Business context and reporting period
Entity discrepancy: The supplied filing is Second Sight Medical Products, Inc. and subsidiary’s Form 10-Q for the quarter ended June 30, 2015—not a filing for Vivani Medical, Inc. This summary reflects the filing provided.
Second Sight develops, manufactures and sells the Argus II retinal prosthesis. The unaudited filing reports the three and six months ended June 30, 2015, compared with the same periods in 2014.
Financial results and liquidity
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Net sales | $2.66 million | $0.61 million | $4.36 million | $1.27 million |
| Gross profit (loss) | $1.09 million | ($0.38 million) | $1.50 million | ($0.45 million) |
| Gross margin | 41.0% | (62.4%) | 34.3% | (35.7%) |
| Operating expenses | $6.04 million | $5.18 million | $11.40 million | $9.57 million |
| Net loss | ($4.92 million) | ($7.54 million) | ($9.88 million) | ($13.98 million) |
| Operating cash used | — | $9.89 million | $10.28 million |
At June 30, 2015, cash was $0.41 million and money market funds were $26.18 million, totaling $26.59 million in cash and equivalents/investments; current assets were $35.75 million and current liabilities $8.84 million, for working capital of $26.91 million. Total assets were $36.94 million. No convertible notes remained outstanding; they converted to equity upon the November 2014 IPO. The filing reports no other debt balance.
Material changes versus prior period
- Q2 sales rose 335% and six-month sales rose 244%, chiefly as implants increased to 20 in Q2 from 3, and 39 in the half-year from 9.
- Higher production volume and yields, along with fewer inventory write-offs, contributed to positive gross profit versus gross losses in 2014. Management cautioned that quarterly gross margins may fluctuate.
- Operating expenses increased 17% in Q2 and 19% for the first half. Selling and marketing and general and administrative costs rose; R&D expense declined as grant funding offset costs.
- Net losses narrowed, partly because 2014 included convertible-note interest and discount amortization that ceased after the IPO conversion.
- Cash and money market funds declined $8.03 million from December 31, 2014; working capital fell $6.62 million.
Outlook, commentary and risks
Management stated IPO proceeds provided resources to fund operations for more than the next 12 months, while also anticipating a need to raise additional debt or equity capital within 12–18 months; financing availability and terms were not assured. The company aims to grow product revenue and reduce unit costs, but gave no formal earnings or revenue guidance.
Management expects higher spending on sales and marketing, clinical and regulatory work, R&D, and public-company infrastructure. Plans include Argus II enhancements, an AMD pilot study and possible larger trial, and preclinical work on the Orion I cortical prosthesis. These programs and potential approvals are uncertain. Reimbursement remains incomplete, particularly in the United States; revenue recognition per implant can vary with reimbursement, geography, exchange rates and product mix. The company reported low manufacturing yields and reliance on sole-source suppliers. Several customers represented significant portions of revenue and receivables. Ten European patent oppositions challenge patents; management said an adverse result was not expected to materially affect operations, though it could affect the ability to block competitors in Europe.
Other notable items: during the first half, $529,602 of a $4.075 million Johns Hopkins Applied Physics Laboratory grant was recognized to offset R&D costs. IPO investors may qualify for up to 496,548 additional shares under Long Term Investor Rights, depending on share-price conditions. The filing reports no off-balance-sheet arrangements.
Most important facts to verify
- Confirm the intended issuer: the supplied filing identifies Second Sight Medical Products, Inc., not Vivani Medical, Inc.
- Assess whether cash burn and the stated potential financing need are consistent with the company’s claimed operating runway.
- Track implant volumes, recognized revenue per implant, reimbursement coverage and customer concentration.
- Monitor manufacturing yield improvements, inventory quality and exposure to sole-source suppliers.
- Review AMD and Orion development timelines, funding requirements, clinical outcomes and the European patent challenges.