See accompanying notes to the condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Organization and Business Operations
Second Sight Medical Products, Inc. (“Second Sight,” the “Company,” “we,” “us,” “our” or similar terms) has developed, manufactured and marketed implantable visual prosthetics that are intended to deliver useful artificial vision to blind individuals. We are a recognized global leader in neuromodulation devices for blindness, and are committed to developing new technologies to treat the broadest population of sight-impaired individuals.
Leveraging our 20 years of experience in neuromodulation for vision, we are developing the Orion® Visual Cortical Prosthesis System (“Orion”), an implanted cortical stimulation device intended to provide useful artificial vision to individuals who are blind due to a wide range of causes, including glaucoma, diabetic retinopathy, optic nerve injury or disease and eye injury. Orion is intended to convert images captured by a miniature video camera mounted on glasses into a series of small electrical pulses. The device is designed to bypass diseased or injured eye anatomy and to transmit these electrical pulses wirelessly to an array of electrodes implanted on the surface of the brain’s visual cortex, where it is intended to provide the perception of patterns of light. We are conducting a six-subject Early Feasibility Study of the Orion device at the Ronald Reagan UCLA Medical Center in Los Angeles (“UCLA”) and Baylor College of Medicine in Houston (“Baylor”). Regularly scheduled visits at both sites were paused in mid-March due to the coronavirus outbreak, however visits at UCLA resumed mid-September 2020 and Baylor resumed in December 2020. Our 24 month results, most of which were measured after the study resumed, indicate to us that:
|
•
|
We have a good safety profile. Five subjects experienced a total of thirteen adverse events (AEs) related to the device or to the surgery, through February 2021. One was considered a serious adverse event (SAE), and all of the adverse events were in the expected category. The one SAE occurred at about 3 months post-implant, was resolved quickly, and did not require a hospital stay. There have been no serious adverse events due to the device or surgery since June 2018.
|
|
•
|
The efficacy data is encouraging. We measure efficacy by looking at three measures of visual function: The first is square localization, where Orion subjects sit in front of a touch screen and are asked to touch within the boundaries of a square when it appears. The second is direction of motion, where subjects are asked to identify the direction and motion of lines on a screen. The third is grating visual acuity, a measure of visual acuity that is adapted for very low vision. On square localization, five of the five subjects tested in our feasibility study performed significantly better with the system on than off. On direction of motion, four out of five performed better with the system on than off; and on grating visual acuity, two of five tested had measurable visual acuity on the scale of this test (versus none who can do it with the device off). Another efficacy measurement of day-to-day functionality and benefit is FLORA, an acronym for Functional Low-Vision Observer Rated Assessment. FLORA is an assessment performed by an independent, third-party low vision orientation and mobility specialist who spends time with each of the subjects in their homes. The specialist asks each of the subjects a series of questions and also observes them performing 15 or more daily living tasks, such as finding light sources, following a sidewalk, or sorting laundry. The specialist then determines if the system is providing a benefit, if it is neutral, or if it is actually hurting the abilities of subjects to perform these tasks. Our FLORA results show that for two of the two subjects tested at 24-months to date, the Orion system is providing benefit. We reached agreement with the FDA in the fourth quarter of 2019 to utilize a revised version of FLORA as our primary efficacy endpoint in our pivotal trial for Orion, pending successful validation of the instrument.
|
No peer-reviewed data is available yet for the Orion system. We are currently negotiating the clinical and regulatory pathway to commercialization with the FDA as part of the Breakthrough Devices Program.
Our principal offices are located in Los Angeles, California.
In 2007, Second Sight formed Second Sight Medical Products (Switzerland) Sàrl, initially to manage clinical trials and sales and marketing in Europe, the Middle East and Asia-Pacific, and more recently for the research of future technologies. As the laws of Switzerland require at least two corporate stockholders, Second Sight Medical Products (Switzerland) Sàrl is 99.5% owned directly by us and 0.5% owned by an executive of Second Sight as of March 31, 2021. Accordingly, Second Sight Medical Products (Switzerland) Sàrl is considered 100% owned for financial statement purposes and is consolidated with Second Sight for all periods presented. We have closed our foreign operations and expect final dissolution of this entity in the third quarter of 2021.
8
Product and Clinical Development Plans
By further developing our visual cortical prosthesis, Orion, we believe we may be able to significantly expand our market to include nearly all profoundly blind individuals. The principal notable exceptions for potential use of the Orion are those who are blind due to otherwise currently treatable diseases, individuals who are born blind, or blindness due to direct damage of the visual cortex, which is rare. However, of the estimated 36 million blind people worldwide, there are approximately 5.8 million people who are legally blind due to causes that are not otherwise treatable. We continue to develop and refine our estimates of the potential addressable market size as we evaluate the commercial prospects for Orion using a combination of published sources, third party market research, and physician feedback. We currently estimate over 500,000 individuals in the US are legally blind due to retinitis pigmentosa, glaucoma, diabetic retinopathy, optic nerve disease and eye injury. Of this population, we estimate the potential US addressable market is between 50,000 and 100,000 individuals with bi-lateral blindness at the light-perception level or worse. Our marketing approvals by the FDA and other regulatory agencies will ultimately determine the subset of these patients who are eligible for the Orion based on our clinical trials and the associated results.
Our objective in designing and developing the Orion visual prosthesis system is to bypass the optic nerve and directly stimulate the part of the brain responsible for human vision. A six-subject Early Feasibility Study of the Orion device is currently underway at UCLA and Baylor. Our 24 month results for the six subjects indicate a good safety profile with encouraging efficacy data and benefits in helping subjects perform their daily living tasks. We believe these data results are encouraging and support advancement of Orion into a larger pivotal clinical study. Early promising results are not necessarily indicative of results which may be obtained in our larger Orion clinical trials.
In November 2017, the FDA granted Breakthrough Devices Program designation for the Orion. This designation is given to a few select medical devices in order to provide more effective treatment of life-threatening or irreversibly debilitating diseases or conditions. This program is intended to help patients have more timely access to these medical devices by expediting their development, assessment, and review.
On February 26, 2021, the U.S. Food and Drug Administration (FDA) approved the Argus 2s Retinal Prosthesis System, a redesigned set of external hardware (glasses and video processing unit) initially for use in combination with previously implanted Argus II systems for the treatment of retinitis pigmentosa (RP). The Company expects that the Argus 2s will be adapted to be the external system for the next generation Orion Visual Cortical Prosthesis System currently under development. In addition to ergonomic improvements, the Argus 2s system offers significantly more processing power, potentially allowing for improved video processing. A decision on when or if to begin production of the newly approved hardware is under evaluation.
Liquidity and Capital Resources
From inception, our operations have been funded primarily through the sales of our common stock and warrants, as well as from the issuance of debt, convertible debt, research and clinical grants, and limited product revenue generated from the sale of our Argus II product. Funding of our business since 2019 has been primarily provided by:
|
|
|
|
•
|
On March 23, 2021, we closed our private placement to seven institutional investors of 4,650,000 shares of common stock at a price of $6.00 per share for aggregate net proceeds of approximately $24.5 million
|
|
|
|
|
•
|
On December 8, 2020, we borrowed $1 million from Gregg Williams, Chairman of the Board of Directors of the Company and $1.2 million from two unaffiliated shareholders
|
|
•
|
On May 5, 2020, we closed our underwritten public offering of 7,500,000 shares of common stock at an offering price of $1.00 per share for aggregate net proceeds of approximately $6.7 million
|
We were awarded a $1.6 million grant (with the intent to fund $6.4 million over five years subject to annual review and approval) from the National Institutes of Health (NIH) to fund the “Early Feasibility Clinical Trial of a Visual Cortical Prosthesis” that commenced in January 2018. Our second year grant of $1.4 million was approved on April 6, 2021. As of March 31, 2021 we recorded $0.5 million of deferred grant costs receivable, included in prepaid expenses and other current assets.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on our ability to develop profitable operations through implementation of our business initiatives and/or raise additional capital, however, there can be no assurances that we will be able to do so.
We have been notified by the Nasdaq stock market regarding our non-compliance with one of the continued listing requirements of the Nasdaq Capital Market and as a result we could be subject to delisting if we do not regain compliance within the compliance period (or the compliance period as may be extended). We believe that our planned shareholders’ meeting on May 28, 2021 satisfies this listing requirement.
9
2. Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation
These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and following the requirements of the United States Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In our opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with our financial statements and accompanying notes for the fiscal year ended December 31, 2020, contained in our Annual Report on Form 10-K filed with the SEC on March 16, 2021. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.
Reverse Stock Split
On December 31, 2019 we effected a reverse stock split of the outstanding shares of our no par value common stock and outstanding warrants to purchase our common stock by a ratio of 1-for-8 (1:8). The common stock and warrants began trading on the Nasdaq Capital Market on a split-adjusted basis on January 6, 2020.
The accompanying consolidated financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented. All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock units, and per share amounts contained in our consolidated financial statements have been retrospectively adjusted.
Significant Accounting Policies
Segment Reporting. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. Our chief operating decision-maker reviews financial information presented on a consolidated basis. Accordingly, we consider ourselves to be in a single reporting segment, specifically the discovery, development and commercialization of visual prosthetics for profoundly blind individuals. We historically managed our Argus II and Orion programs on a consolidated basis within this single operating segment and do not assess the performance of our product lines or geographic regions on other measures of income or expense, such as program expense, operating income or net income. Our underlying technology consists of hardware components (implanted and wearable) and software. A vast majority of this underlying technology was shared between the Argus II and Orion branded systems. While we have ceased production and marketing the Argus II product we are developing Orion as a next generation product with potential to treat a broader market of blind individuals.
On March 31, 2020, due to the COVID-19 pandemic and related inability to secure additional funding, we laid off the majority of our employees and reduced our operating expenses significantly to allow for our continuing business operations. Due to our focus on Orion and wind down of selling and marketing activities related to Argus II, we recorded impairment charges to our inventory of $0.5 million and $0.7 million to our fixed assets used primarily for Argus activities. We also incurred $0.2 million in severance payments. We continue to advance the development of our Orion technology and are exploring various strategic options to accelerate development of Orion.
Our significant accounting policies are set forth in Note 2 of the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
Recently Issued Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting standards, if adopted, will have a material effect on the financial statements.
3. Concentration of Risk
Credit Risk
Financial instruments that subject us to concentrations of credit risk consist primarily of cash, money market funds, and trade accounts receivable. We maintain cash and money market funds with financial institutions that we deem reputable. We extended differing levels of credit to our customers, and typically did not require collateral.
10
Foreign Operations
The accompanying condensed consolidated financial statements as of March 31, 2021 and December 31, 2020 include assets amounting to $62,000 and $18,000, respectively, relating to operations of our subsidiary based in Switzerland.
4. Fair Value Measurements
The authoritative guidance with respect to fair value establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that we have the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models.
Cash equivalents, which includes money market funds, are the only financial instrument measured and recorded at fair value on our consolidated balance sheet, and they are valued using Level 1 inputs.
Assets measured at fair value on a recurring basis are as follows (in thousands):
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
March 31, 2021 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
26,698
|
|
|
$
|
26,698
|
|
|
$
|
—
|
|
|
$
|
—
|
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
3,122
|
|
|
$
|
3,122
|
|
|
$
|
—
|
|
|
$
|
—
|
|
5. Selected Balance Sheet Detail
Inventories, net
Inventories consisted of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Raw materials
|
|
$
|
—
|
|
|
$
|
—
|
|
Work in process
|
|
|
—
|
|
|
|
—
|
|
Finished goods
|
|
|
295
|
|
|
|
295
|
|
|
|
|
295
|
|
|
|
295
|
|
Allowance for excess and obsolete inventory and impairment charge
|
|
|
(295
|
)
|
|
|
(295
|
)
|
Inventories, net
|
|
$
|
—
|
|
|
$
|
—
|
|
Property and equipment, net
Property and equipment consisted of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Laboratory equipment
|
|
$
|
584
|
|
|
$
|
584
|
|
Computer hardware and software
|
|
|
69
|
|
|
|
69
|
|
|
|
|
653
|
|
|
|
653
|
|
Accumulated depreciation and amortization
|
|
|
(499
|
)
|
|
|
(479
|
)
|
Property and equipment, net
|
|
$
|
154
|
|
|
$
|
174
|
|
11
As a result of our decision to cease marketing of Argus II we recorded an impairment of $0.7 million during the period ended March 31, 2020 related to our fixed assets.
Debt
On December 8, 2020, we borrowed $1 million from Gregg Williams, Chairman of the Board of Directors of the Company and $1.2 million from two unaffiliated shareholders. Each promissory note is unsecured and accrues interest at a rate of twelve percent (12%) per annum beginning on receipt of the loan amounts. Principal and accrued interest under the promissory notes, are payable on December 31, 2021. As of March 31, 2021 and December 31, 2020, accrued interest amounted to $82,000 and $17,000, respectively, and is recorded in accrued expenses.
Contract Liabilities
Contract liabilities consisted of the following (in thousands):
Beginning balance as of December 31, 2020
|
|
$
|
335
|
|
Consideration received in advance of revenue recognition
|
|
|
—
|
|
Revenue recognized
|
|
|
—
|
|
Ending balance as of March 31, 2021
|
|
$
|
335
|
|
Product Warranties
A summary of activity of our warranty liabilities, which are included in accrued expenses, for the period ended March 31, 2021 is presented below:
Beginning balance as of December 31, 2020
|
|
$
|
200
|
Additions
|
|
|
—
|
Settlements
|
|
|
—
|
Adjustments and other
|
|
|
—
|
Ending balance as of March 31, 2021
|
|
$
|
200
|
|
Right-of-use assets and operating lease liabilities
We lease certain office space and equipment for our use. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease costs are recognized in the income statement over the lease term on a straight-line basis. Depreciation is computed using the straight-line method over the estimated useful life of the respective assets. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. As most of our leases do not provide an implicit rate, we used our estimated incremental borrowing rate of 10% based on the information available at commencement date in determining the present value of lease payments.
On May 18, 2020 we entered into a Letter Agreement with Sylmar Biomedical Park, LLC (the “Landlord”), pursuant to which the parties agreed to accelerate the expiration dates of our existing leases (the “Leases”), to a date not later than June 18, 2020 (“Accelerated Termination Date”). We agreed to pay the Landlord (i) $210,730 to bring the Leases current (the “Owed Rent”) and to remit (ii) a one-time early termination fee in the amount of $150,000 (the “Early Termination Amount”). Prior to the early termination agreed in this letter we were obligated to pay aggregate base rent of approximately $0.9 million and common area maintenance expenses for the term remaining under the Leases through the respective expiration dates in February 2022 and April 2023. The Landlord acknowledged that as of the date of the Letter Agreement the Owed Rent and the Early Termination Amount constituted all amounts owing to the Landlord under the Leases. As a result of the letter agreement, we wrote down the right-of-use assets and extinguished related lease liabilities in the amounts of $2.3 million and $2.4 million, respectively. We have accrued an early termination fee of $150,000 which is included in accrued expenses and restructuring charges as of and for the three months ended March 31, 2020.
On January 22, 2021, we entered into a lease agreement, effective February 1, 2021, to sub-lease office space to replace our existing headquarters. We will pay $17,000 per month, increasing to $17,500 per month on February 1, 2022, plus operating expenses, to lease 17,290 square feet of office space at 13170 Telfair Avenue, Sylmar, CA 91342. Additionally, we receive full rent abatement for March 2021, and half rent abatement for March 2022. The sub-lease is for two years and two months. We are not affiliates of, are not related to, or otherwise have any other relationship with, the other parties, other than the lease.
12
The Company evaluated the lease amendment under the provisions of ASC 842. Information related to the Company’s right-of-use assets and related lease liabilities are as followings (in thousands, except for remaining lease term and discount rate):
Year ending December 31:
|
2021 (9 months remaining)
|
|
|
$
|
153
|
2022
|
|
|
|
201
|
2023
|
|
|
|
52
|
Total lease payments
|
|
|
|
406
|
Less imputed interest
|
|
|
|
(40)
|
Total lease liabilities
|
|
|
$
|
366
|
|
|
|
|
|
Other supplemental information:
|
Current operating lease liabilities
|
|
$
|
167
|
Long term operating lease liabilities
|
|
|
199
|
Total lease liabilities
|
|
$
|
366
|
Discount rate
|
|
|
10%
|
|
|
|
|
|
|
|
|
For the three
months ended
March 31,
2021
|
|
For the three
months ended
March 31,
2020
|
|
Cash paid for operating lease liabilities
|
$
|
17
|
|
$
|
121
|
|
Rent expense, including common area maintenance charges, was $22,000 and $123,000 during the three-month periods ended March 31, 2021 and 2020, respectively.
13
6. Equity Securities
Potentially Dilutive Common Stock Equivalents
As of March 31, 2021 and 2020, we excluded the potentially dilutive securities summarized below, which entitle the holders thereof to potentially acquire shares of common stock, from our calculations of net loss per share and weighted average common shares outstanding, as their effect would have been anti-dilutive (in thousands).
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Common stock warrants issued to underwriter in connection with May 2020 offering
|
|
|
10
|
|
|
|
—
|
|
Common stock warrants issued in connection with March 2017 rights offering
|
|
|
1,706
|
|
|
|
1,706
|
|
Common stock warrants issued in connection with February 2019 rights offering
|
|
|
5,976
|
|
|
|
5,976
|
|
Common stock options
|
|
|
182
|
|
|
|
890
|
|
Restricted stock units
|
|
|
—
|
|
|
|
25
|
|
|
|
|
7,874
|
|
|
|
8,597
|
|
7. Warrants
On February 22, 2019, we completed a registered rights offering to existing stockholders in which we sold approximately 5,976,000 units at $5.792 per unit, which was the adjusted closing price of our common stock on that date. Each Unit consisted of a share of our common stock and a warrant to purchase an additional share of our stock for $11.76. The warrants had a five-year life and trade on Nasdaq under the symbol EYESW.
On March 6, 2017, we completed a registered rights offering to existing stockholders in which we sold approximately 1,706,000 units at $11.76 per unit, which was the adjusted closing price of our common stock on that date. Each unit consisted of a share of our common stock and a warrant to purchase an additional share of our stock for $11.76. The warrants have a five-year life and have been approved for trading on Nasdaq under the symbol EYESW.
We extended the term of 1.7 million warrants issued in our March 2017 rights offering by approximately two years effective as of February 15, 2019 as part of our February 2019 rights offering. We determined the fair value of the March 2017 Warrants immediately before and after the modification. The fair value of the March 2017 Warrants after the modification was increased by approximately $1.6 million, resulting in an accounting adjustment to additional paid-in capital and accumulated deficit in the consolidated statements of shareholders’ equity. The assumptions used in the determination of fair value of the warrants before and after the extension included a risk free interest rate of 2.50% and 2.49%, expected volatility of 81% and 82%, and expected lives of 3.08 years and 5.08 years, respectively and 0% dividend yields for both.
Upon close of our May 2020 registered offering we issued 375,000 warrants to our underwriter. These warrants are exercisable at $1.25 per share and expire on May 5, 2025. At March 31, 2021, 10,125 of the warrants are still outstanding.
14
A summary of warrants activity for the three months ended March 31, 2021 is presented below (in thousands, except per share and contractual life data).
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
Per Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (in Years)
|
|
Warrants outstanding as of December 31, 2020
|
|
|
7,759
|
|
|
$
|
11.66
|
|
|
|
3.21
|
|
Issued
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(67
|
)
|
|
|
11.76
|
|
|
|
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Warrants outstanding as of March 31, 2021
|
|
|
7,692
|
|
|
$
|
11.75
|
|
|
|
2.96
|
|
Warrants exercisable as of March 31, 2021
|
|
|
7,692
|
|
|
$
|
11.75
|
|
|
|
2.96
|
|
The warrants outstanding as of March 31, 2021 had $71,000 in intrinsic value.
8. Stock-Based Compensation
A summary of stock option activity under our 2011 Equity Incentive Plan (“2011 Plan”) for the three months ended March 31, 2021 is presented below (in thousands, except per share and contractual life data).
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
Per Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (in Years)
|
|
Options outstanding as of December 31, 2020
|
|
|
196
|
|
|
$
|
15.48
|
|
|
|
7.65
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Forfeited or expired
|
|
|
(14
|
)
|
|
$
|
12.95
|
|
|
|
|
|
Options outstanding as of March 31, 2021
|
|
|
182
|
|
|
$
|
15.68
|
|
|
|
7.35
|
|
Options exercisable as of March 31, 2021
|
|
|
133
|
|
|
$
|
19.79
|
|
|
|
6.85
|
|
The estimated aggregate intrinsic value of stock options exercisable as of March 31, 2021 was $160,000. As of March 31, 2021, there was $0.1 million of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted average period of 2.70 years.
We adopted an employee stock purchase plan in June 2015 for all eligible employees. At March 31, 2021 the available number of shares that may be issued under the plan is 77,031.
Stock-based compensation expense recognized for stock-based awards in the condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 was as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cost of sales
|
|
$
|
—
|
|
|
$
|
—
|
|
Research and development
|
|
|
5
|
|
|
|
102
|
|
Clinical and regulatory
|
|
|
9
|
|
|
|
15
|
|
Selling and marketing
|
|
|
—
|
|
|
|
41
|
|
General and administrative
|
|
|
5
|
|
|
|
121
|
|
Total
|
|
$
|
19
|
|
|
$
|
279
|
|
15
9. Risk and Uncertainties
COVID-19 has directly and indirectly adversely affected Second Sight and will likely continue to do so for an uncertain period of time. In March and April 2020 we laid off a substantial majority of our employees as a result of COVID-19 and an inability to obtain financing. We retained approximately 11 of our employees to oversee current operations. The cumulative effects of COVID-19 on the Company cannot be predicted at this time, but could include, without limitation:
|
•
|
reputational damages of the Company and its products;
|
|
•
|
inability to raise additional funds to finance and continue our operations;
|
|
•
|
inability to maintain adequate facilities;
|
|
•
|
inability to retain and hire experienced personnel;
|
|
•
|
inability to finalize our plan for and enroll patients into our proposed pivotal clinical trial;
|
|
•
|
material delays or inability to complete development and commercialization of Orion;
|
|
•
|
inability to satisfy Nasdaq’s continued listing requirements and exposure to delisting if not remedied; and
|
|
•
|
other uncertain events that may have negative impact effect on our operations.
|
10. Litigation, Claims and Assessments
Three oppositions filed by Pixium Vision are pending in the European Patent Office, each challenging the validity of a European patent owned by us. The outcome of the challenges are not certain, however, if successful, they may affect our ability to block competitors from utilizing our patented technology. We believe a successful challenge will not have a material effect on our ability to manufacture and sell our products, or otherwise have a material effect on our operations.
As described in the Company’s 10-K for the year ended December 31, 2020, the Company had entered into a Memorandum of Understanding (“MOU”) for a proposed business combination with Pixium Vision SA (“Pixium”). In response to a press release by Pixium dated March 24, 2021, and subsequent communications between us and Pixium, our Board of Directors determined that the business combination with Pixium was not in the best interest of our shareholders. On April 1, 2021, we gave notice to Pixium that we were terminating the MOU between the parties and seeking an amicable resolution of termination amounts that may be due, however no assurance can be given that an amicable resolution will be reached. We accrued $1,000,000 of liquidated damages as contemplated by the MOU in accounts payable as of March 31, 2021 and remitted that amount to Pixium in April 2021. Pixium indicated that it considered this termination wrongful, rejected the Company’s offers, claimed six million Euros in damages (about $7.3 million in USD), and indicated it would pursue litigation. We cannot predict the outcome of this dispute.
In November 2020, we and Pixium retained Oppenheimer & Co. Inc. as placement agent for a proposed private placement of securities in connection with the Business Combination. On April 1, 2021, we received an invoice from Oppenheimer for more than $1.86 million. This amount includes a requested commission of 6.5% on $27.9 million raised in the private placed. We believe that claims for payment presented by this invoice are without merit.
We are party to litigation arising in the ordinary course of business. It is our opinion that the outcome of such matters will not have a material effect on our results of operations, however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors
16