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 September 30, 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 sometime in 2022.
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 36 month results, 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 July 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. Considering the
most recent results for each subject, 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 (the latest for each subject) show that
6 out of 6 had positive or mild 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. 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.
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. 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 36 month results 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 that 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.
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 September 30, 2021 we recorded $0.3 of deferred grant costs receivable,
included in prepaid expenses and other current assets. For the three and nine months ended September 30, 2021 $0.3 million
and $1.1 million of costs were offset by grants as compared to $0.4 million and $1.0 million for the comparable
periods in 2020.
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 on July 23, 2020 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 nine months
ended September 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.
3. Concentration
of Risk
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 September 30, 2021 and December 31, 2020 include assets amounting
to $32,000 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
|
|
September
30, 2021 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$
|
71,970
|
|
|
$
|
71,970
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Laboratory
equipment
|
|
$
|
584
|
|
|
$
|
584
|
|
Computer
hardware and software
|
|
|
69
|
|
|
|
69
|
|
|
|
|
653
|
|
|
|
653
|
|
Accumulated
depreciation and amortization
|
|
|
(536
|
)
|
|
|
(479
|
)
|
Property
and equipment, net
|
|
$
|
117
|
|
|
$
|
174
|
|
As
a result of our decision to cease marketing of Argus II we recorded an impairment of $0.7 million during the nine month period
ended September 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 September 30, 2021
|
|
$
|
335
|
|
Product
Warranties
A
summary of activity of our warranty liabilities, which are included in accrued expenses, for the period ended September 30, 2021
is presented below:
Beginning balance as of December 31, 2020
|
|
$
|
200
|
|
Additions
|
|
|
—
|
|
Settlements
|
|
|
—
|
|
Adjustments and other
|
|
|
(7
|
)
|
Ending balance as of September 30, 2021
|
|
$
|
193
|
|
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 accrued an early termination fee of $150,000 which is included in the restructuring charges as
of and for the nine months ended September 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 follows (in thousands, except for remaining lease term and discount rate):
Year
ending December 31:
|
|
|
|
|
2021
(3 months remaining)
|
|
$
|
51
|
|
2022
|
|
|
201
|
|
2023
|
|
|
52
|
|
Total
lease payments
|
|
|
304
|
|
Less
imputed interest
|
|
|
(23
|
)
|
Total
lease liabilities
|
|
$
|
281
|
|
|
|
|
|
|
Other
supplemental information:
|
|
|
|
|
Current
operating lease liabilities
|
|
$
|
179
|
|
Long
term operating lease liabilities
|
|
|
102
|
|
Total
lease liabilities
|
|
$
|
281
|
|
Discount
rate
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three
months ended
September 30,
2021
|
|
For
the three
months ended
September 30,
2020
|
|
For
the nine
months ended
September 30,
2021
|
|
For
the nine
months ended
September 30,
2020
|
|
Cash
paid for operating lease liabilities
|
|
$
|
51
|
|
$
|
48
|
|
|
119
|
|
|
275
|
|
Rent
expense, including common area maintenance charges, was $146,000 and $277,000 during the nine-month periods ended September 30,
2021 and 2020, respectively.
6.
Equity Securities
Potentially
Dilutive Common Stock Equivalents
As
of September 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).
|
|
September
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
|
|
|
265
|
|
|
|
|
7,873
|
|
|
8,322
|
|
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 have 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 September 30, 2021, 10,125 of the warrants remain outstanding.
A
summary of warrants activity for the nine months ended September 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
|
)
|
|
|
1.45
|
|
|
|
|
|
Forfeited
or expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding as of September 30, 2021
|
|
|
7,691
|
|
|
$
|
11.75
|
|
|
|
2.46
|
|
Warrants
exercisable as of September 30, 2021
|
|
|
7,691
|
|
|
$
|
11.75
|
|
|
|
2.46
|
|
The
warrants outstanding as of September 30, 2021 had $20,000 in intrinsic value.
8.
Stock-Based Compensation
A
summary of stock option activity under our 2011 Equity Incentive Plan (“2011 Plan”) for the nine months ended September
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 September 30, 2021
|
|
|
182
|
|
|
$
|
15.68
|
|
|
|
6.84
|
|
Options
exercisable as of September 30, 2021
|
|
|
143
|
|
|
$
|
18.82
|
|
|
|
6.45
|
|
The
estimated aggregate intrinsic value of stock options exercisable as of September 30, 2021 was $15,000. As of September 30, 2021,
there was $105,000 of total unrecognized compensation cost related to outstanding stock options that will be recognized over a
weighted average period of 2.29 years.
We
adopted an employee stock purchase plan in June 2015 for all eligible employees. At September 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
nine months ended September 30, 2021 and 2020 was as follows (in thousands):
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Research
and development
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
15
|
|
|
$
|
120
|
|
Clinical
and regulatory
|
|
|
9
|
|
|
|
12
|
|
|
|
27
|
|
|
|
39
|
|
Selling
and marketing
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
General
and administrative
|
|
|
5
|
|
|
|
4
|
|
|
|
15
|
|
|
|
194
|
|
Total
|
|
$
|
19
|
|
|
$
|
27
|
|
|
$
|
57
|
|
|
$
|
394
|
|
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 currently employ 15 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 that we completed in March 2021. 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.