Vivani Medical, Inc. quarterly report, Q1 FY2020

Business context and reporting period

The supplied filing identifies the registrant as Second Sight Medical Products, Inc. (NASDAQ: EYES), not Vivani Medical, Inc.; verify the company and filing attribution. This is its unaudited Form 10-Q for the three months ended March 31, 2020, filed June 26, 2020. The company develops implantable visual prosthetics and had shifted focus from the discontinued Argus II product to Orion, an investigational visual cortical prosthesis.

Financial results and liquidity

Amounts below are in millions of dollars, except per-share data.

With no Q1 2020 sales, gross margin is not meaningful. Cash and cash equivalents were $2.339 million at March 31, down from $11.327 million at year-end 2019. Working capital was a $1.6 million deficit; total liabilities were $5.222 million and stockholders’ equity was a $1.318 million deficit. The balance sheet shows no borrowings or conventional debt. Q1 investing cash use was $0.331 million, while financing cash use was $0.005 million; Q1 2019 financing provided $34.399 million, primarily from a rights offering.

Material changes versus the prior period

• Argus II implants fell to zero from 10 in Q1 2019; the company said it no longer marketed the product and did not expect future Argus II revenue.
• Operating expenses declined 12% overall. Research and development rose to $3.887 million from $2.183 million, while clinical and regulatory, selling and marketing, and general and administrative expenses declined.
• Q1 2020 included $1.1 million of reported restructuring charges, including inventory and fixed-asset impairments and severance; Q1 2019 included $2.4 million of restructuring charges, primarily inventory impairment.
• Operating cash use increased by $1.5 million year over year. The company attributed the 2020 liquidity decline to operating needs and reported no material Q1 financing inflow.

Outlook, commentary, risks and unusual items

• Going concern: Management said available funds were insufficient for the next 12 months from issuance of the financial statements, and the filing states substantial doubt about the company’s ability to continue as a going concern. Further funding was not assured.
• Subsequent financing and runway: A May 2020 offering of 7.5 million shares raised approximately $6.6 million net. Management estimated it would fund about six months of ongoing operations—not a full year.
• Restructuring and facilities: The company laid off most employees in March and April, retaining about 10. It agreed to terminate facility leases, paying $210,730 in owed rent and a $150,000 early termination fee; it cited approximately $0.9 million of remaining base rent avoided.
• Orion development: The six-subject feasibility study showed encouraging results as described by management, including benefit on the FLORA assessment for five subjects. These were early results, not peer-reviewed, and management cautioned they may not predict larger-trial outcomes. COVID-19 paused site visits and validation work for the planned FLORA-20 endpoint; timing for resumption was uncertain.
• COVID-19 and strategic uncertainty: The pandemic, financing constraints, staff reductions, supplier risks and clinical delays threatened Orion development and ongoing operations. The company was exploring financing, partnerships and other strategic alternatives, without assurance of success. It suspended work on the separate SLAM project.
• Listing and governance: Nasdaq had notified the company of noncompliance with independent-director, audit-committee and compensation-committee requirements. A compliance plan and cure periods applied; failure to regain compliance could lead to delisting.
• Contingency: An Orion study participant’s counsel demanded $3.0 million over alleged contract, misrepresentation and clinical-practice claims. The company said it believed the claims were without merit; the matter was at an early stage and litigation was uncertain.
• Other unusual items: The company reported a $270,000 cost to rescind certain employee stock-purchase transactions. It also disclosed a delayed 10-Q filing due to COVID-19-related disruptions. Management stated disclosure controls were effective at a reasonable-assurance level.

Most important facts for investors to verify

1. Confirm the registrant identity: this supplied 10-Q names Second Sight Medical Products, Inc., although the request metadata names Vivani Medical, Inc.
2. Check current cash, burn rate, and whether subsequent funding or strategic arrangements extended the roughly six-month runway disclosed after the May offering.
3. Verify progress on Orion clinical visits, FLORA-20 validation, and any pivotal-trial plans, given pandemic delays and severe staffing reductions.
4. Track Nasdaq governance compliance and any delisting determination.
5. Monitor the $3.0 million demand, Argus II warranty obligations, and other contingencies; the filing does not quantify a likely outcome for the demand.