Ladies and gentlemen, thank you for standing by. And welcome to the Second Sight Q3 2016 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today Wednesday, November 2nd, 2016. I will now turn the conference over to Lisa Wilson, Investor Relations with Second Sight. Please go ahead.

Thank you Collin. Good afternoon, and welcome to Second Sight's third quarter 2016 earnings 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 Directors; 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 quarter ended September 30th, 2016. The 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 express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be 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 involve 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, secondsight.com. For the benefit of those, who may be listening to the replay or archived webcast, this call was held and recorded on November 2nd, 2016. 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. Rob Greenberg.

Thank you Lisa. Good afternoon and thank you all for joining our call today. We're pleased to share with you within in the third quarter and in the past few weeks since the quarter ended, we've continued to make important strides as we focus on expanding our global page and bringing life changing technology to patients who can benefit. And as we announced this morning, we are very pleased that yesterday CMS, The Center for Medical Services confirm in their final role that the Medicare hospital outpatient payment rate for 2017 have a 150,000 for the Argus II any implantation procedure, which is up from 95,000 in 2016. In a separate development, the AMA has approved our application, the American Medical Association has approved our application for two new Category III CPT Codes for initial programming and reprogramming the Argus II. With these new codes beginning in July 2017, commissions will have the ability to build for these critical activities. We are continuing to fine tune our US commercialization strategy with a focus on creating centers of excellence and forming distribution partnerships outside the US, steps that will lead to better alignment with partners and to the treatment of greater numbers of patients. Will plans to share more detail later in the call in this. Last week we announced the first successful implantation and activation of a Wireless Visual Cortical Stimulator in a human subject at UCLA. Providing the initial human proof of concept for the ongoing development of the Orion I Visual Cortical Prosthesis. This first human tests represents a very important milestone and confirms that we're on the right track with Orion I program to treat blind patients who cannot benefit from the Argus II currently. The stimulator using this test had only a few electrodes and did…

Thanks, Bob. For the third quarter of 2016, net sales were $1.2 million compared to $2.2 million in the third quarter of 2015. The decrease in revenue was driven by three primary factors. First, the reduced US CMS reimbursement rate for 2016. Second, the timing of revenue recognition due to certain deal terms which increase the amount of revenue recognised in the third quarter of 2015. And third, the geographic mix of implants which favoured AMEA in the current year where we historically have received a lower level of revenue per implant. Given this, the average revenue per implant were $84,000 in the third quarter of 2016 compared to a $148,000 in the third quarter of 2015. With the increase in the CMS reimbursement rate for 2017, we expect that our average revenue per implant will be in the range of $100,000 and $120,000 in fiscal 2017. Depending on the geographic mix of implants, we generated a gross loss of $1.4 million in the quarter compared to a gross profit of $1.5 million in the third quarter of the prior year. The cost of sales for the third quarter includes approximately $700,000 of unabsorbed manufacturing cost due to a lower production volume and a $1 million charge for excess inventory. As discussed on the call last quarter, we had taken certain steps to reduce our manufacturing production and we'll continue to monitor our inventory levels. At the appropriate time, we will resume normal production of Argus II implants. Until then, we expect to continue to generate gross losses and unabsorbed manufacturing over ahead. We still believe that the Argus II can generate solid positive gross margin a sales ramp in future periods. R&D cost, net implant revenues were $1.6 million at the current year third quarter compared to $593,000 in…

Thanks, Tom. As Bob provided in his opening remarks, the third quarter was an exciting period for our company. I'd like to review in more detail some of the positive developments. Let's begin with reimbursement. First, CMS posted the 2017 Medicare hospital outpatient payment rates yesterday. The Medicare hospital outpatient payment rate for the Argus II device and procedure will be a $150,000 as of January 1 2017. Second, we are pleased that the AMA has approved our application for two new Category III CPT Codes for initial programming and reprogramming of the Argus II. This decision is significant as it will enable commissions to build for these critical activities. Third, we continue to make progress with our efforts to secure reimbursement in England through a new commissioning through evaluation our CTE program. National Health Service or NHS England recently requested further information from us and visited one of our implanting centres to spend time with an Argus II patient. While the details and timetable for the final determination are still being worked out, we continue to be encouraged by the progress in the UK and we'll keep you updated. Finally, we have also taken our first steps to pursue a reimbursement in Belgium and submitted a request for reimbursement to the National Authority. Turning now to our commercial performance. As noted earlier, global implant volume grew to 14 in Q3 from a 11 in Q2. The total implants outside of North America was 10. We continued to make progress in obtaining regulatory approvals in Iran, Taiwan, South Korea, and Argentina. We have begun training for our new distributor partners and will be supporting their efforts to apply for funding and reimbursement. While the timing for each market is somewhat difficult to project, we remain confident that these indirect markets…

Thank you, sir. [Operator Instructions] Our first question comes from the line of Dallas Salazar with Atlas Consulting, your line is open. Please go ahead.

Hi guys, nice quarter. It sounds like you made some good progress. Thanks for taking Q&A. I just had two quick ones, the short but meaningful. My first question is, can you explain the status of the long term investor ride?

Yes, I can do that. This is Tom. In a very timely question the long term investor ride or LTIR matures on November 24, the end of this month which is the two year anniversary of the IPO closing day. We issued with every share in the IPO and LTIR, now to qualify for the LTIR investors will require to hold the shares in their name and certificate form and not a street name during the 24 month period following the IPO. Now [Audio Gap]

Yes I appreciate that. I think that's helpful in risk managing, so thank you. The second question would be can you just give us, investors any more information on the status of the plans for AMD?

Sure, Dallas this is Bob, I will take that. So, let me give maybe a little bit of background to kind of where we stand on the current clinical trial and then kind of lead to where we heading with it. So, as you may recall we implanted five patients in the U.K. and these patients are doing well, they report being able to see the outlines of other people heads. They can integrate their native and artificial vision. This is one of the questions that we had going into the trial. They report liking the system and using it to watch TV and garden. And importantly their native vision appears to be preserved which is another question because using AMD patients unlike the RP patients still have some residual vision. So we wanted to make sure we aren't harming that. We still need to demonstrate a real world impact and optimize the rehab to ensure that payers will reimburse for the system with patients with AMD. In addition, we did see some adverse events, so the adverse events were successfully managed by the physicians and so not unexpected in the first few cases of any new indication. So our plan going forward is we will be applying to the U.K. authorities to make some protocol changes to reduce the adverse event rates and also to improve the performance. We are working on some protocol changes that will allow us to test some of the image processing techniques and new retinal stimulation strategies that we can test new patients as well as we are working on some new versions of the implant that would be dedicated for AMD. But our plan is next year to begin soon we get an approval from the regulatory authorities to begin implanting more patients. We haven't yet solidified on a number of patients but we are encouraged by these early first five patients and we are looking forward to testing more patients to demonstrate not only the improved efficacy, but also the improved safety that we expect to see going forward before expanding to an even larger trial for market approval.

Yes. Thank you. Thanks again for the comprehensive answer. And even I have been telling the story in Chinese back and forth since the IPO days. So appreciate you always being there for comprehensive answers and in taking the sub-questions. Thank you guys.

Thank you.

And our next question comes from the line of Jim Collins with Portfolio Guru, your line is open. Please go ahead.

Yes just hoping that you could expand on the last bullet point in the press release, you signed an exclusive rights into funding agreement etcetera, can you just talk about who the commercial partner is, what type of company anyway and what is the scope and magnitude of that funding agreement?

Yes. So I will take that. It's Bob again. Thanks for the question Jim. So we are not announcing the name of the company but it's a small company. It's a small technology based company that had some unique image processing technology that we had done some work with and it showed promising results in patients. Patients were able to perform some task that they couldn't without this new image processing technology and so we entered into kind of a twofold agreement with them. One was we – one was the exclusive license for the technology to apply it to vision prosthetics but and then the second was the applied with them for some grants. And so, we were fortunate that to get $450,000 worth of grants from the National Eye Institute and they were able to get some additional grant funding as well. So going forward we will continue to work with them to perfect that technology and implement it in our next generation external. So this will be software in one case, a hardware modification to the external system that in initial testing at Johns Hopkins it looks like it's performing, improving the quality of patient's vision.

Okay and the back to, I think I sort of missed what Tom said about what you are doing to manage inventory now so I guess the question is if I watch your facility today what sort of production rate are you adding and when this echo back to normal?

Well, most of our R&D, our manufacturing efforts right now are going to support R&D efforts and so we are not really making more Argus II at the moment. We are looking at the inventory levels and when we see a rebound in implants, when we see that going up, we will make a decision about increasing production. So right now we did reduce a lot of our manufacturing staff. In the second quarter of the year we kept some key people on board and we are using them once again to support some of our R&D efforts on the cortical and on the new externals. So you would not see a whole lot of, well you won’t see any activity on the Argus. You would see activity on some of our prototype development.

And then for 2017, obviously I think we are all expecting that the implantation rate will snap back as the reimbursement rate goes back to 150,000 so at what point would you need to start running the line again or to use that industrial phrase and how quickly can you get things restarted to scale Argus II production?

Yes this is Will. I mean, we really haven't given forecast or anything concerning implants next year. We do expect the rate to increase next year. A couple of things would drive that in the U.S. it's the implantation of our Centers of Excellence program and specifically some of the things we talked about in the call focusing our efforts to recruit patients by improving and now reimbursing the program in post-surgery and then finally maybe most importantly improvements that we are making to the post-surgery rehab. So that there will address some of our current accounts as well as some of the new accounts as they come on board and put them in a position we think to start doing higher consistent volume. The second thing that will drive increased volume is the kind of resumption in the U.S. if you will, adding new accounts. We haven’t added too many new accounts in the U.S. in the last 12 to 14 months and we are in pretty active discussions with quite a few accounts now. And I think you should expect to see us adding new accounts in 2017 on a regular basis. And finally, kind of the third piece that could drive the volume would be MAC expansion. So getting additional MACs to issue a positive recovery decision, outside of the U.S., we expect growth there as well. There the growth will be driven, the two opportunities I think for growth outside of the U.S. would be number one getting a positive reimburse decision for UK or for England, and then the opening up of some of the distributor markets that I talked about during the call. And then based upon that we really just have to track, I don't think Tom has very specific answer. We will track our remaining Argus II inventory and at some point we will have a trigger that if we get down to low enough inventory we will resume production. When we did scale back our production activities last quarter or the quarter before we were very cautious and the people that we retained and the people that we have in place now being the ones that we think are the most skilled and the most critical for restarting production and ramping back up in a consistent manner. So I think we did a nice job of thinking through that and we feel very comfortable that we have the ability to ramp up in ample time to meet any demand we would see in the near future. It will be little more than you asked for that Jim.

No, thanks. I appreciate the color Will, and last question I promise, but Tom mentioned having enough cash to make it through the second quarter of 2017, I guess the question is what happens next especially given that your stock is trading at, basically an all time well. So what do you sort of considering as far as this capital raising option for next year?

Well, we think that we have a lot of financing options. I don't want to go through all the things we talk to people about but we are on ongoing discussion with our board and ultimately it's going to be their call. But just like this year we had a very successful rates offering in June and we are in discussions with our board about various opportunities and options and we will make the call before we – sometime when we are thinking the first quarter, second quarter, at the latest we would do something.

Yes, this is Will. I will just add. I think we probably need to make a decision sometime in Q1. We obviously would rather be sitting here to much higher stock price everything looks better from a potential equity raise standpoint, but we are confident that we will have several options available to us. And we are confident that funds will be available. We just make that decision a little later this year or early next year and of course when we make a decision we will inform you guys about our plans.

Okay, great, thanks Will, thanks Bob and thanks Tom.

You are welcome.

And there are no further questions on the phone lines. I will now turn the call back to the presenters. You may continue with your presentation or closing remarks.

Thank you all for joining us today, we are especially grateful to our shareholders who support our goal of making the dream of sight, the reality for blind individuals around the world. Have a great day.

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