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.
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.
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 2020 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 three 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. Four subjects have completed these tests
at 36-months, one subject at 24-months, and one subject at 12-months. For these most
recent results, on square localization, six of six subjects tested in our feasibility
study performed significantly better with the system on than off. On direction of motion,
six of six performed better with the system on than off. On grating visual acuity, two
of six 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. Due to the Covid-19 pandemic, 4 out of 6
FLORA assessments were not performed at the 24 month timeframe. A protocol update
was made to add FLORA assessments at the 36 month timeframe. FLORA results
to date show that 4 out of 6 completing the FLORA at 36 months had positive
results indicating 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.
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
June 25, 2021, we closed an underwritten public offering of 11,500,000 shares of common
stock at a price of $5.00 per share for aggregate net proceeds of $53.3 million
|
|
|
|
|
•
|
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. These loans and accrued interest were repaid in the second quarter of 2021
|
|
|
|
|
•
|
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 and our
third year grant of $1.4
million was approved on May 12, 2021. As of June 30, 2021 we recorded $0.3
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. We estimate that currently available cash will
provide sufficient funds to enable the Company to meet its planned obligations for at least eighteen months. 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
were notified by the Nasdaq stock market regarding our non-compliance with one of the continued listing requirements of the Nasdaq
Capital Market. We have subsequently satisfied the Nasdaq compliance listing requirement.
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.
The balance sheet as of December 31, 2020 has been derived from our audited balance sheet included in our annual report on
Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 16, 2021. 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. 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. In the
six months ended June 30, 2020, 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.
Credit
Risk
Financial
instruments that subject us to concentrations of credit risk consist primarily of cash and money market funds. We maintain
cash and money market funds with financial institutions that we deem reputable.
Foreign
Operations
The
accompanying condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 include assets amounting to
$27,000 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
|
|
June 30, 2021 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
73,818
|
|
|
$
|
73,818
|
|
|
$
|
—
|
|
|
$
|
—
|
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
3,122
|
|
|
$
|
3,122
|
|
|
$
|
—
|
|
|
$
|
—
|
|
5.
|
Selected Balance Sheet Detail
|
Property
and equipment, net
Property
and equipment consisted of the following (in thousands):
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Laboratory equipment
|
|
$
|
584
|
|
|
$
|
584
|
|
Computer hardware and software
|
|
|
69
|
|
|
|
69
|
|
|
|
|
653
|
|
|
|
653
|
|
Accumulated depreciation and amortization
|
|
|
(518
|
)
|
|
|
(479
|
)
|
Property and equipment, net
|
|
$
|
135
|
|
|
$
|
174
|
|
As
a result of our decision to cease marketing of Argus II we recorded an impairment of $0.7
million during the period ended June 30, 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 was unsecured and accrued interest at a rate of
twelve percent (12%)
per annum beginning on receipt of the loan amounts. We repaid the principal and accrued interest of $135,000 during the
quarter ended June 30, 2021.
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 June 30, 2021
|
|
$
|
335
|
|
Product
Warranties
A
summary of activity of our warranty liabilities, which are included in accrued expenses, for the period ended June 30, 2021 is
presented below:
Beginning balance as of December 31, 2020
|
|
$
|
200
|
|
Additions
|
|
|
—
|
|
Settlements
|
|
|
—
|
|
Adjustments and other
|
|
|
(15)
|
|
Ending balance as of June 30, 2021
|
|
$
|
185
|
|
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
no 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 six months ended June 30, 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 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 received full rent abatement
for March 2021, and will receive half rent abatement during 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.
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 (6 months remaining)
|
|
$
|
102
|
|
2022
|
|
|
201
|
|
2023
|
|
|
52
|
|
Total lease payments
|
|
|
355
|
|
Less imputed interest
|
|
|
(31
|
)
|
Total lease liabilities
|
|
$
|
324
|
|
|
|
|
|
|
Other supplemental information:
|
|
|
|
|
Current operating lease liabilities
|
|
$
|
173
|
|
Long term operating lease liabilities
|
|
|
151
|
|
Total lease liabilities
|
|
$
|
324
|
|
Discount rate
|
|
|
10
|
%
|
|
|
For
the three
months ended
June 30,
2021
|
|
For
the three
months ended
June 30,
2020
|
|
For
the six
months ended
June 30,
2021
|
|
For
the six
months ended
June 30,
2020
|
|
Cash
paid for operating lease liabilities
|
|
$
|
51
|
|
$
|
106
|
|
|
68
|
|
|
227
|
|
Rent expense, including
common area maintenance charges, was $49,000 and $229,000 during the six-month periods ended June 30, 2021 and 2020, respectively.
Potentially Dilutive
Common Stock Equivalents
As
of June 30, 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).
|
|
June 30,
|
|
|
|
2021
|
|
2020
|
|
Common stock warrants issued to underwriter
in connection with May 2020 offering
|
|
|
10
|
|
|
375
|
|
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
|
|
|
5,975
|
|
|
5,976
|
|
Common stock options
|
|
|
182
|
|
|
304
|
|
Restricted stock units
|
|
|
—
|
|
|
8
|
|
|
|
|
7,873
|
|
|
8,369
|
|
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 June 30, 2021, 10,125
of the warrants are still outstanding.
A
summary of warrants activity for the six months ended June 30, 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
|
|
|
(68
|
)
|
|
|
11.76
|
|
|
|
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Warrants outstanding as of June 30, 2021
|
|
|
7,691
|
|
|
$
|
11.75
|
|
|
|
2.71
|
|
Warrants exercisable as of June 30, 2021
|
|
|
7,691
|
|
|
$
|
11.75
|
|
|
|
2.71
|
|
The warrants outstanding
as of June 30, 2021 had $37,000 in intrinsic value.
8. Stock-Based Compensation
A
summary of stock option activity under our 2011 Equity Incentive Plan (“2011 Plan”) for the six months ended June
30, 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 and expected to vest as of June 30, 2021
|
|
|
182
|
|
|
$
|
15.68
|
|
|
|
7.10
|
|
Options exercisable as of June 30, 2021
|
|
|
138
|
|
|
$
|
19.29
|
|
|
|
6.66
|
|
The
estimated aggregate intrinsic value of stock options exercisable as of June 30, 2021 was $20,000. As of June 30, 2021, there
was $124,000 of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted
average period of 2.48 years.
We
adopted an employee stock purchase plan in June 2015 for all eligible employees. At June 30, 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 and
six months ended June 30, 2021 and 2020 was as follows (in thousands):
|
|
Three
Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Cost
of sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
90
|
|
Research
and development
|
|
|
5
|
|
|
|
7
|
|
|
|
10
|
|
|
|
321
|
|
Clinical
and regulatory
|
|
|
9
|
|
|
|
12
|
|
|
|
18
|
|
|
|
65
|
|
Selling
and marketing
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
261
|
|
General
and administrative
|
|
|
5
|
|
|
|
69
|
|
|
|
10
|
|
|
|
1,020
|
|
Total
|
|
$
|
19
|
|
|
$
|
88
|
|
|
$
|
38
|
|
|
$
|
1,757
|
|
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
Four
oppositions filed by Pixium Vision are pending in the European Patent Office, each challenging the validity of a European patent
owned by us. The outcomes 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,
but retained the $1,000,000
payment. On May 19, 2021, Pixium filed suit in the Paris Commercial Court, claiming damages of €5,217,659.60,
about $6,162,760.
We believe we have fulfilled our obligations to Pixium with the liquidated damages payment of $1,000,000.
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 placement. We believe that claims for payment presented
by this invoice are without merit.
On or about July 19, 2021 Martin Sumichrast filed a complaint with the Superior Court of the State of
California, County of Los Angeles—Central District, claiming that he is entitled to compensation for services, as well as
exemplary and other damages in an amount to be determined at trial but not less than $2 million, which arise from his allegedly
arranging and securing financing that the Company obtained in May 2020 via a registered underwritten public offering of common
stock. The action is in early stages and the Company is considering its responses, however the Company believes that the claims
for compensation are without merit and intends to defend vigorously.
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.
11.
Subsequent Events
We
were notified on July 29, 2021, we were awarded a grant from the National Institutes of Health to fund a patient preference
information study of blind candidates for a visual prosthesis. The entirety of
the $155,964 grant will be provided to UCLA as a subcontractor to conduct the study. This study will help us
better understand acceptable risks, necessary benefits, and appropriate risk/benefit balance for devices such as the Orion Visual Cortical Prosthesis and the decision process of a person deciding whether or not to be implanted with a visual prosthesis.
One subject in the Early Feasibility study had the Orion device explanted on August 9, 2021. The explant was due to the need for an MRI to diagnose a condition unrelated to the Orion device.