law Offices of Aaron A. Grunfeld & Associates, included in Exhibit 5.1 hereto.
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23.2*
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Consent of Herbert D. Sturman, included in Exhibit 8.1 hereto.
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24.1
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Power of attorney
(included on Signature Page).
|
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99.1*
|
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Form of Instructions as to Use of Subscription Rights Certificates.
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99.2*
|
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Form of Letter to Stockholders who are Record Holders.
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99.3*
|
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Form of Letter to Brokers, Dealers, Banks and Other Nominees.
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99.4*
|
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Form of Broker Letter to Clients Who are Beneficial Holders.
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99.5*
|
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Form of Beneficial Owner Election Form.
|
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99.6*
|
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Form of Nominee Holder Election.
|
|
|
|
99.7*
|
|
Form of Notice of Important Tax Information.
|
|
|
|
99.8*
|
|
Form of Notice of Guaranteed Delivery.
|
*
|
Filed herewith
|
**
|
Previously filed
|
+
|
Management contract or compensatory plan or arrangement
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