Vivani Medical, Inc.
Q3 2015 Earnings Call Transcript

Published: 31 Oct 2015

[Operator:]

Welcome to the Second Sight Q3 2015 results call. [Operator Instructions] I would now like to turn the conference over Lisa Wilson, Investor Relations for Second Sight. Please go ahead.

[Lisa Wilson:]

Thank you. Good afternoon and welcome to Second Sight's third quarter 2015 results call. This is Lisa Wilson, Investor Relations for Second Sight. With me on today's call are Dr. Robert Greenberg, Chairman of the Board of Director; Will McGuire, President and Chief Executive Officer; and Tom Miller, Chief Financial Officer of Second Sight. At the close of market, the company issued a press release detailing financial results for the third quarter ended September 30, 2015. The release can be accessed through the Investor Relation section of the Second Sight's website at secondsight.com. You can also access the webcast of this call from there. Before we get started, I would like to remind everyone that any statements made on today's conference call that express, a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance maybe considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Second Sight management as of today and evolve risks and uncertainties including those noted in this afternoon's press release and Second Sight's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Second Sight specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A telephone replay of the call will be available shortly after completion of this call for the next two weeks. You'll find dial-in information in today's press release. The archived webcast will be available for one month on the company's website at secondsight.com. For the benefit of those, who may be listening to the replay or archived webcast, this call was held and recorded on October 29, 2015. Since then Second Sight may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Second Sight's Chairman, Dr. Robert Greenberg. Bob?

[Robert Greenberg:]

Thank you, Lisa. Good afternoon, everyone. I'd like to begin by introducing Will McGuire to our shareholders. As you know, Will was appointed as Second Sight's President and CEO on August 18, and will review our Q3 performance in detail, shortly. But first, I'd like to highlight some of our key developments in Q3, and then turn the call over to Tom Miller to walk us through the financials. During Q3, we continued to execute on our strategic plan. We advanced both our commercial and research and development efforts and remain focused on our mission to bring vision to the blind. 15 Argus II Retinal Prosthesis Systems were successfully implanted during Q3, up from five units implanted during the same period last year. This reflects a sequential increase in United States compared to the prior quarter, offset by expected seasonality in Europe, which is consistent with other medical device companies. Our revenues were up nearly threefold to $2.2 million compared with $600,000 in Q3 of 2014, primarily as a result of our implant volume growth combined with our ongoing ability to collect deferred revenue in United States. We also continue to generate positive gross margins, extending a trend established during the first half of 2015. We added two new implanting centers in United States and in Europe, expanding our reach to potential candidates in North America and Europe as well. Growing the number of centers globally is a cornerstone of our commercialization strategy. We now have 31 active hospitals and ambulatory surgery centers or ASCs worldwide, up from 29 at the end of Q2, and remain on track to double our implanting centers versus the total at the end of 2014. We also continue to make progress on the reimbursement front. Preauthorizations for implants are up, a clear indication that insurers recognize the value of the Argus II. Earlier today, the Medicare Administrative Contractor or MAC, National Government Services, NGS, agreed to cover the Argus II for the FDA approved indications. NGS is the MAC for 10 states. Our MAC coverage now extends to approximately one-third of the U.S. population, up from 8% at the beginning of the year. In June, we published three year multi-center clinical trial data, supporting the long-term safety and efficacy of the Argus II. We expect five year data to be presented and submitted for publication during the first quarter of 2016. We believe this evidence will further support positive coverage decisions and facilitate additional favorable coverage decisions by insurers. Our research and development efforts are also making good progress. Our dry age-related macular degeneration or AMD clinical trial in the U.K. remains on track. We have now successfully implanted two subjects, and identified and scheduled for surgery the three remaining subjects for implantation before the end of the year. In parallel, we are continuing to work on the Orion I Visual Cortical Prosthesis. This program will allow us to expand into direct visual cortical stimulation, addressing the needs of an estimated 6 million individuals worldwide, who are legally blind due to causes such as glaucoma, diabetic retinopathy, retinal detachment, trauma and infection among the others. A total of four prototype Orion devices have now been implanted in animals and have been well-tolerated. This has helped us also refine the design. We expect to have a fully functional prototype completed by the end of the year and implanted during Q1 of 2016, as a next step in the clinical process. We have also scheduled a meeting with the FDA to begin to discuss the regulatory path for Orion in United States. In addition, we are working on significant upgrades to the Argus II that include software and hardware systems, and features that we believe will enhance both the clinician and end-user experience and broaden our market appeal. We expect to introduce the first of these enhancements in 2016, as we continue to lead the field of vision restoration. I'd now like to turn the call over to our CFO, Tom Miller, to discuss the financial results for the quarter. Tom?

[Thomas Miller:]

Thank you, Bob. This was our fourth consecutive quarter of year-over-year growth, since our IPO. For the third quarter of 2015, our revenue was $2.2 million, up 265% compared to the $609,000 in the third quarter of 2014. A total of 15 Argus II devices were implanted during Q3, of those, eight implants were performed in North America with seven in Europe and the Middle East. We are pleased with the steady growth in the U.S. In Europe, we experienced expected seasonality that Bob discussed previously. In U.S., we offer extended payment terms and discounts on some deals, recognizing full revenue from these transactions only when cash is received. In Q3, we collected and recognized approximately $400,000 in net deferred revenue related to implants performed in prior quarters. Excluding the effect of net deferred revenue during the quarter, our average revenue per implant was approximately $120,000. Overtime, we expect our average revenue to be in the range of $107,000 to $125,000 per implant, depending on the geographical mix of implants during any given quarter. As we have shown throughout 2015, despite a relatively low production volume, we were able to achieve positive gross profits, confirming the inherent leverage in our model. We achieved gross profit of $1.5 million, which compares to a gross profit of $193,000 in Q3 of 2014. Higher volume has allowed us to spread our manufacturing overhead across more units, thus lowering our overall cost per unit. While our margin at 66% this quarter benefited from the deferred revenue that was recognized in the quarter, we expect gross margins going forward to be in the 45% to 55% range. Operating expenses in the second quarter of 2015 were $6.1 million compared to $5.8 million recorded in the third quarter of last year. Research and development cost decreased by approximately $827,000 from the third quarter of 2014, primarily due to $778,000 of grant funding that we recognized in the quarter, as an offset to expense. As discussed previously, in 2014 we received a $4.1 million grant from Johns Hopkins Advanced Physics Lab that we expect to recognize as an offset to expense over 2015 and 2016. Clinical and regulatory costs increased by $354,000 compared to the prior year period, reflecting increased activity in post market studies conducted in the U.S. and Europe, as well as the initiation of our AMD trail. Sales and marketing costs increased $525,000, as we incurred additional expense to expand our sales and marketing team to build and support the growth in units over the past year. General and administrative expenses increased by $239,000 due to increased spending on legal, audit and other costs associated with being a public company. Our net loss for the third quarter of 2015 was $4.7 million or a loss of $0.13 per share compared to a net loss of $7.6 million or a loss of $0.31 per share in the third quarter of 2014. During the third quarter of 2015, we recorded non-cash charges of $942,000 consisting of stock-based compensation. This compares to non-cash charges of $3 million in the prior-year period, which included $562,000 of stock-based compensation, $423,000 for debt forgiveness and $2 million of interest expense and amortization of debt issuance costs related to the convertible debt we had outstanding prior to the IPO. Excluding non-cash items, our non-GAAP net loss for the third quarter of 2015 was $3.7 million or a loss of $0.10 per share compared to a non-GAAP adjusted net loss of $4.7 million or a loss of $0.19 per share in the third quarter of 2014. A full reconciliation of the GAAP net loss to non-GAAP net loss, including per share reconciliation, can be found in the tables at the end of the earnings release. Turning to the balance sheet. As of September 30, 2015, we had $21.7 million of cash and cash equivalents with no debt. We estimate that we have sufficient cash on hand to last until the fourth quarter of 2016. With that said, I'd now like to turn the call over to Will McGuire, our President and CEO. Will?

[Will McGuire:]

Thanks, Tom, and thank you all for joining us on today's call. As many of you know, I was fortunate to join Second Sight this past August, and what I believe to be a very exciting time for the company. Before continuing, I'd like to thank Bob, Tom, the Board of Directors and the entire Second Sight team for a warm welcome that I have received over the past several months. I look forward to having a chance to meet many of our shareholders in the coming months and to updating all of you on Second Sight's progress. We are committed to delivering the most robust technology to help blind patients improve their quality of life, which ultimately we believe will create significant long-term value for our shareholders. Our current revenues are driven by the Argus II, the first and only FDA approved medical device for the totally blind. Our first indication is for a subset of the approximately 1.5 million people worldwide that suffer from retinitis pigmentosa or RP. RP is an inherited disease that causes degeneration of the photoreceptor cells, leading initially to a loss of peripheral vision, the inability to see in dimly lit situations and eventually to complete blindness. The Argus II allows patients who previously saw only darkness, to see light, identify shapes and detect motion. As Bob mentioned, we are focused on expanding the commercial footprint of the Argus II, so that all eligible individuals will be able to benefit from our life-altering technology. We now have 31 active hospitals and ambulatory surgery centers around the world that are staffed and trained to surgically implant Argus II. 14 are in North America and 17 are in the EU and Middle East. In order to be considered an active site, the facility must have successfully performed at least one Argus II implant and continue to support further Argus II procedures. Looking into the future, we envision operating approximately 50 centers of excellence throughout North America and a similar number in Europe, submitting the majority of our targeted population to reach an implanting center within a two to three hour drive. We believe this will maximize convenience for patients and drive adoption of our technology. Overtime, these centers will also serve as launching pads for future product introductions that will further expand our technology reach to blind individuals. Ultimately, we aim to have retinal surgeons implanting the Argus II in medical facilities in most major cities throughout the world. To inform and drive broader acceptance of our technology, we continue to study the long-term safety and benefits of the Argus II. You may recall that in June, peer-reviewed results from a three year multi-center trial of the Argus II were published in the Journal of Ophthalmology. But the 30 subjects that participated in the study, 29 maintained improvements in visual function, orientation and mobility with the Argus II after three years. No subjects were affected negatively in functional vision and quality of life assessment. And 89% perform statistically better with Argus II system implanted compared with native residual vision and a digital function task. Over the next six months, we expect four additional papers to be submitted for publication, including one that addresses five-year data from the original multi-center trail, which will be the longest tenure published data of any retinal prosthetic device. The remaining papers will address various aspects for the Argus II, including durability, safety, improvements in quality of life and activities of daily living. It is clear that Second Sight is committed to building the evidence, supporting the safety and benefits of the Argus II, which already is the most steady treatment for retinitis pigmentosa commercially available or in trials today. Turning to reimbursement. We recently secured a third Medicare Administrative Contractor or MAC, and now we have three MACs, CGS Administrators, Palmetto GBA and National Government Services in the U.S. that have published favorable coverage decisions spanning 16 states. As Bob mentioned, our MAC coverage now extends to approximately one-third of the U.S. population, up from 8% at the beginning of the year. This is in addition to a growing list of private insurers and Medicare advantage plans that have positive coverage. We are actively engaged with remaining MACs and are committed to supporting their request for information and evidence. We expect that additional positive coverage decisions will be issued overtime. Until broader coverage is a reality, preauthorizations remain an important avenue for U.S. patients to gain access to our technology. We saw a continued increase in patient preauthorizations during Q3, which reflects a growing recognition of the value of the Argus II technology in the market. Substantially, all preauthorization decisions have resulted in approval. As of September 30, 2015, 29 out of 32 preauthorizations in the U.S. have been approved. While we are pleased with the continued success in obtaining these preauthorizations, the reliance on this process impacts our ability to more significantly ramp volume at individual centers. Today the process of securing preauthorizations and ultimately getting payment can take several months. As additional favorable coverage decisions are obtained, we are confident in our ability to grow the number of procedures, reflecting the tremendous benefits the Argus II offers patients. In Europe and the Middle East, coverage decisions are determined on a country or regional basis. Italy and France, for coverage was established last year remain our strongest non-U.S. markets. We are actively working to establish coverage in additional markets where we currently have implanting centers or plan to open new centers. As with most companies our size, we will continue to explore partnerships, as it means to build our commercial foundation around the world and ensure our long-term success, in some cases, the right distribution partners who allow us to speed market access, keep cost down and lower our risk profile. I'd like to turn now to the progress we are making with our R&D and clinical programs. Our product and clinical roadmap is focused on leveraging our existing technology, patent of state and centers of excellence to address the unmet needs of over 8 billion blind individuals who today have few options. Our R&D and clinical programs have four main areas of focus. First, improving the post-implant fitting and programming procedure and supporting software. These enhancements are expected to reduce the time to fit the Argus II, which in turn simplifies the post-implant responsibilities of our surgical centers. We expect to introduce these enhancements in early 2016. Second, we are developing a significant upgrade to the externals, which is our terminology for the glasses, the camera, and the video processing unit. These improvements, which we expect to introduce late next year will address ease of use, ergonomics and the aesthetics of our technology. The new VPU also have a 25x increase in processing power that will service their platform for future software improvements to enhance quality and usefulness of vision. Importantly, these improvements will be available to patients, who have previously received Argus II implants. Third, we are conducting a pilot study to test the safety and efficacy of the Argus II in patients with dry AMD, a specific form of age-related macular degeneration resulting in legal blindness, which affects nearly 2 million people worldwide. Two subjects have been implanted in the U.K. as part of the trial. Over 400 patients contacted the center following the positive media coverage with the first implant success, allowing the center to identify the remaining patients required to enroll the trial. Our first subject was able to see that outline of people's heads using the implant just two weeks after his surgery and we will be activating the Argus II in the second subject this week. We hope to replicate this experience with additional subjects and remain on track to apply for approval in 2016 to initiate a larger scale efficacy trial, if results from the feasibility study continue to prove promising. Lastly, as Bob mentioned, we are advancing our program to expand into direct visual cortical stimulation. These efforts centers on the Orion I Visual Cortical Prosthesis, a device that leverages the Argus II technology, but is designed to treat patients with nearly all forms of blindness in which the optic nerve or retina is damaged, opening up a significant market approaching 6 million patients worldwide. We believe our very robust R&D program will drive long-term value for our customers and shareholders. Enhancing the software and hardware of the Argus II to improve patient and physician's experience will allow us to further penetrate the RP market. Expanding the technology platform to potentially treat other forms of blindness, including dry AMD and other conditions that could benefit from direct cortical visual stimulation will be the key to opening up very significant new markets for our technology. I am confident that the path we're pursing will allow us to continue to lead the way in bringing Sight within reach of blind individuals around the world. Important to note that at each step into R&D process, we are mindful to fully protect our intellectual property in the U.S. and abroad. It is one of our key assets. Today, we have a growing portfolio of over 300 issued and over 150 pending patents and we anticipate further additions to our patent of state as we advance our R&D programs. We stand at the forefront of our industry. There are certainly other players in our space and we have followed the efforts of any company that shares our goal of bringing vision to the blind. It is important to note that other approaches at treating low-vision patients including gene therapies and stem cell research are years away and none have demonstrated the ability to restore vision to patients that are completely blind. At best, other approaches have improved some aspects of vision and partially sighted individuals. Based on what we see across the competitive landscape, we expect to maintain our market leadership for the foreseeable future. I'd like to conclude by reminding you why Second Sight will remain the clear leader in this space for the long runway for growth. To date, more than 150 patients have received Argus II implants and 31 centers are staffed and trained to implant our technology. Acclaimed in the U.S. and Canada for the treatment of RP, with CE mark clearance in Europe and regulatory approval in Saudi Arabia, the Argus II is the only device with demonstrated long-term safety and benefits to patients. Going forward, we are committed to continuing our important work to develop significant technological breakthroughs that offer potential treatments for other forms of blindness. We probably stand as a leader in an emerging industry and look forward to updating you on our progress in the coming months. With that, I'd like to open the call for questions. Operator, please go ahead with the instructions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Amit Dayal with Rodman & Renshaw.

[Amit Dayal:]

Just to begin with on the insurance side, thank you for some of the updates you provided in your comments. Maybe it would help us to also understand a little bit how this whole process works to potentially get the remaining MACs on board? What the near-term pipeline for closing some of these arrangements is? And if there is any possibility of adding any additional MACs before the year closes out?

[Will McGuire:]

Yes, I mean the MAC decisions are primarily driven by clinical evidence. And as we mentioned earlier, in the call, in the prepared remarks, we have four additional papers that are in process now. And that we expect in the next six months that they will be submitted for publication. And really I think that's the number one and the number two and the number three thing that we need to be doing right now to have further success with MACs. So when we've been denied coverage or not received a positive decision, it's typically related to the amount of evidence that we have supporting our product and supporting our technology. So we're not in a position to speculate about additional approvals in any time period. I guess, I would end by saying that given the success that we've had so far this year in growing the percentage of Americans that are covered by Medicare, we expect that success to continue in the future. And we're dedicated to gathering the data and publishing the data required to have that success.

[Amit Dayal:]

So does having these three MACs on board already helped in that process or is each process different for each MAC?

[Will McGuire:]

It's hard to say. I think it certainly doesn't hurt. I mean, the other MACs will certainly be aware of the success that we've had and who has provided positive coverage decisions for us. So that would not be a secret. So you're not asking any other MACs to be first now and cover the technology. But at the same time, I think each one has their own medical director, each one has their own decision making process, and I think they would like to make their decisions independently. But again, it's certainly doesn't hurt our case and it may give some other MACs confidence that we've already got so many approvals this year.

[Amit Dayal:]

And just moving on to the pipeline of patients, in previous calls you've highlighted pretty robust pipeline. Is that still intact? Are we adding to that? Any color on how that looks for the company.

[Will McGuire:]

I think Bob mentioned in the past call, we had a list with 800 patients who had called Second Sight and expressed interest in our technology. We're still in the very early stages of scrubbing that list. By scrubbing that, we're actually calling and having a much more detailed conversation with each one of those individuals to ascertain if they're a candidate right now or potentially a candidate later. So I can say, not all of the 800 will be candidates for the Argus II right now, but we certainly expect a meaningful percentage try to be candidates. And I would also say that some that are not candidates now would be candidates later, because they may have RP, but it's not a advance stage that we could treat now. And we've even had some calls from AMD patients that we hope will be a candidate for us at one point in the future. With that said, we're not relying solely on this list. We initiated an outreach program this past quarter. It's very early, but we're doing kind of geography specific programs, primarily concentrating on radio ads. And the first one that we conducted we had a very good response. We had a lot of phone calls. And we're optimistic that we generated three or four real candidates out of that program. So we'll asses this program. And most likely, if it's been as successful as we think it is so far, we would start doing additional outreach programs around the country, but the focus being in metropolitan areas where we have obviously a center, but also where we have reimbursement coverage.

[Amit Dayal:]

Sequentially, in terms of the number of the implants, there was a slight drop given the slow period in Europe. Do you expect that to pick up in the fourth quarter?

[Will McGuire:]

I can address that, I mean we don't give guidance. But as you said, U.S. was sequentially up. Europe experienced seasonality in Q3, which was reflected in our internal plan. And we also given the size of our business right now, we expect to see some quarter-to-quarter variability. I mean, we're still quite a small company. And you can look at some quarters and with the small volumes that we have, we can have a few patients that are rescheduled at the end of the quarter for various reasons and it can have a meaningful impact on our results in that quarter. With that said though, I mean, of course over time, we continue to expect the business will grow. And as reimbursement is more broadly in place and steady stake, if you will, we'll be in a better position to accurately project our growth, accurately project the next few quarters and start giving you guys a meaningful guidance at that point.

[Amit Dayal:]

And just finally on the AMD enrollment, et cetera, I guess moving along really quickly in terms of enrolling patients, et cetera, what sort of costs, in addition to the operating costs we're already seeing, should we lookout for in relation to the trial around these five patients for next year?

[Robert Greenberg:]

So we mentioned that we'll be fully enrolled. This initial trial is a five-patient feasibility study, which we expect to be fully enrolled by the end of the year. The most of the costs of the trial, which we estimate to be on the order of $200,000, are in the upfront period where we're implanting these patients. The follow-up to the patients is we're going to be studying these patients and doing some research with them to figure out how to optimally stimulate these AMD patients. But we don't expect the cost to be very significant for this trial. If the remainder of the patients do as well as these first two patients appear to be doing, then we would be expanding the trial to a pivotal study in the United States and we've actually begun talking to the FDA about that as well. So that trial will have more expense with it, but until we have concurrence with the FDA on the exact size of that trial and duration of that trial, it's a little bit difficult to estimate the cost at this point.

[Operator:]

Our next question comes from the line of Jeanne Wong with Granite Investment Partners.

[Jeanne Wong:]

Will mentioned in your presentation that the competitive strategy, such as gene therapies are still years away. I guess some of these therapies are coming into two, three other kinds of blindness. So how do you view a prosthetic implant such as yours? How does that stack up to other gene therapy for instance?

[Robert Greenberg:]

There are some efforts out there, and actually, there have been a few efforts in the news recently. There is on the gene therapy side, another company just completed a Phase 3 study. It was a one-year follow-up with 21 patients for an RPE65 gene, particular gene, a particular type of blindness called Leber's congenital amaurosis. It's an incredibly -- in this particular disease, the median age in their trial was age 11. So it's targeted primarily at a young population. And the reason I bring up this particular example is besides the fact that it's been in the news, it's the furthest along of the gene therapy approaches. They did pass their primary endpoint, which was navigating a maze. They did fail one of their secondary endpoints, which is more typically was our primary endpoint and it is more typically the primary endpoint of the visual devices, visual acuity. Our feeling about -- the most important thing I guess is that there actually isn't any overlap in their population and ours for a couple of reasons. One is because of the younger population the Argus II in United States is approved for age 25 and older, so there is no overlap because of age. Their patients are also partially-sighted, so they've shown that these folks can do better on this maze test with one year follow-up. Our expectation is because the FDA has never approved a gene therapy trial, they may approve it for this. And they might not, because in children my expectation would be that the FDA would want longer-term follow up than one year on these 21 patients. But in the earliest case, our expectation is that that would get approved in a couple of years and wouldn't have any impact on our business, because there is no overlapping in the population. On the stem cell side, there is also a stem cell implant that was in the news recently, and that was for a wet AMD patient in the U.K. And that one patient, they were basically announcing the first implantation of an embryonic stem cell in the eye, and no data was reported yet. So that's obviously much, much earlier and many years away, because there is no data yet, whether it even worked. So those are the kind of the areas and we view these as non-competing our AMD trials in dry macular degeneration, which is actually the larger group of the macular degeneration patients compared to the wet. And so since there is no overlap, we view these other areas as complementary. And as Will said in his prepared remarks that we obviously welcome anyone who is trying to help the blind see.

[Operator:]

Our next question comes from the line of Jeff Osher with Harvest Capital.

[Jeff Osher:]

Just two quick questions from me. The $1.3 million jump in inventory, was that about 26 incremental Argus IIs that you produced and then capitalized?

[Thomas Miller:]

That's about the approximate number, yes.

[Jeff Osher:]

And given that big ramp, does that speak anything into your Q4 visibility or you're just debottlenecking the production line and thought it was, you have the working capital right now, so that was good use to build inventory. What's the thought process?

[Thomas Miller:]

I think that's the answer. You have to remember that you go back a few years ago and it was challenging for us to make a few of these Argus II implants per quarter, and we've improved the manufacturing process. And so the idea really is, let's build up the inventory, we have the team in place that actually takes us a few months start to finish on any given unit. So we can't really turn production up and down. And certainly, if we do, we don't really get rid of a lot of the cost that are associated with production. There's a lot of that's overhead and direct labor. So really I wouldn't read anything into it in terms of our outlook for implants, it's more that we've been improving on the manufacturing side and we're able to produce more, and I think that's the good news. But right now, we really can't link sales demand and production that closely. We're just glad that we're able to start producing these in commercial volumes.

[Jeff Osher:]

And I guess to that same point along lines of working capital, so you've got a couple more quarters and you run out of cash, assume philosophically you probably won't run the company into that cash flow. So can you maybe just philosophically talk about the avenues of working capital access or capital access you have looking out over the next six months, if you effectively have nine to 12 months of cash? Can you talk about philosophically, how the Board thinks about the capital markets, number one? And number two, refresh my memory on two things, fully diluted share count and your lock up?

[Thomas Miller:]

Right. Well, let's get those first two housekeeping issues out of the way. We're about between 35 million and 36 million shares outstanding; fully diluted is around 42 million, something in that nature with options, warrants, et cetera, out there.

[Jeff Osher:]

Under treasury method -- I'm sorry. Under treasure it's 42 million or 42 million is the fully diluted count?

[Thomas Miller:]

That's the fully diluted count. Not applying any treasury method. And as far as the lock up, we had a one-year lock up from the IPO date for officers and directors. And so that's somewhere in the neighborhood a little north of 24 million shares. The lock up expires in the middle of November. So that's coming up. We don't anticipate a lot of selling at that point, but that's when the lock up expires in what's a one-year lock up. Now, as far as the Board's view on raising more cash, we think given our capital needs relative to our market cap right now that we should be able to access the markets relatively easily with little dilution. So I think as we go forward we look at that, it just isn't going to be that dilutive. We also believe that there are a lot of investors out there, who share our long-term vision for the company. So I think that we'll find if we need to go to the markets and raise some money. I think that we'll find willing investors and I don't think that we're going to do anything that is that dilutive.

[Jeff Osher:]

In theory, anything you do will be accretive. And as far as market expectations, you wouldn't expect that to be addressed, I guess in the last two months of the year or is that a statement you guys maybe wouldn't be comfortable making?

[Thomas Miller:]

We don't want to make a statement as to timing. I think we you said, yes, we get to the end of next year. So clearly sometime before that we'll have to address our capital needs.

[Operator:]

Dr. Greenberg, I will now turn the call back to you. Please continue with your presentation or closing remarks. End of Q&A

[Robert Greenberg:]

Well, thank you all again for joining us today. And thank you to every single one of our shareholders, who are making the dream of Sight possible for blind individuals around the world. Have a great day.

[Operator:]

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.