Document and Entity Information
Document and Entity Information - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 13, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | SECOND SIGHT MEDICAL PRODUCTS INC | ||
Entity Central Index Key | 1,266,806 | ||
Document Type | 10-K | ||
Trading Symbol | EYES | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 40,600 | ||
Entity Common Stock, Shares Outstanding | 59,858,842 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 604 | $ 539 |
Money market funds | 7,235 | 10,336 |
Accounts receivable, net | 1,831 | 274 |
Inventories, net | 2,700 | 3,416 |
Prepaid expenses and other current assets | 795 | 717 |
Total current assets | 13,165 | 15,282 |
Property and equipment, net | 1,299 | 1,489 |
Deposits and other assets | 33 | 39 |
Total assets | 14,497 | 16,810 |
Current liabilities: | ||
Accounts payable | 752 | 1,156 |
Accrued expenses | 2,425 | 2,088 |
Accrued compensation expense | 2,611 | 1,600 |
Accrued clinical trial expense | 779 | 629 |
Deferred revenue | 48 | 85 |
Deferred grant revenue | 104 | |
Total current liabilities | 6,615 | 5,662 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, no par value, 10,000 shares authorized; none outstanding | ||
Common stock, no par value; 200,000 shares authorized; shares issued and outstanding: 57,630 and 42,701 at December 31, 2017 and December 31, 2016, respectively | 202,156 | 186,769 |
Common stock to be issued | 153 | 153 |
Additional paid-in capital | 40,522 | 30,697 |
Notes receivable to finance stock option exercises | (2) | |
Accumulated other comprehensive loss | (572) | (608) |
Accumulated deficit | (234,377) | (205,861) |
Total stockholders' equity | 7,882 | 11,148 |
Total liabilities and stockholders' equity | $ 14,497 | $ 16,810 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, no par value (in dollars per share) | ||
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Common stock, no par value (in dollars per share) | ||
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, issued | 57,630,000 | 42,701,000 |
Common stock, outstanding | 57,630,000 | 42,701,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | |||
Net sales | $ 7,964 | $ 3,985 | $ 8,950 |
Cost of sales | 5,117 | 10,076 | 5,293 |
Gross profit (loss) | 2,847 | (6,091) | 3,657 |
Operating expenses: | |||
Research and development, net of grants | 7,893 | 5,347 | 3,036 |
Clinical and regulatory | 3,062 | 2,703 | 3,510 |
Selling and marketing | 9,569 | 8,989 | 8,935 |
General and administrative | 10,932 | 10,080 | 8,223 |
Total operating expenses | 31,456 | 27,119 | 23,704 |
Loss from operations | (28,609) | (33,210) | (20,047) |
Interest income | 93 | 31 | 2 |
Other income, net | 27 | ||
Net loss | $ (28,516) | $ (33,179) | $ (20,018) |
Net loss per common share - basic and diluted (in dollars per share) | $ (0.53) | $ (0.84) | $ (0.56) |
Weighted average shares outstanding - basic and diluted (in shares) | 54,152 | 39,554 | 35,637 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (28,516) | $ (33,179) | $ (20,018) |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | 36 | (27) | (107) |
Comprehensive loss | $ (28,480) | $ (33,206) | $ (20,125) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock [Member] | Common Stock Issuable [Member] | Additional Paid-in Capital [Member] | Notes Receivable for Stock Option Exercises [Member] | Accumulated Other Comprehensive Loss [Member] | Accumulated Deficit [Member] | Total |
Balance beginning at Dec. 31, 2014 | $ 163,171 | $ 166 | $ 24,590 | $ (171) | $ (474) | $ (152,664) | $ 34,618 |
Balance beginning (in shares) at Dec. 31, 2014 | 35,241,000 | 16,000 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock in connection with warrant exercise | $ 702 | 702 | |||||
Issuance of common stock in connection with warrant exercise (in shares) | 140,000 | ||||||
Issuance of common stock in connection with cashless warrant exercise | |||||||
Issuance of common stock in connection with cashless warrant exercise (in shares) | 1,000 | ||||||
Issuance of common stock in connection with Employee Stock Purchase Plan | $ 226 | 226 | |||||
Issuance of common stock in connection with Employee Stock Purchase Plan (in shares) | 53,000 | ||||||
Exercise of stock options | $ 2,782 | 2,782 | |||||
Exercise of stock options (in shares) | 574,000 | ||||||
Stock-based compensation expense | 2,687 | 2,687 | |||||
Common stock tendered to exercise stock options | $ (993) | (993) | |||||
Common stock tendered to exercise stock options (in shares) | (78,000) | ||||||
Stock issued or issuable in connection with professional services | $ 285 | $ 39 | $ 324 | ||||
Stock issued or issuable in connection with professional services (in shares) | 23,000 | 17,000 | 23,136 | ||||
Common stock tendered to pay taxes on stock option exercise | $ (124) | $ (124) | |||||
Common stock tendered to pay taxes on stock option exercise (in shares) | (12,000) | ||||||
Repayment of notes receivable for stock option exercises, net | 166 | 166 | |||||
Comprehensive loss: | |||||||
Net loss | (20,018) | (20,018) | |||||
Foreign currency translation adjustment | (107) | (107) | |||||
Comprehensive loss | (107) | (20,018) | (20,125) | ||||
Balance ending at Dec. 31, 2015 | $ 166,049 | $ 205 | 27,277 | (5) | (581) | (172,682) | 20,263 |
Balance ending (in shares) at Dec. 31, 2015 | 35,942,000 | 33,000 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock in connection with Employee Stock Purchase Plan | $ 488 | 488 | |||||
Issuance of common stock in connection with Employee Stock Purchase Plan (in shares) | 189,000 | ||||||
Exercise of stock options | $ 478 | 3 | 481 | ||||
Exercise of stock options (in shares) | 96,000 | ||||||
Stock-based compensation expense | 3,367 | 3,367 | |||||
Stock issued or issuable in connection with professional services | $ 324 | $ (52) | $ 272 | ||||
Stock issued or issuable in connection with professional services (in shares) | 82,000 | 44,000 | 82,000 | ||||
Issuance of common stock and options in connection with rights offering net of expenses | $ 19,430 | 53 | $ 19,483 | ||||
Issuance of common stock and options in connection with rights offering net of expenses (in shares) | 5,978,000 | ||||||
Issuance of shares under Long-Term Investor Right (in shares) | 355,000 | ||||||
Issuance of RSU units | |||||||
Issuance of RSU units (in shares) | 59,000 | ||||||
Comprehensive loss: | |||||||
Net loss | (33,179) | (33,179) | |||||
Foreign currency translation adjustment | (27) | (27) | |||||
Comprehensive loss | (27) | (33,179) | (33,206) | ||||
Balance ending at Dec. 31, 2016 | $ 186,769 | $ 153 | 30,697 | (2) | (608) | (205,861) | $ 11,148 |
Balance ending (in shares) at Dec. 31, 2016 | 42,701,000 | 77,000 | 42,701,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock in connection with Employee Stock Purchase Plan | $ 394 | $ 394 | |||||
Issuance of common stock in connection with Employee Stock Purchase Plan (in shares) | 407,000 | ||||||
Stock-based compensation expense | 3,784 | 3,784 | |||||
Stock issued or issuable in connection with professional services | $ 262 | $ 262 | |||||
Stock issued or issuable in connection with professional services (in shares) | 223,000 | 5,000 | 223,000 | ||||
Repayment of notes receivable for stock option exercises, net | $ 2 | ||||||
Issuance of shares of common stock in connection with ATM, net of expenses | $ 1,084 | $ 1,084 | |||||
Issuance of shares of common stock in connection with ATM, net of expenses (in shares) | 598,000 | ||||||
Issuance of common stock and options in connection with rights offering net of expenses | $ 13,647 | 6,021 | 19,668 | ||||
Issuance of common stock and options in connection with rights offering net of expenses (in shares) | 13,653,000 | ||||||
Issuance of RSU units | |||||||
Issuance of RSU units (in shares) | 48,000 | ||||||
Fair value of stock options issued for services in connection with rights offering | 20 | 20 | |||||
Comprehensive loss: | |||||||
Net loss | (28,516) | (28,516) | |||||
Foreign currency translation adjustment | 36 | 36 | |||||
Comprehensive loss | 36 | (28,516) | (28,480) | ||||
Balance ending at Dec. 31, 2017 | $ 202,156 | $ 153 | $ 40,522 | $ (572) | $ (234,377) | $ 7,882 | |
Balance ending (in shares) at Dec. 31, 2017 | 57,630,000 | 82,000 | 57,630,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | |||
Net loss | $ (28,516) | $ (33,179) | $ (20,018) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization of property and equipment | 457 | 432 | 335 |
Loss on disposal of property and equipment | 2 | ||
Stock-based compensation | 3,784 | 3,367 | 2,687 |
Bad debt (recovery) expense | (142) | 258 | |
Excess inventory (recovery) reserve | (3,106) | 4,728 | |
Common stock issued for services | 262 | 272 | 324 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (1,413) | 955 | (793) |
Inventories | 3,868 | 10 | (2,488) |
Prepaid expenses and other assets | (71) | 378 | (127) |
Accounts payable | (419) | 446 | 197 |
Accrued expenses | 331 | 44 | 656 |
Accrued compensation expenses | 1,013 | (469) | 707 |
Accrued clinical trial expenses | 150 | 13 | 127 |
Deferred revenue | (41) | (234) | (278) |
Deferred grant revenue | (104) | (2,093) | (1,878) |
Net cash used in operating activities | (23,947) | (25,070) | (20,549) |
Cash flows from investing activities: | |||
Purchases of property and equipment | (265) | (490) | (762) |
Proceeds from money market funds | 3,106 | 5,378 | 18,279 |
Net cash provided by investing activities | 2,841 | 4,888 | 17,517 |
Cash flows from financing activities: | |||
Net proceeds from sale of common stock in rights offerings and At-the-Market sale of common stock | 20,772 | 19,483 | |
Proceeds from exercise of options, warrants and employee stock purchase plan options | 396 | 969 | 2,883 |
Payment of employment taxes related to stock option exercises | (124) | ||
Net cash provided by financing activities | 21,168 | 20,452 | 2,759 |
Effect of exchange rate changes on cash | 3 | 30 | (107) |
Cash: | |||
Net increase (decrease) | 65 | 300 | (380) |
Balance at beginning of year | 539 | 239 | 619 |
Balance at end of year | 604 | 539 | 239 |
Non-cash financing and investing activities: | |||
Fair value of stock options issued for services rendered in connection with rights offering | $ 20 | $ 53 |
Organization and Business Opera
Organization and Business Operations | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business Operations | 1. Organization and Business Operations Second Sight Medical Products, Inc. (“Second Sight” or “the Company”), formerly Second Sight LLC, was founded in 1998 as a limited liability company and was subsequently incorporated in the State of California in 2003. Second Sight develops, manufactures and markets implantable prosthetic devices that can restore some functional vision to patients blinded by outer retinal degenerations, such as Retinitis Pigmentosa. In 2007, Second Sight formed Second Sight (Switzerland) Sarl, initially to manage clinical trials for its products in Europe, and later to manage sales and marketing in Europe and the Middle East. As the laws of Switzerland require at least two corporate stockholders, Second Sight (Switzerland) Sarl is 99.5% owned directly by the Company and 0.5% owned by an executive of Second Sight, who is acting as a nominee of the Company. Accordingly, Second Sight (Switzerland) Sarl is considered 100% owned for financial statement purposes and is consolidated with Second Sight for all periods presented. The Company’s current product, the Argus II system, entered clinical trials in 2006, received CE Mark approval for marketing and sales in the European Union (“EU”) in 2011, and approval by the United States Food and Drug Administration (“FDA”) for marketing and sales in the United States in 2013. The began selling the Argus II System in Europe at the end of 2011, Saudi Arabia in 2012, the United States and Canada in 2014, Turkey in 2015, Iran, Taiwan, South Korea and Russia in 2017, and Singapore in 2018. Going Concern From inception, the Company’s operations have been funded primarily through the sales of its common stock, as well as from the issuance of convertible debt, research and clinical grants, and limited product revenue generated from the sale of its Argus II System. During the years ended December 31, 2017, 2016 and 2015, the Company funded its business primarily through: ● Issuance of common stock and warrants in our Rights Offering in March 2017, which generated net cash proceeds of $19.7 million. ● Issuance of common stock in our Rights Offering in June 2016, which generated net cash proceeds of $19.5 million. ● Issuance of common stock through our At-the-Market sales agreement during the fourth quarter of 2017, which generated $1.1 million of net cash proceeds. ● Revenue of $8.0 million, $4.0 million, and $8.9 million in 2017, 2016 and 2015, respectively, generated by sales of our Argus II System. The Company’s financial statements have been presented on the basis that its business is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to the risks and uncertainties associated with a business with one product line and limited commercial product revenues, including limitations on the Company’s operating capital resources and uncertain demand for its product. The Company has incurred recurring operating losses and negative operating cash flows since inception, and it expects to continue to incur operating losses and negative operating cash flows for at least the next few years. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern, and the Company’s independent registered public accounting firm, in its report on the Company’s 2017 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that it does not have sufficient funds to support its operations past the end of the second quarter of 2018. In order to continue business operations past that point, the Company currently anticipates that it will need to raise additional debt and/or equity capital during the next several months. 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. 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 require the Company to relinquish rights to its products, or to discontinue its operations entirely. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the financial statements of Second Sight and Second Sight Switzerland. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets. Actual results could differ from those estimates Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents are carried at fair value. The Company generally invests funds that are in excess of current needs in high credit quality instruments such as money market funds. Accounts receivable Trade accounts receivable are stated net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers or interest on past due amounts. Management estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that may not be collectible and how recently payments have been received. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. Allowance for doubtful accounts amounted to approximately $74,000 and $213,000 at December 31, 2017 and 2016, respectively. Inventories Inventories are stated at the lower of cost or market, determined by the first-in, first-out method. Inventories consist primarily of raw materials, work in progress and finished goods, which includes all direct material, labor and other overhead costs. The Company establishes a reserve to mark down its inventory for estimated unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about the usability of the inventory, future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserve may be required. Property and Equipment Property and equipment are recorded at historical cost less accumulated depreciation and amortization. Improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation. The resulting gains and losses are reflected in the consolidated statements of operations. Depreciation is provided for using the straight-line method in amounts sufficient to relate the cost of assets to operations over their estimated service lives. Leasehold improvements are amortized over the shorter of the life of the asset or the related lease term. Estimated useful lives of the principal classes of assets are as follows: Lab equipment 5 – 7 years Computer hardware and software 3 – 7 years Leasehold improvements 2 – 5 years or the term of the lease, if shorter Furniture, fixtures and equipment 5 – 10 years The Company reviews its property and equipment for impairment annually or whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. There were no impairment losses recognized in 2017, 2016, and 2015. Depreciation and amortization of property and equipment amounted to $457,000, $432,000 and $335,000 for the years ended December 31, 2017, 2016 and 2015, respectively. Research and Development Research and development costs are charged to operations in the period incurred and amounted to $7.9 million, $5.3 million and $3.0 million net of grant revenue, for the years ended December 31, 2017, 2016 and 2015, respectively. Patent Costs The Company has over 400 domestic and foreign patents at December 31, 2017. Due to the uncertainty associated with the successful development of one or more commercially viable products based on Company’s research efforts and any related patent applications, all patent costs, including patent-related legal, filing fees and other costs, including internally generated costs, are expensed as incurred. Patent costs were $684,000, $652,000 and $679,000 for the years ended December 31, 2017, 2016 and 2015, respectively, and are included in general and administrative expenses in the consolidated statements of operations. Revenue Recognition The Company’s revenue is derived primarily from the sale of its Argus II retinal implant, which is implanted during retinal surgery to restore some functional vision to patients blinded by Retinitis Pigmentosa. The Company sells to a variety of customers including university hospitals, large medical centers and distributors. Revenue is recognized when persuasive evidence of an arrangement exists, the fee is fixed or determinable, collectability is probable, and delivery has occurred. Revenue is generated under sales agreements with multiple deliverables (multiple-element arrangements), comprising the following deliverables: ● Hospital start up kits (one per site), ● Surgical support, ● Training, and ● The Argus II System The deliverables may vary by transaction. The Company evaluates each deliverable in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company has determined that the elements listed above do not have standalone value to the customer until delivery of all components has occurred. Accordingly, revenue from multiple-element arrangements is recognized when delivery of all of deliverables has taken place and all other revenue recognition criteria have been met. Generally, revenue recognition occurs at the time of implantation, but revenue recognition can be delayed if certain training has not been delivered to the implanting sites, or if other revenue recognition criteria have not been met. In the United States, the amount of revenue recognized per unit has been limited in some situations due to the uncertainties of the reimbursement environment and payment terms. In such cases, revenue is not recognized until the consideration becomes fixed, generally when paid to the Company. In order to determine whether collection is reasonably assured, the Company assesses a number of factors, including creditworthiness of the customer and medical insurance coverage. The Company may periodically grant extended payment terms to customers. In such situations, the Company defers the recognition of revenue until collection becomes probable, which is generally upon receipt of payment. The Company also sells surgical supplies to customers and recognizes revenue on these products when they are shipped and other revenue recognition criteria have been met. The Company sells through distributors in certain countries. The Company provides these distributors with clinical start-up kits, surgical supplies and the Argus II System, as well as training them to provide pre- and post-surgical support. The Company monitors the surgery. Other than surgical support which is provided by the Company, the distributor is responsible for delivering products and services to its customers. In the past, the Company has allowed distributors to return or exchange products in certain situations. Due to the Company’s continuing involvement and its returns policy, the Company recognizes revenue from distributors when the implantation procedure has been performed by the distributor’s customer, and all other revenue recognition criteria between the Company and the distributor have been met. Grant Receipts and Liabilities From time to time, the Company receives grants that help fund specific development programs. Any amounts received pursuant to grants are offset against the related operating expenses as the costs are incurred. During the years ended December 31, 2017, 2016 and 2015 grants offset against operating expenses were $0.4 million, $2.4 million and $1.9 million, respectively. Concentration of Risk Credit Risk Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, money market funds, and trade accounts receivable. The Company maintains cash and money market funds with financial institutions that management deems reputable, and at times, cash balances may be in excess of FDIC and SIPC insurance limits of $250,000 and $500,000 (including cash of $250,000), respectively. 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. Accounts at such bank are insured up to an amount specified by the deposit insurance agency of Switzerland. Customer Concentration During the years ended December 31, 2017, 2016 and 2015, one customer represented 10%, 13%, and 14% of revenue, respectively. No other customer represented 10% or more of revenue in any year. As of December 31, 2017 and 2016, the following customers comprised more than 10% accounts receivable: 2017 2016 Customer 1 17 % 0 % Customer 2 16 % 0 % Customer 3 11 % 1 % Customer 4 0 % 34 % Customer 5 0 % 34 % Customer 6 0 % 29 % Geographic Concentration During the years ended December 31, 2017, 2016 and 2015, regional revenue, based on customer locations which comprised more than 10% of revenues, consisted of the following: 2017 2016 2015 United States 53 % 47 % 46 % Italy 13 % 17 % 20 % France 8 % 9 % 16 % Germany 3 % 12 % 6 % 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 cause time delays that impede the commercial production of the Argus II, reduce gross profit margins and impact the Company’s abilities to deliver its products as may be timely required to meet demand. Foreign Operations The accompanying consolidated financial statements as of December 31, 2017 and 2016 include assets amounting to approximately $2.7 million and $1.7 million, respectively, relating to operations of the Company in Switzerland. It is always possible unanticipated events in foreign countries could disrupt the Company’s operations. Fair Value of Financial Instruments 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 has 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 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. The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end. Money market funds are the only financial instrument that is measured and recorded at fair value on the Company’s balance sheet, and they are considered Level 1 valuation securities in both 2017 and 2016. Stock-Based Compensation Pursuant to Financial Accounting Standards Board (“FASB”) ASC 718 Share-Based Payment (“ASC 718”), the Company records stock-based compensation expense for all stock-based awards. Under ASC 718, the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions used in the Black-Scholes valuation model are as follows: ● The grant price of the issuances, is determined based on the fair value of the shares at the date of grant. ● The risk free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. ● As permitted by SAB 107, due to the Company’s insufficient history of option activity, management utilizes the simplified approach to estimate the options expected term, which represents the period of time that options granted are expected to be outstanding. ● Volatility is determined based on average historical volatilities of comparable companies in similar industry. ● Expected dividend yield is based on current yield at the grant date or the average dividend yield over the historical period. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. Long Term Investor Right Each beneficial owner (“IPO Shareholder”) of the Company’s common stock, who purchased shares directly in the offering (“IPO Shares”), was eligible to receive up to one additional share of common stock from the Company for each share purchased in the offering (“IPO Supplemental Shares”) pursuant to the Long Term Investor Right that was included with each IPO Share. To receive IPO Supplemental Shares, within 90 days following the closing date of the offering, or by February 22, 2015, an IPO Shareholder was required to take action to become the direct registered owner of its IPO Shares. Furthermore, IPO Shareholders were required to hold their IPO Shares in their own name and not place them in “street name” or trade them at any time during the 24 month period immediately following the IPO closing date. This Long Term Investors Right was non-detachable and transferable only in limited circumstances. The formula to determine the number of IPO Supplemental Shares issued on a trigger of the Long Term Investor Right was: (i) $18.00 minus (ii) the average of the highest consecutive closing prices in any 90 day trading period on the principal exchange during the two years after the IPO closing date (the “Measurement Average”) divided by the Measurement Average. Fractional shares issuable to a qualifying IPO Shareholder resulting from the calculation were rounded up to the next whole share of Common Stock, taking into account the aggregate number of Long Term Investor Rights of a holder. Since the highest average of consecutive closing prices over any 90 calendar day period was $13.96 per share, each Long-Term Investor Right was entitled to 0.2894 additional shares of common stock, which is calculated as: ($18.00 - $13.96)/$13.96. Shortly after the second anniversary of the IPO closing date, an independent public accountant verified the above formula calculation and determined which IPO Shareholders qualified to receive IPO Supplemental Shares. In total, 355,095 shares were distributed to IPO Shareholders’ accounts. The Long Term Investor Right was an equity instrument that was accounted for as a component of the actual price per common share paid by the investor in the IPO. For basic earnings per share, the common shares associated with the Long Term Investor Right were treated as contingently issuable shares and were not included in basic earnings per share until the actual number of shares were issued in November 2016. Comprehensive Income or Loss The Company complies with provisions of FASB ASC 220, Comprehensive Income, which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distributions to owners, for the period in which they are recognized. Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive and other comprehensive income (loss) is reported on the face of the financial statements. For the years ended December 31, 2017, 2016 and 2015 comprehensive income (loss) is the total of net income (loss) and other comprehensive income (loss) which, for the Company, consists entirely of foreign currency translation adjustments and there were no material reclassifications from other comprehensive loss to net loss during the years ended December 31, 2017, 2016 and 2015. Foreign Currency Translation and Transactions The financial statements and transactions of the subsidiary’s operations are reported in the local (functional) currency of Swiss francs (CHF) and translated into US dollars in accordance with U.S. GAAP. Assets and liabilities of those operations are translated at exchange rates in effect at the balance sheet date. The resulting gains and losses from translating foreign currency financial statements are recorded as other comprehensive income (loss). Revenues and expenses are translated at the average exchange rate for the reporting period. Foreign currency transaction gains (losses) resulting from exchange rate fluctuations on transactions denominated in a currency other than the foreign operations’ functional currencies are included in expenses in the consolidated statements of operations. Income Taxes The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made. The Company has incurred losses for tax purposes since inception and has significant tax losses and tax credit carryforwards. As of December 31, 2017 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 $44.5 million and $32.9 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 2033 through 2037. 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 $120 million and $56 million of federal and state net operating loss carryforwards, respectively, expiring unused. On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company will continue to analyze the provisions of the Tax Reform Law to assess the impact on the Company’s consolidated financial statements. Product Warranties The Company’s policy is to warrant all shipped products against defects in materials and workmanship for up to two years by replacing failed parts. The Company also provides a three-year manufacturer’s warranty covering implant failure by providing a functionally-equivalent replacement implant. Accruals for product warranties are estimated based on historical warranty experience and current product performance trends, and are recorded at the time revenue is recognized as a component of cost of sales. The warranty liabilities are reduced by material and labor costs used to replace parts over the warranty period in the periods in which the costs are incurred. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Although any such adjustments were not material in the years ended December 31, 2017, 2016 and 2015, any such adjustments could be material in the future if estimates differ significantly from actual warranty expense. The warranty liabilities are included in accrued expenses in the consolidated balance sheets. Presentation of sales and value added taxes The Company collects value added tax on its sales in Europe and certain states in the United Sates impose a sales tax on the Company’s sales to nonexempt customers. The Company collects that valued added and sales tax from customers and remits the entire amount to the respective authorities. The Company’s accounting policy is to exclude the tax collected and remitted to the authorities from revenues and cost of revenues. Net Loss per Share The Company’s computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, preferred stock warrants and common stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all common stock warrants and common stock options outstanding were anti-dilutive. At December 31, 2017, 2016 and 2015, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive (in thousands). 2017 2016 2015 Long Term Investor Rights — — 400 Underwriter’s warrants 802 802 802 Warrants associated with convertible debt 676 1,039 1,039 Warrants associated with 2017 Rights Offering 13,652 — — Common stock options 5,675 3,667 3,472 Restricted stock units 83 131 190 Employee stock purchase plan 271 206 93 Total 21,159 5,845 5,996 Recently Adopted Accounting Standards In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Presentation of Financial Statements — Going Concern (Subtopic 205-10). ASU 2014-15 provided guidance as to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing these financial statement management evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As fully described in Note 1, the Company believes that it does not have sufficient funds to support its operations through the end of second quarter of 2018. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period and the entity must adopt all of the amendments from ASU 2016-09 in the same period. Management has determined that adoption of this standard did not have a material effect to the financial statements and related disclosures. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company generally does not finance purchases of equipment or other capital, but does lease its facilities. While the Company is continuing to assess all potential impact of this standard, it expects most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption. In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting.” ASU No. 2017-09 provides clarity and reduces complexity when applying the guidance in Topic 718 for changes in terms or conditions of share-based payment awards. It is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this new standard will have on its financial statements. While the Company is continuing to assess all potential impact of this standard, it expects most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption. 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 d eferred 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), Contracts with Customers. The above subsequent ASUs 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 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 has adopted the new accounting standards as of January 1, 2018 using the modified retrospective transition method, in which the two new accounting standards were applied retrospectively with the cumulative effect of initially applying the new accounting standards as an adjustment to the opening balance of r |
Money Market Funds
Money Market Funds | 12 Months Ended |
Dec. 31, 2017 | |
Cash and Cash Equivalents [Abstract] | |
Money Market Funds | 3. Money Market Funds Money market funds at December 31, 2017 totaled $7,235,000 and consisted of $698,000 in the City National Rochdale Government Fund Class S, $6,366,000 in the FFI Institutional Fund, and $171,000 held in a deposit account in Switzerland as security for the performance of contracts. Money market funds at December 31, 2016 totaled $10,336,000 and consisted of $218,000 in the City National Rochdale Government Fund Class S, $9,995,000 in the FFI Institutional Fund, and $123,000 held in a deposit account in Switzerland as security for the performance of contracts. The investment objective of the City National Rochdale Government Money Market Fund is to preserve principal and maintain a high degree of liquidity while providing current income through a portfolio of liquid, high quality, short-term U.S. Government bonds and notes, at least 80% of which is in U.S. Government securities. The City National Rochdale Government Money Market Fund is managed by City National Rochdale, LLC. The investment objective of the FFI Institutional Fund, managed by Merrill Lynch, is to seek maximum current income consistent with liquidity and the maintenance of a portfolio of high-quality, short-term money market securities. The following table presents money market funds at their level within the fair value hierarchy at December 31, 2017 and 2016 (in thousands). Total Level 1 Level 2 Level 3 December 31, 2017: Money market funds $ 7,235 $ 7,235 $ — $ — December 31, 2016: Money market funds $ 10,336 $ 10,336 $ — $ — |
Selected Balance Sheet Detail
Selected Balance Sheet Detail | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Selected Balance Sheet Detail | 4. Selected Balance Sheet Detail Inventories, net Inventories consisted of the following at December 31, 2017 and 2016 (in thousands): 2017 2016 Raw materials $ 485 $ 477 Work in process 2,620 5,032 Finished goods 1,660 3,284 4,765 8,793 Allowance for excess and obsolescence (2,065 ) (5,377 ) Inventories, net $ 2,700 $ 3,416 During the year-ended December 31, 2017, the Company reversed $ 3.1 million of the 2016 charge for excess inventory based upon increased sales volumes in 2017. During the year-ended December 31, 2016, the Company recorded a charge of $4.7 million for excess inventory determined by management based on projected sales volumes in 2017. Property and equipment, net of accumulated depreciation and amortization Property and equipment consisted of the following at December 31, 2017and 2016 (in thousands): 2017 2016 Laboratory equipment $ 2,450 $ 2,300 Computer hardware and software 1,329 1,220 Leasehold improvements 298 288 Furniture, fixtures and equipment 46 45 4,123 3,853 Accumulated depreciation and amortization (2,824 ) (2,364 ) Property and equipment, net $ 1,299 $ 1,489 |
Grants
Grants | 12 Months Ended |
Dec. 31, 2017 | |
Grants | |
Grants | 5. Grants In September 2014, the Company entered into a Joint Research and Development Agreement or JRDA with The Johns Hopkins University Applied Physics Laboratory or APL. The JRDA includes a subcontract to do research under a grant received by APL. Under the JRDA, the Company has agreed to perform research regarding integration of APL research in to a visual prosthesis system. In October, 2014, APL paid the Company $4.1 million in one lump sum to conduct its portion of the research. The JRDA also includes a license from APL to the Company, for the life of any patents resulting from APL’s portion of the research. The APL portion of the research includes image processing enhancements for a visual prosthesis. In exchange for the license, the Company issued 1,000 shares of its common stock to APL , |
Warrants
Warrants | 12 Months Ended |
Dec. 31, 2017 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | 6. Warrants Warrants Associated with Convertible Debt During 2012 and 2013, the Company borrowed money primarily from then existing investors through the issuance of convertible promissory notes (collectively, the “Convertible Notes”) totaling $29.5 million. The Convertible Notes accrued interest at the rate of 7.5% per annum, which was added to the principal amounts. At the time of the Company’s November 2014 IPO, and in accordance with their original terms, the Convertible Notes were converted into 6.6 million shares of the Company’s common stock. In connection with the Convertible Notes, the Company issued warrants to purchase 1.2 million shares of the Company’s common stock at a price of $5.00 per share. Until their expiration date, the warrants could be exercised at any time, and from time to time, in whole or in part. In accordance with their amended terms, the warrants expire on the earlier of their expiration dates or upon a change in control event. The 361,909 warrants associated with the Convertible Notes issued in 2012 expired on July 31, 2017. The warrants associated with the Convertible Notes issued in 2013 had an expiration date of February 28, 2018. As of December 31, 2017, there were outstanding warrants associated with the Convertible Notes to purchase 676,494 shares of the Company’s common stock, of which warrants for 240,000 shares were held by a related party. Underwriter’s Warrant As a component of the IPO underwriting fee, the Company granted the underwriter a warrant to purchase 805,000 shares of the Company’s common stock at an exercise price of $11.25 per share, which was 25 percent above the offering price to the investors. The warrant is exercisable, in whole or in part, for a period commencing 180 days after the effective date of the registration statement (November 18, 2014) and ending on the fifth anniversary date of the effective date of the registration statement. Underwriter’s warrants to purchase 802,000 of the Company’s common stock are still outstanding at December 31, 2017. Warrants from March 2017 Right Offering On March 6, 2017, the Company completed a registered Rights Offering to existing stockholders in which it sold 13.7 million Units at $1.47 per Unit, which was the closing price of the Company common stock on that date. Each Unit consisted of a share of the Company’s common stock and a warrant to purchase an additional share of the Company’s stock for $1.47. The warrants have a five-year life and have been approved for trading on Nasdaq under the symbol EYESW. None of the warrants associated with the Rights Offering had been converted as of December 31, 2017. (See Rights Offerings in Note 9.) A summary of warrant activity for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands, except per share and contractual life data): Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Warrants outstanding at December 31, 2014 1,984 $ 5.00 Granted — — Exercised (144 ) 5.13 Forfeited or expired — — Warrants outstanding at December 31, 2015 1,840 $ 7.72 Granted — — Exercised — — Forfeited or expired — — Warrants outstanding at December 31, 2016 1,840 $ 7.72 Granted 13,652 1.47 Exercised — — Forfeited or expired (362 ) 5.00 Warrants outstanding at December 31, 2017 15,130 $ 2.15 3.90 Warrants exercisable at December 31, 2017 15,130 $ 2.15 3.90 The estimated aggregate intrinsic value of warrants exercisable at December 31, 2017 was approximately $6.0 million. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | 7. Employee Benefit Plans The Company has a 401(k) Savings Retirement Plan that covers substantially all full-time employees who meet the plan’s eligibility requirements and provides for an employee elective contribution. The Plan provides for employer matching contributions. Employer contributions are discretionary and determined annually by the Board of Directors. For the years ended December 31, 2017, 2016 and 2015, employer contributions to the Plan totaled $142,000, $147,000 and $137,000, respectively. The Company is required to contribute to a government-sponsored pension plan for the employees of its Switzerland-based subsidiary. For the years ended December 31, 2017, 2016 and 2015, the employer’s portion of the amounts contributed to the subsidiary’s pension plan on behalf of those employees was $139,000, $132,000 and $134,000, respectively. |
Equity Securities
Equity Securities | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Equity Securities | 8. Equity Securities In June 2014, the Company’s articles of incorporation were amended to increase authorized common shares to 200,000,000, no par value, and to authorize 10,000,000 shares of preferred stock, no par value. The Company’s consolidated financial statements have been retroactively restated to reflect this amendment. The Board of Directors has the authority to establish the rights, preferences, privileges and restrictions granted to and imposed upon the holders of preferred stock and common stock. Long Term Investor Right As of November 24, 2016, the Company identified investors who had perfected and maintained Long Term Investor Rights in an aggregate of 1,226,854 shares of common stock that were acquired as part of the Company’s IPO. The highest average closing price for the Company’s common stock on Nasdaq during any consecutive 90 day period ended on or before November 24, 2016 was $13.96. Based on this average closing stock price, an investor who purchased shares as part of the IPO, and who has perfected its Long Term Investor Right, was entitled to 0.2894 shares for each share purchased in the IPO, rounded up to the next whole share, which represents an aggregate of 355,095 shares. Subsequent to November 24, 2016, the two-year anniversary of the Company’s IPO, the Company distributed 355,095 shares of its common stock to IPO investors who met the qualifying terms of the Long Term Investor Right (LTIR). The shares distributed in connection with the LTIR have been accounted for as an equity transaction in the Company’s Consolidated Statement of Stockholders’ Equity and had no impact on the Consolidated Statements of Operations. Common Stock Issuable Beginning with services rendered in 2014, and with the first payment in June 2015, non-employee members of the Board of Directors were paid for their services in common stock on June 1 of each year based on the average closing prices for the immediately preceding twenty trading days. For 2017, for these services the Company issued 223,000 shares with a value of $262,000 and accrued $153,000, which equates to 82,000 shares based on the average closing price of $1.86 for the Company’s common stock during last 20 trading days as of December 31, 2017. For 2016, for these services the Company issued 82,000 shares with a value of $324,000 and accrued $153,000, which equates to 77,000 shares based on the average closing price of $1.98 for the Company’s common stock during last 20 trading days as of December 31, 2016. For 2015, for these services the Company issued 23,136 shares with a value of $285,000 and accrued $205,000, which equates to 33,293 shares based on the average closing price of $6.15 for the Company’s common stock during last 20 trading days as of December 31, 2015. The shares, which have not yet been issued, are excluded from the calculation of weighted average common shares outstanding for EPS purposes. Rights Offerings In June 2016, the Company completed a Rights Offering to existing stockholders, raising proceeds of $19.5 million net of cash offering costs, and selling 5,978,465 shares of common stock at $3.315 per share, representing 85% of the Company’s stock price at the close of the rights offering. The Company evaluated the financial impact 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 than the fair value of the stock, then the weighted average shares outstanding and basic and diluted earnings per share shall be adjusted retroactively to reflect the bonus element of the rights offering for all periods presented. The Company determined that the application 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. On March 6, 2017, the Company completed a registered Rights Offering to existing stockholders in which it sold 13.7 million Units at $1.47 per Unit, which was the closing price of the Company common stock on that date. Each Unit consisted of a share of the Company’s common stock and a warrant to purchase an additional share of the Company’s stock for $1.47. The warrants have a five-year life and have been approved for trading 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 the date of issuance, (ii) if the shares of the Company’s common stock are trading at $2.94, which is 200% of 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. At-the-Market Sales Agreement During December 2017, the Company issued 598,276 shares of common stock for gross proceeds of approximately $1.2 million as part of its At-the-Market (“ATM”) sales agreement with two different investment banks. The Company paid expenses of approximately $0.1 million resulting in net proceeds of $1.1 million. In the period from January 1, 2018 to February 28, 2018, the Company sold approximately 2.2 million additional shares through its ATM sales agreement, raising gross proceeds of approximately $4.1 million and net proceeds of approximately $4.0 million after expenses. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | 9. Stock-Based Compensation Under the 2003 Plan, as restated in June 2011, the Company was authorized to issue options covering up to 3,500,000 common stock shares. Effective June 1, 2011, the Company adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The maximum number of shares with respect to which options may be granted under the 2011 Plan is 7,500,000 shares, which is offset and reduced by options previously granted under the 2003 Plan. 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. Both plans provide for accelerated vesting if there is a change of control, as defined in the plans. On May 15, 2015 shareholders approved (1) an increase of 2,000,000 shares in the number of shares available for option awards under the 2011 Equity Incentive Plan, and (2) an Employee Stock Purchase Plan, with an initial 250,000 shares with annual increases of shares available equal to the lesser of (i) 1% of outstanding shares or (ii) 100,000 shares. On May 10, 2016 shareholders approved an increase of 1,500,000 shares in the number of shares available for option awards under the 2011 Equity Incentive Plan. No option shall be granted under the 2011 Plan after May 31, 2021. The Company recognized stock-based compensation cost of $3,784,000, $3,367,000 and $2,687,000 during 2017, 2016 and 2015, respectively. The calculated value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2017 2016 2015 Risk-free interest rate 1.92% – 2.25% 1.40% – 2.03% 1.93%–2.21% Expected dividend yield 0% 0% 0% Expected volatility 48.0% 47.6% – 48.2% 47.5%–50.4% Expected term 6.25 years 6.25 years 6.25–6.5 years Weighted-average grant date calculated fair value $ 0.90 $ 1.97 $ 6.17 As the Company has limited stock trading history, the expected volatility is based on the historical volatility of similar companies that have a trading history. The expected term represents the estimated average period of time that the options are expected to remain outstanding. Since the Company does not have sufficient historical data on the exercise of stock options, the expected term is based on the “simplified” method that measures the expected term as the average of the vesting period and the contractual term. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the options. A summary of stock option activity for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands, except per share and contractual life data): Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Options outstanding at December 31, 2014 3,252 $ 6.07 Granted 998 12.29 Exercised (574 ) 4.85 Forfeited or expired (204 ) 7.08 Options outstanding at December 31, 2015 3,472 $ 8.01 Granted 745 4.18 Exercised (96 ) 5.00 Forfeited or expired (454 ) 8.66 Options outstanding at December 31, 2016 3,667 $ 7.23 Granted 2,701 1.80 Exercised — Forfeited or expired (693 ) 5.38 Options outstanding at December 31, 2017 5,675 $ 4.87 7.40 Options exercisable at December 31, 2017 2,161 $ 7.19 5.25 The exercise prices of common stock options outstanding and exercisable are as follows at December 31, 2017 (in thousands): Exercise Price Options Outstanding (Shares) Options Exercisable (Shares) $ 1.12 to 1.97 2,617 40 $ 2.34 to 4.18 444 169 $ 4.88 to 5.23 1,116 973 $ 7.00 to 9.01 805 588 $ 12.43 to 14.06 693 391 5,675 2,161 The estimated aggregate intrinsic value of stock options exercisable at December 31, 2017 was approximately $6,000. As of December 31, 2017, there was $4,901,000 of total unrecognized compensation cost related to the outstanding stock options that will be recognized over a weighted average period of 2.69 years. During the first quarter of 2016, the Company recorded a charge of $55,000 to extend the exercise period of 98,681 vested options for one employee who resigned and became a consultant for the Company. All unvested options for this employee were terminated when this employee ceased full-time employment with the Company. During the year ended December 31, 2016, the Company granted stock options to purchase 30,000 shares of common stock to an outside attorney in connection with his services relating to the Company’s rights offering to stockholders. The options have fully vested and are exercisable for a period of four years from the date of grant at a price of $5.23 per share, which was 125% of the fair value of the Company’s common stock on the grant date of January 14, 2016. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $53,000 ($1.77 per share). Assumptions used in the model were an expected term of 6.25 years, volatility of 48.2%, a risk-free interest rate of 1.87%, 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 of the offering. During the year ended December 31, 2017, the Company granted stock options to purchase 2,511,150 shares of common stock to certain employees. The options are exercisable for a period of ten years from the date of grant at prices ranging from $1.12 to $1.97 per share, which was the fair value of the Company’s common stock on the respective grant dates. The options vest over a period of four years. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $2,251,000 ($0.54 to $0.96 per share). Assumptions used in the model were an expected term of 6.25 years, volatility of 48.0%, a risk-free interest rate of 1.92% to 2.25%, and an expected dividend rate of 0%. In March 2017, the Company granted stock options to purchase 40,000 shares of common stock to an outside attorney 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 of the date of grant. The fair value of these options, as calculated pursuant 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. In October 2017, the Company granted stock options to purchase 150,000 shares of common stock to an outside contractor in connection with his services. The options are exercisable for a period of ten years from the date of grant at a price of $1.21 per share, which was the fair value of the Company’s common stock on the grant date. The options vest over a four year period. The unvested portion of these stock options is remeasured by the Company at each reporting period. The fair value of these options, as remeasured pursuant to the Black-Scholes option-pricing model at December 31, 2017, was determined to be $175,067 ($1.17 per share). Assumptions used in the model were an expected term of 6.25 years, volatility of 48.0%, a risk-free interest rate of 2.25%, and an expected dividend rate of 0%. The cost of these shares will be expensed over the life of the grants. As of December 31, 2017 $11,000 has been expensed for this grant. The Company adopted an employee stock purchase plan in June, 2015 for all eligible employees. As of December 31, 2017, the maximum number of shares that may be issued under the plan is 950,000. Under the plan, 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 December 31, 2017, 648,534 shares were issued under the stock purchase plan. The following table presented below summarizes Restricted Stock Unit (RSU) activity for the years ended December 31, 2017, 2016 and 2015 (in thousands, except per share data): Number Weighted Average Outstanding as of December 31, 2014 — $ — Awarded 190 12.43 Vested — — Forfeited/canceled — — Outstanding as of December 31, 2015 190 $ 12.43 Awarded — — Vested 59 12.43 Forfeited/canceled — — Outstanding as of December 31, 2016 131 $ 12.43 Awarded — — Vested 48 12.43 Forfeited/canceled — — Outstanding as of December 31, 2017 83 $ 12.43 As of December 31, 2017, there was $961,000 of total unrecognized compensation cost related to the outstanding RSUs that will be recognized over a weighted average period of 1.63 years. The total stock-based compensation recognized for stock-based awards granted in the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 is as follows (in thousands): 2017 2016 2015 Cost of sales $ 235 $ 312 $ 279 Research and development 288 303 208 Clinical and regulatory 329 173 235 Selling and marketing 339 104 442 General and administrative 2,593 2,475 1,523 Total $ 3,784 $ 3,367 $ 2,687 From time to time, the Company has extended full-recourse loans to certain non-officer employees for the purpose of financing stock option exercises. These loans bear interest ranging from 1.27% to 1.91% per annum and are payable over three years in monthly installments of principal and interest. At December 31, 2017, and 2016 the outstanding balance of such loans, including accrued interest, was $0 and $2,000, respectively. These loans receivable are recorded in the Company’s consolidated financial statements as an offset to stockholders’ equity. Employment Agreement On June 19, 2015 the Company entered into an at will employment agreement with Will McGuire to become the Company’s President and Chief Executive Officer. The Company has agreed to pay Mr. McGuire an initial annual salary of $390,000 and he is also entitled to receive performance bonuses which will be based on performance standards and goals established by the Company’s Board of Directors. Upon termination without cause, Mr. McGuire will be entitled to receive severance consisting of his salary for a period of 12 months following such termination and his pro-rated target bonus through the balance of the calendar year in which such termination occurs. As part of the agreement, the Company agreed to grant Mr. McGuire, effective on his official start date as an employee, options to purchase 420,000 shares of the Company’s common stock, the fair value of which was determined to be $2,574,000, of which $643,000, $645,000 and $240,000 was recognized during the years ended December 31, 2017, 2016 and 2015, respectively, and 190,000 RSUs the fair value of which was determined to be $2,362,000, of which $590,000, $591,000 and $220,000 was recognized during the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of the RSUs and the exercise price of the options were both marked at $12.43 which was the closing price of the Company’s stock on Nasdaq on August 17, 2015. The options and RSUs vest over four years, with 25% vesting on the first anniversary of the grant date, and the remainder vesting thereafter in twelve equal installments of 6.25% on the quarterly anniversaries of the grant date. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 10. Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2017 and 2016 are summarized below (in thousands): 2017 2016 Stock-based compensation $ 3,346 $ 4,135 Research credits 5,858 5,493 Depreciation (41 ) (36 ) Net operating loss carryforwards 11,646 54,509 Inventory reserve 480 1,958 Other 462 847 Total deferred tax assets 21,751 66,906 Valuation allowance (21,751 ) (66,906 ) Net deferred tax assets $ — $ — In assessing the potential realization of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2017 and 2016, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates. No federal tax provision has been provided for the years ended December 31, 2017 and 2016 due to the losses incurred during such periods. The Company’s effective tax rate is different from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses. As of December 31, 2017, after the ownership change under Section 382(g), the Company had federal and state income tax net operating loss carryforwards, which may be applied to future taxable income, of approximately $44.5 million and $32.9 million, respectively. The federal net operating loss carryforwards will expire at various dates from 2035 through 2037. The state net operating loss carryforwards began to expire at various dates from 2033 through 2037. The Company also has a federal and state research and development tax credit carryforwards totaling approximately $3,354,000 and $2,505,000, respectively. The federal research and development tax credit carryforwards will expire at various dates from 2023 through 2037. The state research and development tax credit carryforwards do not expire. The Company files income tax returns in the U.S. federal jurisdiction and various states and is subject to income tax examinations by federal tax authorities for tax years ended 2014 and later and by state authorities for tax years ended 2013 and later. The Company currently is not under examination by any tax authority. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2017 and 2016, the Company has no accrued interest or penalties related to uncertain tax positions. Second Sight Switzerland, the Company’s foreign subsidiary, has not had any taxable income in the prior and current years. On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act significantly revises the existing tax law by, among other things, lowering the United States corporate income tax rate from 35% to 21% beginning in 2018. The Company reviewed and incorporated the impact of the Tax Act in its tax calculations and disclosures. The primary impact on the Company stems from the re-measurement of its deferred taxes at the new corporate tax rate of 21%, which reduced the Company's net deferred tax assets, before valuation allowance, by $7.5 million . Due to the full valuation allowance, the change in deferred taxes was fully offset by the change in valuation allowance. The Tax Act did not have a significant impact on the Company's Consolidated Financial Statements for the year ended December 31, 2017. |
Product Warranties
Product Warranties | 12 Months Ended |
Dec. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Product Warranties | 11. Product Warranties A summary of activity in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands): 2017 2016 2015 Balance, beginning of year $ 1,525 $ 1,066 $ 556 Additional accruals 470 727 991 Payments (236 ) (268 ) (443 ) Adjustments and other (303 ) — (38 ) Total $ 1,456 $ 1,525 $ 1,066 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 12. Commitments and Contingencies Lease Commitment Effective August 2012, the Company entered into a lease agreement (the “Sylmar Lease”) with a company owned by the major stockholder of the Company for office space for a term of five years that was initially set to expire on February 28, 2017. The Sylmar Lease included rental of additional space commencing January 1, 2013 and a five year option to renew. The lease requires the Company to pay real estate taxes, insurance and common area maintenance each year, and is subject to periodic cost of living adjustments. In April 2014, the Sylmar Lease was renegotiated with the term ending on February 28, 2022, and a five year option to renew. The new lease also requires the Company to pay real estate taxes, insurance and common area maintenance each year and includes automatic increases in base rent each year. In November 2014, the property underlying the Sylmar lease was sold to an unrelated party. The current base rent at this facility is $36,600 per month. Second Sight Switzerland rents office space in Switzerland on a month-to-month basis for CHF 8,200 (approximately $8,400, at December 31, 2017) per month. Total rent expense was approximately $1,017,000, $1,050,000 and $954,000 for the years ended December 31, 2017, 2016 and 2015, respectively, and is allocated based on square footage to general and administrative and manufacturing costs in the accompanying consolidated statement of operations.. Future minimum rental payments required under the operating leases are as follows for the years ended December 31 (in thousands). Years Amount 2018 $ 858 2019 884 2020 910 2021 937 2022 158 Total $ 3,747 License Agreements The Company has exclusive licensing agreements to utilize certain patents. These patents are related to the technology for visual prostheses. There are currently two such agreements that the Company has determined there is a reasonable likelihood of future royalty payments. The Company has agreed to pay the licensors’ royalties for licensed products sold or leased by the Company. The royalty rates range from 0.5% to 3.25%, based on related net sales of the patented portion of licensed products, less a credit for royalties paid to others. The 3.25% rate does not reflect a .25% credit for royalties paid to others. Additional discounts may be possible if the Company enters into additional licenses. One of the licensing agreements requires the Company to pay the licensors a $5,000 annual maintenance fee for the first seven years and a $10,000 annual maintenance fee each year thereafter for as long as the agreement has not been terminated by the Company. The second of these agreements has no stipulated fees. Pursuant to these agreements, the Company has incurred costs of approximately $93,000, $74,000 and $93,000 for the years ended December 31, 2017, 2016 and 2015, respectively. Clinical Trial Agreements Based upon FDA approval, which was obtained in February 2013, the Company is required to collect follow-up data from subjects enrolled in its pre-approval trial for a period of up to ten years post-implant, which extends this trial through the year 2019. In addition, the Company is conducting three post-market studies to comply with US FDA, French, and European post-market surveillance regulations and requirements. The Company has contracted 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 years ended December 31, 2017, 2016 and 2015 were $814,000, $786,000 and $1,409,000, respectively. Litigation, Claims and Assessments Twenty-one oppositions have been filed by a third-party in the European Patent Office, each challenging the validity of a European patent owned or exclusively licensed by the Company. The outcome of the challenges is not certain, however, if successful, they may affect the Company’s ability to block competitors from utilizing its patented technology. Management of the Company believes a successful challenge will not have a material effect on its ability to manufacture and sell its products, or otherwise have a material effect on its operations. The Company is party to litigation arising in the ordinary course of business. It is management’s opinion that the outcome of such matters will have not have a material effect on the Company’s financial statements. |
Quarterly Financial Summary (un
Quarterly Financial Summary (unaudited) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Summary (unaudited) | 13. Quarterly Financial Summary (unaudited) Quarters Ended (in thousands, except per share data) December 31, September 30, June 30, March 31, Product sales $ 3,109 $ 1,610 $ 2,236 $ 1,009 Gross profit (loss) $ 1,247 $ 609 $ 1,109 $ (118 ) Operating loss $ (7,433 ) $ (6,749 ) $ (6,872 ) $ (7,555 ) Net loss $ (7,409 ) $ (6,716 ) $ (6,843 ) $ (7,548 ) Net loss per share – basic and diluted $ (0.13 ) $ (0.12 ) $ (0.12 ) $ (0.16 ) Quarters Ended December 31, September 30, June 30, March 31, Product sales $ 715 $ 1,180 $ 1,037 $ 1,053 Gross profit (loss) $ (2,593 ) $ (1,435 ) $ (2,204 ) $ 141 Operating loss $ (10,383 ) $ (8,499 ) $ (8,507 ) $ (5,821 ) Net loss $ (10,370 ) $ (8,489 ) $ (8,504 ) $ (5,816 ) Net loss per share – basic and diluted $ (0.24 ) $ (0.20 ) $ (0.23 ) $ (0.16 ) |
Subsequent Event
Subsequent Event | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | 14. Subsequent Events Stock Option Grants In January 2018, the Company granted stock options to purchase 1,658,872 shares of common stock to employees, including 1,210,000 options that were granted to senior management of the Company. The options are exercisable for a period of ten years from the date of grant with exercise prices ranging from $1.83 to $2.06 per share. The options vest primarily over a four year term, of which one-fourth vests on the one year anniversary of the date of grant and the remaining options vest quarterly over three years thereafter. The fair value of these options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $1,625,489 (a weighted average of $0.98 per share). Severance Agreement During March 2018, the Company entered into a severance agreement with Gregoire Cosendai, its former Vice President of Clinical Affairs, who was released from work obligations effective January 16, 2018. Under Swiss law, Mr. Cosendai will remain an employee of the Company through April 30, 2018, at which time he will receive five months of voluntary severance pay equal to CHF 103,896, or approximately $110,000. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the financial statements of Second Sight and Second Sight Switzerland. Intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets. Actual results could differ from those estimates |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash equivalents are carried at fair value. The Company generally invests funds that are in excess of current needs in high credit quality instruments such as money market funds. |
Accounts receivable | Accounts receivable Trade accounts receivable are stated net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers or interest on past due amounts. Management estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that may not be collectible and how recently payments have been received. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. Allowance for doubtful accounts amounted to approximately $74,000 and $213,000 at December 31, 2017 and 2016, respectively. |
Inventories | Inventories Inventories are stated at the lower of cost or market, determined by the first-in, first-out method. Inventories consist primarily of raw materials, work in progress and finished goods, which includes all direct material, labor and other overhead costs. The Company establishes a reserve to mark down its inventory for estimated unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about the usability of the inventory, future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserve may be required. |
Property and Equipment | Property and Equipment Property and equipment are recorded at historical cost less accumulated depreciation and amortization. Improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation. The resulting gains and losses are reflected in the consolidated statements of operations. Depreciation is provided for using the straight-line method in amounts sufficient to relate the cost of assets to operations over their estimated service lives. Leasehold improvements are amortized over the shorter of the life of the asset or the related lease term. Estimated useful lives of the principal classes of assets are as follows: Lab equipment 5 – 7 years Computer hardware and software 3 – 7 years Leasehold improvements 2 – 5 years or the term of the lease, if shorter Furniture, fixtures and equipment 5 – 10 years The Company reviews its property and equipment for impairment annually or whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. There were no impairment losses recognized in 2017, 2016, and 2015. Depreciation and amortization of property and equipment amounted to $457,000, $432,000 and $335,000 for the years ended December 31, 2017, 2016 and 2015, respectively. |
Research and Development | Research and Development Research and development costs are charged to operations in the period incurred and amounted to $7.9 million, $5.3 million and $3.0 million net of grant revenue, for the years ended December 31, 2017, 2016 and 2015, respectively. |
Patent Costs | Patent Costs The Company has over 400 domestic and foreign patents at December 31, 2017. Due to the uncertainty associated with the successful development of one or more commercially viable products based on Company’s research efforts and any related patent applications, all patent costs, including patent-related legal, filing fees and other costs, including internally generated costs, are expensed as incurred. Patent costs were $684,000, $652,000 and $679,000 for the years ended December 31, 2017, 2016 and 2015, respectively, and are included in general and administrative expenses in the consolidated statements of operations. |
Revenue Recognition | Revenue Recognition The Company’s revenue is derived primarily from the sale of its Argus II retinal implant, which is implanted during retinal surgery to restore some functional vision to patients blinded by Retinitis Pigmentosa. The Company sells to a variety of customers including university hospitals, large medical centers and distributors. Revenue is recognized when persuasive evidence of an arrangement exists, the fee is fixed or determinable, collectability is probable, and delivery has occurred. Revenue is generated under sales agreements with multiple deliverables (multiple-element arrangements), comprising the following deliverables: ● Hospital start up kits (one per site), ● Surgical support, ● Training, and ● The Argus II System The deliverables may vary by transaction. The Company evaluates each deliverable in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company has determined that the elements listed above do not have standalone value to the customer until delivery of all components has occurred. Accordingly, revenue from multiple-element arrangements is recognized when delivery of all of deliverables has taken place and all other revenue recognition criteria have been met. Generally, revenue recognition occurs at the time of implantation, but revenue recognition can be delayed if certain training has not been delivered to the implanting sites, or if other revenue recognition criteria have not been met. In the United States, the amount of revenue recognized per unit has been limited in some situations due to the uncertainties of the reimbursement environment and payment terms. In such cases, revenue is not recognized until the consideration becomes fixed, generally when paid to the Company. In order to determine whether collection is reasonably assured, the Company assesses a number of factors, including creditworthiness of the customer and medical insurance coverage. The Company may periodically grant extended payment terms to customers. In such situations, the Company defers the recognition of revenue until collection becomes probable, which is generally upon receipt of payment. The Company also sells surgical supplies to customers and recognizes revenue on these products when they are shipped and other revenue recognition criteria have been met. The Company sells through distributors in certain countries. The Company provides these distributors with clinical start-up kits, surgical supplies and the Argus II System, as well as training them to provide pre- and post-surgical support. The Company monitors the surgery. Other than surgical support which is provided by the Company, the distributor is responsible for delivering products and services to its customers. In the past, the Company has allowed distributors to return or exchange products in certain situations. Due to the Company’s continuing involvement and its returns policy, the Company recognizes revenue from distributors when the implantation procedure has been performed by the distributor’s customer, and all other revenue recognition criteria between the Company and the distributor have been met. |
Grant Receipts and Liabilities | Grant Receipts and Liabilities From time to time, the Company receives grants that help fund specific development programs. Any amounts received pursuant to grants are offset against the related operating expenses as the costs are incurred. During the years ended December 31, 2017, 2016 and 2015 grants offset against operating expenses were $0.4 million, $2.4 million and $1.9 million, respectively. |
Concentration of Risk | Concentration of Risk Credit Risk Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, money market funds, and trade accounts receivable. The Company maintains cash and money market funds with financial institutions that management deems reputable, and at times, cash balances may be in excess of FDIC and SIPC insurance limits of $250,000 and $500,000 (including cash of $250,000), respectively. 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. Accounts at such bank are insured up to an amount specified by the deposit insurance agency of Switzerland. Customer Concentration During the years ended December 31, 2017, 2016 and 2015, one customer represented 10%, 13%, and 14% of revenue, respectively. No other customer represented 10% or more of revenue in any year. As of December 31, 2017 and 2016, the following customers comprised more than 10% accounts receivable: 2017 2016 Customer 1 17 % 0 % Customer 2 16 % 0 % Customer 3 11 % 1 % Customer 4 0 % 34 % Customer 5 0 % 34 % Customer 6 0 % 29 % Geographic Concentration During the years ended December 31, 2017, 2016 and 2015, regional revenue, based on customer locations which comprised more than 10% of revenues, consisted of the following: 2017 2016 2015 United States 53 % 47 % 46 % Italy 13 % 17 % 20 % France 8 % 9 % 16 % Germany 3 % 12 % 6 % 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 cause time delays that impede the commercial production of the Argus II, reduce gross profit margins and impact the Company’s abilities to deliver its products as may be timely required to meet demand. |
Foreign Operations | Foreign Operations The accompanying consolidated financial statements as of December 31, 2017 and 2016 include assets amounting to approximately $2.7 million and $1.7 million, respectively, relating to operations of the Company in Switzerland. It is always possible unanticipated events in foreign countries could disrupt the Company’s operations. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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 has 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 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. The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end. Money market funds are the only financial instrument that is measured and recorded at fair value on the Company’s balance sheet, and they are considered Level 1 valuation securities in both 2017 and 2016. |
Stock-Based Compensation | Stock-Based Compensation Pursuant to Financial Accounting Standards Board (“FASB”) ASC 718 Share-Based Payment (“ASC 718”), the Company records stock-based compensation expense for all stock-based awards. Under ASC 718, the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions used in the Black-Scholes valuation model are as follows: ● The grant price of the issuances, is determined based on the fair value of the shares at the date of grant. ● The risk free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. ● As permitted by SAB 107, due to the Company’s insufficient history of option activity, management utilizes the simplified approach to estimate the options expected term, which represents the period of time that options granted are expected to be outstanding. ● Volatility is determined based on average historical volatilities of comparable companies in similar industry. ● Expected dividend yield is based on current yield at the grant date or the average dividend yield over the historical period. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. |
Long Term Investor Right | Long Term Investor Right Each beneficial owner (“IPO Shareholder”) of the Company’s common stock, who purchased shares directly in the offering (“IPO Shares”), was eligible to receive up to one additional share of common stock from the Company for each share purchased in the offering (“IPO Supplemental Shares”) pursuant to the Long Term Investor Right that was included with each IPO Share. To receive IPO Supplemental Shares, within 90 days following the closing date of the offering, or by February 22, 2015, an IPO Shareholder was required to take action to become the direct registered owner of its IPO Shares. Furthermore, IPO Shareholders were required to hold their IPO Shares in their own name and not place them in “street name” or trade them at any time during the 24 month period immediately following the IPO closing date. This Long Term Investors Right was non-detachable and transferable only in limited circumstances. The formula to determine the number of IPO Supplemental Shares issued on a trigger of the Long Term Investor Right was: (i) $18.00 minus (ii) the average of the highest consecutive closing prices in any 90 day trading period on the principal exchange during the two years after the IPO closing date (the “Measurement Average”) divided by the Measurement Average. Fractional shares issuable to a qualifying IPO Shareholder resulting from the calculation were rounded up to the next whole share of Common Stock, taking into account the aggregate number of Long Term Investor Rights of a holder. Since the highest average of consecutive closing prices over any 90 calendar day period was $13.96 per share, each Long-Term Investor Right was entitled to 0.2894 additional shares of common stock, which is calculated as: ($18.00 - $13.96)/$13.96. Shortly after the second anniversary of the IPO closing date, an independent public accountant verified the above formula calculation and determined which IPO Shareholders qualified to receive IPO Supplemental Shares. In total, 355,095 shares were distributed to IPO Shareholders’ accounts. The Long Term Investor Right was an equity instrument that was accounted for as a component of the actual price per common share paid by the investor in the IPO. For basic earnings per share, the common shares associated with the Long Term Investor Right were treated as contingently issuable shares and were not included in basic earnings per share until the actual number of shares were issued in November 2016. |
Comprehensive Income or Loss | Comprehensive Income or Loss The Company complies with provisions of FASB ASC 220, Comprehensive Income, which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distributions to owners, for the period in which they are recognized. Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive and other comprehensive income (loss) is reported on the face of the financial statements. For the years ended December 31, 2017, 2016 and 2015 comprehensive income (loss) is the total of net income (loss) and other comprehensive income (loss) which, for the Company, consists entirely of foreign currency translation adjustments and there were no material reclassifications from other comprehensive loss to net loss during the years ended December 31, 2017, 2016 and 2015. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The financial statements and transactions of the subsidiary’s operations are reported in the local (functional) currency of Swiss francs (CHF) and translated into US dollars in accordance with U.S. GAAP. Assets and liabilities of those operations are translated at exchange rates in effect at the balance sheet date. The resulting gains and losses from translating foreign currency financial statements are recorded as other comprehensive income (loss). Revenues and expenses are translated at the average exchange rate for the reporting period. Foreign currency transaction gains (losses) resulting from exchange rate fluctuations on transactions denominated in a currency other than the foreign operations’ functional currencies are included in expenses in the consolidated statements of operations. |
Income Taxes | Income Taxes The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made. The Company has incurred losses for tax purposes since inception and has significant tax losses and tax credit carryforwards. As of December 31, 2017 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 $44.5 million and $32.9 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 2033 through 2037. 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 $120 million and $56 million of federal and state net operating loss carryforwards, respectively, expiring unused. On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company will continue to analyze the provisions of the Tax Reform Law to assess the impact on the Company’s consolidated financial statements. |
Product Warranties | Product Warranties The Company’s policy is to warrant all shipped products against defects in materials and workmanship for up to two years by replacing failed parts. The Company also provides a three-year manufacturer’s warranty covering implant failure by providing a functionally-equivalent replacement implant. Accruals for product warranties are estimated based on historical warranty experience and current product performance trends, and are recorded at the time revenue is recognized as a component of cost of sales. The warranty liabilities are reduced by material and labor costs used to replace parts over the warranty period in the periods in which the costs are incurred. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Although any such adjustments were not material in the years ended December 31, 2017, 2016 and 2015, any such adjustments could be material in the future if estimates differ significantly from actual warranty expense. The warranty liabilities are included in accrued expenses in the consolidated balance sheets. |
Presentation of sales and value added taxes | Presentation of sales and value added taxes The Company collects value added tax on its sales in Europe and certain states in the United Sates impose a sales tax on the Company’s sales to nonexempt customers. The Company collects that valued added and sales tax from customers and remits the entire amount to the respective authorities. The Company’s accounting policy is to exclude the tax collected and remitted to the authorities from revenues and cost of revenues. |
Net Loss per Share | Net Loss per Share The Company’s computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, preferred stock warrants and common stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all convertible notes payable, common stock warrants and common stock options outstanding were anti-dilutive. At December 31, 2017, 2016 and 2015, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive (in thousands). 2017 2016 2015 Long Term Investor Rights — — 400 Underwriter’s warrants 802 802 802 Warrants associated with convertible debt 676 1,039 1,039 Warrants associated with 2017 Rights Offering 13,652 — — Common stock options 5,675 3,667 3,472 Restricted stock units 83 131 190 Employee stock purchase plan 271 206 93 Total 21,159 5,845 5,996 |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Presentation of Financial Statements — Going Concern (Subtopic 205-10). ASU 2014-15 provided guidance as to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing these financial statement management evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As fully described in Note 1, the Company believes that it does not have sufficient funds to support its operations through the end of second quarter of 2018. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period and the entity must adopt all of the amendments from ASU 2016-09 in the same period. Management has determined that adoption of this standard did not have a material effect to the financial statements and related disclosures. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company generally does not finance purchases of equipment or other capital, but does lease its facilities. While the Company is continuing to assess all potential impact of this standard, it expects most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption. In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting.” ASU No. 2017-09 provides clarity and reduces complexity when applying the guidance in Topic 718 for changes in terms or conditions of share-based payment awards. It is effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this new standard will have on its financial statements. While the Company is continuing to assess all potential impact of this standard, it expects most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption. 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 d eferred 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), Contracts with Customers. The above subsequent ASUs 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 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 has adopted the new accounting standards as of January 1, 2018 using the modified retrospective transition method, in which the two new accounting standards were 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 applied the new guidance retrospectively only to contracts that were 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 its assessment of adoption of ASC 606 2016, 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 believes the financial statement impact of the expected changes will be minimal. Management believes that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would not have a material impact on the Company’s financial statement presentation or disclosures. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Schedule of estimated useful life of property and equipment | Estimated useful lives of the principal classes of assets are as follows: Lab equipment 5 – 7 years Computer hardware and software 3 – 7 years Leasehold improvements 2 – 5 years or the term of the lease, if shorter Furniture, fixtures and equipment 5 – 10 years |
Schedule of customer concentration of risk in accounts receivable | As of December 31, 2017 and 2016, the following customers comprised more than 10% accounts receivable: 2017 2016 Customer 1 17 % 0 % Customer 2 16 % 0 % Customer 3 11 % 1 % Customer 4 0 % 34 % Customer 5 0 % 34 % Customer 6 0 % 29 % |
Schedule of geographic concentration of risk in revenue | During the years ended December 31, 2017, 2016 and 2015, regional revenue, based on customer locations which comprised more than 10% of revenues, consisted of the following: 2017 2016 2015 United States 53 % 47 % 46 % Italy 13 % 17 % 20 % France 8 % 9 % 16 % Germany 3 % 12 % 6 % |
Schedule of net loss per share | At December 31, 2017, 2016 and 2015, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive (in thousands). 2017 2016 2015 Long Term Investor Rights — — 400 Underwriter’s warrants 802 802 802 Warrants associated with convertible debt 676 1,039 1,039 Warrants associated with 2017 Rights Offering 13,652 — — Common stock options 5,675 3,667 3,472 Restricted stock units 83 131 190 Employee stock purchase plan 271 206 93 Total 21,159 5,845 5,996 |
Money Market Funds (Tables)
Money Market Funds (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of money market funds | The following table presents money market funds at their level within the fair value hierarchy at December 31, 2017 and 2016 (in thousands). Total Level 1 Level 2 Level 3 December 31, 2017: Money market funds $ 7,235 $ 7,235 $ — $ — December 31, 2016: Money market funds $ 10,336 $ 10,336 $ — $ — |
Selected Balance Sheet Detail (
Selected Balance Sheet Detail (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of inventories | Inventories consisted of the following at December 31, 2017 and 2016 (in thousands): 2017 2016 Raw materials $ 485 $ 477 Work in process 2,620 5,032 Finished goods 1,660 3,284 4,765 8,793 Allowance for excess and obsolescence (2,065 ) (5,377 ) Inventories, net $ 2,700 $ 3,416 |
Schedule of property and equipment | Property and equipment consisted of the following at December 31, 2017and 2016 (in thousands): 2017 2016 Laboratory equipment $ 2,450 $ 2,300 Computer hardware and software 1,329 1,220 Leasehold improvements 298 288 Furniture, fixtures and equipment 46 45 4,123 3,853 Accumulated depreciation and amortization (2,824 ) (2,364 ) Property and equipment, net $ 1,299 $ 1,489 |
Warrants (Tables)
Warrants (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of warrant activity | A summary of warrant activity for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands, except per share and contractual life data): Number of Shares Weighted Average Weighted Average Warrants outstanding at December 31, 2014 1,984 $ 5.00 Granted — — Exercised (144 ) 5.13 Forfeited or expired — — Warrants outstanding at December 31, 2015 1,840 $ 7.72 Granted — — Exercised — — Forfeited or expired — — Warrants outstanding at December 31, 2016 1,840 $ 7.72 Granted 13,652 1.47 Exercised — — Forfeited or expired (362 ) 5.00 Warrants outstanding at December 31, 2017 15,130 $ 2.15 3.90 Warrants exercisable at December 31, 2017 15,130 $ 2.15 3.90 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of option grant | The calculated value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2017 2016 2015 Risk-free interest rate 1.92% – 2.25% 1.40% – 2.03% 1.93%–2.21% Expected dividend yield 0% 0% 0% Expected volatility 48.0% 47.6% – 48.2% 47.5%–50.4% Expected term 6.25 years 6.25 years 6.25–6.5 years Weighted-average grant date calculated fair value $ 0.90 $ 1.97 $ 6.17 |
Schedule of stock option activity | A summary of stock option activity for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands, except per share and contractual life data): Number of Shares Weighted Average Weighted Average Options outstanding at December 31, 2014 3,252 $ 6.07 Granted 998 12.29 Exercised (574 ) 4.85 Forfeited or expired (204 ) 7.08 Options outstanding at December 31, 2015 3,472 $ 8.01 Granted 745 4.18 Exercised (96 ) 5.00 Forfeited or expired (454 ) 8.66 Options outstanding at December 31, 2016 3,667 $ 7.23 Granted 2,701 1.80 Exercised — Forfeited or expired (693 ) 5.38 Options outstanding at December 31, 2017 5,675 $ 4.87 7.40 Options exercisable at December 31, 2017 2,161 $ 7.19 5.25 |
Schedule of exercise prices of common stock options outstanding and exercisable | The exercise prices of common stock options outstanding and exercisable are as follows at December 31, 2017 (in thousands): Exercise Price Options Outstanding (Shares) Options Exercisable (Shares) $ 1.12 to 1.97 2,617 40 $ 2.34 to 4.18 444 169 $ 4.88 to 5.23 1,116 973 $ 7.00 to 9.01 805 588 $ 12.43 to 14.06 693 391 5,675 2,161 |
Schedule of restricted stock unit (RSU) activity | The following table presented below summarizes Restricted Stock Unit (RSU) activity for the years ended December 31, 2017, 2016 and 2015 (in thousands, except per share data): Number Weighted Average Outstanding as of December 31, 2014 — $ — Awarded 190 12.43 Vested — — Forfeited/canceled — — Outstanding as of December 31, 2015 190 $ 12.43 Awarded — — Vested 59 12.43 Forfeited/canceled — — Outstanding as of December 31, 2016 131 $ 12.43 Awarded — — Vested 48 12.43 Forfeited/canceled — — Outstanding as of December 31, 2017 83 $ 12.43 |
Schedule of stock-based compensation | The total stock-based compensation recognized for stock-based awards granted in the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 is as follows (in thousands): 2017 2016 2015 Cost of sales $ 235 $ 312 $ 279 Research and development 288 303 208 Clinical and regulatory 329 173 235 Selling and marketing 339 104 442 General and administrative 2,593 2,475 1,523 Total $ 3,784 $ 3,367 $ 2,687 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets | Significant components of the Company’s deferred tax assets as of December 31, 2017 and 2016 are summarized below (in thousands): 2017 2016 Stock-based compensation $ 3,346 $ 4,135 Research credits 5,858 5,493 Depreciation (41 ) (36 ) Net operating loss carryforwards 11,646 54,509 Inventory reserve 480 1,958 Other 462 847 Total deferred tax assets 21,751 66,906 Valuation allowance (21,751 ) (66,906 ) Net deferred tax assets $ — $ — |
Product Warranties (Tables)
Product Warranties (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Schedule of activity in the Company's warranty liabilities | A summary of activity in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands): 2017 2016 2015 Balance, beginning of year $ 1,525 $ 1,066 $ 556 Additional accruals 470 727 991 Payments (236 ) (268 ) (443 ) Adjustments and other (303 ) — (38 ) Total $ 1,456 $ 1,525 $ 1,066 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule future minimum rental payments | Future minimum rental payments required under the operating leases are as follows for the years ended December 31 (in thousands). Years Amount 2018 $ 858 2019 884 2020 910 2021 937 2022 158 Total $ 3,747 |
Quarterly Financial Summary (31
Quarterly Financial Summary (unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of quarterly financial | Quarters Ended (in thousands, except per share data) December 31, September 30, June 30, March 31, Product sales $ 3,109 $ 1,610 $ 2,236 $ 1,009 Gross profit (loss) $ 1,247 $ 609 $ 1,109 $ (118 ) Operating loss $ (7,433 ) $ (6,749 ) $ (6,872 ) $ (7,555 ) Net loss $ (7,409 ) $ (6,716 ) $ (6,843 ) $ (7,548 ) Net loss per share – basic and diluted $ (0.13 ) $ (0.12 ) $ (0.12 ) $ (0.16 ) Quarters Ended December 31, September 30, June 30, March 31, Product sales $ 715 $ 1,180 $ 1,037 $ 1,053 Gross profit (loss) $ (2,593 ) $ (1,435 ) $ (2,204 ) $ 141 Operating loss $ (10,383 ) $ (8,499 ) $ (8,507 ) $ (5,821 ) Net loss $ (10,370 ) $ (8,489 ) $ (8,504 ) $ (5,816 ) Net loss per share – basic and diluted $ (0.24 ) $ (0.20 ) $ (0.23 ) $ (0.16 ) |
Organization and Business Ope32
Organization and Business Operations (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2007 | |
Subsidiary, Sale of Stock [Line Items] | ||||||||||||
Issuance of common stock and options in connection with rights offering net of expenses | $ 19,668 | $ 19,483 | ||||||||||
Issuance of shares of common stock in connection with ATM, net of expenses | 1,084 | |||||||||||
Net sales | $ 3,109 | $ 1,610 | $ 2,236 | $ 1,009 | $ 715 | $ 1,180 | $ 1,037 | $ 1,053 | $ 7,964 | $ 3,985 | $ 8,950 | |
Second Sight (Switzerland) Sarl [Member] | ||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||
Ownership percentage by parent | 100.00% | 100.00% | 99.50% | |||||||||
Second Sight (Switzerland) Sarl [Member] | Executive Officer [Member] | ||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||
Ownership percentage by noncontrolling interest | 0.50% |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Lab Equipment [Member] | Minimum [Member] | |
Estimated useful lives | 5 years |
Lab Equipment [Member] | Maximum [Member] | |
Estimated useful lives | 7 years |
Computer Hardware and Software [Member] | Minimum [Member] | |
Estimated useful lives | 3 years |
Computer Hardware and Software [Member] | Maximum [Member] | |
Estimated useful lives | 7 years |
Leasehold Improvements [Member] | Minimum [Member] | |
Estimated useful lives | 2 years |
Leasehold Improvements [Member] | Maximum [Member] | |
Estimated useful lives | 5 years |
Furniture, Fixtures and Equipment [Member] | Minimum [Member] | |
Estimated useful lives | 5 years |
Furniture, Fixtures and Equipment [Member] | Maximum [Member] | |
Estimated useful lives | 10 years |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details 1) - Accounts Receivable [Member] | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Customer 1 [Member] | ||
Customer concentration | 17.00% | 0.00% |
Customer 2 [Member] | ||
Customer concentration | 16.00% | 0.00% |
Customer 3 [Member] | ||
Customer concentration | 11.00% | 1.00% |
Customer 4 [Member] | ||
Customer concentration | 0.00% | 34.00% |
Customer 5 [Member] | ||
Customer concentration | 0.00% | 34.00% |
Customer 6 [Member] | ||
Customer concentration | 0.00% | 29.00% |
Summary of Significant Accoun35
Summary of Significant Accounting Policies (Details 2) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
UNITED STATES | |||
Geographic concentration | 53.00% | 47.00% | 46.00% |
ITALY | |||
Geographic concentration | 13.00% | 17.00% | 20.00% |
FRANCE | |||
Geographic concentration | 8.00% | 9.00% | 16.00% |
GERMANY | |||
Geographic concentration | 3.00% | 12.00% | 6.00% |
Summary of Significant Accoun36
Summary of Significant Accounting Policies (Details 3) - shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Calculation of earnings per share common stock anti-dilutive securities | 21,159 | 5,845 | 5,996 |
Long Term Investor Rights [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 400 | ||
Underwriter's Warrants [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 802 | 802 | 802 |
Warrants Associated with Convertible Debt [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 676 | 1,039 | 1,039 |
Warrants associated with 2017 Rights Offering [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 13,652 | ||
Common Stock Options [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 5,675 | 3,667 | 3,472 |
Restricted Stock Units [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 83 | 131 | 190 |
Employee Stock Purchase Plan [Member] | |||
Calculation of earnings per share common stock anti-dilutive securities | 271 | 206 | 93 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details Narrative) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($)Patent$ / sharesshares | Dec. 31, 2016USD ($)shares | Dec. 31, 2015USD ($) | Oct. 31, 2014shares | |
Allowance for doubtful accounts | $ 74 | $ 213 | ||
Depreciation and amortization of property and equipment | 457 | 432 | $ 335 | |
Research and development costs | 7,893 | 5,347 | 3,036 | |
Patent costs | 684 | 652 | 679 | |
Grants offset against operating expenses | 4,000 | 2,400 | $ 1,900 | |
FDIC insured amount | 250 | |||
SPIC insured amount | 500 | |||
Assets | $ 14,497 | $ 16,810 | ||
Description of long term investor right | The formula to determine the number of IPO Supplemental Shares issued on a trigger of the Long Term Investor Right was: (i) $18.00 minus (ii) the average of the highest consecutive closing prices in any 90 day trading period on the principal exchange during the two years after the IPO closing date (the "Measurement Average") divided by the Measurement Average. Fractional shares issuable to a qualifying IPO Shareholder resulting from the calculation were rounded up to the next whole share of Common Stock, taking into account the aggregate number of Long Term Investor Rights of a holder. Since the highest average of consecutive closing prices over any 90 calendar day period was $13.96 per share, each Long-Term Investor Right was entitled to 0.2894 additional shares of common stock, which is calculated as: ($18.00 - $13.96)/$13.96. | |||
Common stock issuable under outstanding | shares | 57,630,000 | 42,701,000 | 1,000 | |
Net operating loss carryforwards limitations | 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 $120 million and $56 million of federal and state net operating loss carryforwards, respectively, expiring unused. | |||
Previous federal corporate tax rate | 35.00% | |||
Revised federal corporate tax rate | 21.00% | |||
Sales Revenue, Net [Member] | Customer 1 [Member] | ||||
Customer concentration | 10.00% | 13.00% | 14.00% | |
Federal [Member] | ||||
Net operating lossess carryforward | $ 44,500 | |||
State [Member] | ||||
Net operating lossess carryforward | $ 32,900 | |||
Long Term Investor Rights [Member] | ||||
IPO common stock price (in dollars per share) | $ / shares | $ 18 | |||
Common stock issuable under outstanding | shares | 355,095 | |||
SWITZERLAND | ||||
Number of domestic and foreign patents | Patent | 400 | |||
Assets | $ 2,700 | $ 1,700 |
Money Market Funds (Details)
Money Market Funds (Details) - Money Market Funds [Member] - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Money market funds | $ 7,235 | $ 10,336 |
Level 1 [Member] | ||
Money market funds | 7,235 | 10,336 |
Level 2 [Member] | ||
Money market funds | ||
Level 3 [Member] | ||
Money market funds |
Money Market Funds (Details Nar
Money Market Funds (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Money market funds | $ 7,235 | $ 10,336 |
Deposit account | 171 | 123 |
City National Rochdale Government Fund Class S [Member] | ||
Money market funds | 698 | 218 |
FFI Institutional Fund [Member] | ||
Money market funds | $ 6,366 | $ 9,995 |
Selected Balance Sheet Detail40
Selected Balance Sheet Detail (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 485 | $ 477 |
Work in process | 2,620 | 5,032 |
Finished goods | 1,660 | 3,284 |
Inventories, gross | 4,765 | 8,793 |
Allowance for excess and obsolescence | (2,065) | (5,377) |
Inventories, net | $ 2,700 | $ 3,416 |
Selected Balance Sheet Detail41
Selected Balance Sheet Detail (Details 1) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 4,123 | $ 3,853 |
Accumulated depreciation and amortization | (2,824) | (2,364) |
Property and equipment, net | 1,299 | 1,489 |
Laboratory Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,450 | 2,300 |
Computer Hardware and Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,329 | 1,220 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 298 | 288 |
Furniture, Fixtures and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 46 | $ 45 |
Selected Balance Sheet Detail42
Selected Balance Sheet Detail (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Charge for excess inventory | $ 3,100 | $ 4,700 |
Grants (Details Narrative)
Grants (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Oct. 31, 2014 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Lump sum amount paid for research by APL | $ 4,100 | |||
Common shares issued to APL, | 1,000 | 57,630,000 | 42,701,000 | |
Royalty of net sales of licensed products | 0.25% | |||
APL [Member] | ||||
Research and development expenses offset | $ 100 | $ 2,100 | $ 1,900 |
Warrants (Details)
Warrants (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Class of Warrant or Right, Outstanding [Roll Forward] | |||
Outstanding at ending | 676,494 | ||
Warrant [Member] | |||
Class of Warrant or Right, Outstanding [Roll Forward] | |||
Outstanding at beginning | 1,840,000 | 1,840,000 | 1,984,000 |
Granted | 13,652,000 | ||
Exercised | (144,000) | ||
Forfeited or expired | (362,000) | ||
Outstanding at ending | 15,130,000 | 1,840,000 | 1,840,000 |
Exercisable at ending | 15,130,000 | ||
Class of Warrant or Right, Exercise Price of Warrants or Rights [Roll Forward] | |||
Outstanding at beginning | $ 7.72 | $ 7.72 | $ 5 |
Granted | 1.47 | ||
Exercised | 5.13 | ||
Forfeited or expired | 5 | ||
Outstanding, ending | 2.15 | $ 7.72 | $ 7.72 |
Exercisable at ending | $ 2.15 | ||
Class of Warrant or Right, Weighted Average Remaining Contractual Life of Warrants or Rights [Roll Forward] | |||
Outstanding at ending | 3 years 10 months 24 days | ||
Exercisable at ending | 3 years 10 months 24 days |
Warrants (Details Narrative)
Warrants (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 06, 2017 | Jun. 30, 2016 | Dec. 31, 2013 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2012 |
Borrowed fund by issuing convertible notes | $ 29,500 | |||||||
Number of warrant outstanding | 676,494 | 361,909 | ||||||
Number of shares issued upon debt conversion | 6,600,000 | |||||||
Related Party [Member] | ||||||||
Number of warrant outstanding | 240,000 | |||||||
Warrant [Member] | ||||||||
Warrants to purchase shares of common stock | 1,200,000 | |||||||
Warrants exercise price (in dollars per share) | $ 2.15 | $ 7.72 | $ 7.72 | $ 5 | ||||
Intrinsic value of warrants exercisable | $ 6,000 | |||||||
Number of warrant outstanding | 15,130,000 | 1,840,000 | 1,840,000 | 1,984,000 | ||||
Underwriter's Warrant [Member] | ||||||||
Warrants exercise price (in dollars per share) | $ 11.25 | |||||||
Purchase of common stock by underwriter, granted | 805,000 | |||||||
Number of warrant outstanding | 802,500 | |||||||
Right Offering [Member] | ||||||||
Number of shares issued upon right offering | 13,700,000 | 5,978,465 | ||||||
Share price (in dollars per share) | $ 1.47 | $ 3.315 | ||||||
Additional share price (in dollars per share) | $ 1.47 | |||||||
Term of warrant | 5 years |
Employee Benefit Plans (Details
Employee Benefit Plans (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Retirement Benefits [Abstract] | |||
Employer contributions to plan | $ 142 | $ 147 | $ 137 |
Pension plan for the employees | $ 139 | $ 132 | $ 134 |
Equity Securities (Details Narr
Equity Securities (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 06, 2017 | Nov. 24, 2016 | Dec. 31, 2017 | Jun. 30, 2016 | Feb. 28, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Oct. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2012 |
Common stock issuable under outstanding | 57,630,000 | 57,630,000 | 42,701,000 | 1,000 | |||||||
Perfectly maintained Long Term Investor Rights aggregate common stock | 1,226,854 | ||||||||||
Highest average closing price on NASDAQ | $ 13.96 | ||||||||||
Share entitlement price for perfectly maintained Long Term Investor Right | $ 0.2894 | ||||||||||
Rounded up of next whole share aggregate maximum shares | 355,095 | ||||||||||
Number of shares issued for services | 223,000 | 82,000 | 23,136 | ||||||||
Shares issued for services to directors, amount | $ 262 | $ 324 | $ 285 | ||||||||
Accrued services, shares | 82,000 | 82,000 | 77,000 | 33,293 | |||||||
Accrued services, Closing price per share | $ 1.86 | $ 1.86 | $ 1.98 | $ 6.15 | |||||||
Accrued services | $ 153 | $ 153 | $ 205 | ||||||||
Number of warrant outstanding | 676,494 | 676,494 | 361,909 | ||||||||
At-the-Market Sales Agreement [Member] | |||||||||||
Proceeds from issuance or sale of shares | $ 1,100 | ||||||||||
Number of shares issued | 598,276 | ||||||||||
Gross proceeds from issuance or sale of shares | $ 1,200 | ||||||||||
Shares issuance expenses | $ 100 | ||||||||||
At-the-Market Sales Agreement [Member] | Subsequent Event [Member] | |||||||||||
Proceeds from issuance or sale of shares | $ 4,000 | ||||||||||
Number of shares issued | 2,200,000 | ||||||||||
Gross proceeds from issuance or sale of shares | $ 4,100 | ||||||||||
Right Offering [Member] | |||||||||||
Proceeds from issuance or sale of shares | $ 19,500 | ||||||||||
Number of shares issued upon right offering | 13,700,000 | 5,978,465 | |||||||||
Share price (in dollars per share) | $ 1.47 | $ 3.315 | |||||||||
Percentage of company's stock price at the close of the rights offering | 85.00% | ||||||||||
Additional share price | $ 1.47 | ||||||||||
Term of warrants | 5 years | ||||||||||
Description for redemption of warrants | The warrants are redeemable on 30 days’ notice (i) at any time 24 months after the date of issuance, (ii) if the shares of the Company’s common stock are trading at $2.94, which is 200% of 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. | ||||||||||
Common Stock [Member] | |||||||||||
Increase authorized shares | 200,000,000 | ||||||||||
Par value | $ 0 | ||||||||||
Number of shares issued for services | 223,000 | 82,000 | 23,000 | ||||||||
Preferred Stock [Member] | |||||||||||
Increase authorized shares | 10,000,000 | ||||||||||
Par value | $ 0 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Expected volatility | 48.00% | ||
Expected term | 6 years 3 months | 6 years 3 months | |
Weighted-average grant date calculated fair value | $ 0.90 | $ 1.97 | $ 6.17 |
Minimum [Member] | |||
Risk-free interest rate | 1.92% | 1.40% | 1.93% |
Expected volatility | 47.60% | 47.50% | |
Expected term | 6 years 3 months | ||
Maximum [Member] | |||
Risk-free interest rate | 2.25% | 2.03% | 2.21% |
Expected volatility | 48.20% | 50.40% | |
Expected term | 6 years 6 months |
Stock-Based Compensation (Det49
Stock-Based Compensation (Details 1) - Stock Option Grants [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Options outstanding at beginning | 3,667,000 | 3,472,000 | 3,252,000 |
Granted | 2,701,000 | 745,000 | 998,000 |
Exercised | (96,000) | (574,000) | |
Forfeited or expired | (693,000) | (454,000) | (204,000) |
Options outstanding at ending | 5,675,000 | 3,667,000 | 3,472,000 |
Options exercisable at ending | 2,161,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |||
Options outstanding at beginning | $ 7.23 | $ 8.01 | $ 6.07 |
Granted | 1.80 | 4.18 | 12.29 |
Exercised | 5 | 4.85 | |
Forfeited or expired | 5.38 | 8.66 | 7.08 |
Options outstanding at ending | 4.87 | $ 7.23 | $ 8.01 |
Options exercisable at ending | $ 7.19 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Life (in Years) [Roll Forward] | |||
Options outstanding at ending | 7 years 4 months 24 days | ||
Options exercisable at ending | 5 years 3 months |
Stock-Based Compensation (Det50
Stock-Based Compensation (Details 2) | Dec. 31, 2017shares |
Exercise Price Range $1.12 to $1.97 [Member] | |
Options Outstanding (in shares) | 2,617,000 |
Options Exercisable (in shares) | 40,000 |
Exercise Price Range $1.12 to $1.97 [Member] | Minimum [Member] | |
Exercise Price | 1.12 |
Exercise Price Range $1.12 to $1.97 [Member] | Maximum [Member] | |
Exercise Price | 1.97 |
Exercise Price Range $2.34 to $4.18 [Member] | |
Options Outstanding (in shares) | 444,000 |
Options Exercisable (in shares) | 169,000 |
Exercise Price Range $2.34 to $4.18 [Member] | Minimum [Member] | |
Exercise Price | 2.34 |
Exercise Price Range $2.34 to $4.18 [Member] | Maximum [Member] | |
Exercise Price | 4.18 |
Exercise Price Range $4.88 to $5.23 [Member] | |
Options Outstanding (in shares) | 1,116,000 |
Options Exercisable (in shares) | 973,000 |
Exercise Price Range $4.88 to $5.23 [Member] | Minimum [Member] | |
Exercise Price | 4.88 |
Exercise Price Range $4.88 to $5.23 [Member] | Maximum [Member] | |
Exercise Price | 5.23 |
Exercise Price Range $7.00 to $9.01 [Member] | |
Options Outstanding (in shares) | 805,000 |
Options Exercisable (in shares) | 588,000 |
Exercise Price Range $7.00 to $9.01 [Member] | Minimum [Member] | |
Exercise Price | 7 |
Exercise Price Range $7.00 to $9.01 [Member] | Maximum [Member] | |
Exercise Price | 9.01 |
Exercise Price Range $12.43 to $14.06 [Member] | |
Options Outstanding (in shares) | 693,000 |
Options Exercisable (in shares) | 391,000 |
Exercise Price Range $12.43 to $14.06 [Member] | Minimum [Member] | |
Exercise Price | 12.43 |
Exercise Price Range $12.43 to $14.06 [Member] | Maximum [Member] | |
Exercise Price | 14.06 |
Exercise Price Range [Member] | |
Options Outstanding (in shares) | 5,675,000 |
Options Exercisable (in shares) | 2,161,000 |
Stock-Based Compensation (Det51
Stock-Based Compensation (Details 3) - Restricted Stock Units [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward] | |||
Outstanding at beginning | 131,000 | 190,000 | |
Awarded | 190,000 | ||
Vested | 48,000 | 59,000 | |
Forfeited/canceled | |||
Outstanding at ending | 83,000 | 131,000 | 190,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Weighted Average Grant Date Fair Value [Roll Forward] | |||
Outstanding at beginning | $ 12.43 | $ 12.43 | |
Awarded | 12.43 | ||
Vested | 12.43 | 12.43 | |
Forfeited/canceled | |||
Outstanding at ending | $ 12.43 | $ 12.43 | $ 12.43 |
Stock-Based Compensation (Det52
Stock-Based Compensation (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Total | $ 3,784 | $ 3,367 | $ 2,687 |
Cost Of Sales [Member] | |||
Total | 235 | 312 | 279 |
Research And Development [Member] | |||
Total | 288 | 303 | 208 |
Clinical And Regulatory [Member] | |||
Total | 329 | 173 | 235 |
Selling And Marketing [Member] | |||
Total | 339 | 104 | 442 |
General And Administrative [Member] | |||
Total | $ 2,593 | $ 2,475 | $ 1,523 |
Stock-Based Compensation (Det53
Stock-Based Compensation (Details Narrative) - USD ($) | May 10, 2016 | Jun. 19, 2015 | May 15, 2015 | Oct. 31, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Description of plan | Shareholders approved an increase of 1,500,000 shares in the number of shares available for option awards under the 2011 Equity Incentive Plan. | Shareholders approved (1) an increase of 2,000,000 shares in the number of shares available for option awards under the 2011 Equity Incentive Plan, and (2) an Employee Stock Purchase Plan, with an initial 250,000 shares with annual increases of shares available equal to the lesser of (i) 1% of outstanding shares or (ii) 100,000 shares. | |||||||
Stock-based compensation | $ 3,784,000 | $ 3,367,000 | $ 2,687,000 | ||||||
Expected terms (in years) | 6 years 3 months | 6 years 3 months | |||||||
Volatility rate | 48.00% | ||||||||
Expected dividend rate | 0.00% | 0.00% | 0.00% | ||||||
Outstanding balance, loan | $ 0 | $ 2,000 | |||||||
Issued common stock for services, shares | 223,000 | 82,000 | 23,136 | ||||||
Issued common stock for services, amount | $ 262,000 | $ 272,000 | $ 324,000 | ||||||
Minimum [Member] | |||||||||
Expected terms (in years) | 6 years 3 months | ||||||||
Volatility rate | 47.60% | 47.50% | |||||||
Risk-free interest rate | 1.92% | 1.40% | 1.93% | ||||||
Loans bear interest | 1.27% | ||||||||
Maximum [Member] | |||||||||
Expected terms (in years) | 6 years 6 months | ||||||||
Volatility rate | 48.20% | 50.40% | |||||||
Risk-free interest rate | 2.25% | 2.03% | 2.21% | ||||||
Loans bear interest | 1.91% | ||||||||
Restricted Stock Units [Member] | |||||||||
Period of recognized compensation cost | 1 year 7 months 17 days | ||||||||
Total non vested unrecognized compensation cost | $ 961,000 | ||||||||
Consultant [Member] | |||||||||
Stock-based compensation | $ 55,000 | ||||||||
Number of vested shares | 98,681 | ||||||||
Description of vesting terms | All unvested options for this employee were terminated when this employee ceased full-time employment with the Company. | ||||||||
Outside Attorney [Member] | |||||||||
Number of options granted | 40,000 | 30,000 | |||||||
Exercisable terms | 4 years | 4 years | |||||||
Exercise price (in dollars per share) | $ 1.76 | $ 5.23 | |||||||
Percentage of fair value common stock granted | 120.00% | 125.00% | |||||||
Fair value of options | $ 19,640,000 | $ 53,000 | |||||||
Share price (in dollars per share) | $ 0.49 | $ 1.77 | |||||||
Expected terms (in years) | 4 years | 6 years 3 months | |||||||
Volatility rate | 48.00% | 48.20% | |||||||
Risk-free interest rate | 1.81% | 1.87% | |||||||
Expected dividend rate | 0.00% | 0.00% | |||||||
Outside Contractor [Member] | |||||||||
Number of options granted | 150,000 | ||||||||
Exercisable terms | 10 years | ||||||||
Exercise price (in dollars per share) | $ 1.21 | ||||||||
Fair value of options | $ 175,067 | ||||||||
Share price (in dollars per share) | $ 1.17 | ||||||||
Expected terms (in years) | 6 years 3 months | ||||||||
Volatility rate | 48.00% | ||||||||
Risk-free interest rate | 2.25% | ||||||||
Expected dividend rate | 0.00% | ||||||||
Vesting period | 4 years | ||||||||
Shares issuance expenses | $ 11,000 | ||||||||
Mr. Jonathan Will McGuire [Member] | |||||||||
Stock-based compensation | $ 390,000 | ||||||||
Mr. Jonathan Will McGuire [Member] | Employment Agreement [Member] | |||||||||
Number of options granted | 420,000 | ||||||||
Fair value of stock option granted | $ 2,574,000 | ||||||||
Stock option recognized | $ 643,000 | $ 645,000 | $ 240,000 | ||||||
Mr. Jonathan Will McGuire [Member] | Employment Agreement [Member] | Restricted Stock Units [Member] | |||||||||
Description of vesting terms | With 25% vesting on the first anniversary of the grant date, and the remainder vesting thereafter in twelve equal installments of 6.25% on the quarterly anniversaries of the grant date. | ||||||||
Number of options granted | 190,000 | ||||||||
Fair value of stock option granted | $ 2,362,000 | ||||||||
Stock option recognized | $ 590,000 | $ 591,000 | $ 220,000 | ||||||
Exercise price of the options (in dollars per share) | $ 12.43 | ||||||||
Vesting period | 4 years | ||||||||
Certain Employees [Member] | |||||||||
Number of shares options granted | 2,511,150 | ||||||||
Exercisable terms | 10 years | ||||||||
Fair value of options | $ 2,251,000 | ||||||||
Expected terms (in years) | 6 years 3 months | ||||||||
Volatility rate | 48.00% | ||||||||
Expected dividend rate | 0.00% | ||||||||
Vesting period | 4 years | ||||||||
Certain Employees [Member] | Minimum [Member] | |||||||||
Exercise price (in dollars per share) | $ 1.12 | ||||||||
Share price (in dollars per share) | $ 0.54 | ||||||||
Risk-free interest rate | 1.92% | ||||||||
Certain Employees [Member] | Maximum [Member] | |||||||||
Exercise price (in dollars per share) | $ 1.97 | ||||||||
Share price (in dollars per share) | $ 0.96 | ||||||||
Risk-free interest rate | 2.25% | ||||||||
2011 Equity Incentive Plan [Member] | |||||||||
Number of shares authorized | 3,500,000 | ||||||||
Number of shares options granted | 7,500,000 | ||||||||
Aggregate exercisable intrinsic value | $ 6,000 | ||||||||
Total unrecognized compensation cost of options | $ 4,901,000 | ||||||||
Period of recognized compensation cost | 2 years 8 months 8 days | ||||||||
Exercisable terms | 10 years | ||||||||
Employee Stock Purchase Plan [Member] | |||||||||
Description of plan | Under the plan, 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 $25,000 determined as of the first trading day of the offering period. Additionally, a participating employee may not purchase more than 100,000 shares of common stock in any one offering period. | ||||||||
Number of shares issued | 648,534 | ||||||||
2015 Employee Stock Purchase Plan [Member] | |||||||||
Number of shares issued | 950,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Stock-based compensation | $ 3,346 | $ 4,135 |
Research credits | 5,858 | 5,493 |
Depreciation | (41) | (36) |
Net operating loss carryforwards | 11,646 | 54,509 |
Inventory reserve | 480 | 1,958 |
Other | 462 | 847 |
Total deferred tax assets | 21,751 | 66,906 |
Valuation allowance | (21,751) | (66,906) |
Net deferred tax assets |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Effective federal statutory rate | 34.00% | |
Previous federal corporate tax rate | 35.00% | |
Revised federal corporate tax rate | 21.00% | |
Total deferred tax assets | $ 21,751 | $ 66,906 |
Federal [Member] | ||
Net operating loss carryforwards | $ 44,500 | |
Net operating loss carryforwards expired | 2035 through 2037 | |
Research and development tax credit carryforwards | $ 3,354 | |
Research and development tax credit carryforwards expired | 2023 through 2037 | |
State [Member] | ||
Net operating loss carryforwards | $ 32,900 | |
Net operating loss carryforwards expired | 2033 through 2037 | |
Research and development tax credit carryforwards | $ 2,505 |
Product Warranties (Details)
Product Warranties (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Product Warranties Disclosures [Abstract] | |||
Balance, beginning of year | $ 1,525 | $ 1,066 | $ 556 |
Additional accruals | 470 | 727 | 991 |
Payments | (236) | (268) | (443) |
Adjustments and other | (303) | (38) | |
Total | $ 1,456 | $ 1,525 | $ 1,066 |
Commitments and Contingencies57
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Future minimum rental payments | |
2,018 | $ 858 |
2,019 | 884 |
2,020 | 910 |
2,021 | 937 |
2,022 | 158 |
Total | $ 3,747 |
Commitments and Contingencies58
Commitments and Contingencies (Details Narrative) | 1 Months Ended | 12 Months Ended | ||||
Apr. 30, 2014 | Aug. 31, 2012 | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2017CHF (SFr) | |
Lease commitment | $ 8,400 | |||||
Lease rent expense | 1,017,000 | $ 1,050,000 | $ 954,000 | |||
License fee | 93,000 | 74,000 | 93,000 | |||
Clinical and regulatory expense | $ 814,000 | $ 786,000 | $ 1,409,000 | |||
Annual maintenance fee term | 7 years | |||||
Minimum [Member] | ||||||
License royalty rates range | 0.50% | |||||
Maintenance fee | $ 5,000 | |||||
Maximum [Member] | ||||||
License royalty rates range | 3.25% | |||||
License royalty rates paid to other | 0.25% | |||||
Maintenance fee | $ 10,000 | |||||
CHF | ||||||
Lease commitment | SFr | SFr 8,200 | |||||
Sylmar Lease [Member] | ||||||
Lease rent expense | $ 36,600 | |||||
Lease agreement term | 5 years | |||||
Lease agreement maturity date | Feb. 28, 2022 | Feb. 28, 2017 | ||||
Lease agreement renew term | 5 years | 5 years |
Quarterly Financial Summary (59
Quarterly Financial Summary (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Product sales | $ 3,109 | $ 1,610 | $ 2,236 | $ 1,009 | $ 715 | $ 1,180 | $ 1,037 | $ 1,053 | $ 7,964 | $ 3,985 | $ 8,950 |
Gross profit (loss) | 1,247 | 609 | 1,109 | (118) | (2,593) | (1,435) | (2,204) | 141 | 2,847 | (6,091) | 3,657 |
Operating loss | (7,433) | (6,749) | (6,872) | (7,555) | (10,383) | (8,499) | (8,507) | (5,821) | (28,609) | (33,210) | (20,047) |
Net loss | $ (7,409) | $ (6,716) | $ (6,843) | $ (7,548) | $ (10,370) | $ (8,489) | $ (8,504) | $ (5,816) | $ (28,516) | $ (33,179) | $ (20,018) |
Net loss per share - basic and diluted (in dollars per share) | $ (0.13) | $ (0.12) | $ (0.12) | $ (0.16) | $ (0.24) | $ (0.20) | $ (0.23) | $ (0.16) | $ (0.53) | $ (0.84) | $ (0.56) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Mar. 31, 2018USD ($) | Mar. 31, 2018CHF (SFr) | Jan. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017$ / shares | Dec. 31, 2016$ / shares | Dec. 31, 2015$ / shares | |
Stock Option Grants [Member] | ||||||
Exercise price (in dollars per share) | $ 5 | $ 4.85 | ||||
Subsequent Event [Member] | Mr. Gregoire Cosendai [Member] | Severance Agreement [Member] | ||||||
Voluntary severance pay period | 5 months | 5 months | ||||
Voluntary severance pay amount | $ | $ 110 | |||||
Subsequent Event [Member] | Mr. Gregoire Cosendai [Member] | Severance Agreement [Member] | CHF | ||||||
Voluntary severance pay amount | SFr | SFr 103,896 | |||||
Subsequent Event [Member] | Stock Option Grants [Member] | ||||||
Exercise price (in dollars per share) | $ 0.98 | |||||
Vesting period | 4 years | |||||
Exercisable terms | 10 years | |||||
Fair value of options | $ | $ 1,625,489 | |||||
Subsequent Event [Member] | Stock Option Grants [Member] | Minimum [Member] | ||||||
Exercise price (in dollars per share) | $ 1.83 | |||||
Subsequent Event [Member] | Stock Option Grants [Member] | Maximum [Member] | ||||||
Exercise price (in dollars per share) | $ 2.06 | |||||
Subsequent Event [Member] | Stock Option Grants [Member] | Employee [Member] | ||||||
Number of shares options granted | shares | 1,658,872 | |||||
Subsequent Event [Member] | Stock Option Grants [Member] | Senior Management [Member] | ||||||
Number of shares options granted | shares | 1,210,000 |