UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2017March 31, 2023

OR

OR

For the transition period from ________ to ________

Commission File Number 333-198073 001-36747

Second SightVivani Medical, Products, Inc.

(Exact name of Registrant as specified in its charter)

12744 San Fernando Road, 5858 Horton Street, Suite 400, Sylmar, 280Emeryville, CA 9134294608 

(Address of principal executive offices, including zip code)

(415) 506-8462

(818) 833-5000

(Registrant’s telephone number, including area code)

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

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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes☒  No ☐

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

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 November 3, 2017,May 10, 2023, the issuerregistrant had 56,806,35250,793,799 shares of common stock, issuedno par value per share and 7,680,938 warrants, outstanding.

SECOND SIGHTVIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

FormFORM 10-Q for the Quarter Ended September 30, 2017

INDEX

TABLE OF CONTENTS

SECOND SIGHTPART I. FINANCIAL STATEMENTS

Item 1. Financial Statements

VIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARYSUBSIDIARIES

Condensed Consolidated Balance Sheets (unaudited)

(Inin thousands)

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

VIVANI MEDICAL, INC.

AND SUBSIDIARIES

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited)(unaudited)

(Inin thousands, except per share data)

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

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

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

VIVANI MEDICAL, INC.

AND SUBSIDIARIES

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)Comprehensive Loss (unaudited)
(in thousands)

(In thousands)

Nine months ended September 30, 2017 and 2016

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

VIVANI MEDICAL, INC.

AND SUBSIDIARIES

SECOND SIGHT MEDICAL PRODUCTS, INC.

AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)Stockholders’ Equity (Deficit) (unaudited)
(in thousands)

(In thousands)

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

VIVANI MEDICAL, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

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

VIVANI MEDICAL, PRODUCTS, INC.

AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)(unaudited)

Vivani Medical, Inc. (“Vivani,” the “Company,” “we,” “us,” “our” or similar terms) is 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 potentially commercialize drug implant candidates, 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 non-adherent to their medicines which can lead to poor clinical outcomes. We are developing a portfolio of miniature, sub-dermal drug implant candidates 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).

ThreeIn February 2022, we announced the signing of a definitive merger agreement between Nano Precision Medical, Inc. (“NPM”) and Nine Months Ended September 30, 2017 and 2016

1. Organization and Business Operations

Second Sight Medical Products, Inc. (“Second Sight” or “the Company”), formerlypursuant to which NPM became a wholly-owned subsidiary of Second Sight. On August 30, 2022, the merger closed and the combined company of Nano Precision Medical (“NPM” and Second Sight LLC,Medical Products (“SSMP)” was founded in 1998 as a limited liabilityrenamed Vivani Medical, Inc,

While the primary focus of Vivani is to develop and ultimately commercialize the drug implant business from legacy company NPM, Vivani’s new management team remains committed to identifying and was subsequently incorporated inexploring strategic options for the Statefurther advancement of California in 2003.the neuromodulation business of former legacy company Second Sight develops, manufactureswhich includes development of its pioneering neurostimulation systems to help patients recover critical body functions. On December 28, 2022, the neuromodulation assets and markets implantable prosthetic devices that can restore some functional visioncertain of its liabilities were contributed to patients blindedCortigent, Inc. a newly formed wholly owned subsidiary of Vivani, in exchange for 20 million shares of common stock of Cortigent. 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 continue to be majority-owned by outer retinal degenerations, such as Retinitis Pigmentosa.Vivani immediately following the initial public offering.

In 2007,Subject to completion of Cortigent’s initial public offering, Vivani intends to focus exclusively on further development of the drug implant business. Vivani plans to file an Investigational New Drug (IND) application with the US Food and Drug Administration to support a first in human (FIH) study with lead asset NPM-119 (GLP-1 implant). Following an acceptable IND submission, Vivani plans to initiate the FIH study, named LIBERATE-1, which is a Randomized, Phase 2, 12-week investigation of NPM-119 in patients with type 2 diabetes. The IND filing and the initiation of LIBERATE-1 remain on track to occur mid-2023.

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

On February 4, 2022, Second Sight formed Medical Products, Inc. (“Second Sight (Switzerland) Sarl, initially to manage clinical trials for its products in Europe,Sight”) entered into an agreement and later to manage sales and marketing in Europe, the Middle East and Asia. As the lawsplan of Switzerland require at least two corporate stockholders, Second Sight (Switzerland) Sarl is 99.5% owned directlymerger (the “Merger Agreement”) with Nano Precision Medical, Inc. (“NPM”). The Merger was approved by the Company and 0.5% is owned by an executiveshareholders of Second Sight who is acting as a nomineeon July 27, 2022, and closed on August 30, 2022. Upon consummation of the Company. Accordingly,Merger, NPM became a wholly-owned subsidiary of Second Sight. Concurrent with to the Merger, Second Sight (Switzerland) Sarl is considered 100% owned for financial statement purposeschanged its name to Vivani Medical, Inc. and is consolidated withchanged its trading symbol from EYES to VANI, and trades under the ticker VANI on the NASDAQ market. Certain investors and members of the NPM board of directors are also investors and members of the board of directors of Second Sight for all periods presented.Sight.

Since its inception,Under the Company has generated limited revenues fromterms and conditions of the saleMerger Agreement, the securities of productsNPM converted into the right to receive shares of Second Sight’s common stock representing 77.32% of the total issued and has financed its operations primarily through the issuanceoutstanding shares of common stock of Second Sight on a fully converted basis, including, without limitation, giving effect to the conversion of all options, warrants, and any and all other convertible debt (which has been converted into common stock), and grants primarily from government agencies.securities assuming net settlement. Second Sight filed a Registration Statement on Form S-4 on May 13, 2022, in connection with the Merger to register the merger shares effective June 24, 2022.

On March 6, 2017,February 4, 2022, in connection with the CompanyMerger, Second Sight and NPM also entered into a Simple Agreement for Future Equity (“SAFE”) whereby Second Sight provided to NPM an investment advance of $8 million. The Merger Agreement provided that the SAFE would terminate if the Merger were to be successfully completedcompleted. Under the terms of the SAFE, upon successfully completion of the Merger on August 30, 2022, the investment advance was eliminated. Under the accounting for a registered Rights Offeringbusiness combination, the $8 million adjusted the purchase consideration.

The Merger involved a change of control and was accounted for as a reverse merger in accordance 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 805”), Business Combinations. Accordingly, on August 30, 2022 (the “Acquisition Date”), NPM (a calendar year-end entity) was deemed to existing stockholders raising net proceedshave acquired 100% of approximately $19.7the outstanding common shares and voting interest of Second Sight, Medical, Inc. 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 in, which it sold 13.7 million Units at $1.47consisted of the fair value of the 13,136 common shares deemed issued to Second Sight shareholders, was determined based on the per Unit, which was theshare closing price of the Company’s common stockshares on that date. Each Unit consistedthe acquisition date of a share$4.14.

The following table summarizes the fair values of the Company’s common stockassets acquired and a warrant to purchase an additional share ofliabilities assumed at the Company’s stock for $1.47. The warrants have a five-year life and trade on Nasdaq under the symbol EYESW. At the Company’s discretion, the warrants are redeemable on 30 days’ notice (i) at any time 24 months after theacquisition date of issuance, (ii) if the shares of its common stock are trading at 200% or higher than the Subscription Price for 15 consecutive trading days and (iii) if all of the independent directors vote in favor of redeeming the warrants. Holders may be able to sell or exercise warrants prior to any announced redemption date and the Company will redeem outstanding warrants not exercised by the announced redemption date for a nominal amount of $0.01 per Warrant. The Company deemed it appropriate not to record the liability for this warrant redemption amount as the probability of any redemptions was deemed remote based upon its terms. For purposes of recording this transaction, the Company allocated the proceeds from the offering between the common stock and warrants issued based on their relative fair values on the date of issuance. The fair value used for the common stock was the closing price of the stock of $1.47 on March 6, 2017. The fair value used for the warrants was their Black-Scholes value of $0.64 per warrant, calculated as of March 6, 2017. Accordingly, the relative fair value assigned to the common stock was $1.02 per share and the relative fair value assigned to the warrants was $0.45 per warrant. The Company is using these proceeds to invest in its business to expand sales and marketing efforts, enhance current products, gain regulatory approvals for additional indications, and continue research and development into next generation technology.(in thousands):

The Company evaluatedSAFE loan of $8.0 million was cancelled in the financial impactMerger which adjusted the fair value of FASB ASC 260, “Earnings per Share,” which states, among other things, that if a rights issue is offered to all existing stockholders at an exercise price that is less thannet assets acquired.

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

Because NPM purchased 100% of Second Sight and the fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the stock, thenconsideration, we reassessed the weighted average shares outstandingrecognition and basicmeasurement of identifiable assets acquired and diluted earnings per share shall be adjusted retroactively to reflect the bonus element of the rights offering forliabilities assumed and concluded that all periods presented. The Company determinedacquired assets and assumed liabilities were properly recognized and that the applicationvaluation procedures and resulting measures were appropriate. As a result, we recognized a gain of this specific provision of ASC 260 was immaterial to previously issued financial statements and, therefore, did not retroactively adjust previously reported weighted average shares outstanding and basic and diluted earnings per share.$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 if Second Sight had been included in the consolidated results was $6.1 million for the three months ended March 31, 2022.

Liquidity

From inception, our operations have been funded primarily through the sales of our common stock and warrants. The Company’scompletion of our reverse merger with Second Sight Medical Products, Inc. provided $53.3 million in net assets including approximately $55.4 million in cash.

Our financial statements have been presented on the basis that itsour business is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company isWe are subject to the risks and uncertainties associated with a business with one product line and limited commercial product revenues,no revenue that is developing novel medical devices, including limitations on itsour operating capital resources and uncertain demand for its products. The Company hasresources. We have incurred recurring operating losses and negative operating cash flows since inception, and expectswe expect to continue to incur operating losses and negative operating cash flows for at least the next several years as a result of which, management has concludedforeseeable future. We estimate that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s 2016 consolidated financial statements, has also raised substantial doubt about the Company’s ability to continue as a going concern.

The Company believes that it hascurrently available cash will provide sufficient funds to last through the first quarter of 2018. To continue business operations beyond that point, the Company will need to raise additional debt and/or equity capital. However, there can be no assurances that the Company will be able to secure any such additional financing on acceptable terms and conditions, or at all so as to be able to continue operating its business at current levels past the first quarter of 2018. If cash resources become insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its technology and product development programs and/or clinical trials, or obtain funds, if available (although there can be no certainty), through strategic alliances that may requireenable the Company to relinquish rights tomeet its products, or to discontinue its operations entirely. planned obligations into the second half of 2024.

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

Basis of Presentation

The accompanyingThese unaudited condensed consolidatedinterim financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and following the rules and regulationsrequirements of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Accordingly,interim reporting. As permitted under those rules, certain footnotes or other financial information and footnote disclosuresthat are normally included inrequired by GAAP can be condensed or omitted. In our opinion, the unaudited interim financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet at December 31, 2016 has been derived fromprepared on the Company’ssame basis as the audited consolidated financial statements.

In the opinion of management, these financial statements reflectand include all adjustments, which include only normal recurring and other adjustments, necessary for athe fair presentation.presentation of our financial position and our results of operations and cash flows for periods presented. These consolidated financial statements do not include all disclosures required by GAAP and should be read in conjunction with the audited consolidatedour financial statements and accompanying notes for the fiscal year ended December 31, 2022, included in the Company’swithin our Annual Report on Form 10-K forfiled with the year ended DecemberSEC on March 31, 2016. Operating2023. The results forof the interim periods are not necessarily indicative of operatingthe results expected for an entirethe full fiscal year or any other interim period or any future periods.year or period.

Significant Accounting PoliciesIncome 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 Company’spreparation 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 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 March 31, 2023, and 2022 (in thousands):

Schedule of net loss per share

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 in its Annual Report on Form 10-K for the year ended December 31, 2016.2022, included within our Annual Report on Form 10-K filed with the SEC on March 31, 2023.

Net Operating Loss CarryforwardsRecently Issued Accounting Pronouncements

As of December 31, 2016 pursuant to an analysis done under Section 382, Limitations on Net Operating Losses, of the Internal Revenue Code of 1986, as amended, the Company had $142.3 million and $93.8 million of federal and state operating loss carryforwards, respectively, with which to offset any future taxable income. The federal and state net operating loss carryforwards will begin to expire at various dates from 2016 through 2036. If these loss carryforwards are unavailable for use in future periods, the Company’s results of operations and financial position may be adversely affected.

The Company experienced an “ownership change” within the meaning of Section 382(g) of the Internal Revenue Code of 1986, as amended, during the second quarter of 2017. The ownership change will subject the Company’s net operating loss carryforwards to an annual limitation, which will significantly restrict the Company’s ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a tax-exempt interest rate specified by the Internal Revenue Service. The Company has analyzed the available information to determine the amount of the annual limitation. Based on information available to the Company, the limitation arising from this ownership change is estimated to range between $1.4 million and $3.7 million annually. In total, the Company estimates that the 2017 ownership change will result in approximately $102 million and $54 million of federal and state net operating loss carryforwards, respectively, expiring unused.  

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09-Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which provides new guidance for revenue recognition. The Financial Accounting Standards Board (“FASB”) subsequently issued ASU No. 2015-14-Revenue from Contracts with Customers (Topic 606), which deferred the effective date of ASU 2014-09, ASU No. 2016-08-Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),ASU No. 2016-10-Revenue fromContracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU No. 2016-12-Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20-Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The above subsequent ASUsdid not change the core principle of the guidance in ASU 2014-09. The ASUs referred to above collectively will supersede and replace the revenue recognition requirements in ASC Topic 605-Revenue Recognition, and most of the related industry specific guidance and replace them with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle in ASC 606 is that revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

ASU 2014-09 also creates ASC Subtopic 340-40-Other Assets and Deferred Costs-Contracts with Customers (“ASC 340-40”), which requires an entity to recognize an asset for certain types of costs related to a contract with a customer within the scope of ASC 606 and amortize the asset over a period consistent with the transfer of the goods and services to which the asset relates. Specifically, the costs required to be capitalized are (a) incremental costs of obtaining a contract with a customer and (b) costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic.

ASC 606 and ASC 340-40 (the “new accounting standards”) require the Company to make significant judgments and estimates.  The new accounting standards also require more extensive disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company will adopt the new accounting standards as of January 1, 2018 using the modified retrospective transition method, in which the two new accounting standards are applied retrospectively with the cumulative effect of initially applying the new accounting standards as an adjustment to the opening balance of retained earnings at January 1, 2018, the date of initial adoption. In accordance with the modified retrospective transition method, the Company will apply the new guidance retrospectively only to contracts that are not completed contracts at January 1, 2018.

Also in accordance with the modified retrospective transition method, the Company will provide additional disclosures in its financial statements for each of the quarterly and annual reporting periods in 2018 of (a) the amount by which each financial statement line item is affected in the reporting period by the application of the new accounting standards as compared to the accounting guidance that was in effect before the change, and (b) an explanation of the reasons for significant changes identified.

The Company completed an initial assessment of adoption of ASC 606, and is currently in the process of updating that assessment to reflect changes in contractual terms and the Company’s customary business practices since completion of the initial assessment.  The Company is also assessing the ASC 606 revenue recognition policy related to a new type of revenue arrangement the Company entered into subsequent to September 30, 2017 which is expected to generate revenue in the fourth quarter of 2017.

The Company has not yet estimated the financial statement impact of the expected changes due to the adoption of ASC 606. The Company expects to complete its assessment during the fourth quarter of 2017 and will adopt the new accounting standards effective January 1, 2018.

Management doesWe do not believe that any other 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 the Companyus to concentrations of credit risk consist primarily of cash and money market funds, and trade accounts receivable. The Company maintainsfunds. We maintain cash and money market funds with financial institutions that management deems reputable, and at times, cash balances may be in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits. The Company extends differing levels of credit to customers, and typically does not require collateral.

The Company also maintains a cash balance at a bank in Switzerland, which is insured up to an amount specified by the deposit insurance agency of Switzerland.

Customer Concentration

During the three and nine months ended September 30, 2017 and 2016, the following customers comprised more than 10% of revenues (unaudited):

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

Geographic Concentration

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

Sources of Supply

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

Foreign Operations

The accompanying condensed consolidated financial statements as of September 30, 2017 (unaudited) and DecemberMarch 31, 20162023, include gross assets amounting to $2.0$0.1 million and $1.7 million, respectively, relating to operations of the Company’sour subsidiary based in Switzerland. It is possible that unanticipated events in foreign countries could disrupt the Company’s operations.

4. Money Market FundsFair 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 the Company haswe 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.

MoneyCash equivalents, which includes money market funds, are the only financial instrument measured and recorded at fair value on the Company’sour consolidated balance sheet, and they are consideredvalued using Level 1 valuation securities. The following table presents money market fundsinputs.

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

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

5. Selected Balance Sheet Detail

Accounts receivable, net

Accounts receivable consisted of the following at (in thousands):

Inventories, net

Inventories consisted of the following at (in thousands):

Property and equipment net of accumulated depreciation and amortization

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

6.   Equity Securities

Common Stock IssuableRight-of-use assets and operating lease liabilities

Non-employee membersWe 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 Boardrespective assets. The depreciable life of Directorsassets and leasehold improvements are paid for their services in common stock on June 1limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. As most of each yearour leases do not provide an implicit rate, we used our estimated incremental borrowing rate based on the average closing prices forinformation available at commencement date in determining the immediately preceding twenty trading days. Aspresent value of September 30, 2017, the Company accrued $86,000 for these services, which equates to 75,000 shares. These shares have not yet been issued and are excluded from the calculation of weighted average common shares outstanding for EPS purposes.lease payments.

Potentially Dilutive Common Stock EquivalentsOn 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 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. 

Schedule of right of use assets and operating lease liabilties

Schedule of lease liabilities

Rent expense, including common area maintenance charges, was $0.3 million and $0.2 million during the three-month periods ended March 31, 2023 and 2022, respectively.

6. Equity Securities

At September 30, 2017 and 2016, the Company excluded the outstanding securities summarized below, which entitle the holders thereofWe are authorized to ultimately acquireissue 300,000,000 shares of common stock with 50,788,799 issued as of March 31, 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 for every three shares. All share numbers have been retroactively adjusted for the split. On August 30, 2022, 13,136,362 shares were deemed issued for the merger acquisition.

7. Warrants

NPM, prior to the Merger, issued common stock and warrants (collectively, the “unit” or “units”) in 2019, 2020 and 2021 for $3.15 per unit. Outstanding warrants of 7,746,855 to purchase common stock are shown in the table below and generally expire 5 years from its calculationsthe date of earningsissuance at $3.15 per share, are transferable into one share of common stock and may be exercised on a cashless basis. The warrants qualified for an exception to derivative accounting and, accordingly, their value was not bifurcated from the total purchase price.

Second Sight warrants of 7,691,063 were outstanding and are convertible into 2,563,688 shares in the table below and converted as part of the Merger for Vivani warrants on a like for-like basis. The weighted average exercise price of these warrants is $35.24. Of this total 7,680,938 warrants are convertible into 2,560,313shares outstanding,and are tradeable on the open market. Under accounting standards in a business combination, these warrants were measured at fair value as their effect would have been anti-dilutive (in thousands), as follows (unaudited):of the Merger date; however, the warrants were substantially out-of-the-money and were assigned no value.

7. Warrants

A summary of warrant activity for the ninethree months ended September 30, 2017March 31, 2023 is presented below (in thousands, except per share and contractual life data) (unaudited).

Summary of Warrant Activity

The intrinsic value of warrants outstanding at September 30, 2017 was $0.as of March 31, 2023, had no intrinsic value.

8. Stock-Based Compensation

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

A summary of stock option activity for the ninethree months ended September 30, 2017March 31, 2023, is presented below (in thousands, except per share and contractual life data) (unaudited).

Summary of Stock Option Activity

The estimated aggregate intrinsic value of stock options exercisable at September 30, 2017as of March 31, 2023, was $0.$0.2 million. As of September 30, 2017,March 31, 2023, there was $5.7$2.9 million of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted average period of 2.911.4 years.

During the nine monthsquarter ended September 30, 2017, the CompanyMarch 31, 2023, we granted stock options to purchase 2,464,150993,333 shares of common stock to certain employees.employees and board members. The options are exercisable for a period of ten years from the date of grant at prices ranging from $1.13 to $1.97a weighted average price of $0.90 per share, which was calculated at the fair value of the Company’sour common stock on the respective grant dates.date. The options generally vest over a period of four years.years. The fair value of these options, as calculated pursuant tousing the Black-Scholes option-pricing model, was determined to be $2,222,000 ($0.55 to $0.96 per share). Assumptions used in$0.9 million using the model were anfollowing assumptions: expected term of 6.254.00 to 6.02 years, volatility of 48.0%100%, a risk-free interest rate of 1.92%4.22% to 2.14%4.45%, and an expected dividend rate of 0%.

In March 2017,0.0%.We also granted 402,500 RSU’s (as defined below) during the Company grantedquarter. These RSUs had market conditions which required our stock optionsprice to purchase 40,000 shares of common stock to an outside attorneyexceed $3.15 per share for three consecutive days in connection with his services relating to the Company’s March, 2017 rights offering to stockholders. The options are exercisable for a period of four years from the date of grant at a price of $1.76 per share, which was 120% of the fair value of the Company’s common stock on the grant date of March 6, 2017. The options vested as offor the date of grant. The fair value of these options, as calculated pursuantRSUs to the Black-Scholes option-pricing model, was determined to be $19,640 ($0.49 per share). Assumptions used in the model were an expected term of 4.0 years, volatility of 48.0%, a risk-free interest rate of 1.81%, and an expected dividend rate of 0%. The cost of these shares was treated as an issuance cost of the offering and was deducted from the gross proceeds from the offering.

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

The following table summarizes Restricted Stock Unit (RSU)restricted stock unit (“RSU”) activity (unaudited) for the ninethree months ended September 30, 2017March 31, 2023 (in thousands, except per share data):

Summary of Restricted Stock Unit

As of September 30, 2017,March 31, 2023, there was $1.1$0.4 million of total unrecognized compensation cost related to the outstanding RSUs that will be recognized over a weighted average period of 1.883.1 years.

Stock-based compensation expense recognized for stock-based awards granted under the 2011 Plan and the ESPP in the condensed consolidated statements of operations for the three and nine months ended September 30, 2017March 31, 2023, and 2016 is2022 was as follows (in thousands) (unaudited):