eyes-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

 

Commission File Number 001-36747

Second Sight Medical Products, Inc.

(Exact name of Registrant as specified in its charter)

 

California

 

02-0692322

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

12744 San Fernando Road, Suite 400, Sylmar, CA 91342

(Address of principal executive offices, including zip code)

 

(818) 833-5000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

EYES

 

NASDAQ

Warrants

 

EYESW

 

NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     

 Yes    No 

 Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

 

As of November 12, 2019, the registrant had 124,598,198 shares of common stock, $0 par value per share and 61,459,657 warrants, outstanding.

 

 

 


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

 

FORM 10-Q

TABLE OF CONTENTS 

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

3

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (unaudited)

5

 

Condensed Consolidated Statements of Stockholders’ Equity for each of the three-month periods ended during the nine months ended September 30, 2019 and 2018 (unaudited)

6

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

 

 

 

Item 4.

Controls and Procedures

29

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

30

 

 

 

Item 1A.

Risk Factors

30

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

 

 

 

Item 3.

Defaults Upon Senior Securities

35

 

 

 

Item 4.

Mine Safety Disclosures

35

 

 

 

Item 5.

Other Information

35

 

 

 

Item 6.

Exhibits

36

 

 

 

SIGNATURES

37

 

2


 

Part I. Financial Statements

Item 1. Financial Statements

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,462

 

 

$

4,471

 

Accounts receivable, net

 

 

264

 

 

 

504

 

Inventories, net

 

 

1,264

 

 

 

3,250

 

Prepaid expenses and other current assets

 

 

366

 

 

 

1,395

 

Total current assets

 

 

20,356

 

 

 

9,620

 

Property and equipment, net

 

 

1,125

 

 

 

1,025

 

Right-of-use assets

 

 

2,399

 

 

 

 

Deposits and other assets

 

 

18

 

 

 

37

 

Total assets

 

$

23,898

 

 

$

10,682

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,126

 

 

$

1,305

 

Accrued expenses

 

 

2,082

 

 

 

2,503

 

Accrued compensation expense

 

 

2,461

 

 

 

2,690

 

Accrued clinical trial expenses

 

 

734

 

 

 

933

 

Current operating lease liabilities

 

 

228

 

 

 

 

Contract liabilities

 

 

554

 

 

 

167

 

Total current liabilities

 

 

7,185

 

 

 

7,598

 

Long term operating lease liabilities

 

 

2,427

 

 

 

 

Total liabilities

 

 

9,612

 

 

 

7,598

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, no par value, 10,000 shares authorized; none outstanding

 

 

 

 

 

 

Common stock, no par value; 300,000 shares authorized; shares issued and

   outstanding: 124,598 and 76,336 as of September 30, 2019 and December 31,

   2018, respectively

 

 

263,656

 

 

 

229,019

 

Additional paid-in capital

 

 

48,131

 

 

 

44,111

 

Accumulated other comprehensive loss

 

 

(585

)

 

 

(575

)

Accumulated deficit

 

 

(296,916

)

 

 

(269,471

)

Total stockholders’ equity

 

 

14,286

 

 

 

3,084

 

Total liabilities and stockholders’ equity

 

$

23,898

 

 

$

10,682

 

 

See accompanying notes.

3


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

472

 

 

$

2,246

 

 

$

2,882

 

 

$

5,129

 

Cost of sales

 

 

364

 

 

 

1,784

 

 

 

2,028

 

 

 

3,287

 

Gross profit

 

 

108

 

 

 

462

 

 

 

854

 

 

 

1,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net of grants

 

 

3,379

 

 

 

2,672

 

 

 

8,998

 

 

 

7,567

 

Clinical and regulatory, net of grants

 

 

862

 

 

 

964

 

 

 

2,404

 

 

 

3,439

 

Selling and marketing

 

 

1,308

 

 

 

3,040

 

 

 

5,100

 

 

 

8,931

 

General and administrative

 

 

2,178

 

 

 

2,332

 

 

 

6,883

 

 

 

8,208

 

Restructuring charges

 

 

 

 

 

 

 

 

3,297

 

 

 

 

Total operating expenses

 

 

7,727

 

 

 

9,008

 

 

 

26,682

 

 

 

28,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(7,619

)

 

 

(8,546

)

 

 

(25,828

)

 

 

(26,303

)

Interest income

 

 

35

 

 

 

24

 

 

 

104

 

 

 

67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(7,584

)

 

$

(8,522

)

 

$

(25,724

)

 

$

(26,236

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

$

(0.06

)

 

$

(0.12

)

 

$

(0.22

)

 

$          (0.41)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic and diluted

 

 

124,592

 

 

 

68,763

 

 

 

115,266

 

 

 

64,113

 

 

See accompanying notes.

4


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

(in thousands)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(7,584

)

 

$

(8,522

)

 

$

(25,724

)

 

$

(26,236

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(11

)

 

 

24

 

 

 

(10

)

 

 

(8

)

Comprehensive loss

 

$

(7,595

)

 

$

(8,498

)

 

$

(25,734

)

 

$

(26,244

)

 

See accompanying notes.

5


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(in thousands)

 

 

 

Common Stock

 

 

Common Stock

Issuable

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2017

 

 

57,630

 

 

$

202,156

 

 

 

82

 

 

$

153

 

 

$

40,522

 

 

$

(572

)

 

$

(234,377

)

 

$

7,882

 

Issuance of shares of common

   stock, net of issuance costs

 

 

2,224

 

 

 

3,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,992

 

Warrants exercise

 

 

5

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Common stock issuance for

   services

 

 

 

 

 

 

 

 

34

 

 

 

65

 

 

 

 

 

 

 

 

 

 

 

 

65

 

Release of restricted stock units

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,285

 

 

 

 

 

 

 

 

 

1,285

 

Exercise of common stock options

 

 

5

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,753

)

 

 

(9,753

)

Foreign currency translation

  adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

45

 

Balance, March 31, 2018

 

 

59,876

 

 

 

206,163

 

 

 

116

 

 

 

218

 

 

 

41,807

 

 

 

(527

)

 

 

(244,130

)

 

 

3,531

 

Issuance of shares of common

   stock, net of issuance costs

 

 

6,757

 

 

 

9,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,978

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

226

 

 

 

261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

261

 

Common stock issued or

   issuable  for services

 

 

133

 

 

 

262

 

 

 

(116

)

 

 

(218

)

 

 

 

 

 

 

 

 

 

 

 

44

 

Release of restricted stock units

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

627

 

 

 

 

 

 

 

 

 

627

 

Exercise of common stock options

 

 

71

 

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

141

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,961

)

 

 

(7,961

)

Foreign currency translation

  adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

 

 

 

(77

)

Balance, June 30, 2018

 

 

67,075

 

 

 

216,805

 

 

 

 

 

 

 

 

 

42,434

 

 

 

(604

)

 

 

(252,091

)

 

 

6,544

 

Issuance of shares of common

   stock, net of issuance costs

 

 

3,225

 

 

 

4,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,969

 

Release of restricted stock units

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

877

 

 

 

 

 

 

 

 

 

877

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,522

)

 

 

(8,522

)

Foreign currency translation

  adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

Balance, September 30, 2018

 

 

70,312

 

 

$

221,774

 

 

 

 

 

$

 

 

$

43,311

 

 

$

(580

)

 

$

(260,613

)

 

$

3,892

 

 

 

6


 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2018

 

 

76,336

 

 

$

229,019

 

 

$

44,111

 

 

$

(575

)

 

$

(269,471

)

 

$

3,084

 

Adoption of ASC Topic 842-Leases

   (see note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(144

)

 

 

(144

)

Issuance of shares of common stock and

   warrants in connection with rights offering,

   net of issuance costs

 

 

47,812

 

 

 

34,399

 

 

 

 

 

 

 

 

 

 

 

 

34,399

 

Release of restricted stock units

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants modification (see note 7)

 

 

 

 

 

 

 

 

1,577

 

 

 

 

 

 

(1,577

)

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

898

 

 

 

 

 

 

 

 

 

898

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,700

)

 

(9,700)

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Balance, March 31, 2019

 

 

124,198

 

 

 

263,418

 

 

 

46,586

 

 

 

(583

)

 

 

(280,892

)

 

 

28,529

 

Release of restricted stock units

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection with employee stock purchase plan

 

 

376

 

 

 

238

 

 

 

 

 

 

 

 

 

 

 

 

238

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

859

 

 

 

 

 

 

 

 

 

859

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,440

)

 

 

(8,440

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Balance, June 30, 2019

 

 

124,586

 

 

 

263,656

 

 

 

47,445

 

 

 

(574

)

 

 

(289,332

)

 

 

21,195

 

Release of restricted stock units

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

686

 

 

 

 

 

 

 

 

 

686

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,584

)

 

 

(7,584

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Balance, September 30, 2019

 

 

124,598

 

 

$

263,656

 

 

$

48,131

 

 

$

(585

)

 

$

(296,916

)

 

$

14,286

 

 

See accompanying notes.

 

7


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(25,724

)

 

$

(26,236

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

293

 

 

 

329

 

Stock-based compensation

 

 

2,443

 

 

 

2,789

 

Bad debt recovery

 

 

 

 

 

(6

)

Non-cash lease expense

 

 

13

 

 

 

 

Inventory reserve

 

 

(793

)

 

 

171

 

Restructuring charges-inventory impairment

 

 

2,587

 

 

 

 

Common stock issuance for services

 

 

 

 

 

109

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

240

 

 

 

639

 

Inventories

 

 

186

 

 

 

(1,082

)

Prepaid expenses and other assets

 

 

1,010

 

 

 

291

 

Accounts payable

 

 

(178

)

 

 

795

 

Accrued expenses

 

 

(282

)

 

 

(447

)

Accrued compensation expenses

 

 

(227

)

 

 

351

 

Accrued clinical trial expenses

 

 

(199

)

 

 

155

 

Contract liabilities

 

 

388

 

 

 

63

 

Net cash used in operating activities

 

 

(20,243

)

 

 

(22,079

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(394

)

 

 

(144

)

Net cash used in investing activities

 

 

(394

)

 

 

(144

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from sale of common stock and warrants

 

 

34,399

 

 

 

18,939

 

Proceeds from exercise of options, warrants and employee stock purchase plan options

 

 

238

 

 

 

417

 

Net cash provided by financing activities

 

 

34,637

 

 

 

19,356

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(9

)

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Net increase (decrease)

 

 

13,991

 

 

 

(2,867

)

Balance at beginning of period

 

 

4,471

 

 

 

7,839

 

Balance at end of period

 

$

18,462

 

 

$

4,972

 

 

See accompanying notes.

8


 

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

1. Organization and Business Operations

Second Sight Medical Products, Inc. (“Second Sight,” “we,” “us,” or “the Company”) was incorporated in the State of California in 2003. Second Sight develops, manufactures and markets implantable visual prosthetics to potentially enable blind individuals to achieve greater independence.

In 2007, Second Sight formed Second Sight Medical Products (Switzerland) Sàrl, initially to manage clinical trials for its products in Europe, and later to manage sales and marketing in Europe, the Middle East and Asia-Pacific. 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, 2019. 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.