Vivani Medical, Inc. quarterly report, Q1 FY2022

Business context and reporting period

Second Sight Medical Products, Inc. (the registrant named in this filing; the request metadata identifies Vivani Medical, Inc.) filed this unaudited Form 10-Q for the quarter ended March 31, 2022. The company was developing implantable visual prosthetics, including the Orion visual cortical prosthesis, and reported no sales in either comparative quarter.

On February 4, 2022, Second Sight agreed to merge with Nano Precision Medical, Inc. (NPM), subject to conditions including Second Sight shareholder approval. The filing states that NPM securities would convert into approximately 134.35 million Second Sight shares, representing about 77.32% of the combined company’s fully converted shares. Second Sight filed a merger-related Form S-4 on May 13, 2022.

Financial results and liquidity

Amounts below are in millions of dollars, except per-share data and where stated otherwise.

• Revenue and gross profit were zero; therefore, a gross margin is not meaningful. R&D expense increased 93% to $0.645 million, and clinical and regulatory expense increased to $0.105 million. General and administrative expense declined 41% to $1.466 million, primarily reflecting higher legal and termination costs in Q1 2021.
• Cash and cash equivalents were $59.599 million at March 31, 2022, down from $69.593 million at December 31, 2021. Working capital was $57.8 million, versus $68.0 million at year-end.
• Investing activities used $8.018 million, including an $8.0 million advance under the NPM SAFE and $0.018 million for equipment. Financing activities provided no cash in Q1 2022; Q1 2021 financing provided $24.466 million.
• The balance sheet reported total liabilities of $2.385 million and no debt balance. The $8.0 million SAFE was recorded as an asset and is subject to fair-value accounting.

Material changes, outlook and risks

• Net loss narrowed year over year, but operating cash use increased. The filing attributes higher R&D and clinical costs to increased outside services and renewed activity; lower G&A primarily reflects the prior-year comparison.
• The company said it expected continued operating losses and negative operating cash flows, and no revenue until Orion is developed and receives marketing approval. It may need additional financing; the filing warns that financing may be unavailable or dilutive and that programs or operations could be curtailed if funds are insufficient.
• Under the merger agreement, the company was required to have at least $64 million in cash, cash equivalents and marketable securities, reduced by advances to NPM. After the $8 million SAFE advance, the stated requirement was $56 million; management said it anticipated meeting it.
• Orion’s early feasibility study reported 36-month results for five subjects: all five performed better with the system on for square localization and direction-of-motion tests; two of five had measurable grating acuity with the system on; and four of four completing the FLORA assessment had positive or mildly positive results. The filing cautions that these early results may not predict larger-trial outcomes; no peer-reviewed Orion data was available, and the FDA pathway was still under discussion. Orion had FDA Breakthrough Devices Program designation.
• COVID-19 had disrupted clinical visits and could continue to affect trials, suppliers, operations and financing conditions. The company also cited the usual clinical-development, regulatory-approval and commercialization uncertainties.
• Contingencies include Pixium’s Paris Commercial Court claim of approximately €5.1 million (about $5.6 million), following the company’s $1.0 million payment; Second Sight disputed additional liability. The company also disputed an Oppenheimer invoice exceeding $1.86 million. Three Pixium patent oppositions remained pending. A separate claim seeking at least $2 million was dismissed, and the appeal was abandoned.
• Management concluded disclosure controls were effective at a reasonable-assurance level. It was updating internal controls to address reduced staffing and operating activity. No material change in internal control was reported for the quarter.

Important facts for investors to verify

• Confirm the registrant and reporting-company identity: this filing is for Second Sight Medical Products, Inc., despite the Vivani Medical, Inc. request metadata.
• Review the merger’s status, shareholder approval and final exchange terms, including the NPM share issuance and cash condition; the filing describes a proposed transaction, not a completed merger.
• Assess cash runway and funding needs in light of zero revenue, ongoing cash burn, the SAFE advance and the possibility of additional financing.
• Track Orion clinical and regulatory progress, including validation of FLORA, larger-trial results and the FDA pathway; early feasibility findings are not assurance of later results.
• Monitor the Pixium and Oppenheimer disputes, patent challenges, and any resulting changes in exposure or financial accruals.