UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 20222023

ORor

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

For the transition period from ________ to ________

Commission File NumberNumber: 001-36747

Second SightVivani Medical, Products, Inc.

(Exact name of Registrantregistrant as specified in its charter)

CaliforniaDelaware02-0692322

(State or other jurisdiction of


incorporation or organization)

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

 

13170 Telfair Avenue5858 Horton Street, SylmarSuite 280Emeryville, CA 9134294608 

(Address of principal executive offices, including zip code)

((818)415) 833-5000506-8462

(Registrant’s telephone number, including area code)

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

Title of each class

TradingSymbol(s)

Symbol(s)

Name of each exchange on which
registered
Common StockEYESVANINASDAQ
WarrantsEYESWNASDAQ

 

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

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

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

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
Emerging growth company☐

 

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

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

Yes ☐  No ☒

As of August 8, 2022,10, 2023, the registrant had 39,409,17650,818,799 shares of common stock, no par value $0.0001 per share and 7,680,938 warrants, outstanding.

 

 

 

SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART IFINANCIAL INFORMATION
Item 1.
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 20222023 and December 31, 202120223
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 20222023 and 202120224
Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 20222023 and 202120225
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for each of the three-month periods ended during the six months ended June 30, 20222023 and 202120226
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20222023 and 202120227
Notes to Condensed Consolidated Financial Statements8
Item 2.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1817
Item 3.Quantitative and Qualitative Disclosures About Market Risk22
Item 4.Controls and Procedures22
PART IIOTHER INFORMATION
Item 1.Legal Proceedings23
Item 4.1A.Risk FactorsControls and Procedures23
PART IIOTHER INFORMATION
Item 1.Legal Proceedings24
Item 1A.Risk Factors24
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2426
Item 3.Defaults Upon Senior Securities2426
Item 4.Mine Safety Disclosures26
Item 4.Mine Safety Disclosures24
Item 5.Other Information26
Item 5.Other Information24
Item 6.Exhibits27
Item 6.Exhibits25
SIGNATURES
SIGNATURES2628

 

 

 

Part I. Financial StatementsPART I. FINANCIAL STATEMENTS

Item 1. Financial Statements

SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (unaudited)

(in thousands)thousands except per share data)

 June 30, December 31,  June 30, December 31, 
 2022  2021  2023 2022 
          
ASSETS             
Current assets:             
Cash and cash equivalents $56,377  $69,593  $32,486 $45,076 
Prepaid expenses and other current assets  1,012   914   3,736  2,452 
Total current assets  57,389   70,507  36,222 47,528 
Property and equipment, net  103   117  1,075 1,182 
SAFE (see Note 1)  8,000   — 
Right-of-use assets  140   228  20,684 779 
Restricted cash 1,366 1,366 
Deposits and other assets  17   27   260  275 
Total assets $65,649  $70,879  $59,607 $51,130 
LIABILITIES AND STOCKHOLDERS’ EQUITY             
Current liabilities:             
Accounts payable $966  $519  $1,989 $1,177 
Accrued expenses  796   548  1,994 2,358 
Litigation accrual 1,675 1,675 
Accrued compensation expense  678   748  567 657 
Accrued clinical trial expenses  —   462 
Current operating lease liabilities  151   185   861  955 
Total current liabilities  2,591   2,462  7,086 6,822 
Long term operating lease liabilities  —   52   20,127  — 
Total liabilities  2,591   2,514   27,213  6,822 
Commitments and contingencies        
Commitments and contingencies (Note 10)     
Stockholders’ equity:             
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 as of June 30, 2022 and December 31, 2021  347,940   347,940 
Preferred stock, no par value, 10,000 shares authorized; none outstanding — — 
Common stock, par value $0.0001 per share; 300,000 shares authorized; shares issued and outstanding: 50,799 as of June 30, 2023 and 50,736 as of December 31, 2022, respectively 5 5 
Additional paid-in capital  49,415   49,389  117,954 117,054 
Accumulated other comprehensive loss  (424)  (379) 65 35 
Accumulated deficit  (333,873)  (328,585)  (85,630)  (72,786)
Total stockholders’ equity  63,058   68,365   32,394  44,308 
Total liabilities and stockholders’ equity $65,649  $70,879  $59,607 $51,130 

 

SeeThe accompanying notes.notes are an integral part of these condensed consolidated financial statements.

3 

 


SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

 

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2022  2021  2022  2021 
Net sales $—  $—  $—  $— 
Cost of sales  —   —   —   — 
Gross profit  —   —   —   — 
                 
Operating expenses:                
Research and development, net of grants $843  $695  $1,488  $1,029 
Clinical and regulatory, net of grants  161   263   266   300 
General and administrative  2,125   1,338   3,591   3,810 
Total operating expenses  3,129   2,296   5,345   5,139 
                 
Loss from operations  (3,129)  (2,296)  (5,345)  (5,139)
Other income (expense), net  53   2   57   2 
                 
Net loss $(3,076) $(2,294) $(5,288) $(5,137)
                 
Net loss per common share – basic and diluted $(0.08) $(0.08) $(0.13) $(0.20)
                 
Weighted average common shares outstanding – basic and diluted  39,409   28,667   39,409   26,117 

             
  For the Three Months ended  For the Six Months ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
                 
Operating expenses:                
Research and development, net of grants $3,864  $3,203  $7,819  $5,883 
General and administrative  3,139   884   5,785   2,112 
Total operating expenses  7,003   4,087   13,604   7,995 
                 
Loss from operations  (7,003)  (4,087)  (13,604)  (7,995)
Other income (expense), net  477   (16)  760   (33) 
                 
Net income/(loss) $(6,526)  $(4,103) $(12,844) $(8,028)
                 
Net income/(loss) per common share – basic $(0.13)  $(0.11) $(0.25) $(0.22)
                 
Weighted average common shares outstanding – basic  50,795   36,880   50,748   36,819 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4 

 

See accompanying notes to the condensed consolidated financial statements.


SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss (unaudited) 

(in thousands)

                    
 Three Months Ended Six Months Ended  Three Months Ended Six Months Ended 
 June 30,  June 30,  June 30, June 30, 
 2022  2021  2022  2021  2023 2022 2023 2022 
Net loss $(3,076) $(2,294) $(5,288) $(5,137) $(6,526)  $(4,103) $(12,844) $(8,028)
                         
Other comprehensive income (loss):                         
Foreign currency translation adjustments  (32)  25   (45)  61   21  —  30  — 
Comprehensive loss $(3,108) $(2,269) $(5,333) $(5,076) $(6,505)  $(4,103) $(12,814) $(8,028)

SeeThe accompanying notes to theare an integral part of these condensed consolidated financial statements.

5 

 


SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)


(in thousands)

           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Loss  Deficit  Equity (Deficit) 
Balance, January 1, 2022  36,803  $4  $61,358  $     —  $(58,897) $2,465 
Repurchase of common stock  4   —   —   —   —   — 
Options exercised  24   —   1   —   —   1 
Stock-based compensation expense  —   —   340   —   —   340 
Net loss  —   —   —   —   (3,924)  (3,924)
                         
Balance, March 31, 2022  36,831  $4  $61,699  $—  $(62,821) $(1,118)
Options exercised  6   —   12   —   —   12 
Stock-based compensation expense  —   —   394   —   —   394 
Net loss  —   —   —   —   (4,103)  (4,103)
                         
Balance, June 30, 2022  36,837  $4  $62,105  $—  $(66,924) $(4,815)

 

           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Loss  Deficit  Equity(Deficit) 
Balance, December 31, 2020  23,214  $270,126  $49,314  $(448) $(319,664) $(672)
Issuance of shares of common stock in connection with private placement  4,650   24,451   —   —   —   24,451 
Warrants exercised  44   15   —   —   —   15 
Stock-based compensation expense  —   —   19   —   —   19 
Net loss  —   —   —   —   (2,843)  (2,843)
Foreign currency translation adjustment  —   —   —   36   —   36 
Balance, March 31, 2021  27,908  $294,592  $49,333  $(412) $(322,507) $21,006 
Issuance of shares of common stock in underwritten public offering  11,500   53,338   —   —   —   53,338 
Warrants exercised  1   10   —   —   —   10 
Stock-based compensation expense  —   —   19   —   —   19 
Net loss  —   —   —   —   (2,294)  (2,294)
Foreign currency translation adjustment  —   —   —   25   —   25 
Balance, June 30, 2021  39,409  $347,940  $49,352  $(387) $(324,801) $72,104 
                         
           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Loss  Deficit  Equity(Deficit) 
Balance, December 31, 2021  39,409  $347,940  $49,389  $(379) $(328,585) $68,365 
Stock-based compensation expense  —   —   13   —   —   13 
Net loss  —   —   —   —   (2,212)  (2,212)
Foreign currency translation adjustment  —   —   —   (13)  —   (13)
Balance, March 31, 2022  39,409  $347,940  $49,402  $(392) $(330,797) $66,153 
Stock-based compensation expense  —   —   13   —   —   13 
Net loss  —   —   —   —   (3,076)  (3,076)
Foreign currency translation adjustment  —   —   —   (32)  —   (32 
Balance, June 30, 2022  39,409  $347,940  $49,415  $(424) $(333,873) $63,058 
                         


           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Loss  Deficit  Equity 
Balance, January 1, 2023  50,736  $5  $117,054  $35  $(72,786) $44,308 
Options exercised  53   —   —        —   —   — 
Stock-based compensation expense  —   —   369   —   —   369 
Foreign currency adjustment  —   —   —   9   —   9 
Net loss  —   —   —   —   (6,318)  (6,318)
                         
Balance, March 31, 2023  50,789  $5  $117,423  $44  $(79,104) $38,368 
                         
Options exercised  10   —   7        —   —   7 
Stock-based compensation expense  —   —   524   —   —   524 
Foreign currency adjustment  —   —   —   21   —   21 
Net loss  —   —   —   —   (6,526)  (6,526)
                         
Balance, June 30, 2023  50,799  $5  $117,954  $65  $(85,630) $32,394 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6 

SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

       
  Six Months Ended June 30, 
  2022  2021 
  (unaudited) 
Cash flows from operating activities:        
Net loss $(5,288) $(5,137)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  31   39 
Stock-based compensation  26   38 
Non-cash lease expense  2   13 
Changes in operating assets and liabilities:        
Prepaid expenses and other assets  (87)   (515)
Accounts payable  433   169 
Accrued expenses  218   327 
Accrued compensation expenses  (70)  234 
Accrued clinical trial expenses  (462)  (131)
Net cash used in operating activities  (5,197)  (4,963)
Cash flows from investing activities:        
SAFE (see Note 1)  (8,000)  — 
Purchases of property and equipment  (18)  — 
Net cash used in investing activities  (8,018)  — 
Cash flows from financing activities:        
Net proceeds from sale of common stock and exercise of warrants  —   77,814 
      Repayment of debt  —   (2,200)
Net cash provided by financing activities  —   75,614 
Effect of exchange rate changes on cash and cash equivalents  (1)  17 
Cash and cash equivalents:        
Net increase (decrease)  (13,216)  70,668 
Balance at beginning of period  69,593   3,177 
Balance at end of period $56,377  $73,845 
         
Supplemental disclosures of cash flow information:        
Cash paid during the period ended for:        
Interest $—  $135 

         
  Six Months Ended June 30, 
  2023  2022 
Cash flows from operating activities:        
Net loss $(12,844) $(8,028)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  188   170 
Stock-based compensation  893   734 
Non-cash lease expense  128   54 
Changes in operating assets and liabilities:        
Prepaid expenses and other assets  (1,270)  (181)
Accounts payable  822   363 
Accrued compensation expenses  (90)  — 
Accrued expenses  (343)  263 
Net cash used in operating activities  (12,516)  (6,625)
Cash flows from investing activities:        
Purchases of property and equipment  (81)  (116)
Net cash used in investing activities  (81)  (116)
Cash flows from financing activities:        
Proceeds from SAFE note  —   8,000 
Net proceeds from sale of common stock and exercise of warrants  7   13 
Net cash provided by financing activities  7   8,013 
Effect of exchange rate changes on cash and cash equivalents  0   — 
Cash, cash equivalents and restricted cash:        
Net increase (decrease)  (12,590)  1,272 
Balance at beginning of period  46,442   2,178 
Balance at end of period $33,852  $3,450 
Non-cash investing and financing activities:        
Establishment of operating right-of-use assets through operating lease obligations $20,755  $— 

 

SeeThe accompanying notes are an integral part of these condensed consolidated financial statements.. 

 


7 

SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARY 

AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(unaudited)

 

1.Organization and Business Operations

 

Second Sight

Vivani Medical, Products, Inc. (“Second Sight,Vivani,” the “Company,” “we,” “us,” “our” or similar terms) has developed, manufacturedis a preclinical stage biopharmaceutical company which develops miniaturized, subdermal implants utilizing its proprietary NanoPortal™ technology to enable long-term, near constant-rate delivery of a broad range of medicines to treat chronic diseases. Vivani uses this platform technology to develop and marketed implantable visual prosthetics thatpotentially commercialize drug implants, alone or in collaboration with pharmaceutical company partners to address a leading cause of poor clinical outcomes in the treatment of chronic disease, medication non-adherence. For example, approximately 50% of patients treated for type 2 diabetes are intendednon-adherent to deliver useful artificial visiontheir medicines which can lead to blind individuals.poor clinical outcomes. We are developing a recognized global leaderportfolio of miniature, sub-dermal drug implants that, unlike most oral and injectable medicines, are designed with the goal of guaranteeing adherence by delivering therapeutic drug levels for up to 6 months or the life of the implant. In addition, by leveraging our proprietary NanoPortal implant technology we can design implants that deliver minimally fluctuating drug levels that may improve the tolerability profiles for certain medicines for which side effects are associated with fluctuating drug levels such as GLP-1 receptor agonists (GLP-1s).

In February 2022, we announced the signing of a definitive merger agreement between Nano Precision Medical, Inc. (“NPM”) and Second Sight Medical Products, Inc. (“Second Sight”), pursuant to which NPM became a wholly owned subsidiary of Second Sight. On August 30, 2022, the merger closed and the combined company of NPM and Second Sight was renamed Vivani Medical, Inc.

In December 2022, we contributed our neuromodulation assets and certain liabilities to Cortigent, Inc. a newly formed corporation in neuromodulation devicesDelaware, and wholly owned subsidiary of Vivani, in exchange for blindness,20 million shares of common stock of Cortigent. While the primary focus of Vivani is to develop and areultimately commercialize our drug implant business from legacy company NPM, Vivani’s new management team remains committed to developing new technologiesidentifying and exploring strategic options for the further advancement of the neuromodulation business of Cortigent which includes the development of its pioneering neurostimulation systems to treathelp patients recover critical body functions. In March 2023, Vivani announced the broadest populationfiling of sight-impaired individuals.a Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) for the proposed initial public offering of Cortigent. Cortigent will continue to be majority-owned by Vivani immediately following its initial public offering.

 

Subject to completion of Cortigent’s initial public offering, Vivani intends to focus exclusively on further development of the drug implant business.

On July 6, 2023, Vivani changed its state of incorporation from the State of California to the State of Delaware by means of a plan of conversion, effective July 5, 2023. The reincorporation, including the principal terms of the plan of conversion, was submitted to a vote of, and approved by, Vivani’s stockholders at its 2023 Annual Meeting of Stockholders held on June 15, 2023.

As part of this change of incorporation the Company established a par value of $0.0001 per share and all periods have been retroactively adjusted to reflect this change.

In early July 2023, Vivani successfully completed the manufacture of clinical supplies to support a proposed first-in-human (“FIH”) investigation of NPM-119 (exenatide implant) in patients with type 2 diabetes mellitus. On July 14, 2023, the Company submitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (“FDA)” for the proposed NPM-119 FIH study also named LIBERATE-1™.  On August 11, 2023, FDA verbally notified Vivani that the agency was placing a clinical hold on Vivani’s IND application for the proposed clinical investigation and indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. Vivani plans to engage with the FDA in order to lift the clinical hold and commence its planned clinical development of NPM-119. The Company expects to commence enrollment in LIBERATE-1 in the second half of 2023 subject to regulatory clearance. Assuming LIBERATE-1 commences as planned, the Company would anticipate the availability of interim LIBERATE-1 data in the first half of 2024 and full top-line results in the second half of 2024. 

8 

Agreement and Plan of Merger with Nano Precision Medical, Inc.

As disclosed in the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2022, onOn February 4, 2022, Second Sight entered into thean agreement and plan of merger (the “Merger Agreement”) with Nano Precision Medical, Inc., a California corporation (“NPM”),NPM. The Merger was approved by the shareholders of Second Sight on July 27, 2022, and upon and subject to the execution of a joinder, NPM Acquisition Corp., a California corporation and a wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, NPM will merge with and into Merger Sub (the “Merger”), and uponclosed on August 30, 2022. Upon consummation of the Merger, Merger Sub will cease to exist and NPM will becomebecame a wholly-ownedwholly owned subsidiary of the Company. Upon completion ofSecond Sight. Concurrent with to the Merger, and subject to shareholder approval, the Company will changeSecond Sight changed its name as the Companyto Vivani Medical, Inc., and NPM may agree in the future and changechanged its trading symbol asfrom EYES to VANI, and trades under the ticker VANI on the NASDAQ market. Certain investors and members of the NPM requests in writing following consultation with Nasdaq. Subject toboard of directors are also investors and members of the board of directors of Second Sight.

Under the terms and conditions of the Merger Agreement, if the Merger is completed, the securities of NPM will be converted into the right to receive an aggregate of approximately 134,349,464shares of the Company’sSecond Sight’s common stock (the “Merger Shares”) representing approximately 77.32% of the total issued and outstanding shares of common stock of the CompanySecond Sight on a fully converted basis, including, without limitation, giving effect to the conversion of all options, warrants, and any and all other convertible securities. The Merger will involve change of control and may be consummated only following the approval of the Company’s shareholders. The Companysecurities assuming net settlement. Second Sight filed a Registration Statement on Form S-4 on May 13, 2022, as amended, in connection with the Merger to register the Merger Shares, which registration statement is currently effective. The Company’s shareholders approved the Merger on July 27,merger shares effective June 24, 2022.

SAFE Agreement

On February 4, 2022, in connection with the Merger, Second Sight and NPM also entered into a Simple Agreement for Future Equity (“SAFE”) whereby Second Sight would provideprovided to NPM pending closing of the Merger, an investment advance of $8 million which, effective upon$8 million. The Merger Agreement provided that the termination dateSAFE would terminate if the Merger were to be successfully completed. Under the terms of the Merger Agreement withoutSAFE, upon successfully completion of the Merger will resulton August 30, 2022, the investment advance was eliminated. Under the accounting for a business combination, the $8 million adjusted the purchase consideration.

The Merger involved a change of control and was accounted for as a reverse merger in NPM’s issuingaccordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, Second Sight was treated as the “acquired” company for financial reporting purposes with NPM as the acquirer. The assets acquired and liabilities assumed by NPM were recorded at fair value under Accounting Codification Standard (“ASC”), Business Combinations. Accordingly, on August 30, 2022 (the “Acquisition Date”), NPM (a calendar year-end entity) was deemed to have acquired 100% of the outstanding common shares and voting interest of Second Sight. The results of Second Sight’s operations have been included in the consolidated financial statements since that date.

The acquisition-date fair value of consideration transferred totaled $54.4 million, which consisted of the fair value of the 13,136 common shares deemed issued to Second Sight that number of shares of NPM common stock which following that issuance will equal not less than 2.133%shareholders, was determined based on the per share closing price of the issuedCompany’s common shares on the acquisition date of $4.14.

The following table summarizes the fair values of the assets acquired and outstanding sharesliabilities assumed at the acquisition date (in thousands):

At August 30, 2022   
    
Cash $55,374 
Property and equipment  99 
Prepaid expenses  1,657 
Right of use assets  140 
Other assets  56 
Total identifiable assets acquired  57,326 
Current liabilities  (3,913)
Right of use liabilities  (151)
Total liabilities assumed  4,064 
Net identifiable assets acquired $53,262 

The SAFE loan of $8.0 million was cancelled in the Merger which adjusted the fair value of net assets acquired.

The following table summarizes the calculation of the gain on bargain purchase (in thousands):

     
Total consideration $54,385 
SAFE loan forgiven  (8,000)
Less net identifiable assets acquired  (53,262)
Gain on bargain purchase $6,877 

Because NPM common stock assuming exercise or conversionpurchased 100% of all outstanding vested and unvested options, warrants, and convertible securities. In the event NPM completes an equity financing at a lower valuation, Second Sight may be eligible to receive additional sharesand the fair value of NPM common stock as set forth inidentifiable assets acquired and liabilities assumed exceeded the SAFE. If the Merger is completed, the SAFE will terminate. The SAFE is classified as a marked-to-market asset pursuant to ASC 480, Distinguishing Liabilities from Equity, due to the potential variability at the time of share settlement. The carryingfair value of the SAFEconsideration, we reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that all acquired assets and assumed liabilities were properly recognized and that the valuation procedures and resulting measures were appropriate. As a result, we recognized a gain of $6.9 million.

We recognized $0.7 million of acquisition related costs that were expensed in the twelve months ended December 31, 2022. These costs are included in the consolidated income statement in the line item entitled “General and administrative costs.”

Pro forma consolidated net loss as ofif Second Sight had been included in the consolidated results was $13.3 million for the six months ended June 30, 2022 was determined to approximate fair value due to proximity to the issuance date and the significant probability of a successful merger.2022.

Liquidity

Product and Clinical Development Plans

Leveraging our 20 years of experience in neuromodulation for vision, we are developing the Orion® Visual Cortical Prosthesis System (“Orion”), an implanted cortical stimulation device intended to provide useful artificial vision to individuals who are blind due to a wide range of causes, including glaucoma, diabetic retinopathy, optic nerve injury or disease and eye injury. Orion is intended to convert images captured by a miniature video camera mounted on glasses into a series of small electrical pulses. The device is designed to bypass diseased or injured eye anatomy and to transmit these electrical pulses wirelessly to an array of electrodes implanted on the surface of the brain’s visual cortex, where it is intended to provide the perception of patterns of light. We are conducting an Early Feasibility Study of the Orion device at the Ronald Reagan UCLA Medical Center in Los Angeles (“UCLA”) and Baylor College of Medicine in Houston (“Baylor”). Regularly scheduled visits at both sites were paused in mid-March 2020 due to the coronavirus outbreak, however visits at UCLA resumed mid-September 2020 and Baylor resumed in December 2020. Our 36-month results, all of which were measured after the study resumed, indicate to us that:

●We have a good safety profile. Five subjects experienced a total of fourteen adverse events (AEs) related to the device or to the surgery, through February 2022. One was considered a serious adverse event (SAE), and all of the adverse events were in the expected category. The one SAE occurred at about three months post-implant, was resolved quickly, and did not require a hospital stay. There have been no serious adverse events due to the device or surgery since June 2018.


●The efficacy data is encouraging. We measure efficacy by looking at three measures of visual function: The first is square localization, where Orion subjects sit in front of a touch screen and are asked to touch within the boundaries of a square when it appears. The second is direction of motion, where subjects are asked to identify the direction and motion of lines on a screen. The third is grating visual acuity, a measure of visual acuity that is adapted for very low vision. Five subjects have completed these tests at 36-months. For these 36-month results, on square localization, five of five subjects tested in our feasibility study performed significantly better with the system on than off. On direction of motion, five of five performed better with the system on than off. On grating visual acuity, two of five tested had measurable visual acuity on the scale of this test (versus none who can do it with the device off). Another efficacy measurement of day-to-day functionality and benefit is FLORA, an acronym for Functional Low-Vision Observer Rated Assessment. FLORA is an assessment performed by an independent, third-party low vision orientation and mobility specialist who spends time with each of the subjects in their homes. The specialist asks each of the subjects a series of questions and also observes them performing 15 or more daily living tasks, such as finding light sources, following a sidewalk, or sorting laundry. The specialist then determines if the system is providing a benefit, if it is neutral, or if it is actually hurting the abilities of subjects to perform these tasks. FLORA results to date show that 4 out of 4 completing the FLORA at 36 months had positive or mild positive results indicating the Orion system is providing benefit. We reached agreement with the FDA in the fourth quarter of 2019 to utilize a revised version of FLORA as our primary efficacy endpoint in our pivotal trial for Orion, pending successful validation of the instrument.

No peer-reviewed data is available yet for the Orion system. We are currently negotiating the clinical and regulatory pathway to commercialization with the FDA as part of the Breakthrough Devices Program.

In November 2017, the FDA granted Breakthrough Devices Program designation for the Orion. This designation is given to a few select medical devices in order to provide more effective treatment of life-threatening or irreversibly debilitating diseases or conditions. This program is intended to help patients have more timely access to these medical devices by expediting their development, assessment, and review.

On February 26, 2021, the U.S. Food and Drug Administration (FDA) approved the Argus 2s Retinal Prosthesis System, a redesigned set of external hardware (glasses and video processing unit) initially for use in combination with previously implanted Argus II systems for the treatment of retinitis pigmentosa (RP). The Company expects that the Argus 2s will be adapted to be the external system for the next generation Orion Visual Cortical Prosthesis System currently under development. In addition to ergonomic improvements, the Argus 2s system offers significantly more processing power, potentially allowing for improved video processing.

Our principal offices are located in Los Angeles, California.

In 2007, Second Sight formed Second Sight Medical Products (Switzerland) Sàrl, initially to manage clinical trials and sales and marketing in Europe, the Middle East and Asia-Pacific, and more recently for the research of future technologies. As the laws of Switzerland require at least two corporate stockholders, Second Sight Medical Products (Switzerland) Sàrl is 99.5% owned directly by us and 0.5% owned by an executive of Second Sight as of June 30, 2022. Accordingly, Second Sight Medical Products (Switzerland) Sàrl is considered 100% owned for financial statement purposes and is consolidated with Second Sight for all periods presented. We have closed our foreign operations and expect final dissolution of this entity in 2023.

Market Development Plans

Orion. 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. An Early Feasibility Study of the Orion device is currently underway at UCLA and Baylor College of Medicine. Regularly scheduled visits at both sites were placed on hold in mid-March due to Covid-19, however visits at UCLA resumed mid-September 2020 and Baylor resumed in December 2020. Our 36-month results indicate a good safety profile with encouraging efficacy data and benefits in helping subjects perform their daily living tasks. We believe these data 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.


COVID-19 Pandemic

We are requiring our employees to adhere to the local and state guidelines regarding the COVID-19 pandemic, and use their best judgement to work remotely or work in the office. While many of our employees are accustomed to working remotely, much of our workforce has not historically been remote. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance becomes available, restricting the ability to do business in person may create operational or other challenges, any of which could harm our business, financial condition and results of operations.

In addition, our clinical trials have been affected by the COVID-19 outbreak. Patient visits in ongoing clinical trials were paused, for example, due to prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions imposed by governments, and the inability to access sites for initiation and monitoring. Also, some of our suppliers of certain materials used in the development of our product candidates are located in areas impacted by COVID-19 which could limit our ability to obtain sufficient materials for our product candidates. COVID-19 has and will continue to adversely affect global economies and financial markets, and may result in an economic downturn that could affect demand for our product candidates, if approved, and impact our operating results. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the continued global economic impact of the pandemic. We cannot anticipate all of the ways in which health epidemics such as COVID-19 could adversely impact our business. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

Liquidity

From inception, our operations have been funded primarily through the sales of our common stock and warrants, as well as from the issuance of convertible debt, research and clinical grants, and limited product revenue generated from the salewarrants. The completion of our Argus II product. We have funded our business since 2020 primarily through the following transactions:

●On June 25, 2021, we closed an underwritten public offering of 11,500,000 shares of common stock at a price ofreverse merger with Second Sight Medical Products, Inc. provided $5.00 per share for aggregate net proceeds of $53.3 million

●On March 23, 2021, we closed our private placement to seven institutional investors of 4,650,000 shares of common stock at a price of $6.00 per share for aggregate net proceeds of approximately $24.5 million

We were awarded a $1.6 million grant (with the intent to fundin net assets including approximately $6.455.4 million over five years subject to annual review and approval) from the National Institutes of Health (NIH) to fund the “Early Feasibility Clinical Trial of a Visual Cortical Prosthesis” that commenced in January 2018. Our second year grant of $1.4 millioncash. was approved on April 6, 2021 and our third year grant of $1.4 million was approved on May 12, 2021 and the fourth year grant of $1.1 million was approved on July 18, 2022.  

Our financial statements have been presented on 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. We are subject to the risks and uncertainties associated with a business with no revenue that is developing a novel medical device,devices, including limitations on our operating capital resources. 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 the foreseeable future. We estimate that currently available cash will provide sufficient funds to enable the Company to meet its planned obligations through September 2024.

9 

 

On March 31, 2020, due to the COVID-19 pandemic and related inability to secure additional funding, we laid off the majority of our employees and reduced our operating expenses significantly to allow for our continuing business operations.  We continue to advance the development of our Orion technology and are exploring various strategic options for this technology.       


2. Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements

Basis of Presentation

These unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and following the requirements of the United States Securities and Exchange Commission (“SEC”)SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In our opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with our financial statements and accompanying notes for the fiscal year ended December 31, 2021, contained in2022, included within our Annual Report on Form 10-K filed with the SEC on March 29, 2022.31, 2023. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.

Income taxes - interim periods

In calculating the provision for interim income taxes, in accordance with ASC 740, Income Taxes, an estimated annual effective tax rate is applied to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. This differs from the method utilized at the end of an annual period.

Use of estimates

The preparation of financial statements requires management to make a number of estimates and assumptions related to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the period. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Some of the more significant estimates include the purchase price of net assets acquired in the Merger, useful lives of long-lived assets, the fair value of equity-based compensation, and the estimated incremental borrowing rate used in calculating lease assets and liabilities and evaluation of going concern. Actual results could differ materially from those estimates.

Net income/loss per share

Basic net income/loss per share is computed using net income/loss from operations divided by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income/loss per share represents net income/loss from operations divided by the weighted- average number of common shares outstanding during the period, including all potentially dilutive common stock equivalents. Common stock equivalents consist of shares subject to warrants and share-based awards with exercise prices less than the average market price of common stock for the period, to the extent their inclusion would be dilutive.

The computation of the weighted-average shares of common stock outstanding for diluted EPS excludes the following potential common shares as of June 30, 2023, and 2022 (in thousands):

Schedule of net loss per share

  June 30,
2023		  June 30,
2022		 
Shares underlying warrants outstanding  10,311   9,074 
Shares underlying stock options outstanding  6,139   4,630 
Shares underlying RSU’s  403   — 

 

The shares underlying the SAFE obligation were issuable only if the Merger were to be terminated. These contingently issuable shares were excluded from the dilutive computation because conversion was not “probable” as defined in the accounting literature. However, if the evaluation met the probability threshold, the shares would be excluded from diluted EPS since their inclusion would have an anti-dilutive effect.

Significant Accounting Policies

Our significant accounting policies are set forth in Note 2 of theour financial statements infor the year ended December 31, 2022, included within our Annual Report on Form 10-K forfiled with the year ended DecemberSEC on March 31, 2021.2023.

Recently Issued Accounting Pronouncements

We do not believe that any recently issued, but not yet effective, accounting standards, if adopted, will have a material effect on the financial statements.

3. Concentration of Risk

Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and money market funds. We maintain cash and money market funds with financial institutions that we deem reputable.

Foreign Operations

The accompanying condensed consolidated financial statements as of June 30, 2022 and December 31, 20212023, include gross assets amounting to $0.1 million and $0.1 million, respectively, relating to operations of our subsidiary based in Switzerland.


10 

4. Fair Value Measurements

The authoritative guidance with respect to fair value establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that we have the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange basednon-exchange-based derivatives, mutual funds, and fair-value hedges.

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models.

Cash equivalents, which includes money market funds, are the only financial instrument measured and recorded at fair value on our consolidated balance sheet, and they are valued using Level 1 inputs.

Assets measured at fair value on a recurring basis are as follows (in thousands)::

Schedule of Money Market Funds at their Level within the Fair Value Hierarchy

 Total  Level 1  Level 2  Level 3  Total Level 1 Level 2 Level 3 
June 30, 2022 (unaudited):                
June 30, 2023 (unaudited):         
Money market funds $56,338  $56,338  $—  $—  $31,561 $31,561 $— $— 
December 31, 2021:                
December 31, 2022:         
Money market funds $69,487  $69,487  $—  $—  $44,417 $44,417 $— $— 

 

5. Selected Balance Sheet Detail

Property and equipment

Property and equipment consisted of the following (in thousands)::

  June 30,
2023		  December 31,
2022		 
Equipment $3,598  $3,520 
Furniture and fixtures  10   10 
Software  54   51 
Leasehold improvements  12   12 
   3,674   3,593 
Accumulated depreciation and amortization  (2,599)  (2,411)
Property and equipment, net $1,075  $1,182 

11 

 

  June 30,  December 31, 
  2022  2021 
Laboratory equipment $584  $584 
Computer hardware and software  100   82 
   684   666 
Accumulated depreciation and amortization  (581)  (549)
Property and equipment, net $103  $117 

Contract Liabilities

Contract liabilities which are included in accrued expenses consisted of the following (in thousands):

Beginning balance as of December 31, 2021 $335 
        Consideration received in advance of revenue recognition  — 
        Revenue recognized  — 
Ending balance as of June 30, 2022 $335 

Product Warranties

A summary of activity of our warranty liabilities, which are included in accrued expenses, for the six month period ended June 30, 2022 is presented below:

Beginning balance as of December 31, 2021 $50 
         Additions  — 
         Settlements  — 
         Adjustments and other  — 
Ending balance as of June 30, 2022 $50 

Right-of-use assets and operating lease liabilities

We lease certain office space and equipment for our use. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease costs are recognized in the income statement over the lease term on a straight-line basis. Depreciation is computed using the straight-line method over the estimated useful life of the respective assets. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. As most of our leases do not provide an implicit rate, we used our estimated incremental borrowing rate of 10% based on the information available at commencement date in determining the present value of lease payments.

On January 22, 2021, we entered into a lease agreement, effective February 1, 2021, to sub-lease office space to replace our existing headquarters.  We will pay $17,000 per month, increasing to $17,500 per month on February 1, 2022, plus operating expenses, to lease 17,290 square feet of office space at 13170 Telfair Avenue, Sylmar CA 91342.  Additionally, we received full rent abatement for March 2021, and half rent abatement for March 2022. The sub-lease is for two years and two months.  Neither we nor any affiliates are related to, or otherwise have any other relationship with, the other parties, other than the lease.

Schedule of right of use assets and operating lease liabilties

Assets Classification 

June 30,

2022

  December 31,
2021		  Classification June 30,
2023 (in thousands)		 December 31,
2022 (in thousands)		 
Non-current assets Right-of-use assets $140  $228  Right-of-use assets $20,684 $779 
Liabilities             
Current Current operating lease liabilities $151  $185  Current operating lease liabilities $861 $955 
Long term Long term operating lease liabilities $—  $52  Long term operating lease liabilities $20,127 $— 

 

Schedule of lease liabilities

  For the three  For the three  For the six  For the six 
  months ended  months ended  months ended  months ended 
  June 30,  June 30,  June 30,  June 30, 
  2022  2021  2022  2021 
Cash paid for operating lease liabilities $49  $51   92   68 
                 

  For the three
months ended
June 30,
2023		  For the three
months ended
June 30,
2022		  For the six
months ended
June 30,
2023		  For the six
months ended
June 30,
2022		 
Cash paid for operating lease liabilities (in thousands) $382  $211   759   422 

 

Rent expense, including common area maintenance charges, was $49,0000.6 million and $0.2 million and was $0.9 and $27,000 and $98,000 and $49,0000.5 during the threethree-month and six-month periods ended June 30, 2023 and 2022, respectively.

On February 1, 2023, we entered into a lease agreement, effective March 1, 2023, to sublease office space to replace Cortigent’s existing headquarters. Our rental payments amount to $22,158 per month plus operating expenses, to lease 14,823 square feet of office space at 27200 Tourney Road, Valencia, California 91355.The sub-lease has a term of two years and 2021, respectively.two months. We also entered into a lease for storage space on January 25, 2023, in the same building at a cost of $6,775 per month for a term of two years and one month.

Vivani entered into a triple net lease agreement for a single building with 43,645 square feet of space in Alameda, California on November 21, 2022. The stated term of the lease commences on June 1, 2023 and terminates on September 30, 2033, ten years and 4 months. Payments increase annually from $2,676,311 to $3,596,784, or 124 payments less the first four which are abated, totaling approximately $31 million. Vivani will be responsible for insurance, property taxes and CAM charges. Vivani was required to deposit $1.4 million to guarantee a letter of credit to secure the lease and this amount is included in long-term assets on the balance sheet at June 30, 2023. The current lease expires on September 30, 2023.

The Company evaluated the lease under the provisions of ASC 842, Leases. Information related to the right-of-use assets and related lease liabilities under this lease are as follows (in thousands):

Year Ending December 31,    
2023  $669 
2024   2,723 
2025   2,805 
2026   2,889 
2027   2,976 
Thereafter   18,926 
Total lease payments  $30,988 
      
Less imputed interest   (10,900)
      
Total lease liabilities  $20,088 
      
Discount rate   8.38%


12 

6.Equity Securities

Potentially Dilutive Common Stock Equivalents

As of June 30, 2022 and 2021, we excluded the potentially dilutive securities summarized below, which entitle the holders thereof

We are authorized to potentially acquireissue 300,000,000 shares of common stock from our calculationswith 50,798,799 issued as of net loss perJune 30, 2023. In addition, we are authorized to issue 10,000,000 shares of preferred stock with none issued. On August 19, 2022, the Company initiated a reverse stock split of one share and weighted average common shares outstanding, as their effect wouldfor every three shares. All share numbers have been anti-dilutive (in thousands)retroactively adjusted for the split. On August 30, 2022, 13,136,362. shares were deemed issued for the merger acquisition.

  June 30, 
  2022  2021 
Common stock warrants issued to underwriter  10   10 
Common stock warrants issued in rights offerings  7,681   7,681 
Common stock options  180   182 
   7,871   7,873 

7. Warrants

On February 22, 2019, we completed a registered rights offeringNPM, prior 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 ourMerger, issued common stock and a warrantwarrants (collectively, the “unit” or “units”) in 2019, 2020 and 2021 for $3.15 per unit. Outstanding warrants of 7,746,855 to purchase an additionalcommon stock are shown in the table below and generally expire 5 years from the date of issuance at $3.15 per share, are transferable into one share of ourcommon stock for $11.76.and may be exercised on a cashless basis. The warrants have a five-year lifequalified for an exception to derivative accounting and, trade on Nasdaq underaccordingly, their value was not bifurcated from the symbol EYESW.total purchase price.

On March 6, 2017, we completed a registered rights offering to existing stockholdersSecond Sight warrants of 7,691,063 were outstanding and are convertible into 2,563,688 shares 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 comm11.76 on stocktable below and a warrant to purchase an additional share of our stock for $11.76. The warrants had a five-year life but were extended to expire in February, 2024 to coincide with the February 22, 2019 warrants.

As a componentconverted as part of the funding underwriting fee of our May 5, 2020 public underwriting offer, we granted 375,000Merger for Vivani warrants at anon a like for-like basis. The weighted average exercise price of these warrants is $1.25 which expire on May 5, 202535.24. At June 30, 2022,Of this total 10,1257,680,938 warrants are convertible into 2,560,313 shares and are tradeable on the open market. Under accounting standards in a business combination, these warrants were measured at fair value as of the Merger date; however, the warrants are still outstanding.were substantially out-of-the-money and were assigned no value.


13 

A summary of warrantswarrant activity for the six months ended June 30, 20222023 is presented below (in thousands, except per share and contractual life datadata).).

Summary of Warrant Activity

 

Number of 

Shares 

 

Weighted 

Average 

Exercise 

Price 

Per Share 

 

Weighted 

Average 

Remaining 

Contractual 

Life (in Years) 

  Number of
 Shares		 Weighted
Average
Exercise
Price
Per Share		 Weighted
Average
Remaining
Contractual
Life (in Years)		 
Warrants outstanding as of December 31, 2021  7,691  $11.75   2.21 
Warrants outstanding as of December 31, 2022 10,311 $11.13 2.31 
Issued  —   0   —  —     
Exercised  —          —     
Forfeited or expired  —           —     
Warrants outstanding as of June 30, 2022  7,691  $11.75   1.71 
Warrants exercisable as of June 30, 2022  7,691  $11.75   1.71 
Warrants outstanding as of June 30, 2023  10,311 $11.13 1.81 
Warrants exercisable as of June 30, 2023  10,311 $11.13 1.81 

 

The warrants outstanding as of June 30, 20222023, had $8,000no in intrinsic value.

8. Stock-Based Compensation

A summary of stock option activity under our 2011 Equity Incentive Plan (“2011 Plan”) for the six months ended June 30, 20222023, is presented below (in thousands, except per share and contractual life datadata).).

Summary of Stock Option Activity

 

Number of 

Shares 

 

Weighted 

Average 

Exercise 

Price 

Per Share 

 

Weighted 

Average 

Remaining 

Contractual 

Life (in Years) 

  Number of
Shares		 Weighted
Average
Exercise
Price
Per Share		 Weighted
Average
Remaining
Contractual
Life (in Years)		 
Options outstanding as of December 31, 2021  182  $15.68   6.59 
Options outstanding as of December 31, 2022 5,272 $3.07 7.15 
Granted  —  $—      1,122 $1.25   
Exercised  0  $0      (101) $0.44   
Forfeited or expired  (2) $40.00       (154) $2.78   
Options outstanding, vested and expected to vest as of June 30, 2022  180  $15.47   6.15 
Options exercisable as of June 30, 2022  155  $17.39   5.91 
Options outstanding, vested and expected to vest as of June 30, 2023  6,139 $2.79 7.03 
Options exercisable as of June 30, 2023  3,941 $3.29 5.94 

 

The estimated aggregate intrinsic value of stock options exercisable as of June 30, 20222023, was $25,0000.3 million. As of June 30, 2022,2023, there was $0.12.4 million of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted average period of 0.751.2 years.


We adopted an employee stock purchase plan in June 2015 for all eligible employees. AtDuring the six months ended June 30, 20222023, we granted stock options to purchase 1,121,817 shares of common stock to certain employees and board members. The options are exercisable for a period of ten years from the available numberdate of shares that may begrant at a weighted average price of $1.25 per share, which was calculated at the fair value of our common stock on the respective grant date. The options generally vest over a period of four years. The fair value of options subject to only service conditions are valued using the Black-Scholes option pricing model, while those subject to performance or market conditions are valued using the Monte-Carlo Simulation model. During the six-months ended June 30, 2023, 200,000 options were issued underand valued at $0.1 million using the plan is Monte-Carlo model using the following assumptions:

●Beginning Stock Price. We utilized the Company's publicly traded share price as of the Valuation Date as the beginning stock value. At the Valuation Date, the publicly traded common share price was $1.09 per share.

●Drift Rate. In determining the value of the instrument in the risk-neutral framework, riskfree rates were estimated based on the applicable treasury rate for the projection period. For each simulation, the term of the risk-free rate was based on the term from the Valuation Date through the latest date on which the award could vest (i.e., two years following the Performance Period End Date). Please note that, for the purposes of calculating the service period associated with the Subject Interest, the Company’s cost of equity was utilized as the drift rate.

●Volatility. The total equity volatility (standard deviation) was based on a total equity volatility analysis.

●Period. The period was measured as the number of years from the Valuation Date through the PSO expiration date (10 years following the date of grant).

●Dividends. The Company has not historically paid dividends. In addition, the Company does not expect to pay dividends going forward. As such, no dividends were considered in our analysis.

77,031

During the six-months ended June 30, 2023, 921,817 options were issued and valued at $0.9 million using the Black-Scholes option-pricing model using the following assumptions: expected term of 4.00 to 6.20 years, volatility of 100%, risk-free interest rate of 3.99% to 4.45%, and expected dividend rate of 0.0%.

We also granted 402,500 RSU’s (as defined below) during the quarter. These RSUs had market conditions which required our stock price to exceed $3.15 per share for three consecutive days in the four years from grant date for the RSUs to vest.

The following table summarizes restricted stock unit (“RSU”) activity for the six months ended June 30, 2023 (in thousands, except per share data):

Summary of Restricted Stock Unit

  

Number

of Shares 

  

Weighted

Average Grant

Date Fair Value

Per Share 

 
Outstanding as of December 31, 2022  —  $— 
Awarded  403   0.93 
Vested and released  —   — 
Forfeited/canceled  —   — 
Outstanding as of June 30, 2023  403  $0.93 

 

As of June 30, 2023, there was $0.2 million of total unrecognized compensation cost related to the outstanding RSUs that will be recognized over a weighted average period of 1.2 years.

14 

Stock-based compensation expense recognized for stock-based awards in the condensed consolidated statements of operations for the three and six months ended June 30, 20222023, and 20212022 was as follows (in thousands):

Stock-based Compensation Expense

 Three Months Ended  Six Months Ended 
 June 30,  June 30,  Three Months Ended
June 30,		 Six Months Ended
June 30,		 
 2022  2021  2022  2021  2023 2022 2023 2022 
Research and development $5  $5  $10  $10  $284  $324  $532  $514 
Clinical and regulatory  3   9   6   18 
General and administrative  5   5   10   10   240   70   361   220 
Total $13  $19  $26  $

38

  $524  $394  $893  $734 

15 

 


9. Risk and Uncertainties

9.Risk and Uncertainties

 

COVID-19 has directly and indirectly adversely affected Second Sight and will likely continue to do so for an uncertain period of time. We are asking our employees to adhere to local and state guidelines regarding the COVID-19 pandemic and use their best judgement to work remotely or work in the office. While many of our employees are accustomed to working remotely, much of our workforce has not historically been remote. Although we continue to monitor the situationongoing COVID-19 global pandemic which has resulted in travel and may adjust our current policies as more informationother restrictions to reduce the spread of the disease. We presently are not experiencing any significant disruptions from the ongoing COVID-19 pandemic. All clinical and publicchemistry, manufacturing and control activities are currently active.

The safety, health guidance becomes available, restrictingand well-being of all patients, medical staff and internal and external teams is the abilityparamount and primary focus. As the pandemic and its resulting restrictions evolve in jurisdictions across the country, the potential exists for further disruptions to doprojected timelines. We are in close communication with clinical teams and key vendors and are prepared to take action should the pandemic worsen and impact the business in person may create operational or other challenges, anythe future.

10. Commitments and Contingencies

Clinical Trial Agreements

Based upon FDA approval of Argus II, which could harmwas obtained in February 2013, we were required to collect follow-up data from subjects enrolled in our business, financial condition and resultspre-approval trial for a period of operations.

up to ten years post-implant, which was extended through the year 2019. This requirement to collect follow-up data was halted in 2020 with FDA approval. In addition, ourwe conducted three post-market studies to comply with U.S. FDA, French, and European post-market surveillance regulations and requirements and are conducting an early feasibility clinical trialsstudy of Orion. We have been affected bycontracted with various universities, hospitals, and medical practices to provide these services. Payments are based on procedures performed for each subject and are charged to clinical and regulatory expense as incurred. Total amounts charged to expense for the COVID-19 outbreak. Patient visits in ongoing clinical trialsthree and six months ended June 30, 2023 were paused, for example, due to prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions imposed by governments,$88,000 and the inability to access sites for initiation and monitoring. Also, some of our suppliers of certain materials used in the development of our product candidates are located in areas impacted by COVID-19 which could limit our ability to obtain sufficient materials for our product candidates. COVID-19 has and will continue to adversely affect global economies and financial markets and may result in an economic downturn that could affect demand for our product candidates, if approved, and impact our operating results. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the continued global economic impact of the pandemic. We cannot anticipate all of the ways in which health epidemics such as COVID-19 could adversely impact our business. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.$115,000, respectively.

10. Litigation, Claims and Assessments

Three oppositions filed by Pixium Vision SA (“Pixium”) are pending in the European Patent Office, each challenging the validity of a European patent owned by us. The outcomes of the challenges are not certain, however, if successful, they may affect our ability to block competitors from utilizing our patented technology. We do not believe a successful challenge will not have a material effect on our ability to manufacture and sell our products, or otherwise have a material effect on our operations.

As described in the Company’s 10-K for the year ended December 31, 2020, the Company had entered into a Memorandum of Understanding (“MOU”) for a proposed business combination with Pixium. 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, and currently claimsclaim damages of approximately €5.1 million or about $5.25.6 million at current exchange rates.million. We believe we have fulfilled our obligations to Pixium with the liquidated damages payment of $1,000,000 and thus$1,000,000.On December 9, 2022, the Company doesreceived notice that the Paris Commercial Court has rendered its judgement, including finding that the Company’s termination of the MOU was not believe any further loss accrual is necessary.

valid. In November 2020, we andthe judgement, the Company was ordered to pay to Pixium retained Oppenheimer & Co. Inc. as placement agentthe amount of €2,500,000 minus a €947,780 credit for the $1,000,000 already paid for, a proposed private placementnet amount payable of securities in connectionapproximately €1,552,220. The Company filed an appeal with the Business Combination. On April 1, 2021, we received an invoice from OppenheimerAppeals Court of Paris on May 24, 2023. The Company recorded a charge of $1,675,000 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 byyear ended December 31, 2022, related to this invoice are without merit.matter but plans to raise any and all legal challenges to this preliminary judgement.

We are party to litigation arising in the ordinary course of business. It is our opinion that the outcome of such matters will not have a material effect on our results of operations, however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

11. Subsequent Events

In early July 2023, Vivani successfully completed the manufacture of clinical supplies to support a proposed first-in-human (“FIH”) investigation of NPM-119 (exenatide implant) in patients with type 2 diabetes mellitus. On July 14, 2023, the Company submitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (“FDA)” for the proposed NPM-119 FIH study also named LIBERATE-1.  On August 11, 2023, FDA verbally notified Vivani that the agency was placing a clinical hold on Vivani’s IND application for the proposed clinical investigation and indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. Vivani plans to engage with the FDA in order to lift the clinical hold and commence its planned clinical development of NPM-119. The Company expects to commence enrollment in LIBERATE-1 in the second half of 2023 subject to regulatory clearance. Assuming LIBERATE-1 commences as planned, the Company would anticipate the availability of interim LIBERATE-1 data in the first half of 2024 and full top-line results in the second half of 2024. 

  

10. Subsequent Events

16 

 

The 2022 Annual Meeting of Shareholders of Second Sight Medical Products Inc. was held on July 27, 2022. Holders of 27,621,649 shares of Second Sight’s common stock were represented at the meeting in person or by proxy, constituting a quorum. A proposal to approve the transactions contemplated by the Agreement and Plan of Merger, dated February 4, 2022, by and between the Company and Nano Precision Medical, Inc., a California corporation (“NPM”), pursuant to which NPM will merge with and into NPM Acquisition Corp., a California corporation and a wholly-owned subsidiary of the Company, with NPM surviving as a wholly-owned subsidiary of the Company was approved.


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 together with our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited 2021 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 29, 2022.10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect toourproducts,plansand 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 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, including those required to commence clinical development of our product candidates, insurance reimbursements and product launches, our financing plans and future capital requirements, and statements regarding the anticipated or projected impact of our merger with NPM (as defined below), if and when occurs, on our business, results of operations, financial condition or prospects, 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 the plans, intentions and expectations disclosed in the forward-looking statements that we make. We assume no obligations to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect actual outcomes.

Second SightOverview

Vivani Medical, Products, Inc. (“Second Sight,Vivani,” the “Company,” “we,” “us,” “our” or similar terms) has developed, manufacturedis a preclinical stage biopharmaceutical company which develops miniaturized, subdermal implants utilizing its proprietary NanoPortal™ technology to enable long-term, near constant-rate delivery of a broad range of medicines to treat chronic diseases. Vivani uses this platform technology to develop and marketed implantable visual prosthetics thatpotentially commercialize drug implants, alone or in collaboration with pharmaceutical company partners to address a leading cause of poor clinical outcomes in the treatment of chronic disease, medication non-adherence. For example, approximately 50% of patients treated for type 2 diabetes are intendednon-adherent to deliver useful artificial visiontheir medicines which can lead to blind individuals.poor clinical outcomes. We are developing a recognized global leaderportfolio of miniature, sub-dermal drug implants that, unlike most oral and injectable medicines, are designed with the goal of guaranteeing adherence by delivering therapeutic drug levels for up to 6 months or the life of the implant. In addition, by leveraging our proprietary NanoPortal implant technology we can design implants that deliver minimally fluctuating drug levels that may improve the tolerability profiles for certain medicines for which side effects are associated with fluctuating drug levels such as GLP-1 receptor agonists (GLP-1s).

In February 2022, we announced the signing of a definitive merger agreement between Nano Precision Medical, Inc.(“NPM”) and Second Sight Medical Products, Inc. (“Second Sight”) pursuant to which NPM became a wholly owned subsidiary of Second Sight. On August 30, 2022, the merger closed and the combined company of NPM and Second Sight was renamed Vivani Medical, Inc.

In December 2022, we contributed our neuromodulation assets and certain liabilities to Cortigent, Inc., a newly formed wholly owned subsidiary of Vivani, in neuromodulation devicesexchange for blindness20 million shares of common stock of Cortigent. While the primary focus of Vivani is to develop and areultimately commercialize our drug implant business from legacy company NPM, Vivani’s new management team remains committed to developing new technologies to treatidentifying and exploring strategic options for the broadest population of sight-impaired individuals.

Leveraging our 20 years of experience in neuromodulation for vision, we are developing the Orion® Visual Cortical Prosthesis System (“Orion”), an implanted cortical stimulation device intended to provide useful artificial vision to individuals who are blind due to a wide range of causes, including glaucoma, diabetic retinopathy, optic nerve injury or disease and eye injury. Orion is intended to convert images captured by a miniature video camera mounted on glasses into a series of small electrical pulses. The device is designed to bypass diseased or injured eye anatomy and to transmit these electrical pulses wirelessly to an array of electrodes implanted on the surfacefurther advancement of the brain’s visual cortex, where it is intended to provideneuromodulation business of Cortigent which includes the perceptiondevelopment of patterns of light. We are conducting an Early Feasibility Study of the Orion device at the Ronald Reagan UCLA Medical Center in Los Angeles (“UCLA”) and Baylor College of Medicine in Houston (“Baylor”). Regularly scheduled visits at both sites were paused in mid-March 2020 due to the coronavirus outbreak, however visits at UCLA resumed mid-September 2020 and Baylor resumed in December 2020. Our 36-month results, all of which were measured after the study resumed, indicate to us that:

●We have a good safety profile. Five subjects experienced a total of fourteen adverse events (AEs) related to the device or to the surgery, through February 2022. One was considered a serious adverse event (SAE), and all of the adverse events were in the expected category. The one SAE occurred at about three months post-implant, was resolved quickly, and did not require a hospital stay. There have been no serious adverse events due to the device or surgery since June 2018.

●The efficacy data is encouraging. We measure efficacy by looking at three measures of visual function: The first is square localization, where Orion subjects sit in front of a touch screen and are asked to touch within the boundaries of a square when it appears. The second is direction of motion, where subjects are asked to identify the direction and motion of lines on a screen. The third is grating visual acuity, a measure of visual acuity that is adapted for very low vision. Five subjects have completed these tests at 36-months. For these 36-month results, on square localization, five of five subjects tested in our feasibility study performed significantly better with the system on than off. On direction of motion, five of five performed better with the system on than off. On grating visual acuity, two of five tested had measurable visual acuity on the scale of this test (versus none who can do it with the device off). Another efficacy measurement of day-to-day functionality and benefit is FLORA, an acronym for Functional Low-Vision Observer Rated Assessment. FLORA is an assessment performed by an independent, third-party low vision orientation and mobility specialist who spends time with each of the subjects in their homes. The specialist asks each of the subjects a series of questions and also observes them performing 15 or more daily living tasks, such as finding light sources, following a sidewalk, or sorting laundry. The specialist then determines if the system is providing a benefit, if it is neutral, or if it is actually hurting the abilities of subjects to perform these tasks. FLORA results to date show that 4 out of 4 completing the FLORA at 36 months had positive or mild positive results indicating the Orion system is providing benefit. We reached agreement with the FDA in the fourth quarter of 2019 to utilize a revised version of FLORA as our primary efficacy endpoint in our pivotal trial for Orion, pending successful validation of the instrument.


No peer-reviewed data is available yet for the Orion system. We are currently negotiating the clinical and regulatory pathway to commercialization with the FDA as part of the Breakthrough Devices Program.

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 intendedits pioneering neurostimulation systems to help patients have more timely accessrecover critical body functions. In March 2023, Vivani announced the filing of a Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) for the proposed initial public offering of Cortigent. Cortigent is expected to these medical devicescontinue to be majority-owned by expediting theirVivani immediately following the initial public offering.

On July 6, 2023, Vivani changed its state of incorporation from the State of California to the State of Delaware by means of a plan of conversion, effective July 5, 2023. The reincorporation, including the principal terms of the plan of conversion, was submitted to a vote of, and approved by, Vivani’s stockholders at its 2023 Annual Meeting of Stockholders held on June 15, 2023.  

Subject to completion of Cortigent’s initial public offering, Vivani intends to focus exclusively on further development assessment, and review.of the drug implant business.

In early July 2023, Vivani successfully completed the manufacture of clinical supplies to support a proposed first-in-human (“FIH”) investigation of NPM-119 (exenatide implant) in patients with type 2 diabetes mellitus. On February 26, 2021,July 14, 2023, the Company submitted an Investigational New Drug (“IND”) application to 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(“FDA)” for the treatmentproposed NPM-119 FIH study also named LIBERATE-1.  On August 11, 2023, FDA verbally notified Vivani that the agency was placing a clinical hold on Vivani’s IND application for the proposed clinical investigation and indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. Vivani plans to engage with the FDA in order to lift the clinical hold and commence its planned clinical development of retinitis pigmentosa (RP).NPM-119. The Company expects thatto commence enrollment in LIBERATE-1 in the Argus 2s will be adaptedsecond half of 2023 subject to beregulatory clearance. Assuming LIBERATE-1 commences as planned, the external system forCompany would anticipate the next generation Orion Visual Cortical Prosthesis System currently under development. In addition to ergonomic improvements,availability of interim LIBERATE-1 data in the Argus 2s system offers significantly more processing power, potentially allowing for improved video processing.first half of 2024 and full top-line results in the second half of 2024.

17 

 

Market Development PlansLiquidity

Orion. 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. An Early Feasibility Study of the Orion device is currently underway at UCLA and Baylor College of Medicine. Regularly scheduled visits at both sites were placed on hold in mid-March due to Covid-19, however visits at UCLA resumed mid-September 2020 and Baylor resumed in December 2020. Our 36 month results indicate a good safety profile with encouraging efficacy data and benefits in helping subjects perform their daily living tasks. We believe these data are encouraging and support advancement of Orion into a larger 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.


Liquidity

From inception, our operations have been funded primarily through the sales of our common stock and warrants, as well as from the issuance of convertible debt, research and clinical grants, and limited product revenue generated from the salewarrants. The completion of our Argus II product. We have funded our business since 2020 primarily through the following transactions:reverse merger with Second Sight Medical Products, Inc. provided $53.3 million in net assets including approximately $55.4 million in cash.

●On June 25, 2021, we closed an underwritten public offering of 11,500,000 shares of common stock at a price of $5.00 per share for aggregate net proceeds of $53.3 million

●On March 23, 2021, we closed our private placement to seven institutional investors of 4,650,000 shares of common stock at a price of $6.00 per share for aggregate net proceeds of approximately $24.5 million

We wereSecond Sight was 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)(“NIH”) five-year grant (with annual reviews) from NIH to fund the “Early Feasibility Clinical Trial of a Visual Cortical Prosthesis” that commenced in January 2018. Our secondProsthesis.” The fifth and final year grant of $1.4$1.0 million was approved on April 6, 2021, our third year grant of $1.4 million was approved on May 12, 2021 and our fourth year grant of $1.1 million was approved on July 18, 2022.in March 2023.

We are subject to the risks and uncertainties associated with a business with no revenue that is developing a novel pharmaceutical product candidates and medical device.devices candidates. 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 the foreseeable future. We expect our operating expenses to increase significantly as we continue our business operations, particularly as we prepare to and initiate our planned clinical trial of NPM-119 and conduct our other research and development activities.

On August 11, 2023, the FDA notified us that the agency was placing a clinical hold on our IND for the proposed FIH study of NPM-119. The FDA indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. If we are required to conduct additional IND-enabling activities such as additional pre-clinical studies, our overall expenditures relating to our NPM-119 program would increase. Our financial statements have been presented on the basis that our business is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. To finance our operations, 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 financings, grants, collaborations, strategic partnerships or other sources. However, we may be unable to raise additional capital or enter into such other arrangements when needed on favorable terms or at all. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs, or we may be unable to expand or maintain our operations, maintain our current organization and employee base or otherwise capitalize on our business opportunities, as desired, which could materially and adversely affect our business, financial condition and results of operations. We estimate that currently available cash will provide sufficient funds to enable the Company to meet its planned obligations through September 2024.

Merger Agreement

As discussed in the Notes to Condensed Consolidated Financial Statements of the Company, on February 4, 2022, the Company entered the Merger Agreement.Agreement with Second Sight. On May 13, 2022, the Company filed a Registration Statement on Form S-4 (the “Registration Statement”) with the SEC in connection with the contemplated Merger, which is currently effective. Shareholders of the Company approved the Merger on July 27, 2022, and the merger is anticipated to bewas completed in August 2022. We encourage you to review the final proxy statement/prospectus filed with the SEC on June 24, 2022 for more information about the contemplated Merger.

Safe Agreement

On February 4, 2022, and in connection with the Merger, discussed in Note 1,Second Sight and NPM and SSMPalso entered into an agreementa Simple Agreement for Future Equity (“SAFE”) whereby SSMP would provideSecond Sight provided to NPM pending closing of the Merger an investment advance of $8 million, which effective upon the termination date ofmillion. If the Merger Agreementwere to be terminated without completion, of the Merger, will result in NPM’s issuingNPM would issue to SSMPSecond Sight that number of shares of NPM Capital Stock which following that issuance willcommon stock equal to not less than 2.133% of the issued and outstanding shares of NPM capitalcommon stock assuming exercise or conversion of all outstanding vested and unvested options, warrants, and convertible securities.

In The agreement provided that the event NPM completes an equity financing within one year from the date of termination of the merger at a lower valuation, SSMP may be eligible to receive additional shares of NPM capital stock as set forth in the SAFE. IfSAFE would terminate if the Merger is completed,were to be successfully completed.

Under the SAFE will terminate. The SAFE is classified as a marked-to-market asset pursuant to ASC 480, Distinguishing Liabilities from Equity, due to the potential variability at the time of share settlement. The carrying valueterms of the SAFE, asupon successfully completion of Junethe Merger on August 30, 2022, the investment advance was determined to approximate fair value due to proximity toeliminated. Under the issuance date and current probability ofaccounting for a successful merger.business combination, the $8 million adjusted the purchase consideration.


18 

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) and the requirements of the United States Securities and Exchange Commission require management to make estimates, assumptions and 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, 2021.

There have been no other material changes to our critical accounting policies during the six months ended June 30, 2022.2023.

Results of Operations

Operating Expenses. We generally recognize our operating expenses as incurred in threetwo general operational categories: research and development clinical and regulatory and general and administrative. Our operating expenses also include a non-cash component related to the amortization of stock-based compensation for research and development clinical and regulatory and general and administrative personnel. 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 reductions to operating expenses.

●Research and development expenses consist primarily of employee compensation 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. Due to the recent downsizing of our business, we are currently evaluating the path forward for our research and development activities for Orion, including the potential for collaboration with 3rd parties and/or outsourcing the engineering work for Orion.

●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 offset by grant revenue received in support of specific clinical research products.projects. We expect clinicalexpense our research and regulatory expenses to be lower in the short-rundevelopment costs as we have closed our clinical study activities related to Argus II. In the long-run, we expect clinical and regulatory expenses to increase if and when we conduct a larger clinical study of Orion.they are incurred.

 

●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.

 

Comparison of the Three Months Ended June 30, 20222023 and 20212022

Research and development expense. Research and development expense increased by $0.1$0.7 million, or 21%, to $0.8$3.9 million in the second quarter of 20222023 from $0.7$3.2 million in the second quarter of 2021.2022. The costs increased due to costs of our acquired company Second Sight being included from the merger acquisition date of August 30, 2022. This inclusion increased usethese costs for the quarter by $0.5 million. The remainder of outside services and additional salaries as we restart our curtailed activity.the increase was primarily due to drug implants development costs.

Clinical and regulatory expense. Clinical and regulatory expense decreased $0.1 million, or 39%, to $0.2 million in the second quarter of 2022 from $0.3 million in the second quarter of 2021. This decrease is attributable to decreased costs associated with outside services primarily from patient studies.

General and administrative expense. General and administrative expense increased $0.8$2.2 million, or 59%255%, to $2.1$3.1 million in the second quarter of 20222023 from $1.3$0.9 million in the same period of 2021.2022. This increase iswas attributable to increased legal costs associated with the currentinclusion of our acquired company Second Sight which totaled $1.0 million in the second quarter of 2023, higher costs associated with being a public company of $0.9 million for D&O insurance and professional fees, and payroll related expenses. Approximately $0.2 million of costs were incurred related to the Cortigent IPO in the quarter.

Other income. Other income was impacted by the merger agreement.acquisition of cash which increased our interest income by $0.5 million for the three months ended June 30, 2023 as compared to the same period in 2022 before the merger.

Comparison of the Six Months Ended June 30, 20222023 and 20212022

Research and development expense. Research and development expense increased by $0.5$1.9 million, or 45%33%, to $1.5$7.8 million in the first six months of 20222023 from $1.0$5.9 million in the same period of 2021.2022. The costs increased due to costs of our acquired company Second Sight being included from the merger acquisition date of August 30, 2022. This inclusion increased usethese costs for the period by $1.2 million. The remainder of outside services and increased salaries as we restart our curtailed activity.the increase was primarily due to drug implants development costs.

Clinical and regulatory expense. Clinical and regulatory expense decreased $34,000, or 11%, to $266,000 in the first six months of 2022 from $300,000 in the same period of 2021. This decrease is attributable to decreased costs associated with outside services primarily from patient studies.

General and administrative expense. General and administrative expense decreased $0.2increased $3.7 million, or 6%174%, to $3.6$5.8 million in the first six months of 20222023 from $3.8$2.1 million in the same period of 2021.2022. This decrease isincrease was attributable to the termination feeincreased costs associated with the inclusion of our termination of the MOUacquired company Second Sight which occurredtotaled $2.1 million in the first six months of 2021 partially offset2023, higher public company costs of $1.0 million, and higher payroll related expenses. Approximately $0.3 million of costs were incurred related to the Cortigent IPO in the period.

Other income. Other income was impacted by the merger acquisition of cash which increased legal costs associated withour interest income to $0.7 million for the current merger agreement.six months ended June 30, 2023 as compared to the same period in 2022 before the merger.

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Liquidity and Capital Resources

Our financial statements have been presented on 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. We are subject to the risks and uncertainties associated with a business with no revenue that is developing a novel pharmaceutical product candidates and medical device candidates, including limitations on our operating capital resources and uncertain demand for our products. 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 the foreseeable future.


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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.our products. We expect expenses to increase in connection with our ongoing activities, particularly as we continueinitiate clinical trials, of Orion, initiate new research and development projects and seek marketing approval for any product candidates that we successfully develop. In particular, we expect to incur increased expenses as we initiate our planned Phase 2 clinical trial of NPM-119. On August 11, 2023, the FDA notified us that the agency was placing a clinical hold on our IND for the proposed FIH study of NPM-119. The FDA indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. If we are required to conduct additional IND-enabling activities such as additional pre-clinical studies, our overall expenditures relating to our NPM-119 program would increase. 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 capital or enter into such other arrangements when needed on favorable terms 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 adequate funds are not available, we may be required to further curtail operations significantly or to obtain funds by entering into agreements on unattractive terms. If, for example, we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us. Our inability to raise capital could have a material adverse effect on our business, financial condition and results of operations.

Cash, and cash equivalents and restricted cash decreased by $13.2$12.6 million from $69.6$46.4 million as of December 31, 20212022 to $56.4$33.9 million as of June 30, 2022.2023. Working capital was $54.8$29.1 million as of June 30, 2022, as2023 compared to $68.0$40.7 million as of December 31, 2021,2022, a decrease of $13.2 million primarily as a result of the funding of the SAFE agreement and the current period operating loss.$11.6 million. We use our cash and cash equivalents and working capital to fund our operating activities.

Material Cash Requirements for Known Contractual and Other Obligations

The Merger Agreement as amended provides for the aggregate amount of cash, cash equivalents, and marketable securities of the Company being not less than $63 million less the amount of any advances made to NPM for working capital, in order to consummate the Merger. To date, the Company made an investment advance to NPM in the amount of $8 million under the SAFE, thereby having decreased the available cash requirement of the Merger Agreement to $55 million. The Company currently anticipates that it will be able to satisfy the available cash requirement of the Merger Agreement. 

Cash Flows from Operating Activities

During the first six months of 2022,ended June 30, 2023, we used $5.2$12.5 million of cash in operating activities, consisting primarily of a net loss of $5.3$12.8 million offset byand a net changeincrease in net operating assets and liabilities of $0.1 million. During the first six months of 2021, we used $4.9$0.9 million, of cash in operating activities, consisting primarily of a net loss of $5.1 million,partially offset by non-cash charges which provided cash of $0.1$1.2 million for depreciation and amortization of property and equipment, stock-based compensation and change in right of use assetsassets. During the six months ended June 30, 2022, we used $6.6 million of cash in operating activities, consisting primarily of a net loss of $8.0 million, offset by non-cash charges which provided cash of $1.0 million for depreciation and amortization of property and equipment, stock-based compensation, change in right of use and partially offset by a net changedecrease in net operating assets and liabilities of $0.1$0.4 million.

Cash Flows from Investing Activities

Cash used for investing activities in the first six months ofended June 30, 2023 and 2022 was $8,018,000 and was zero in the first six months of 2021. The $18,000minimal for both periods. In 2023 $81,000 was used for the purchase of property and equipment and $8.0 millionequipment. In 2022, $116,000 was used for our SAFE agreement.the purchase of property and equipment.

Cash Flows from Financing Activities

Financing activities was $7,000 in the six months ended June 30, 2023. Financing activities provided zero cash in the first six months of 2022. Financing activities provided $75.6$8.0 million of cash in the first six months of 2021 $77.8 millionended June 30, 2022 from the salefunding of common stock offset by $2.2 million for repayment of debt.the SAFE agreement.

Off-Balance Sheet Arrangements

AtAs of June 30, 2022,2023, we did not have any transactions, obligations or relationships that constitute off-balance sheet arrangements.


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Item 3.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 June 30, 2022,2023, our investments consisted solely of money market funds.

Exchange Rate Sensitivity

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

Evaluation of Disclosure Controls and Procedures

Our management, including our Acting Chief Executive Officer (“CEO”) and our Acting Chief AccountingFinancial Officer (“CAO”CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. 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 June 30, 2022,2023, based on the evaluation of these disclosure controls and procedures, our CEO and CAOCFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the six months ended June 30, 2022,2023, 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.


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PART II-OTHER INFORMATION

Item 1.Legal Proceedings

 

Three oppositions filed by Pixium Vision SA (“Pixium”) are pending in the European Patent Office, each challenging the validity of a European patent owned by us.Second Sight. The outcomes of the challenges are not certain, however, if successful, they may affect our ability to block competitors from utilizing our patented technology. We believe a successful challenge will not have a material effect on our ability to manufacture and sell our products, or otherwise have a material effect on our operations.

As described in the Company’s 10-K for the year ended December 31, 2020, the Company had entered into a Memorandum of Understanding (“MOU”) for a proposed business combination with Pixium.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, and currently claim damages of approximately €5.1 million or about $5.2 million at current exchange rates.$5.6 million. We believe we have fulfilled our obligations to Pixium with the liquidated damages payment of $1,000,000 and thus$1,000,000. On December 9, 2022, the Company doesreceived notice that the Paris Commercial Court has rendered its judgement, including finding that the Company’s termination of the MOU was not believe any further loss accrual is necessary.

valid. In November 2020, we andthe judgement, the Company was ordered to pay to Pixium retained Oppenheimer & Co. Inc. as placement agentthe amount of €2,500,000 minus a €947,780 credit for the $1,000,000 already paid for, a proposed private placementnet amount payable of securities in connectionapproximately €1,552,220. The Company filed an appeal with the Business Combination. On April 1, 2021, we received an invoice from OppenheimerAppeals Court of Paris on May 24, 2023. The Company recorded a charge of $1,675,000 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 byyear ended December 31, 2022 related to this invoice are without merit.matter but plans to raise any and all legal challenges to this preliminary judgement.

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 normal course of our business in addition to governmental and other regulatory investigations and proceedings. It is our opinion that the outcome of such matters will not have a material adverse effect on our results of operations, however, the 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

 

Our business is subject to numerous material and other risks. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Form 10-Q, including our consolidated financial statements and the related notes, and in our other filings with the SEC. If any of the stated risks actually occur, our business, prospects, operating results, and financial condition could suffer materially. In such event, the trading price of our common stock could decline and you might lose all or part of your investment. The material risks associated with our business were most recently discussed in our Form 10-K that we filed on March 31, 2023. There have been no material changes from the risk factors previously disclosed in such filing, other than those as discussed below.

We could experience delays in the Company’s 2021 Annual Reportcommencement or completion of clinical trials, which could result in increased costs or otherwise impair our research and development efforts.

Delays in the commencement or completion of clinical trials could significantly impact our drug development costs and otherwise impair our research and development efforts. We do not know whether planned clinical trials will begin on Form 10-K, filedtime or be completed on schedule, if at all. The commencement of clinical trials can be delayed for a variety of reasons, including, but not limited to, delays related to:

●obtaining regulatory approval to commence one or more clinical trials;

●reaching agreement on acceptable terms with prospective third-party contract research organizations (CROs) and clinical trial sites;

●manufacturing sufficient quantities of a product candidate or other materials necessary to conduct clinical trials;

●obtaining institutional review board approval to conduct one or more clinical trials at a prospective site;

●recruiting and enrolling patients to participate in one or more clinical trials; and

●the failure of our collaborators to adequately resource our product candidates.

For example, on August 11, 2023, the U.S. Food and Drug Administration (FDA) notified Vivani that the agency was placing a clinical hold on Vivani’s Investigational New Drug (IND) application for the proposed first in human (FIH) study of NPM-119. The FDA indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. Vivani plans to engage with the SEC on March 29, 2022. For riskFDA in order to lift the clinical hold and commence its planned clinical development of NPM-119. However, there can be no assurance that we can address the issues that the FDA may identify in its letter in a timely manner or at all, and we may incur additional expenses in connection with our efforts to advance NPM-119 into the clinic. 

In addition, once a clinical trial has begun, it may be suspended or terminated by us or our collaborators, institutional review boards, or, if applicable, data safety monitoring boards charged with overseeing our clinical trials, the FDA, the EMA, or comparable foreign authorities due to a number of factors, concomitantincluding:

●failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;

●inspection of the clinical trial operations or clinical trial site by the FDA, the EMA or comparable foreign authorities resulting in the imposition of a clinical hold;

●unforeseen safety issues; or

●lack of adequate funding to continue the clinical trial.


If we experience delays in the completion or termination of any clinical trial of our product candidates, the development of product candidates will be impaired. In addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate development process and our anticipated timelines for seeking marketing approval. Such delays could also allow our competitors to obtain marketing approval for their own product candidates before we do or may shorten the patent protection period during which we may have the exclusive right to commercialize our product, if approved. Any of these occurrences may harm our business, financial condition, and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the Merger, please reviewdenial of regulatory approval of our product candidates.

Clinical development involves a lengthy and expensive process with uncertain outcomes. We may incur additional costs and experience delays in developing our product candidates, and our clinical development efforts may not yield favorable results.

To receive regulatory approval for our product candidates, adequate and well-controlled clinical trials must be conducted to demonstrate safety and efficacy in humans to the Registration Statement. satisfaction of the FDA, the EMA, and comparable foreign authorities. We have not yet conducted clinical trials for our current product candidates and clinical testing of such product candidates may not yield results to support continued development or seeking regulatory approval. The development process is expensive, can take many years and has an uncertain outcome. Failure can occur at any stage of the process. We may experience numerous unforeseen events during, or as a result of, the development process that could delay or prevent development and approval of our product candidates, including the following:


●		we may be unable to initiate or conduct planned clinical trials on our anticipated timelines, including as a result of failing to obtain any clearances necessary to conduct clinical trials or being subject to clinical holds that prevent continuation of such trials;

●clinical trials may produce negative or inconclusive results;

●preclinical studies conducted with product candidates during clinical development to, among other things, evaluate their safety, tolerability and pharmacokinetics and optimize their formulation may produce unfavorable results;

●patient recruitment and enrollment in clinical trials may be slower than anticipated;

●costs of development may be greater than anticipated;

●our product candidates may cause undesirable side effects that delay or preclude regulatory approval or limit their commercial use or market acceptance, if approved;

●if one or more product candidates are developed in collaboration with third parties, such parties may not devote sufficient resources to these clinical trials or other preclinical studies of these candidates or conduct them in a timely manner;

●we may face delays or other challenges associated with the availability and sourcing key raw materials and/or key components; and

●we may encounter difficulties in developing product candidates related to our proprietary NanoPortal implant technology or difficulties associated with the long-term purity, potency, safety, or stability of our product candidates.

For example, on August 11, 2023, the FDA notified us that the agency was placing a clinical hold on IND application for the proposed FIH study of NPM-119. The FDA indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. We plan to engage with the FDA in order to lift the clinical hold and commence our planned clinical development of NPM-119. However, there can be no assurance that we can address the issues that the FDA may identify in its letter in a timely manner or at all, and we may incur additional expenses in connection with our efforts to advance NPM-119 into the clinic. 

Even if we experience success in early development for any product candidate, that experience may not be replicated in later development or with respect to any other product candidates. For example, in our industry, product candidates in later-stage clinical trials routinely fail to demonstrate adequate safety and efficacy despite having progressed through initial clinical trials or preclinical testing.

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Even if our clinical trials generate data that we believe are promising, such data may not be sufficient to support seeking marketing approval by the FDA, the EMA, or comparable foreign authorities. Further, data generated during development can be interpreted in different ways, and the FDA, the EMA or comparable foreign authorities may interpret such data in different ways than we do. If we fail to generate data that adequately demonstrate the safety and efficacy of our product candidates to support marketing approval from regulatory authorities, we will not be able to market and commercialize these product candidates.

From time to time, in addition to or as an alternative to raising capital through equity or debt offerings, we may seek to selectively and opportunistically enter into collaborations with third parties to assist in the development and potential future commercialization of some or all of our product candidates. However, there can be no assurance that we will be able to establish such collaborations on acceptable terms, if at all, or it may take longer than expected to establish new collaborations. Even if we enter into one or more of such collaborations, the risks associated with the development of product candidates still remain, and there can be no assurance that our potential collaborators will successfully develop, seek approval for and commercialize any of our product candidates.

We will require substantial additional financing to pursue our business objectives, which may not be available on acceptable terms, or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash, and we expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we will incur significant costs associated with sales, marketing, manufacturing, and distribution activities. Our expenses could increase beyond expectations if required by the FDA, the European Medicines Agency (EMA) or other regulatory agencies to perform clinical trials or preclinical studies in addition to those that we currently anticipate. For example, on August 11, 2023, the FDA notified us that the agency was placing a clinical hold on our IND for the proposed FIH study of NPM-119. The FDA indicated its intention to subsequently provide an official clinical hold letter stating the reasons for the clinical hold. If we are required to conduct additional IND-enabling activities such as additional pre-clinical studies, our overall expenditures relating to our NPM-119 program would increase.  Other unanticipated costs may also arise. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amount of resources and funding that will be necessary to successfully complete the development and commercialization of any product candidate. We are not permitted to market or promote any product candidate before it receives marketing approval from the regulatory authorities. Accordingly, we will need to obtain substantial additional funding in order to continue our operations and pursue our business objectives.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit, or eliminate one or more of our business objectives, and our competitiveness, and business, financial condition and results of operations may be materially adversely affected. If we are unable to continue our business, including due to inadequate funding, you could lose your investment.

Vivani’s future capital requirements will depend on many factors, including, but not limited to:

●the scope, rate of progress, results and cost of its clinical trials, preclinical studies, and other related activities;

●its ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

●the timing of, and the costs involved in, obtaining regulatory approvals for any of its current or future product candidates;

●the number and characteristics of the product candidates it seeks to develop or commercialize;

●the cost of manufacturing clinical supplies, and establishing commercial supplies, of its product candidates;

●the cost of commercialization activities if any of its current or future product candidates are approved for sale, including marketing, sales, and distribution costs;

●the expenses needed to attract and retain skilled personnel;

●the costs associated with being a public company;

●the amount of revenue, if any, received from commercial sales of its product candidates, should any of its product candidates receive marketing approval; and

●the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing possible patent claims, including litigation costs and the outcome of any such litigation.

We may raise capital in the form of equity or debt financing, partnerships, collaborations, licensing, spin-offs or other strategic transactions. If we raise additional capital by issuing equity securities, the ownership of our existing shareholders may be reduced, and accordingly these shareholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences, and privileges senior to those of its common stock. If we raise funding through debt instruments or facilities, lenders may require us to pledge some or all of our assets as collateral. We may also be required to observe financial, operational and other covenants that constrain our business and operations. If we enter into partnerships, collaborations, licensing or other strategic transactions, we may be required to grant rights to third parties, including rights to develop and market product candidates, that we would otherwise have retained.

 

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

 

NoneNone.

Item 3.Defaults upon Senior Securities

 

None.

Item 4.Mine Safety Disclosures

 

Not applicable.

Item 5.Other Information

None.


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Item 6.Exhibits

EXHIBIT INDEX

 

Exhibit No.

Exhibit Description

2.1Merger AgreementPlan of Conversion of Vivani Medical, Inc. (a California corporation) to Vivani Medical, Inc. (a Delaware corporation), dated February 4, 2022July 5, 2023 and effective July 5, 2023 (incorporated by reference to Exhibit 99.1 in the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2022)July 10, 2023).

3.1
2.2WaiverCertificate of Available Cash Requirement toIncorporation of Vivani Medical, Inc., filed with the Merger Agreement dated June 15, 2022Secretary of State of Delaware and effective, July 6, 2023 (incorporated by reference to Exhibit 3.1 in the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2022).July 10, 2023)

3.2Bylaws of Vivani Medical, Inc. (a Delaware Corporation) effective July 6, 2023 (incorporated by reference to Exhibit 3.2 in the Company’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

31.1Certification of Principal Executive Officer of Second SightVivani Medical, Products, Inc. pursuant to Section 302 of Sarbanes-Oxley Act of 2002.*

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

32.1Certifications of Principal Executive Officer and Principal Financial and Accounting Officer of Second SightVivani 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.INSXBRL Instant Document.*

101.SCHXBRL Taxonomy Extension Schema Document.*

101.CALXBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEFXBRL Taxonomy Extension Definition Linkbase Document.*

101.LABXBRL Taxonomy Extension Label Linkbase Document.*

101.PREXBRL Taxonomy Extension Presentation Linkbase Document.*
  
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

 

*Included herein.Indicates the exhibit is being furnished, not filed, with this report.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NameTitleDate
/s/ Scott DunbarAdam Mendelsohn Acting Chief Executive OfficerAugust 11, 202214, 2023
 Scott DunbarAdam Mendelsohn(Principal Executive Officer)
/s/  Edward SedoBrigid A. MakesActing Chief AccountingFinancial OfficerAugust 11, 202214, 2023
Edward SedoBrigid A. Makes(Principal Financial and Accounting Officer)

 

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