Welcome to the Second Sight Q2, 2015 Earnings Conference Call. During the presentation, all participants will be in a listen only mode. Afterwards you will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, August 4, 2015. I would now like to turn the conference over Lisa Wilson, Investor Relations for Second Sight. Please go ahead.

Thank you. Good afternoon and welcome to Second Sight’s second quarter 2015 earnings call. This is Lisa Wilson of In-Site Communications, Investor Relations for Second Sight. With me on today’s call are Dr. Robert Greenberg, President and Chief Executive Officer and Tom Miller, Chief Financial Officer at Second Sight. At the close of market, the company issued a press release detailing financial results for the second quarter ended June 30, 2015. Press release can be accessed through the Investor Relations section of the Second Sight 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 are express, belief, expectation, projection, forecast, anticipation or intent regarding future events and the company’s future performance maybe considered forward-looking statements as filed 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 the press release and Second Sight filings with the SEC. Such forwad-looking statements are not guarantee of the future performance. Actual result may differ materially from those projected in the forward-looking statement. Second Sight’s specifically disclaims any intent or obligation to update these forward-looking statement except as required by law. A telephone replay of the call will be available shortly after the completion of this call for the next two weeks. You will find the dial-in information in today’s press release. The archive webcast will be available for one month on the company’s website at secondsight.com. For the benefit of those, we listening to the reply or archived webcast this call is held and recorded on August 4, 2015. Since then Second Sight may have made announcements related to the topics discussed so please reference the company’s most recent press release as an SEC filings. And with that I’ll turn the call over to Second Sight CEO Dr. Robert Greenberg. Rob.

Thank you, Lisa. Good afternoon everyone. I’m pleased to report our third consecutive quarter of growth since our IPO. Net revenue was up 335% over the same period last year to $2.7 million due to our increased implant volume and our ability to collect deferred payments on implants from prior periods, 20 Argus II Retinal Prosthesis Systems were successfully implanted during the quarter compared to three in Q2 2014 making this our highest volume quarter ever. Even though our production volumes remain relatively low, we achieved positive gross margins during the second quarter. During Q2, we added four Implanting centers, successfully completed our first Implants with distribution partners in Spain and Turkey and expanded reimbursement coverage in the United States. In Europe, where we have established reimbursement in place, we saw strong number of new implants during the second quarter, expanding the number of implanting centers around the world and working with insurers on reimbursement remains the core of our commercialization strategy with the Argus II. Our research and development efforts progressed during the quarter as well; we successfully implanted the first patient in our dry age-related macular degeneration clinical trial in the UK otherwise known as AMD. Our Preclinical Safety Studies in animals for the Orion I Visual Cortical Prosthesis which would allow us to expand into direct visual cortical stimulation is progressing well and the implants appear to be well tolerated. We also remain on track with our other R&D programs including the new external system platform to support new software. In addition we have tested new programming software that reduces the times of patients after surgery. Importantly we strengthened our leadership team so that we could accelerate the execution of our strategic plans to grow the business. Matthew Pfeffer joined our Board of Directors in June, since 2008 Matt has been the Corporate VP and CFO of Mannkind Corporation. We look forward to drive upon his expertise and are confident that he will make a meaningful and immediate contribution to our board. In July, we announced the appointment of Will McGuire as our incoming President and CEO effective August 18 at which point I will assume the role of Chairman of the Board of Directors replacing [indiscernible]. I will continue to provide leadership and guidance of Chairman Emeritus. Will’s extensive medical device industry experience of over 20 years will advance our commercialization strategy and optimize our operational efficiency. After a thorough search process, management and the board are confident that Will’s broad experience, execution expertise and strong leadership skills make him the ideal individual to continue to expand our business. On behalf of the entire Board and executive team I would like to welcome Matt and Will to Second Sight. At this point, I would like to turn the call over to Tom Miller. Our Chief Financial Officer to review our financial results. Tom?

Thank you, Bob. For the second quarter of 2015, our revenue was $2.7 million, up 335% compared to $611,000 in the second quarter of 2014. This increase was due to selling more Argus II implants in the second quarter of 2015 and collecting deferred payments related to the sale of Argus II devices from prior quarters. Of the 20 implants in Q1, seven were in North America, yes seven were in North America and 13 were in Europe and the Middle East. In the second quarter of 2015, our global revenue recognized for implant was approximately $133,000. As you may recall, from our last earnings call, average revenue recognized for implant was approximately $89,000 in the first quarter of 2015. The difference between the two quarters relates primarily to deferred revenue. As discussed on last quarter’s call, the difference in these amounts is due to certain extended arrangements and discounts that we offer to U.S. customers a recognition of these deals is delayed until cash is received. The higher revenue recognized per implant in Q2 reflects the net collection of approximately $360,000 of deferred revenue during the second quarter. In the first quarter due to the timing of collections, we had a net revenue deferral of almost $700,000. Over time, we would expect our revenue to be in the range from $110,000 to $125,000 per implant. During Q2, gross profit improved by $1.5 million to $1.1 million compared to a gross loss of $382,000 in Q2 of 2014. The improvement in gross profit reflects higher revenue in the quarter coupled with the higher level of manufacturing production in 2015 compared to the prior year. This higher level of manufacturing has allowed us to spread our manufacturing overhead across more units thus lowering our overall cost per unit. We expect to…

Thanks, Tom. As mentioned in my opening remarks this was another quarter of strong performance for Second Sight on multiple fronts. In addition to the continued commercial success of the Argus II rental properties, we made meaningful progress on the R&D front. These developments will contribute to the long-term growth of our business and allow us to continue to build shareholder value. Today, our revenues are driven by the Argus II. The device is approved in the United State and Canada for the treatment of retnal Retinitis Pigmentosa or RP. It has CE mark clearance in Europe and regulatory approval in Saudi Arabia. We have the only device available commercially with demonstrated long-term safety and benefits to patients. And based on what we see across the competitive landscape we expect to maintain our market leadership for the foreseeable future. The Argus II is designed to address the approximately 1.5 million people worldwide that suffer from RP, an important initial target market for us. RP is an inherited disease that causes the generation of a photo receptor cells, which are critical for discerning visual stimuli. Patients with RP initially experience a loss of peripheral vision and the ability to see in dimming light situations. Overtime, this becomes increasingly impaired leading to tunnel vision the corporate reference to complete blindness in most cases. The Argus II device offers the RP population, that help over covering, some useful vision that would allow them to lead more independent lifes. We believe our technology may have even border applicability and conservative platform for the next generation products that address the visual needs of even larger populations. During the second quarter of 2015, 20 Argus II rental properties assistance were successfully implanted around the world compared to three in the prior year quarter. Today we have…

Thank you. [Operator Instructions] Our first question comes from the line of [Amit Dayal] (Ph), please proceed.

Thank you. Good afternoon.

Welcome.

Just really quickly on the number of implants we saw 19 implants in the first quarter we saw 20 implants in the second quarter, could you give us some color on implants per center, how we should look at the number of implants ramping these new centers start coming online, are you happy with the relatively flat number of implants over the last two quarters and what expectations can you give for us regarding this for the remainder of the year?

So I will start by saying that we are the thing that we are very excited about is that we are continuing to see traction over these last three quarters and I think what we have said before is that we expect some volatility quarter-to-quarter where as far as the - and so I think the things to focus on will be the year-over-year growth were expect to see some of that volatility smooth out. Having settled that, the scene continued improvement in the number of implants quarter-to-quarter is what we expect near term. As far as individual centers, we are seeing variability and it’s a little still early in the commercialization so it’s hard to note for sure, but in our best centers what we’re seeing is and these are centers that have reimbursement in place, they are able to implant roughly one at this stage, roughly one implant per month, and in the centers where there is not reimbursement issues, that’s what we are seeing is then able to consistently due one in plan a month. I would expect some of these centers to be doing more than that in the future, and there will be some centers that that probably won’t perform for any number of reasons and so I think as we get more experience with these centers we’ll be able to give better guidance at this point, we are not giving any specific guidance on expectations of growth of implants.

Understood. And, are there any centers that are accounting for a larger portion of these impplants?

This Tom, well, as we mentioned in the prepared remarks we are seeing some good activity out of France and Italy, where we have reimbursement. So, yes, you could say that where there is a reimbursement program in place we’re seeing a higher level of activity. So there are few slides in France but they are all part of the same reimbursement program and there is a couple of size in Italy where we are seeing I think better performance overall.

Got it. On the margin side I guess as you keep scaling in terms of volume we probably be looking at improving from the margin front as well. Is there a level at which we get capped out in terms of margins, in terms of the units of implants we are doing.

Yes. I don’t know that we see that right now. We’re still producing at relatively low volumes compared to where we hope to be in the future. And so our projection are that the cost will drop as volumes increase and there could be improvements in yield, in addition to scaled they help us drive the cost down further. So we think there is a lot of upside over time. I mean from quarter-to-quarter, you may see the gross margin go up or down a little bit but over time you should see it increase. And when we are talking about breaking even and that 350 units annually, we are looking at a gross margin then on the 70% to 75% range. But we think at higher volumes, the cost could come down and that of course, it’s a matter of where the ASPs are but we think there is a lot of upside in the margin overtime.

Great. In terms of and Bob, you touched on this a little bit in your prepared marks the backlog of patients that seems the company just continues to get a lot of positive press, can you talk a little bit about the backlog they’re just seeing in terms of patients we are showing interest, how many of them are qualified to receive the implants, just some color on what the opportunity is brewing up in terms of near term patients in this.

Sure. So as you can imagine every time there is a story about the company that’s one of the main reasons that we do these stories to get the word out to blind patients and so we get a lot of incoming calls, and we screen those calls we have a customer service department that rings us calls and makes kind of a first cut at whether the patients are likely to qualify for the Argus II based on their medical background is described to the customer service line. And so we have a database now of well over 800 patients that are interested in the Argus II that have contacted us, this is the United States I’m talking about now. That would like to get the procedure done and so we are not sure not all those have been screened and are known to absolutely qualify, but our customer service department is pretty good at reading out the focused that that are not qualified. So, that’s essentially our U.S. backlog and so the things that are the gate to getting those folks all implanted are twofold one is working through the reimbursement either preauthorization and you heard that were up now an additional 10 positive preauthorizations over last quarter but either working on preauthorizations or having a MAC in their region that has coverage or if their local insurer has a coverage policy as well. The particular private insurer that they might have, so working through those reimbursement issues is one of the things that is a gate and getting those folks in the implant and other is opening centers and so having a center that’s in a reasonable distance to those patients and so one other things driving our choice of centers to open or the locations of some these patients and so some of the centers will be opening up in the next quarter or two. Our centers whether the number of patients in that local region looking to be implanted.

Awesome, I guess, those are the dual questions I had. I will get back in queue and jump back in, thank you.

Thanks.

The next question comes from the line of [indiscernible]. Please proceed.

Hello, yes, hi Bob.

Hey, [Brett] (Ph).

I have got question just about distribution and how you actually pick up distributors in various countries, but kind of how you choose between them and what terms standard in the whole things to grow of Second Sight products within that by distribution area.

[: There are other markets that are more complex for a number of reasons like for instance Saudi Arabia where local customs and local regulations are fairly different than the U.S. or Europe and so we chosen to use a distributor in that country. As far how to choose a distributors we go through a pretty extensive bidding process looking at other products of the distributors are selling. So for instance in Spain we ended up choosing iMac which was the largest distributor of ophthalmic products and typically the folks that were going with have either sold of ophthalmic products or in some cases cochlear implants. The cochlear implants are the electrical simulators that are very similar to a similar to the retina processes but restoring hearing to the deaf and so because of our close relationship with Advanced Bionics and another company founded Alfred Mann. We’re able to access some of their experiences with the distributors and so that’s part of the process of how we choose distributors.

Are you guys are active in India, and China in terms of looking a distribution there and signing out of distributors in it or how you are working distribution.

Yes, so we are beginning to look at both Asia and South America and as far as new markets, new large geographic markets that we are looking to address is a little bit early to know for sure if we’re going go direct or via distributor in those markets, but we will go for a similar process, similar evaluation process that we use in deciding both in North America and in Europe which markets to go direct and…

Okay, go ahead.

We do think there will be important markets for us going forward they are very important markets in the cortical implant business.

Okay. It’s a good thing to follow-on, in terms of geographic break down so to say that as well so you basically of the 20 implants last quarter you think seven North America, 13 Europe and Middle East and out of the 13 Europe and Middle East it look like nine are in Italy and France and you’re kind of expecting continued solid results in those two countries, what is the - how you kind of see that tracking into subsequent quarters down in terms of the distribution breakdown?

While in terms of the geographic breakdown, we would expect to see North America’s share of overall implants increase and we would hope to get to a 50:50 or so maybe longer term more than 50:50 between EMEA and North America. As you recall we launched the product in Europe before the U.S. so the commercial developments are little bit behind of Europe but we’re investing in North America and I think we’re doing a good job of opening centers and so I think we’d like to see once again the split go to 50:50 and then would see from there where we go.

Does it help having moreNorth American sales in terms of ASPs and I guess you’ve been impacted somewhat maybe by the Europe following just give us some color on ASP going forward to - going for what your geographic breakdown you believe will be going forward as well?

Well I think you’re right, I think as we see more implants in North amerce we would expect to see the ASPs increase and because the pricing is a little higher in the U.S. so that would be a favourable trend and the euro although when you look back at last year, we only had three implants last year, so the impact year-on-year of the Euro wasn’t great, certainly as we go forward with the Euro at a $1.10 or so it’s that impacts our ASPs overall, so the growth of North America will be beneficial to ASPs and revenue for all.

Okay, great. And so during the coming year where are you on this is my last question on, in terms of deferred revenue and where does deferred revenue come from, is that primary from distributors that or where is the biggest kind of delay in getting paid andis that kind of changed all over time just talk us a little bit - I don’t know if you have kind of come through that I’m sure you have, but just give us a little color on there?

Okay. Let me say a little bit about that because when we talk about the impact of deferred revenue we’re not talking about distributors. So distributors we don’t recognize the revenue from distributors until they do the implant when we talked about differed revenue it’s really North America that we’re talking about and so what we have in the U.S. is we have some extended payment arrangements and discounts that we offer to U.S. customers, we don’t offer those world- wide and that impacts our ability to recognize all the revenue right away. So most of the deferred revenue that we’re talking about has to do with implants in the U.S. that we haven’t fully recognized and we will recognize them as we receive the cash, now over time we expect this problem to be resolved and we expect there will be a convergence of our ASP and our revenue recognized per implant, and we expect as we said on the call, we expect that the revenue will be somewhere between 110,000 and 125,000 per implant over time. So but once again most of that deferred revenue relates to North American transactions because of the extended arrangements, payment arrangement and discounts.

And then maybe a quick follow-up on distributors is that, so the distributors as Tom mentioned are typically paying cash upfront for implants but as Tom mentioned we’re conservatively not recognized that revenue until they actually go ahead in implant.

Okayt.

Yes. That’s right. So we actually are getting paid by distributors well in the advance usually have the implants.

Okay. Very good. Thank you.

[Operator Instructions] The next question comes from the line of [Jim Collins] (Ph). Please proceed.

Thanks. Question on the cash burn for the quarter it was net cash ended up at $3.1 million lower, that’s obviously a lot lower than the sort of $5 million per quarter guidance you are giving before us. So what was driving that and should we still be using $5 million per quarter going forward.

Very good question. The big difference I think is proceeds from the exercise of options and warrants, that we have to, you maybe be aware that we have two lockups here as part of the IPO, one was a six month lockup for most employees and then there is a one year lockup for officers and for large investors. And so the lock up expired during the quarter and we have some option exercises that provided somewhere around $1.9 million in cash during the second quarter. And that of plugs the gap that you are talking about.

Okay. And then, second question is on the grant funding, that you talked about in the quarter more than 500,000 to whom are you getting those grands and is that another thing that we should be modeling going forward.

So we have a couple of graphs actually. We have one graph that we talked about and S1 which is a large graph that are partnering with John Hopkins applied physic lab and we have another NIH grap currently active that we’re partnering with the University of Southern California on and so both of these graps are aimed at whether our current graps are aimed at improvements to the software that we talked about, its great to have some additional income to offset some of the cost and that’s actually how we’re doing the accounting as well. We are not recognizing it as revenue but we’re recognizing as an offset to R&D.

And I guess, going forward it is that something that the P&L on a quarter-by-quarter basis?

I think so. I think that and the amount is going to vary I think depending on the amount of work that we do but we received last year a grap of little over $4 million from Johns Hopkins and so that’s what’s we utilize a little bit in the second quarter. And I think you will see that once again I’m not sure the exact amount is going vary based on the amount of work that over the next several quarters you will see us utilizing that graph.

And we have other graph applications as well so I would expect to see additional graph offset to the R&D expense going forward.

Okay. That’s great. Thanks for answering my questions.

The next question comes from the line of Amit Dayal. Please proceed.

Yes. Thanks for taking my question. How many implanting centers do you plan to have by the end of the following year, by the end of next year?

So we’re not giving guidance that far out but we have talked about this year, our plan is to double the number of implanting centers, active implanting centers over last year. So at the end of 2014, we had 18 centers and we are targeting doubled our 36 centers at the end of this year.

So possibly over 50 centers by the following year.

Rather than give guidance for the following year I think what I would say is that our long term target we think was about 50 U.S. centers we can cover about we’ve modeled about 90% to 95% of the U.S. market within two to three hour drive of the center. And so we think the steady state in the U.S. could be somewhere around 50 centers.

Okay. Great.

And that’s kind of minimum number. So that’s kind of we may endu up opening more centers in that by the, that’s what we look at for our U.S. number.

And do you expected all these centers to transition the cortical implants as well?

That’s a good question so as we think about the commercialization of the Orion implant, the there a lot of things that are comments, all the evaluation of the patients will likely to be done by the same people they are doing it currently for the Argus II. The only add on will be a neurosurgeon that will actually do the implant itself and so our expectation would be that the same centers with - in many cases the centers are large hospitals that you have both ophthalmology departments and neural implant departments as well. So and the same thing also applies to Macular Degeneration as w expand from retinitis pigmentosa to AMD we would expected to be offered in the same centers.

Okay, great. Thanks so much for taking my question.

Thank you. End of Q&A

And that was the last question Dr. Robert Greenberg. I’ll turn it over back to you for closing remarks.

Okay, well thank you all again for joining us today and I want to thank every one of our shareholders who are making the dream of site possible for blind individuals around the world. Have a great day.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and as you please disconnect your line.