~~As of September 30, 2017 and December 31, 2016, the following customers comprised more than 10% of accounts receivable:~~

~~During the three and nine months ended September 30, 2017 and 2016, regional revenue, based on customer locations which comprised more than 10% of revenues, consisted of the following (unaudited)~~:

Several of the components, materials and services used in the Company’s current Argus II product are available from only one supplier, and substitutes for these items cannot be obtained easily or would require substantial design or manufacturing modifications. Any significant problem experienced by one of the Company’s sole source suppliers could result in a delay or interruption in the supply of components to the Company until that supplier cures the problem or an alternative source of the component is located and qualified. Even where the Company could qualify alternative suppliers, the substitution of suppliers may be at a higher cost and create time delays that impede the commercial production of the Argus II and impact the Company’s abilities to deliver its products as may be timely required to meet demand.

The accompanying condensed consolidated financial statements as of ~~September~~June 30, ~~2017 (unaudited)~~2021 and December 31, ~~2016~~2020 include assets amounting to ~~$2.0 million~~$27,000 and ~~$1.7 million,~~$18,000, respectively, relating to operations of ~~the Company’s~~our subsidiary based in Switzerland. ~~It is possible that unanticipated events in foreign countries could disrupt the Company’s operations.~~

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 ~~the Company has~~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.

~~Money~~Cash equivalents, which includes money market funds, are the only financial instrument measured and recorded at fair value on ~~the Company’s~~our consolidated balance sheet, and they are ~~considered~~valued using Level 1 ~~valuation securities. The following table presents money market funds~~inputs.

Assets measured at ~~their level within the~~ fair value ~~hierarchy at September 30, 2017 and December 31, 2016~~on a recurring basis are as follows (in thousands):

~~6. Equity Securities~~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.

~~Non-employee members~~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.

A summary of activity of our warranty liabilities, which are ~~paid~~included in accrued expenses, for ~~their services~~the period ended June 30, 2021 is presented below:

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 ~~common stock~~the income statement over the lease term on ~~June 1~~a straight-line basis. Depreciation is computed using the straight-line method over the estimated useful life of ~~each year~~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 ~~average closing prices~~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 ~~immediately preceding twenty trading days.~~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 ~~September~~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, ~~2017,~~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 ~~accrued $86,000~~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 ~~these services, which equates to 75,000 shares. These shares have not yet been issued~~remaining lease term and ~~are excluded from~~discount rate):

Rent expense, including common area maintenance charges, was $49,000 and $229,000 during the ~~calculation of weighted average common shares outstanding for EPS purposes.~~six-month periods ended June 30, 2021 and 2020, respectively.

~~At September~~As of June 30, ~~2017~~2021 and ~~2016, the Company~~2020, we excluded the ~~outstanding~~potentially dilutive securities summarized below, which entitle the holders thereof to ~~ultimately~~potentially acquire shares of common stock, from ~~its~~our calculations of ~~earnings~~net loss per share and weighted average common shares outstanding, as their effect would have been anti-dilutive (in thousands)~~, as follows (unaudited):~~.

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 ~~warrant~~warrants activity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 is presented below (in thousands, except per share and contractual life data) ~~(unaudited)~~.

The ~~intrinsic value of~~ warrants outstanding ~~at September~~as of June 30, ~~2017 was $0.~~2021 had $37,000 in intrinsic value.

Effective June 1, 2011, the Company adopted the 2011 Equity Incentive Plan (the “2011 Plan”), which replaced previous equity plans. On June 6, 2017, the shareholders approved amendments to the 2011 Plan increasing the maximum number of shares of common stock that may be issued from 7,500,000 to 9,500,000, which is offset and reduced by options previously granted under previous plans. The option price is determined by the Board of Directors but cannot be less than the fair value of the shares at the grant date. Generally, the options vest ratably over either four or five years and expire ten years from the grant date. In the event of a change of control, as defined in the 2011 Plan, vesting is accelerated.

A summary of stock option activity under our 2011 Equity Incentive Plan (“2011 Plan”) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 is presented below (in thousands, except per share and contractual life data) ~~(unaudited)~~.

The estimated aggregate intrinsic value of stock options exercisable ~~at September~~as of June 30, ~~2017~~2021 was ~~$0.~~$20,000. As of ~~September~~June 30, ~~2017,~~2021, there was ~~$5.7 million~~ $124,000 of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted average period of ~~2.91~~2.48 years.

During the nine months ended September 30, 2017, the Company granted stock options to purchase 2,464,150 shares of common stock to certain employees. The options are exercisable for a period of ten years from the date of grant at prices ranging from $1.13 to $1.97 per share, which was the fair value of the Company’s common stock on the respective grant dates. The options vest over a period of four years. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $2,222,000 ($0.55 to $0.96 per share). Assumptions used in the model were an expected term of 6.25 years, volatility of 48.0%, a risk-free interest rate of 1.92% to 2.14%, and an expected dividend rate of 0%.

In March 2017, the Company granted stock options to purchase 40,000 shares of common stock to an outside attorney in connection with his services relating to the Company’s March, 2017 rights offering to stockholders. The options are exercisable for a period of four years from the date of grant at a price of $1.76 per share, which was 120% of the fair value of the Company’s common stock on the grant date of March 6, 2017. The options vested as of the date of grant. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $19,640 ($0.49 per share). Assumptions used in the model were an expected term of 4.0 years, volatility of 48.0%, a risk-free interest rate of 1.81%, and an expected dividend rate of 0%. The cost of these shares was treated as an issuance cost of the offering and was deducted from the gross proceeds from the offering.

~~The Company~~We adopted an employee stock purchase plan ~~(“ESPP”) starting~~ in June 2015 for all eligible employees. OnAt June ~~6, 2017,~~30, 2021 the ~~shareholders approved an amendment to the ESPP increasing the maximum~~available number of shares ~~of common stock~~ that may be issued from 250,000 to 750,000. Under the ESPP, shares of the Company’s common stock may be purchased at six-month intervals at 85% of the lower of the closing fair market value of the common stock (i) on the first trading day of the offering period or (ii) on the last trading day of the purchase period. An employee may purchase in any one calendar year shares of common stock having an aggregate fair market value of up to $25,000 determined as of the first trading day of the offering period. Additionally, a participating employee may not purchase more than 100,000 shares of common stock in any one offering period. At September 30, 2017, 435,139 shares had been purchased under the ~~ESPP.~~plan is 77,031.

~~The following table summarizes Restricted Stock Unit (RSU) activity (unaudited) for the nine months ended September 30, 2017 (in thousands, except per share data):~~

~~As of September 30, 2017, there was $1.1 million of total unrecognized compensation cost related to the outstanding RSUs that will be recognized over a weighted average period of 1.88 years.~~

Stock-based compensation expense recognized for stock-based awards ~~granted under the 2011 Plan and the ESPP~~ in the condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 is~~2020 was as follows (in thousands) ~~(unaudited)~~:

9. 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:

~~Twenty-one~~Four oppositions ~~have been~~ filed by ~~a third-party~~Pixium Vision are pending in the European Patent Office, each challenging the validity of a European patent owned ~~or exclusively licensed~~ by ~~the Company.~~us. The ~~outcome~~outcomes of the challenges isare not certain, however, if successful, they may affect ~~the Company’s~~our ability to block competitors from utilizing ~~some of its~~our patented ~~technology in Europe. Management of the Company does not~~technology. We believe ~~that~~ a successful challenge will not have a material effect on ~~the Company’s~~our ability to manufacture and sell ~~its~~our products, or otherwise have a material effect on ~~the Company’s~~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 ~~management’s~~our opinion that the outcome of such matters will not have a material effect on our results of operations, however, the ~~Company’s financial statements.~~ 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.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read ~~in conjunction~~together with ~~the~~our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited ~~2016~~2020 financial statements and related notes included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”) on March 16, ~~2017. In addition to historical~~2021 and as thereafter amended on April 14, 2021 and April 27, 2021. Some of the information ~~the~~contained in this discussion and analysis ~~here~~or set forth elsewhere in this Quarterly Report, including information with respect to our products, plans and ~~throughout this Form 10-Q~~strategy for our business and related financing, contains forward-looking statements that involve risks and uncertainties, including statements regarding our expected financial results in future periods. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “will,” “would,” “strategy” and ~~assumptions. Our actual~~similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding expectations for revenues, liquidity, cash flows and financial performance, the anticipated results of our development efforts and the timing for receipt of required regulatory approvals, insurance reimbursements and product launches, our financing plans and future capital requirements, the materially adverse impact of the recent COVID-19 coronavirus pandemic and related public health measures on our business. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from ~~those anticipated~~the plans, intentions and expectations disclosed in the forward-looking statements that we make. We assume no obligations to update these forward-looking statements ~~as a result of certain factors, including, but not limited,~~ to ~~those set forth under “Risk Factors” in Part II, Item 1A~~reflect events or circumstances after the date of this ~~report.~~Quarterly Report or to reflect actual outcomes.

Second Sight ~~was founded in 1998 with a mission~~Medical Products, Inc. (NASDAQ: EYES) develops implantable visual prosthetics that are intended to ~~develop, manufacture, and market prosthetic devices that restore some~~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 populations 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 RP, 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”). Our 24 month results, most of which were measured after the study resumed, indicate to us that:

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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 early AF 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.

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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 four out of six 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.

Our principal offices are located in ~~Sylmar, California, approximately 25 miles northwest of downtown~~ Los ~~Angeles. We also have an office in Lausanne, Switzerland, that manages our commercial and clinical operations in Europe, the Middle East and Asia.~~Angeles, California.

Our ~~current~~first commercially approved product was the Argus^® II Retinal Prosthesis System treats outer retinal degenerations, such as retinitis pigmentosa, which we refer to as RP. RP is a hereditary disease, affecting an estimated 1.5 million people worldwide including about 100,000 people in the United States, that causes a progressive degeneration of the light-sensitive cells of the retina, leading to significant visual impairment and ultimately blindness.(“Argus II”). The Argus II ~~System is~~was the only retinal prosthesis approved in the United States by the Food and Drug Administration ~~(FDA)~~(“FDA”), and was the first approved retinal prosthesis in the world. ~~By providing a useful~~The Argus II system provided an artificial form of vision that differs from the vision of people with normal sight. It did not restore normal vision and there is no evidence that it slowed or reversed the progression of any disease. The majority of patients received a significant benefit from the Argus II, however results did vary and some patients reported receiving little or no benefit. By creating an artificial form of useful vision in patients who otherwise ~~have~~had total sight loss, the Argus II ~~System can provide~~provided benefits ~~which include:~~that included:

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restoring independence through a renewed ability to navigate independently in unfamiliar environments;

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improving patients’ orientation and mobility, such as locating doors and windows, avoiding obstacles, and following the lines of a ~~crosswalk,~~crosswalk;

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allowing patients to feel more connected with people in their surroundings, such as seeing when someone is approaching or moving ~~away,~~away;

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providing patients with enjoyment from being “visual” again, such as locating the moon, tracking groups of players as they move around a field, and watching ~~the~~ moving streams of lights from ~~fireworks, and~~fireworks;

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enabling some patients to re-enter the workforce through multiple vocations that become possible because of Argus II; and

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improving patients’ well-being and ability to perform activities of daily ~~living.~~

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The Argus II System provides an artificial form of vision that differs from the vision of people with normal sight. It does not restore normal vision and it does not slow or reverse the progression of the disease. Results vary among patients and while the majority of patients receive a significant benefit from the Argus II, some patients report receiving little or no benefit.

~~Our major corporate, clinical and regulatory milestones include:~~

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~~In 1998, Second Sight was founded.~~

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~~In 2002, we commenced clinical trials in the US for our prototype product, the Argus I retinal prosthesis.~~

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~~In 2007, we commenced clinical trials in the US for the Argus II System, which later became our first commercial product.~~

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~~In 2011, we received marketing approval in Europe (CE Mark) for the Argus II System.~~

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~~In 2013, we received marketing approval in the United States (FDA) for the Argus II System.~~

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~~In 2014, we launched the Argus II in the US, completed our initial public offering (“IPO”), and began trading on NASDAQ under the symbol “EYES.”~~

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~~In 2014, we launched the Argus II in the US, completed our initial public offering (“IPO”), and began trading on NASDAQ under the symbol “EYES.”~~

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~~In 2015, we commenced a clinical trial in the UK for an expanded indication for the Argus II System in individuals with dry AMD.~~

We began selling the Argus II System in Europe at the end of 2011, Saudi Arabia in 2012, the United States and Canada in 2014, Turkey in 2015, ~~and~~Iran, Taiwan, South Korea and Russia in ~~2017. With~~2017, and Singapore in 2018. Given the ~~exception~~limited addressable market of ~~Taiwan~~Argus II, we no longer market the Argus II and ~~Russia, we~~ have full regulatory approval to sell in these regions. In Taiwan and Russia we have limited regulatory approval but we are working to obtain full regulatory approval in both countries. We sell primarily throughfocused all of our ~~direct sales force, but use distributors in certain countries.~~resources on the development of Orion.

We also researched multiple technologies that we believe to be complimentary to artificial vision and could potentially provide significant enhancements to the Orion user experience. In most cases, we collaborate with 3rd party firms to advance and integrate these innovative technologies with our artificial vision systems. Examples of technologies that we believe will be complimentary to our products include: eye tracking, object recognition and localization, thermal imaging and depth-based decluttering.

~~Going Concern~~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 only 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. Regularly scheduled visits at both sites were paused in mid-March due to Covid-19, however visits at UCLA resumed mid- September 2020 and Baylor resumed in December 2020. 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 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 large clinical trials. No assurance can be given that we will achieve similar results in our larger Orion clinical trials. No peer-reviewed data is available yet for the Orion system.

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. 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 which was generated byfrom the sale of our Argus II ~~System. During the years ended December 31, 2016 and 2015 and the nine months ended September 30, 2017, we funded~~product. Funding of our business since 2019 has been primarily ~~through:~~provided by:

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~~Revenue of $4.9 million in the first nine months of 2017, and $4.0 million and $8.9 million in fiscal years 2016 and 2015, respectively, generated by sales of our Argus II System,~~

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.

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~~Issuance of common stock in our Rights Offering in June 2016, which generated net proceeds of $19.5 million after offering expenses,~~

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~~Issuance of common stock and warrants in our Rights Offering in March 2017, which generated net proceeds of $19.7 million after offering expenses.~~

On March 23, 2021, we closed our private placement to seven institutional investors of 4,650,000 shares of common stock at an offering 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 ~~financial statements~~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, included in prepaid expenses and other current assets.

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 ~~been presented on~~subsequently satisfied the ~~basis that our business is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.~~ Nasdaq compliance listing.

We are subject to the risks and uncertainties associated with a business with ~~one product line and limited commercial product revenues, including limitations on our operating capital resources and uncertain demand for our products.~~no revenue that is developing a novel medical device. We have incurred recurring operating losses and negative operating cash flows since inception, and we expect to continue to incur operating losses and negative operating cash flows for ~~at least~~ the next few years, as a result of which, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s 2016 consolidated financial statements, has also raised substantial doubt about the Company’s ability to continue as a going concern.

In June 2016, the Company successfully completed a Rights Offering to existing stockholders, raising proceeds of $19.5 million net of cash offering costs, selling 6.0 million shares of common stock at $3.315 per share, representing 85% of the Company’s per share stock price at the close of the Rights Offering.

In March 2017, the Company successfully completed a Rights Offering to existing stockholders, raising proceeds of $19.7 million net of cash offering costs, selling 13.7 million Units at $1.47 per Unit, which was the Company’s per share stock price at the close of the Rights Offering. Each Unit consisted of one share of common stock and one warrant, with a five-year life, to buy an additional share of common stock at $1.47 per share. The Company believes that it has sufficient funds to last through the first quarter of 2018.foreseeable future. To ~~continue business~~finance our operations ~~beyond that point, the Company~~we will need to raise additional capital, which cannot be assured. Our operating plan may change as a result of many factors currently unknown to us, and we will need to seek additional funds through public or private equity offerings or debt ~~and/~~financings, grants, collaborations, strategic partnerships or ~~equity capital.~~other sources. However, ~~there can~~we may be ~~no assurances that the Company will be able~~unable to ~~secure any~~raise additional capital or enter into such ~~additional financing~~other arrangements when needed on ~~acceptable~~favorable terms ~~and conditions,~~ or at ~~all so as~~all. If we are unable to be able to continue its business at current levels past the end of the first quarter of fiscal 2018. If cash resources become insufficient to satisfy the Company’s ongoing cash requirements, the Company wouldobtain funding on a timely basis, we may be required to ~~scale back~~significantly curtail, delay or discontinue ~~its technology and product~~one or more of our research or development programs, ~~and/~~or ~~clinical trials, or obtain funds, if available (although there can~~we may be ~~no certainty), through strategic alliances that may require the Company to relinquish rights to its products, or to discontinue its operations entirely.~~

~~Global Reimbursement~~

Obtaining reimbursement from governmental and private insurance companies is critical to our commercial success. Due to the cost of the Argus II System, our sales would be limited without the availability of third party reimbursement. In the US, coding, coverage, and payment are necessary for the surgical procedure and Argus II system to be reimbursed by payers. Coding has been established for the device and the surgical procedure. Coverage and payment vary by payer. The majority of Argus II patients are eligible for Medicare, and coverage is primarily provided through traditional Medicare, sometimes referred to as Medicare Fee-for-Service (FFS) or Medicare Advantage. A small percentage of patients are covered by commercial insurers.

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~~Medicare FFS patients~~– Coverage is determined by Medicare Administrative Contractors (MACs) that administer various geographic regions of the US. Positive coverage decisions for the Argus II are effective in seven of 12 MAC jurisdictions (comprising 28 states). Effective January 1, 2017, the Centers for Medicare and Medicaid Services (CMS) established a 2017 payment rate of $150,000 for both the procedure and the Argus II Retinal Prosthesis System. On November 1, 2017, CMS posted a final 2018 payment rate of $122,500 for both the procedure and the Argus II Retinal Prosthesis System.

~~Medicare Advantage patients~~– Medicare Advantage plans are required to cover the same benefits as those covered by the MAC in that jurisdiction. For example, if a MAC in a jurisdiction has favorable coverage for the Argus II, then all Medicare Advantage plans in that MAC jurisdiction are required to offer the same coverage for the Argus II. Individual hospitals and ASCs may negotiate contracts specific to that individual facility, which may include additional separate payment for the Argus II implant system. In addition, procedural payment is variable and can be based on a percentage of billed charges, payment groupings or other individually negotiated payment methodologies. Medicare Advantage plans also allow providers to confirm coverage and payment for the Argus II procedure in advance of implantation.

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~~Commercial insurer patients~~~~– Commercial insurance plans make coverage and payment rate decisions independent of Medicare, and contracts are individually negotiated with facility and physician providers.~~

~~The Company employs dedicated employees and consultants with insurance reimbursement expertise engaged~~unable to expand or maintain our operations, maintain our current organization and enhance coverage decisions. Currently, seven Medicare jurisdictions, including CGS (J15 -- Ohio and Kentucky), Palmetto GBA (JM -- Virginia, (excluding Part B for Arlington and Fairfax counties), West Virginia, North Carolina and South Carolina), NGS (J6 -- Minnesota, Illinois and Wisconsin), NGS (JK -- Connecticut, New York, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont), FCSO (JN -- Florida, Puerto Rico and the U.S. Virgin Islands), and Novitas (JH and JL -- Arkansas, Colorado, Delaware, District of Columbia, Louisiana, Maryland, Mississippi, New Jersey, New Mexico, Oklahoma, Pennsylvania, and Texas) provide coverage of the Argus II in 28 states, two territories and the District of Columbia when medically necessary. We are actively engaged with the remaining MACs and are committed to supporting their requests for additional information and clinical evidence. We expect that additional positive coverage decisions will be issued over time but cannot predict timingemployee base or ~~ultimate success with each MAC.~~

Within Europe, we have obtained reimbursement approval or funding in Germany, France, and one region of Italy. In France, the Company was selected to receive the first “Forfait Innovation” (Innovation Bundle) from the Ministry of Health, which is a special funding program for breakthrough procedures to be introduced into clinical practice. As part of this program, the Company is conducting a post-market study in France which has enrolled a total of 18 subjects and will follow them for two years. The French program will fund implantation of up to 18 additional patients that will not be part of the post-market study. After review of the study’s results, we expect Argus II therapy to be covered and funded through the standard payment system in France, however, we can provide no assurance that the French government will continue to fund the Argus II after the first 36 implants.

In December 2016, NHS England announced it would cover 10 Argus implantations as part of a CtE program. The CtE program is especially designed for treatments that show significant promise for the future, while new clinical and patient experience data are collected within a formal evaluation program. This program is similar to the Forfait Innovation program in France. NHS England is known to be under significant financial pressure and also highly selective in adopting innovative technologies – which must demonstrate sufficient value for the cost expended. We expect first implants to occur sometime in 2018.

~~We are also seeking reimbursement approval in other countries including Belgium and Turkey and we are also seeking reimbursement approval in additional regions of Italy.~~

To date, our marketing activities have focused on raising awareness of the Argus II System with potential patients, implanting physicians, and referring physicians. Our marketing activities include exhibiting, sponsoring symposia, and securing podium presence at professional and trade shows, securing journalist coverage in popular and trade media, attending patient meetings focused on educating patients about existing and future treatments, and sponsoring information sessions for the Argus II System. In the United States, our efforts are currently focused on media advertisements dedicated to RP patients and their families. These advertisements are placed in geographic areas where we have Centers of Excellence committed to Argus II.

~~Product and Clinical Development Plans~~

The Argus II System is currently approved for RP patients with bare or no light perception in the US, and in Europe for severe to profound vision loss due to outer retinal degeneration, such as from retinitis pigmentosa (RP), choroideremia, and other similar conditions. The number of people who are legally blind due to RP is estimated to be about 25,000 in the US, 42,000 in Europe, and about 375,000 total worldwide. A subset of these patients would be eligible for the Argus II System since the approved baseline vision for the Argus II System is worse than legally blind (20/200).

The Company believes an opportunity exists to expand the use of its Argus II technology to better sighted individuals with RP who are currently not being treated. To achieve this market expansion, the Company is undertaking multiple clinical data collection efforts and product development efforts to improve the technology’s performance, including:

	●	~~Clinical trials with better-sighted individuals;~~
	●	~~Development of retinal stimulation programs that we believe can achieve improved resolution by adjusting electronic retinal stimulation methods;~~
	●	Redesigns of the externals (glasses, camera, and video processing unit) that will possess processing power many times greater than the current Argus II system, which will enable enhanced image processing support for the commercial implementation of the new retina stimulation protocols, possibly by 2018.

We believe we can further expand our market to include nearly all profoundly blind individuals, other than those who are blind due to preventable diseases or due to brain damage, by developing a visual cortical prosthesis. We refer to this product as the Orion I visual prosthesis system. We estimate that there are approximately 5.8 million people worldwide who are legally blind due to causes other than preventable conditions, RP or AMD. If approved for marketing, the FDA and other regulatory agencies will determine the subset of these patients who are eligible for the Orion I basedotherwise capitalize on our ~~clinical trial and the associated results.~~

Our objective in designing and developing the Orion I visual prosthesis system is to bypass the optic nerve and directly stimulate the part of the brain responsible for vision. In October 2017, we received final IDE approval from the FDA to begin a human feasibility study of the Orion I visual prosthesis system. This study will confirm initial findings in our human pilot study we announced in the fourth quarter of 2016 and provide the first human data of a fully functional wireless visual cortical stimulator system including the external video camera system. We expect to implant and activate our Orion I visual prosthesis system in human subjects in late 2017. This study will provide the first human data of a fully functional wireless visual cortical stimulator system including an external video camera system. This initial study in a small number of subjects, if successful, should also form the basis for an expansion to a pivotal clinical trial in 2018.

We began a five-subject pilot study in the United Kingdom in June 2015, to determine the utility of the Argus II System for use in persons suffering from dry AMD. In the second quarter of 2016 we completed enrollment and continue to track the subjects via the site in Manchester. The subjects have reported the ability to integrate their native peripheral vision with their artificial central vision. Subjects also report that they enjoy using their Argus system. To date, however, the subjects have not demonstrated significant objective benefit over their residual vision when using the Argus II. We plan to continue testing these subjects and will submit a revised clinical protocol in 2017. Our approaches to improving the effective resolution in RP patients may work in AMD patients,business opportunities, as desired, which could help us demonstrate objective benefit over their residual vision. The revised protocol will request approval to test new retinal stimulation programs with the existing subjects with the belief they may benefit. If this clinical testing is successful, we plan to enroll additional patients inmaterially and adversely affect our ~~pursuit~~business, financial condition and results of ~~a solution for this large patient population.~~operations.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States ~~or GAAP, requires~~(“GAAP”) and the requirements of the United States Securities and Exchange Commission require management to make estimates, assumptions and ~~assumptions~~judgments that affect the amounts, liabilities, revenue and expenses reported in the financial statements and the notes to the financial statements. On an ongoing basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~ 2020.

There have been no material changes to our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2021 from those disclosed in the Annual Report on 10-K for the year ended December 31, 2020.

Results of Operations

Net sales.Our net sales ~~are derived~~consisted of revenue primarily from the sale of our Argus II ~~System.~~product which is no longer marketed. We ~~began selling our products in Europe in 2011, Saudi Arabia in 2012, the United States and Canada in 2014, Turkey in 2015, Russia, South Korea and Taiwan in 2017. Our objective is~~have discontinued sales of this product to ~~increase our product revenue over the next several years as we pursue commercialization~~focus on development of ~~our product, as our product becomes more well-known and accepted in the market, and as insurance coverage becomes more widespread.~~Orion.

Cost of sales.Cost of sales includes the salaries, benefits, material, overhead, third party costs, warranty, charges for excess and obsolete inventory, and other costs required to make ~~our~~the Argus II ~~System~~system at our ~~Sylmar,~~Los Angeles, California facility. ~~In the second quarter of 2016, due to lower implant rates~~Our product involves technologically complex materials and revenue, we decreased production output and increased our reserve for slow-moving inventory. As a result of the lower production levels, we have been incurring expenses for unabsorbed overhead charges. Beginning in the first quarter of 2017, based on our rolling 12-month sales forecasts, we have been reducing our reserve for slow moving inventory, which has the effect of offsetting theprocesses. We record cost of ~~goods shipped for revenue in~~sales when products are implanted, which may differ from the ~~period. We expect~~period we are able to ~~work through~~record revenue. Such timing differences may cause our ~~slow-moving inventory and resume normal production when and if sales orders increase. Our ability~~reported results of operations to ~~generate a gross profit in future periods will depend on our ability~~be difficult to ~~(i) generate higher revenues and (ii)~~compare from period to produce our product in sufficient quantities that will allow us to absorb all production costs in a given period by spreading our costs over a larger production base, which will lower our cost per unit.period.

Operating Expenses.We generally recognize our operating expenses as ~~we incur them~~incurred in four general operational categories: research and development, clinical and regulatory, sales and marketing, and general and administrative. Our operating expenses also include a non-cash component related to the amortization of ~~deferred~~ stock-based compensation ~~allocated to~~for research and development, clinical and regulatory, sales and marketing, and general and administrative personnel. ~~From time to time we~~We have received grants from institutions or agencies, such as the National Institutes of Health, to help fund the some of the cost of our development efforts. We have recorded the amount of funding received from these grants as ~~offsets~~reductions to ~~the costs as they are incurred to complete the related work.~~operating expenses.

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Research and development expenses consist primarily of employee compensation ~~materials,~~ and consulting costs related to the design, development, and enhancements of our current and potential future products, offset by grant revenue received in support of specific research projects. We expense our research and development costs as they are incurred. ~~We expect~~Due to the recent downsizing of our business, we are currently evaluating the path forward for our research and development ~~expenses to increase in~~activities for Orion, including the ~~future as we pursue further enhancements of our existing product and develop technology~~potential for ~~our potential future products, such as~~collaboration with 3^rdparties and/or outsourcing the ~~Orion I visual cortical prosthesis. We also expect to receive additional grants in the future that will be offset primarily against research and development costs.~~engineering work for Orion.

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Clinical and regulatory expenses consist primarily of salaries, travel and related expenses for personnel engaged in clinical and regulatory functions, as well as internal and external costs associated with conducting clinical trials and maintaining relationships with regulatory ~~agencies.~~agencies offset by grant revenue received in support of specific clinical research products. We expect clinical and regulatory expenses to ~~increase~~be lower in the short-run as we ~~assess the safety and efficacy of enhancements~~have closed our clinical study activities related to ~~our current~~ Argus II ~~System, seek~~and Orion clinical site visits were temporarily paused due to ~~expand~~COVID-19. In the ~~indications for the Argus II System, such as AMD,~~long-run, we expect clinical and ~~prepare~~regulatory expenses to ~~initiate~~increase if and when we conduct a pivotal clinical ~~studies~~study of ~~potential future products such as the Orion I visual cortical prosthesis.~~Orion.

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Sales and marketing expenses consist primarily of salaries, commissions, travel and related expenses for personnel engaged in sales, marketing, market access and business development functions, as well as costs associated with promotional and other marketing ~~activities.~~activities including the cost of units consumed as demos or samples. We expect sales and marketing expenses to ~~increase~~be significantly lower in 2021 than in 2020 as we ~~hire additional~~no longer employ sales and marketing personnel ~~initiate additional marketing programs, develop relationships with new distributors,~~ and ~~expand~~no longer market the ~~number of medical centers that buy and implant our~~ Argus II ~~System and any future products.~~product.

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General and administrative expenses consist primarily of salaries and related expenses for executive, legal, finance, human resources, information technology and administrative personnel, as well as recruiting and professional fees, patent filing and annuity costs, insurance costs and other general corporate expenses, including rent. We expect general and administrative expenses to ~~increase~~be significantly lower in 2021 as we ~~add personnel and incur additional costs related to the growth of our business and operate as a public company.~~have significantly reduced staff.

Comparison of the Three Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020

~~Worldwide commercial implant volume for the three and nine months ended September 30, 2017 was as follows:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Europe and the Middle East 4 10 16 25
Asia 1 — 5 —
Canada 0 — 5 1
United States 7 4 19 9
Total 12 14 45 35

~~Net Sales.~~Net sales increased by $430,000, or 36%, from $1,180,000 in the third quarter of 2016 to $1,610,000 in the third quarter of 2017, which was the result of fewer implants offset by a higher amount of revenue per implant in the current year quarter.

In the third quarter implant volume outside of North America declined from 10 implants in 2016 to five implants in 2017 due, in part, to summer seasonality typical of the European market. In the U.S., we had seven implants in the third quarter of 2017 compared to four in the third quarter of 2016, as our Centers of Excellence strategy continued to gain traction. Based on implant activity through October, and the number of implants scheduled for the remainder of the quarter, we expect to see growth in implants in the fourth quarter of 2017 relative to the third quarter.

Revenue recognized per implant was $134,000 in the third quarter of 2017 compared to $84,000 in the third quarter of 2016. The higher revenue per implant is due mainly to (i) a higher mix of implants in the U.S. and Asia where the prices tend to be higher, (ii) the higher U.S. Medicare reimbursement level in 2017 compared to 2016, and (iii) higher deferred revenue recognized in the third quarter of 2017 compared to same period of 2016. We expect our average revenue per implant for the remainder of 2017 to be in a range of $100,000 to $120,000, depending on the geographic mix of implants. In 2018, with the lower CMS rate discussed above, we expect that our average revenue per implant will be in the range of $90,000 to $105,000, depending on the geographic mix of implants.

~~Cost of sales.~~Cost of sales decreased by approximately $1,614,000, or 62%, from $2,615,000 in the third quarter 2016 to $1,001,000 in the third quarter of 2017. Cost of sales in the third quarter of 2017 included a charge of $498,000 for unabsorbed production costs and a credit of $275,000 for the partial reversal of a reserve for slow moving inventory. Cost of sales in the third quarter of 2016 included a charge of $665,000 for unabsorbed production costs and approximately $1,044,000 to increase the reserve for slow moving inventory. Excluding these costs, cost of goods sold decreased by approximately $128,000, or 14%, from $906,000 in the third quarter of 2016 to $778,000 in the third quarter of 2017. The decrease in costs of goods sold, excluding the impact of unabsorbed production costs and inventory reserves, is consistent with the 14% decrease in implants from 14 in the third quarter of 2016 to 12 in the third quarter of 2017. For the next few quarters we expect that we will continue to keep our production levels low which will result in the generation of significant unabsorbed production costs. We also expect that we will continue to reverse our reserve for excess inventory, as we sell our existing supply of Argus II systems, which will offset the cost of products that we ship.

Research and development expense.Research and development expense increased by ~~$238,000,~~$0.4 million, or ~~15%~~115%, to ~~$1,826,000~~$0.7 million in the ~~third~~second quarter of ~~2017 as compared to $1,588,000~~2021 from $0.3 million in the ~~third~~second quarter of 2016. These expense amounts include $107,000 of offsetting grant revenue in the third quarter of 2017 and $713,000 of offsetting grant revenue in the third quarter of 2016. Excluding the impact of grant revenues, research and development expense decreased by $368,000, or 16%, from $2,301,000 in the third quarter of 2016 to $1,933,000 in the third quarter of 2017. This decrease from the prior year is primarily attributable to $63,000 of higher people-related2020. The costs including compensation, benefits and travel, offset in part by $387,000 of lower costs for supplies and product prototypes. While we expect research and development expense to remain fairly constant for the remainder of the year, we expect that research and development costs will increase in future periodsincreased as we ~~continue~~restarted our curtailed activity due to ~~enhance our current products and develop new products.~~ COVID-19.

Clinical and regulatory expense.Clinical and regulatory expense ~~increased $20,000,~~decreased $0.1 million, or 3%39%, ~~from $609,000~~to $0.3 million in the ~~third~~second quarter of ~~2016 to $629,000~~2021 from $0.4 million in the ~~third~~second quarter of ~~2017.~~2020. This decrease is attributable to decreased costs associated with the Orion feasibility study and increased offsets of grant funds. We expect clinical and regulatory costs to ~~increase~~continue in the future at a reduced level as ~~(i)~~ we resume activities for our Early Feasibility Study.

General and administrative expense. General and administrative expense decreased $0.2 million, or 12%, to $1.3 million in the second quarter of 2021 from $1.5 million in the same period of 2020. General and administrative expenses decreased as a result of staffing reductions.

Restructuring charges. We recorded a restructuring charges of $0.8 million in the second quarter of 2020 comprised of $0.2 million of material and overhead costs in connection with our decision to no longer market Argus II and a $0.6 million cash charge for severance compensation and other associated costs all of which were substantially settled by June 30, 2020.

Comparison of the Six Months Ended June 30, 2021 and 2020

Research and development expense. Research and development expense decreased by $3.2 million, or 76%, to $1.0 million in the first six months 2021 from $4.2 million in the same period of 2020. The costs decreased due to our staffing reductions. We expect our research and development expenses to increase as we restart our ~~implant run rate~~curtailed activity based upon our revised development plans.

Clinical and ~~enroll more patients~~regulatory expense. Clinical and regulatory expense decreased $1.0 million, or 78%, to $0.3 million in ~~post-market clinical studies for regulatory authorities, and (ii) we conduct new clinical trials~~the first six months of 2021 from $1.3 million in the same period of 2020. This decrease is attributable to ~~assess new products such as~~decreased costs associated with the Orion ~~I, test further enhancements~~feasibility study and increased offsets of grant funds. We expect clinical and regulatory costs to ~~our existing product, and begin new trials for better sighted patients.~~continue in the future at a reduced level.

Selling and marketing expense.Selling and marketing expense ~~increased $113,000, or 5%, from $2,262,000~~was zero in the ~~third quarter~~first six months of ~~2016~~2021 as compared to ~~$2,375,000~~$0.7 million in the ~~third quarter~~same period of 2017. This increase in costs was primarily the result of $326,000 more in people related costs, including salaries, benefits, stock based compensation, travel and commissions partially offset by $248,000 in lower costs for consultants related to items such as customer outreach programs and marketing strategies in the U.S. and foreign markets. While we expect these costs to increase in the future as we increase our selling and marketing resources to accelerate the commercialization of our product, we2020. We expect selling and marketing expense to ~~decrease over time when expressed as a percentage of product revenue.~~

~~General and administrative expense~~. General and administrative expense decreased $77,000, or 3%, from $2,605,000 in the third quarter of 2016 to $2,528,000 in the third quarter of 2017. This decrease is primarily attributable to decreases in patent costs, business insurance and bad debt expense offset, partially, by increases in people costs and outside legal expense. Whilecease until we ~~expect these costs to increase in the future, we expect general and administrative expense to decrease over time when expressed as a percentage of product revenue.~~

~~Comparison of the Nine Months Ended September 30, 2017 and 2016~~

~~Net Sales.~~Our net sales increased from $3,270,000 in the first nine months of 2016 to $4,855,000 in the first nine months of 2017, an increase of $1,585,000, or 48%. This increase in net sales was due to an increase in the number of implants to 45 in the first nine months of 2017 compared to 35 in the first nine months of 2016 coupled with a higher average revenue per implant.

In the first nine months of 2017 implant volume in the North American market increased from 10 to 24 units. This increase was driven mainly by the U.S. where we had 19 implants in the first nine months of 2017 compared to nine implants in the first nine months of 2016, asbegin marketing our Centers of Excellence strategy continued to gain momentum. In Europe, the Middle East and Asia, we saw implant volume decrease slightly from 25 units in first nine months of 2016 to 21 units in the first nine months of 2017.

In the first nine months of 2017, revenue recognized per implant of $108,000 was compared to $93,000 in first nine months of 2016. The higher revenue per implant is due mainly to (i) a higher mix of implants in the North America and Asia where the prices tend to be higher, and the (ii) the higher U.S. Medicare reimbursement level in 2017 compared to 2016. We expect our average revenue per implant for the remainder of 2017 to be in a range of $100,000 to $120,000, depending on the geographic mix of implants. In 2018, with the lower CMS rate discussed above, we expect that our average revenue per implant will be in the range of $90,000 to $105,000, depending on the geographic mix of implants.

~~Cost of sales.~~Cost of sales decreased by approximately $3,513,000, or 52%, from $6,768,000 in the first nine months of 2016 to $3,255,000 in the first nine months of 2017. Cost of sales in the first nine months of 2017 included charges of $2,027,000 for unabsorbed production costs and a benefit of approximately $1.7 million for the partial reversal of a reserve for slow moving inventory. Cost of sales in the first nine months of 2016 included charges of $2,099,000 for unabsorbed production costs and approximately $2.6 million to increase the reserve for slow moving inventory. Excluding these costs, cost of goods sold increased by approximately $901,000 or 44%, from $2,058,000 in the first nine months of 2016 to $2,959,000 in the first nine months of 2017. This increase in costs of goods sold, excluding the impact of unabsorbed production costs and inventory reserves, compares to the 29% increase in implants from 35 in the first nine months of 2016 to 45 in the first nine months of 2017. For the next few quarters we expect that we will continue to keep our production levels low which will result in the generation of significant unabsorbed production costs. We also expect that we will continue to reverse our reserve for excess inventory, as we sell our existing supply of Argus II systems, which will offset the cost of products that we ship.

~~Research and development expense.~~Research and development expense, net of grant revenue, increased by $2,356,000, or 72%, from $3,266,000 in the first nine months of 2016 to $5,622,000 in the first nine months of 2017. In the first nine months of 2017, we utilized $235,000 of grant funds to offset costs versus $1,985,000 of grant funds utilized in the first nine months of 2016. Excluding this grant revenue offset, there was an increase in research and development expense of $606,000, or 12%, from $5,251,000 in the first nine months of 2016 to $5,857,000 in the first nine months of 2017. This increase is primarily the result of increased expenditures of $582,000 for compensation costs and $339,000 for outside services, including consultants, partially offset by $389,000 of lower costs for supplies and product prototypes. We expect to see research and development costs remain at the 2017, or higher, levels as we continue to invest in improvements to our Argus II product and development of our new Orion ~~cortical implant.~~

~~Clinical and regulatory expense.~~Clinical and regulatory expense decreased by $28,000, or 1%, from $1,955,000 in the first nine months of 2016 to $1,927,000 in the nine months of 2017. We expect clinical and regulatory costs to increase in upcoming quarters as we (i) conduct clinical trials to assess new products such as the Orion cortical implant, (ii) test enhancements to our existing products, (iii) continue to assess the safety and efficacy of our current product for treating blindness due to age related macular degeneration, and (iv) conduct clinical trials to determine whether better-sighted patients would benefit from our current product.

~~Selling and marketing expense.~~Selling and marketing expense increased by $584,000, or 9%, from $6,473,000 in the first nine months of 2016 to $7,057,000 in the first nine months of 2017. This increase was primarily due to $823,000 in higher people related costs in 2017 as compared to 2016, including higher salaries, stock based compensation, travel and commissions, offset in part by $250,000 less spent out outside services for items such as customer outreach and reimbursement consultants. While we expect these costs to increase in the future as we increase our selling and marketing resources to accelerate the commercialization of our product, we expect selling and marketing expense to decrease over time when expressed as a percentage of product revenue.

General and administrative expense.General and administrative expense increased ~~by $535,000,~~$0.3 million, or 7%8%, ~~from $7,635,000~~to $3.8 million in the first ~~nine~~six months of ~~2016~~2021 from $3.5 million in the same period of 2020. This increase is attributable to ~~$8,170,000~~increased legal costs and termination fee associated with our termination of the MOU of $1.0 million. General and administrative expenses also decreased from staffing reductions.

Restructuring charges. We recorded non-cash restructuring charges of $1.2 million in the first ~~nine~~six months of ~~2017. This increase is primarily attributable~~2020 comprised of $0.5 million to ~~$488,000~~fully reserve our inventory in connection with our decision to no longer market Argus II and $0.7 million to write-down our fixed assets that are not directly involved in the development of ~~higher personnel~~Orion and a $0.2 million in material and overhead costs ~~in 2017~~associated with Argus II and ~~$478,000 more~~a $0.8 million cash charge for ~~outside services, including legal~~severance compensation and ~~consulting costs, partially offset by a $317,000 decrease in bad debt expense.~~ other associated costs.

Liquidity and Capital Resources

Our ~~consolidated~~ financial statements have been ~~presented~~prepared on ~~the basis of our being~~ a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have experienced recurring operating losses and negative operating cash flows since inception, and have financed our working capital requirements through the recurring sale of our equity securities in both public and private offerings. As a result, our independent registered public accounting firm, in its report on our 2016 consolidated financial statements, has raised substantial doubt about ourOur ability to continue as a going concern ~~(see “Going Concern” above). In March 2017, the Company successfully completed a Rights Offering~~is dependent on our ability to ~~existing shareholders, raising proceeds~~develop profitable operations through implementation of $19.7 million net of cash offering costs, and selling 13.7 million Units at $1.47 per Unit. Each Unit consisted of a share of common stock and a five-year warrant with an exercise price of $1.47. Based upon this funding, management believes it has sufficient funds to through the first quarter of 2018. In order to continueour business ~~operations past that point, we will need to~~initiatives and/or raise additional ~~debt and/or equity capital. However,~~capital, however, there can be no assurances that we will be able to ~~secure~~do so.

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 stock at an offering price of $6.00 per share for aggregate net proceeds of approximately $24.5 million. We believe the financing provides sufficient working capital to sustain approximately eighteen months of operations.

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 $6.6 million.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward- looking statement that involves risks and uncertainties, and actual results could vary materially. Conducting clinical trials is a time- consuming, expensive and uncertain process that takes many years to complete and we may never generate the necessary data or results required to obtain marketing approval. We do not expect revenues until we are successful in completing the development and obtaining marketing approval for Orion. We expect expenses to increase in connection with our ongoing activities, particularly as we continue clinical trials of Orion, initiate new research and development projects and seek marketing approval for any product candidates that we successfully develop. In addition, if we obtain marketing approval for Orion, we expect to incur significant additional expenses related to sales, marketing, distribution and other commercial infrastructure to commercialize such product. In addition, our product candidates, if approved, may not achieve commercial success. We incur significant costs associated with operating as a public company in a regulated industry.

Until such time, if ever, we can generate substantial product revenues, we anticipate that we will seek to fund our operations through public or private equity or debt financings, grants, collaborations, strategic partnerships or other sources. However, we may be unable to raise additional ~~financing~~capital or enter into such other arrangements when needed on ~~acceptable~~favorable terms ~~and conditions,~~ or at all. To the extent that we raise additional capital through the sale of equity, convertible debt or other equity-linked securities, the ownership interests of some or all of our common stockholders will be diluted, the holders of new equity securities may have priority rights over our existing stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If ~~cash resources become insufficient to satisfy our ongoing cash requirements, then~~adequate funds are not available, we ~~would~~may be required to ~~scale back~~further curtail operations significantly or ~~discontinue our technology and product development programs and/or clinical trials, or~~to obtain funds ~~if available (although there can be no certainty),~~by entering into agreements on unattractive terms. If, for example, we raise funds through additional collaborations, strategic alliances ~~that~~or licensing arrangements with third parties, we may ~~require us~~have to relinquish valuable rights to our ~~products,~~technologies, future revenue streams, research programs or product candidates, or to ~~discontinue~~grant licenses on terms that may not be favorable to us. Our inability to raise capital could have a material adverse effect on our ~~operations entirely.~~business, financial condition and results of operations.

Cash and ~~money market funds~~cash equivalents increased by ~~$2.4~~$70.6 million ~~or 22%,~~ from ~~$10.9~~$3.2 million atas of December 31, ~~2016~~2020 to ~~$13.3~~$73.8 million ~~at September~~as of June 30, ~~2017.~~2021. Working capital was ~~$11.6~~$71.8 million ~~at September~~as of June 30, ~~2017,~~2021, as compared to ~~$9.6~~a deficit of $0.9 million atas of December 31, ~~2016,~~2020, an increase of ~~$2.0 million, or 21%.~~$72.7 million. We use our cash ~~money market funds~~and cash equivalents and working capital to fund our operating activities.

Cash Flows from Operating Activities

During the first ~~nine~~six months of ~~2017,~~2021, we used ~~$17.2~~$4.9 million of cash in operating activities, consisting primarily of a net loss of ~~$21.1~~$5.1 million, offset by non-cash charges which provided cash of ~~$1.5~~$0.1 million for depreciation and amortization of property and equipment, stock-based compensation, ~~excess inventory reserve, bad debt recovery~~change in right of use assets and ~~common stock issuable and increased~~ by a net change in operating assets and liabilities of ~~$2.4~~$0.1 million. During the first ~~nine~~six months of ~~2016,~~2020, we used ~~$18.1~~$13.9 million of cash in operating activities, consisting primarily of a net loss of ~~$22.8~~$12.0 million, offset by non-cash charges which provided cash of ~~$5.9~~$1.6 million for depreciation and amortization of property and equipment, stock-based compensation, ~~bad debt expense, excess inventory reserves~~change in right of use assets, impairment charge and ~~common stock issuable, and decreased~~offset by a net change in operating assets and liabilities of ~~$1.2~~$3.5 million.

Cash Flows from Investing Activities

~~During~~Cash used for investing activities in the first ~~nine~~six months of ~~2017, investing activities used $2.5 million~~2021 was zero and was $331,000 in the first six months of ~~cash, reflecting $2.3 million used by the purchase of money market investments and $0.2 million used~~2020 for the purchase of ~~equipment. This compares to the first nine months of 2016 when investing activities used $2.2 million, reflecting $1.8 million used by the purchase of money market investments~~property and ~~$0.4 million used for the purchase of~~ equipment.

Cash Flows from Financing Activities

~~During the first nine months of 2017, finance activities provided $19.9 million of cash, of which $19.7 million was from the Rights Offering and $0.2 million was from employee stock plan purchases.~~ Financing activities provided ~~$20.3~~$75.6 million of cash in the first ~~nine~~six months of ~~2016,~~2021 consisting of ~~which $19.5~~$77.8 million ~~was provided by a Rights Offering and $0.8 million~~of net proceeds from the ~~exercise~~sale of common stock ~~options~~ and ~~employee~~$25,000 from the proceeds from warrant exercises offset by the repayment of debt of $2.2 million. Financing activities provided $6.4 million of cash in the first six months of 2020 consisting of $6.7 million of net proceeds from the sale of common stock ~~plan purchases.~~offset by the use of $281,000 for the repurchase of partial shares in connection with our reverse stock split and the repurchase of ESPP shares.

Off-Balance Sheet Arrangements

~~We do~~At June 30, 2021, we did not have any transactions, obligations or relationships that constitute off-balance sheet arrangements.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Item3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

The primary objective of our investment activities is to maintain the safety of principal and preserve liquidity without incurring significant risk. We invest cash in excess of our current needs in money market funds. As of ~~September~~June 30, ~~2017,~~2021, our investments consisted solely of money market funds.

Exchange Rate Sensitivity

~~During the nine months ended September 30, 2017, approximately 69% of our revenue was denominated in U.S. dollars, 27% in Euros, and 4% in Canadian dollars. In the same time period the~~The majority of our operating expenses were denominated in U.S. dollars. We have not entered into foreign currency forward contracts to hedge our operating expense exposure to foreign currencies, but we may do so in the future.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Acting Chief Executive Officer (“CEO”) and our Acting Chief ~~Financial~~Accounting Officer (“CAO”), evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. As of ~~September~~June 30, ~~2017,~~2021, based on the evaluation of these disclosure controls and procedures, our CEO and ~~in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer~~CFO have concluded that our disclosure controls and procedures were ~~not effective.~~

~~Remediation Plan~~

As of September 30, 2017, there were control deficiencies which constituted material weaknesses in our internal control over financial reporting. Management has taken, and is taking steps to strengthen our internal control over financial reporting. Specifically:

●

~~Control over Financial Reporting~~~~. The Company does not have complete written documentation of its internal control policies, procedures and controls and has not fully completed its testing of its key controls. Management evaluated~~effective at the impact of its failure to have fully tested its internal controls and procedures and has concluded that the control deficiency that resulted represented a material weakness and that our internal control over financial reporting was not effective as of the end of the period covered by this Quarterly Report on Form 10-Q. We will continue to work on completing the documentation and testing of our internal controls.

●

~~Updating of Standard Costs.~~ It is a customary practice for manufacturing companies to update their standard costs on a regular basis (at least annually) to ensure that inventory costs are accurately and properly stated. During 2016, due to (i) the limited levels of production during the year, and (ii) the fact the Company had established reserves against approximately 61% of the cost of year-end inventory, which reserved for the cost of nearly all of the goods manufactured in 2016, the Company did not update its standard costs during fiscal 2016. The Company is currently reviewing it standard costs and expects to adjust its current standard costs before the end of 2017. The impact to the financial statements, taken as a whole, that would result from such an adjustment is expected to be immaterial.

While we have taken certain actions to address the material weaknesses identified, additional measures may be necessary as we work to improve the overall effectiveness of our internal controls over financial reporting. Through the actions in the remediation plan reported in our Annual Report on Form 10-K for the year ended December 31, 2016 and in our Quarterly Report on Form 10-Q for the period ended September 30, 2017, we believe that we are addressing the deficiencies that affected our internal control over financial reporting for the year and period then ended however we have not completed all of the corrective processes and procedures as contemplated herein for the identified material weaknesses. Until the remediation plan is fully implemented and operating for a sufficient period of time, we will not be able to conclude that the material weaknesses have been remediated. We will continue to monitor and assess our remediation activities to address the material weaknesses discussed above through remediation as soon as practicable and to provide reasonable assurance ~~that they will prevent or detect material error in the financial statements.~~

level.

Changes in Internal Control over Financial Reporting

~~Other than changes that have~~There has been ~~enacted pursuant to our remediation plan, there were~~ no ~~changes~~change in our internal control over financial reporting during the ~~quarter~~six months ended ~~September~~June 30, ~~2017~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are updating our internal control environment to address changes in our risks in financial reporting to accommodate our reductions in operating activities, reductions in staffing levels, and segregation of duties. Such changes may result in new or reduced controls.

Inherent Limitations on Effectiveness of Controls

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~PART~~PART II-OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1.Legal Proceedings

~~Twenty-one~~Four oppositions ~~have been~~ filed by ~~a third-party~~Pixium Vision are pending in the European Patent Office, each challenging the validity of a European patent owned ~~or exclusively licensed~~ by ~~the Company.~~us. The ~~outcome~~outcomes of the challenges isare not certain, however, if successful, they may affect ~~the Company’s~~our ability to block competitors from utilizing ~~some of its~~our patented ~~technology in Europe. Management of the Company believes that~~technology. We believe a successful challenge ~~or challenges~~ will not have a material effect on ~~the Company’s~~our ability to manufacture and sell ~~its~~our products, or otherwise have a material effect on ~~the Company’s~~our operations.

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.

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 ~~party~~considering its responses, however the Company believes that the claims for compensation are without merit and intends to ~~litigation arising~~defend vigorously.

From time to time, we may be involved in a variety of legal proceedings and claims relating to securities laws, product liability, patent infringement, contract disputes, employment matters and other matters relating to various claims that arise in the ~~ordinary~~normal course of ~~business.~~our business in addition to governmental and other regulatory investigations and proceedings. It is ~~management’s~~our opinion that the outcome of such matters will not have a material adverse effect on our results of operations, however, the ~~Company’s financial statements.~~results of litigation, proceedings, disputes 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.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

~~We incorporate herein by reference the~~There have been no material changes in information regarding our risk factors ~~included in~~as described: Item 1A of our Annual Report on Form 10-K ~~which we~~as filed with the ~~Securities and Exchange Commission~~SEC on March 16, ~~2017.~~2021 and any subsequent filings.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~Not applicable.~~None

~~Item 3.~~

~~Defaults upon Senior Securities~~

Item 3.Defaults upon Senior Securities

~~Not applicable.~~None.

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

~~Item 5.~~

~~Other Information~~

Item 6.Exhibits

On June 20, 2017, Thomas B. Miller, Chief Financial Officer of the Company, notified the Company that he was submitting his resignation as Chief Financial Officer to pursue other opportunities. Mr. Miller agreed to remain in his current role during a transition period. Mr. Miller’s departure did not result from a disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

~~Item 6.~~

~~Exhibits~~

EXHIBIT INDEX

Exhibit No.		Exhibit Description
~~3.1~~		~~Restated Articles of Incorporation of the Registrant. (1)~~
~~3.2~~		~~Amended and Restated Bylaws of the Registrant, as currently in effect. (1)~~
31.1		Certification of Principal Executive Officer of Second Sight Medical Products, Inc. pursuant to Section 302 of Sarbanes-Oxley Act of 2002.*

31.2		Certification of Principal Financial and Accounting Officer of Second Sight Medical Products, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certifications of Principal Executive Officer and Principal Financial and Accounting Officer of Second Sight Medical Products, Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
~~101.INS~~
101.INS		XBRL Instant Document.*
~~101.SCH~~
101.SCH		XBRL Taxonomy Extension Schema Document.*
~~101.CAL~~
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*
~~101.DEF~~
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*
~~101.LAB~~
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*

*	Included herein.

(1) Incorporated by reference to the registrant’s registration statement on Form S-1, file no. 333-198073, originally filed with the Securities and Exchange Commission on August 12, 2014, as amended.

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date

/s/ ~~Jonathan Will McGuire~~Scott Dunbar	Acting Chief Executive Officer ~~and Director~~	~~November 3,2017~~ August 13, 2021
~~Jonathan Will McGuire~~ Scott Dunbar	(Principal Executive Officer)

/s/ ~~Thomas B. Miller~~Edward Sedo	Acting Chief ~~Financial~~Accounting Officer	~~November 3~~,~~2017~~ August 13, 2021
~~Thomas B. Miller~~ Edward Sedo	(Principal Financial and Accounting Officer)

Large accelerated filer ☐	☐	Accelerated filer ☒	☐
Non-accelerated filer ☐	~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company	☒
Emerging growth company	☐

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017 (Unaudited)~~2021 (unaudited) and December 31, ~~2016~~2020		3
	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 (Unaudited)~~2020 (unaudited)		4
	Condensed Consolidated Statements of Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 (Unaudited)~~2020 (unaudited)		5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for each of the ~~nine~~three-month periods ended during the six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 (Unaudited)~~2020 (unaudited)		6
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 (Unaudited)~~2020 (unaudited)		7
	~~Notes to Condensed Consolidated Financial Statements~~		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2523

Item 4.	Controls and Procedures		2623

~~Part~~PART II	OTHER INFORMATION

Item 1.	Legal Proceedings		2725
~~Item 1A.~~	~~Risk Factors~~		27
Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2725

Item 3.	Defaults Upon Senior Securities		2725

Item 4.	Mine Safety Disclosures		2725
~~Item 5.~~	~~Other Information~~		28
Item 6.5.	~~Exhibits~~Other Information		2825
	~~Signatures~~
Item 6.	29Exhibits	26

SIGNATURES		27

	September 30,			December 31,			June 30,			December 31,
	2017			2016			2021			2020
	(Unaudited)						(unaudited)
ASSETS
Current assets:
Cash	$	639		$	539
Money market funds		12,705			10,336
Accounts receivable, net		668			274
Inventories, net		3,245			3,416
Cash and cash equivalents							$	73,845		$	3,177
Prepaid expenses and other current assets		462			717			1,593			1,092

Total current assets		17,719			15,282			75,438			4,269

Property and equipment, net		1,327			1,489			135			174
Right-of-use assets, net								311			—
Deposits and other assets		35			39			32			17

Total assets	$	19,081		$	16,810		$	75,916		$	4,460

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	826		$	1,156		$	670		$	486
Accrued expenses		2,330			2,088			1,126			875
Accrued compensation expense		2,266			1,600			424			173
Accrued clinical trial expenses		623			629			933			1,063
Deferred revenue		64			85
Deferred grant revenue		—			104

Current operating lease liabilities								173			—
Current debt								—			2,200
Contract liabilities								335			335
Total current liabilities		6,109			5,662			3,661			5,132

Long term operating lease liabilities								151			—
Total liabilities								3,812			5,132
Commitments and contingencies

Stockholders’ equity:
Preferred stock, no par value, 10,000 shares authorized; none outstanding		—			—
Common stock, no par value; 200,000 shares authorized; shares issued and outstanding: 56,806 and 42,701 at September 30, 2017 and December 31, 2016, respectively		200,867			186,769
Common stock to be issued		86			153
Stockholders’ equity (deficit):
Preferred stock, 0 par value, 10,000 shares authorized; NaN outstanding								—			—
Common stock, 0 par value; 300,000 shares authorized; shares issued and outstanding: 39,409 and 23,214 as of June 30, 2021 and December 31, 2020, respectively								347,940			270,126
Additional paid-in capital		39,559			30,697			49,352			49,314
Notes receivable to finance stock option exercises		—			(2	)
Accumulated other comprehensive loss		(572	)		(608	)		(387	)		(448	)
Accumulated deficit		(226,968	)		(205,861	)		(324,801	)		(319,664	)

Total stockholders’ equity		12,972			11,148

Total stockholders’ equity (deficit)								72,104			(672	)
Total liabilities and stockholders’ equity	$	19,081		$	16,810		$	75,916		$	4,460


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net sales	$	0		$	0			0			0
Cost of sales		0			0			0			0
Gross profit		0			0			0			0

Operating expenses:
Research and development, net of grants		695			323			1,029			4,210
Clinical and regulatory, net of grants		263			429			300			1,343
Selling and marketing		—			—			—			701
General and administrative		1,338			1,516			3,810			3,537
Restructuring charges		—			848			—			2,229
Total operating expenses		2,296			3,116			5,139			12,020

Loss from operations		(2,296	)		(3,116	)		(5,139	)		(12,020	)
Interest income		2			16			2			34

Net loss	$	(2,294	)	$	(3,100	)	$	(5,137	)	$	(11,986	)

Net loss per common share – basic and diluted	$	(0.08	)	$	(0.15	)	$	(0.20	)	$	(0.67	)

Weighted average common shares outstanding – basic and diluted		28,667			20,337			26,117			17,993


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net loss	$	(2,294	)	$	(3,100	)		(5,137	)		(11,986	)

Other comprehensive income (loss):
Foreign currency translation adjustments		25			10			61			29
Comprehensive loss	$	(2,269	)	$	(3,090	)	$	(5,076	)	$	(11,957	)


	Common Stock						Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount			Capital		Loss			Deficit			Equity(Deficit)
Balance, December 31, 2019		15,643		$	264,008		$	48,613	$	(562	)	$	(304,784	)	$	7,725
Repurchase of fractional shares in connection with reverse stock split		(2	)		(11	)		—		—			—			(11	)
Issuance of shares of common stock		1			6			—		—			—			6
Release of restricted stock units		15			—			—		—			—			—
Stock-based compensation expense		—			—			279		—			—			279
Net loss		—			—			—		—			(8,886	)		(8,886	)
Foreign currency translation adjustment		—			—			—		19			—			19
Balance, March 31, 2020		15,657		$	264,003		$	48,892	$	(543	)	$	(313,670	)	$	(1,318	)
Issuance of shares of common stock and warrants in connection with share offering, net of issuance costs		7,500			6,393			280		—			—			6,673
Repurchase of ESSP shares as part of rescission offer		(39	)		(270	)		—		—			—			(270	)
Stock-based compensation expense		—			—			88		—			—			88
Net loss		—			—			—		—			(3,100	)		(3,100	)
Foreign currency translation adjustment		—			—			—		10			—			10
Balance, June 30, 2020		23,118		$	270,126		$	49,260	$	(533	)	$	(316,770	)	$	2,083


	Six Months Ended June 30,
	2021			2020
	(unaudited)
Cash flows from operating activities:
Net loss	$	(5,137	)	$	(11,986	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		39			126
Stock-based compensation		38			367
Non-cash lease expense		13			3
Restructuring charges-inventory and fixed asset impairment		—			1,115
Changes in operating assets and liabilities:
Accounts receivable		—			461
Inventories		—			(144	)
Prepaid expenses and other assets		(515	)		(364	)
Accounts payable		169			(1,019	)
Accrued expenses		327			108
Accrued compensation expenses		234			(2,369	)
Accrued clinical trial expenses		(131	)		(189	)
Net cash used in operating activities		(4,963	)		(13,891	)
Cash flows from investing activities:
Purchases of property and equipment		—			(331	)
Net cash used in investing activities		—			(331	)
Cash flows from financing activities:
Net proceeds from sale of common stock and/or warrants		77,814			6,679
Repayment of debt		(2,200	)		—
Repurchase of ESPP shares and fractional shares in connection with reverse stock split		—			(281	)
Net cash provided by financing activities		75,614			6,398
Effect of exchange rate changes on cash and cash equivalents		17			2
Cash and cash equivalents:
Net increase (decrease)		70,668			(7,822	)
Balance at beginning of period		3,177			11,327
Balance at end of period	$	73,845		$	3,505

Supplemental disclosures of cash flow information:
Cash paid during the period ended for:
Interest	$	135			—

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Net sales	$	1,610		$	1,180		$	4,855		$	3,270
Cost of sales		1,001			2,615			3,255			6,768
Gross profit (loss)		609			(1,435	)		1,600			(3,498	)

Operating expenses:
Research and development, net of grants		1,826			1,588			5,622			3,266
Clinical and regulatory		629			609			1,927			1,955
Selling and marketing		2,375			2,262			7,057			6,473
General and administrative		2,528			2,605			8,170			7,635
Total operating expenses		7,358			7,064			22,776			19,329

Loss from operations		(6,749	)		(8,499	)		(21,176	)		(22,827	)
Interest income		33			10			69			18

Net loss	$	(6,716	)	$	(8,489	)	$	(21,107	)	$	(22,809	)

Net loss per common share – basic and diluted	$	(0.12	)	$	(0.20	)	$	(0.40	)	$	(0.57	)

Weighted average common shares outstanding – basic and diluted		56,799			42,220			53,206			39,929

	Common Stock				Common Stock Issuable						Additional Paid-in		Notes Receivable for Stock Option			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount			Capital		Exercises			Loss			Deficit			Equity
Balance, December 31, 2015		35,942	$	166,049		33		$	205		$	27,277	$	(5	)	$	(581	)	$	(172,682	)	$	20,263
Issuance of common stock in connection with rights offering, net of expenses		5,978		19,430		—			—			—		—			—			—			19,430
Exercise of stock options		95		478		—			—			—		3			—			—			481
Stock-based compensation expense		—		—		—			—			2,581		—			—			—			2,581
Fair value of stock options issued for services in connection with rights offering		—		—		—			—			53		—			—			—			53
Stock issued or issuable for professional services		82		324		(7	)		(118	)		—		—			—			—			206
Issuance of common stock in connection with Employee Stock Purchase Plan		102		337		—			—			—		—			—			—			337
Issuance of RSUs		48		—		—			—			—		—			—			—			—
Comprehensive loss:
Net loss		—		—		—			—			—		—			—			(22,809	)		(22,809	)
Foreign currency translation adjustment		—		—		—			—			—		—			57			—			57
Comprehensive loss		—		—		—			—			—		—			57			(22,809	)		(22,752	)
Balance, September 30, 2016		42,247	$	186,618		26		$	87		$	29,911	$	(2	)	$	(524	)	$	(195,491	)	$	20,599

Balance, December 31, 2016		42,701	$	186,769		77		$	153		$	30,697	$	(2	)	$	(608	)	$	(205,861	)	$	11,148
Issuance of common stock and warrants in connection with rights offering, net of offering costs		13,653		13,647		—			—			6,021		—			—			—			19,668
Issuance of common stock in connection with Employee Stock Purchase Plan		193		189		—			—			—		—			—			—			189
Fair value of stock options issued for services in connection with rights offering		—		—		—			—			20		—			—			—			20
Common stock issued or issuable for services		223		262		(2	)		(67	)		—		—			—			—			195
Issuance of RSUs		36		—		—			—			—		—			—			—			—
Stock-based compensation expense		—		—		—			—			2,821		—			—			—			2,821
Repayment of notes receivable for stock option exercises		—		—		—			—			—		2			—			—			2
Comprehensive loss:
Net loss		—		—		—			—			—		—			—			(21,107	)		(21,107	)
Foreign currency translation adjustment		—		—		—			—			—		—			36			—			36
Comprehensive loss		—		—		—			—			—		—			36			(21,107	)		(21,071	)
Balance, September 30, 2017		56,806	$	200,867		75		$	86		$	39,559	$	—		$	(572	)	$	(226,968	)	$	12,972

	Nine Months Ended September 30,
	2017			2016

Cash flows from operating activities:
Net loss	$	(21,107	)	$	(22,809	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		345			311
Stock-based compensation		2,821			2,581
Bad debt (recovery) expense		(128	)		191
Excess inventory (recovery) reserve		(1,731	)		2,611
Common stock issuable for services		195			206
Changes in operating assets and liabilities:
Accounts receivable		(311	)		874
Inventories		1,955			(166	)
Prepaid expenses and other assets		261			492
Accounts payable		(299	)		(16	)
Accrued expenses		233			(377	)
Accrued compensation expenses		668			(15	)
Accrued clinical trial expenses		(6	)		(61	)
Deferred revenue		(25	)		(135	)
Deferred grant revenue		(104	)		(1,741	)
Net cash used in operating activities		(17,233	)		(18,054	)

Cash flows from investing activities:
Purchases of property and equipment		(181	)		(406	)
Investment in money market funds		(2,362	)		(1,820	)
Net cash used in investing activities		(2,543	)		(2,226	)

Cash flows from financing activities:
Net proceeds from rights offering		19,688			19,483
Proceeds from repayment of note receivable		2			—
Proceeds from exercise of options and employee stock plan purchases		189			816
Net cash provided by financing activities		19,879			20,299

Effect of exchange rate changes on cash		(3	)		19

Cash:
Net increase		100			38
Balance at beginning of period		539			239
Balance at end of period	$	639		$	277

Supplemental cash flow information:
Non-cash financing and investing activities:
Fair value of stock options issued for services rendered in connection with rights offering	$	20		$	53

	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016

Customer 1		18	%		0	%		8	%		0	%
Customer 2		18	%		0	%		6	%		4	%
Customer 3		18	%		0	%		6	%		0	%
Customer 4		10	%		0	%		3	%		0	%
Customer 5		9	%		0	%		11	%		0	%
Customer 6		0	%		21	%		0	%		8	%
Customer 7		0	%		12	%		3	%		3	%
Customer 8		0	%		11	%		0	%		16	%
Customer 9		0	%		0	%		0	%		10	%

	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3

September 30, 2017 (unaudited):
June 30, 2021 (unaudited):
Money market funds	$	12,705	$	12,705	$		$	—	$	73,818	$	73,818	$	—	$	—

December 31, 2016:
December 31, 2020:
Money market funds	$	10,336	$	10,336	$	—	$	—	$	3,122	$	3,122	$	—	$	—

	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

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

Beginning balance as of December 31, 2020	$	200
Additions		0
Settlements		0
Adjustments and other		(15)
Ending balance as of June 30, 2021	$	185

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	%

						Weighted Average		Number of Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in Years)
				Weighted		Remaining
	Number of			Average		Contractual
	Shares			Exercise Price		Life (in Years)
Warrants outstanding at December 31, 2016		1,840		$	7.72		1.80
Warrants outstanding as of December 31, 2020									7,759		$	11.66		3.21
Issued		13,652		$	1.47				—
Exercised		—							(68	)		11.76
Forfeited or expired		(362	)	$	5.00				—

Warrants outstanding at September 30, 2017		15,130		$	2.15		4.15

Warrants exercisable at September 30, 2017		15,130		$	2.15		4.15
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

	Number			Weighted Average		Weighted Average Remaining Contractual		Number of Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in Years)
	of Shares			Exercise Price		Life (in Years)
Options outstanding at December 31, 2016		3,667		$	7.23		6.27
Options outstanding as of December 31, 2020									196		$	15.48		7.65
Granted		2,504		$	1.85				—		$	—
Exercised		—			—				—		$	—
Forfeited or expired		(641	)	$	5.58				(14	)	$	12.95

Options outstanding at September 30, 2017		5,530		$	4.98		7.56

Options exercisable at September 30, 2017		2,090		$	7.15		5.36
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

	Number of Awards			Weighted Average Grant Date Fair Value Per Share

Outstanding as of December 31, 2016		131		$	12.43
Awarded		—			—
Vested		(36	)		12.43
Forfeited/canceled		—			—
Outstanding as of September 30, 2017		95		$	12.43