Ladies and gentlemen, thank you for standing by. Welcome to the Second Sight year-end earnings conference 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 on today’s date, March 9, 2017. It is now my pleasure to turn the conference over to Lisa Wilson, Investor Relations for Second Sight. Please go ahead.

Thank you, Johnny. Good afternoon and welcome to Second Sight’s fourth 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 Maguire, 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 December 31, 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 March 9, 2017. 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. Bob Greenberg.

Thank you, Lisa. And thank you all for joining our call this afternoon. As we turn the page on 2016 to focus on implementing a refined commercial strategy in 2017, I’d like to take a moment to recap some of the meaningful actions we took to address the challenges of the past year and to better position Second Sight to take advantage of the exciting opportunities ahead of us. Our efforts with CMS resulted in a successful increase in the Medicare hospital outpatient payment rate for 2017 from $95,000 to $150,000 for the Argus II and the implantation procedure. This allows centers to appropriately be reimbursed for both the device and the surgery and we expect it to have a positive impact on a number of US implants performed in 2017. In addition, our application for two new Category III CPT codes for postsurgical programming and reprogramming the Argus II were approved and become effective on July 1, 2017. We also implemented a revised Centers of Excellence strategy and formed additional distribution partnerships outside the US, and you'll hear more about that from Will. On the R&D and clinical front, we have also made progress toward expanding our addressable population. We successfully implanted a wireless visual cortical stimulator in a human subject providing the initial proof of concept and early safety and performance data to support the Orion I program. We expect to file FDA and European submissions this year to clinically test this groundbreaking technology that has the potential to restore useful vision to patients who are blinded by nearly all currently untreatable causes. And, of course, we remain committed to improving the patient experience with the Argus II which is why we are developing and begun testing new retinal simulation techniques in our patients. Our goal is to continue to improve the quality of the vision achieved with the Argus II and also to expand our treatable population to better cited RP and AMD patients. We’re confident that our efforts in 2017 will lead to broader adoption of the Argus II and demonstrate the ability of our technology to treat an even greater number of individuals. I will now turn the call over to Tom Miller, our CFO, who will review our fourth quarter results. Tom?

Thanks, Bob. For the fourth quarter of 2016, net sales were $715,000 compared to $2.4 million in the fourth quarter of 2015. The decrease in revenue was mainly driven by the decrease in units sold, which declined from 21 units in 2015 to 7 in 2016. The average revenue per implant was $102,000 in the fourth quarter of 2016 compared to $112,000 in the fourth 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 $110,000 to $120,000 in 2017 depending on the geographic mix of implants. We generated a gross loss of $2.6 million in the quarter compared to a gross profit of $691,000 in the fourth quarter of 2015. The cost of sales for the fourth quarter of 2016 was $3.3 million and includes approximately $686,000 of unabsorbed production costs due to lower production volumes and a $2.3 million charge for excess inventory. We took certain steps during 2016 to reduce our manufacturing production and will continue to monitor our inventory levels. When demand dictates, we will resume normal production of Argus II implants. Until then, we expect to continue to generate unabsorbed manufacturing overhead costs, although we do not anticipate further large inventory reserves. We still believe that the Argus II can generate a solid, positive gross margin as sales ramp in future periods. R&D costs, net of grant revenues, were $2.1 million during the fourth quarter of 2016 compared to $546,000 in the prior year quarter. The increase was primarily due to higher spending on staffing, outside consultants and services, as well as the utilization of excess capacity and manufacturing to help develop the Orion prototype and other new products. In 2017, we expect to see R&D costs continue…

Thank you, Tom. As Tom noted earlier, we performed seven implants in Q4. Two of these were in North America and five were outside North America. For the full year of 2016, we performed 42 implants globally. As Bob outlined, we made progress on several important points last year to refine our strategy and position ourselves for a stronger 2017 and beyond. We expect implant volumes to grow in 2017 due to our efforts to increase reimbursement coverage globally, coupled with the implementation of our revised US Centers of Excellence strategy. In fact, as of today, we have completed nine surgeries this year and have an additional six scheduled before quarter-end. Please keep in mind that scheduled surgeries can be canceled or rescheduled for subsequent quarters. Let’s now review progress in the US and Canada. We’re building a platform based on Centers of Excellence, capable of delivering a full range of high-quality services critical to optimal patient outcomes, including patient recruitment, post-surgical programming and artificial vision rehab. In 2016, we had in-depth discussions with the majority of our existing US implanting centers and spent time with dozens of our Argus patients to critically assess the support we were providing and identify areas of improvement. Our revised US Centers of Excellence program is a direct result of this assessment. In short, we are establishing a network of high-quality surgical centers that are committed to performing a volume of four plus implants per year, possess the ability to do patient screening and post-surgery programming and are capable of managing the artificial vision rehab process. The majority of our new centers will be located in geographic areas with existing MAC reimbursement coverage in order to draw from a larger pool of prospective patients. Let’s review some of our efforts to address the needs…

[Operator Instructions]. Okay. Let's see here. Our first question comes from the line of Amit Dayal with Rodman & Renshaw. Please go ahead.

Thank you. It looks like we’re off to a stronger start in 2017, at least in term of the pace of the implants, do you think there is a possibility over the next few weeks, as the quarter ends, to add potentially more to the six scheduled implants?

Yeah, Amit. This is Will. I’ll answer that. There is a chance, I would say, at this point – it’s a pretty small chance because it does take some time to get a patient scheduled and make all the necessary arrangements to ensure the surgery goes all smoothly. I do know there are quite a few other patients in the queue. There is a chance one of those could be pulled into the quarter, but at this point, my expectation is additional patients would be scheduled in Q2.

And this number that you’ve given, the nine that have already been implanted and the six scheduled, this is both the US and international?

That is correct. That is correct.

Got it. And in regards to the revised strategy around building sales through the Centers of Excellence and providing this extended patient rehab support, how will that factor into maybe some cost increases on your side, if you could provide any color on that.

For the most part, the specific piece you’re asking about is the rehabilitation. And we're not necessarily going to be the providers of that rehabilitation service. What we're doing is we’re working with the various third-party providers – I’m talking specifically about the US right now – to make sure that we have kind of a standardized rehab program and then we’re able to identify and make sure the rehab providers are trained and competent and we have someone following up with the patient on a regular basis. So as an example, we don’t see much change really from 2016 to 2017 in our overall commercial spend. We’ll probably have one, maybe two people in the US that would be – that would have some of their responsibility to include rehab and following up to make sure all patients are getting proper rehab. But, again, it’s not going to be necessarily a service that we’re going to take on and have to bear the expense of. We do want to make sure it's happening. We do want to make sure it's standardized and happening appropriately, but it’s not something that we’ll take on and do as a company.

Understood. Moving on this high reimbursement rates of around 150K levels, are you seeing more interest and activity now that that issue is out of the way and you have that grid established?

It’s a good question. What happened last year, as you recall, we had a reduction in the rate. So, we had pass-through status at 143,000, 144,000 per device. It moves into a set reimbursement rate or an average reimbursement rate of $95,000 in the. Some confusion resulted because we didn’t decrease our selling price for the first quarter of the year. So, hospitals had basically a delta of $50,000 between what they were being reimbursed and what we were charging. No Medicare patients were done during that time period. We did start decreasing our price at the end of Q1 – or discounting, should I say, and we got our price closer to the expected reimbursement. But to be honest1, there was still some confusion with some of the accounts and some of the accounts had lingering concerns as to whether or not they were going to get appropriately reimbursed in 2016. I think, at this point, all of that has been cleared up, Amit. We have a much higher rate. We are pricing now I think very appropriately, so that when we go through and we talk to an account about what their expected reimbursement is and what our price, the account is now confident that they can do Argus cases and not lose money. So, they’re going to get reimbursement for not only our device, but for all the associated costs with the Argus case. So, it does take that off the table as a big concern on the financial front. I really think, though, that a lot of the confidence that we have in increased US volume in the US, though, is really more around the Centers of Excellence model and these other things that we have kind of tackled for the accounts. So, making sure that we have a more aggressive, but also much more thorough, patient recruitment process, so we’re going to be sending more patients to the accounts, but those patients are going to be – are going to have a much higher likelihood of actually being an Argus candidate. They’ve got a simplified programming system now. It’s going to take less time. They’re going to get reimbursed for it starting mid-year. And then, finally, as we were just discussing, I think the accounts will have also more confidence that any patients that undergo a surgery will get the proper rehab, not only in the hospital, but once they leave the hospital and go home, and that should lead ultimately to, we think, making it easier for a center to be an Argus center and also increasing their confidence in having good patient outcomes.

Understood. Thank you for that. Moving on to your comments maybe modifying the product, the Argus II product to get better cited RP patients, it looks like this effort will require some type of regulatory approval. So maybe two questions on that. One is, what is the time line before all of this materializes? And the second question is around, what this does for you in terms of addressable market?

Sure. Let me take maybe the timeline first. So, think of 2017 as being the year in which we’ll really prove the feasibility of this. So, by the end of the year, we want to have collected data in humans showing that that we can improve their vision and improve their vision to a point where we think we could go out and get regulatory approval and reimbursement coverage. Now, as far as – if you look forward, it’s a little difficult because we don't yet know the magnitude of the improvement, nor do we necessarily know which methods or which techniques we’re going to use to get the desired improvement. But I think it's safe to say that if things progress as we see them now, we would probably see some of these retina stimulation techniques being available in Europe in 2018. So, we would have – in some cases, we have broader indications or labeling in Europe right now that would allow us treat these patients, so then we will just have to really have the improved retina stimulation techniques approved, have some data to support it. We think physicians could start treating some of these patients. For the US, again, it’s a little hard to predict, but I would say most likely the US would be not before the end of 2018 and probably more likely maybe early 2019, if I’m getting my years correct here. And again, that’s before we would have regulatory approvals and reimbursement. To answer your second question around – what does it do for our addressable market? It is a little bit difficult to answer that. I can tell you what we know. First, we know there is approximately 375,000 people that are legally blind from RP globally and we know that…

Got it. And in regards to AMD and the Orion opportunity, from a timeline perspective, again, if you could provide any granularity on when at least you might start seeing – if all goes well and according to plan, when you might start seeing some initial sort of implants, I guess, for those two products.

Hey, Amit. This is Bob. So, as you know, on the AMD front, we currently have patients implanted – we have a number of patients implanted. This year, we’ll begin testing additional software algorithms in an effort to demonstrate improved performance above their residual vision. And similarly, with the Orion, we’ll begin clinical trial testing with patients this year. On the Orion front, we have significantly greatly increased confidence now that we have implanted the patient at the end of last year with the – essentially a prototype type device that allowed us to test the concept. We see now, in this patient, who has a wireless implantable stimulator over her visual cortex, we see that she's able to now see phosphenes with no adverse events, at levels that we – at current levels that expect her to have in the Orion. So, this year, we should have proof of concept for both – understand where we sit in patients for both the AMD patients and the Orion subjects. And what we would expect based on the performance that we see in each of those cases is that we’d be able to then get regulatory and reimbursement approvals over the next few years. So, it’s hard to pin down, as Will said before, with the better vision RP patients. It's hard to pin down exactly how long the regulatory reimbursement timelines will be until we have the patient data to know how good or how much we’re able to improve the performance. But we would hope that later this year we’ll be in a position to be able to give finer estimates for what exactly that will be.

I appreciate that. Thank you for the color. And, I guess, my last question is around what we should be assuming for the diluted share count post this offering.

Amit, this is Tom. So, at year-end, we have about the 42.7 million shares outstanding and this rights offering is another 13.7 million shares. And just so you’re clear, the uptick between September and December 31 was the issuance and the completion of the long-term investor rights basically that we issued in November. So, we have about 56.4 million shares outstanding. And then in terms of potentially dilutive shares if that’s what you’re asking about, we disclosed that in our 10-K. And when you add in the 13.7 million warrant and some options we issued after year-end, we have about 21.7 million potentially dilutive securities outstanding. I would like to point out that over 5 million of those are fairly out of the money right now. So, about 16 million. And when I say in the money, $2 or less. Does that answer your question?

No, I appreciate that. Yes, that was the color I was looking for. Thank you so much, Tom. That’s all I have, guys. Looking forward towards stronger [indiscernible] in 2017.

Great, thanks.

Thank you for your question. Our next question comes from the line of Ning Jia with Century Management. Please go ahead.

Hey, guys. Thanks for taking my questions. My first questions are regarding a company called eSight. So, my sense is that their current device is addressing a different market. It seems like they’re addressing the patients who are legally blind, but whose visions are probably still too good for Argus II. And you’re doing software upgrade for Argus II for those better cited patients. So, how much overlap – I guess, how much market overlap is there between the market they’re addressing and the market you’re trying to address with your software upgrade? And longer term, how much of a threat do you think eSight is given their device only costs $10,000 and doesn’t require surgery.

Sure. This is Bob. So, eSight has been in the news a bit lately. And for [ph] folks who may not be familiar with it, a little background, it’s a low vision device. It’s not a medical device. And what that means is it doesn't qualify for Medicare reimbursement because it's devices that are low vision or hearing aids are specifically excluded from reimbursement by Medicare. So, it’s a self-pay device. And it retails, as you said, for about $10,000. It doesn't restore vision, like the Argus II does. What it does do is it enhances residual vision. So, as you said, patients with much better vision than what we have today and your question about will our software algorithms improve the quality of the vision to the point where we would start – where they could start impacting our market, we don't think so. So, we think that our – we don't see any overlap for the foreseeable future. We actually see it as more of a complementary technology. We think that will improve the addressable population, but not to the point of nearly normal vision that eSight system is addressing today. So, it’s more of a complementary device, self-pay, not really impacting our market anytime soon.

Okay. And longer-term, is that a threat for your Orion device?

No. So, similarly for the Orion – our expectation is that the Orion would also begin with the worst affected patients, so patients who are completely blind. And for the Orion patients, many of those will – the real target for the Orion patients are patients – there is no overlap at all because they’re patients who have a damaged optic nerve. So, they might not even have eyes, all things that the eSight would require. eSight essentially requires near normal vision or what's known as low vision. Patients have to be able to see to benefit from the eSight device. And because it’s not actually restoring vision, it’s essentially enhancing vision by improving things like contrast enhancement. So, it's like turning up the contrast on your television. You still need to be able to see the television. But in case of the Orion, many of the patients that will be eligible for the Orion might not have eyes at all, might have a damaged optic nerve, might have glaucoma that's completely destroyed their vision or diabetic retinopathy that’s completely destroyed their vision that make them eligible for the Orion. So, even longer-term, we don't see it as impacting our market.

Thank you for the detailed answer. So, my other question is related to your patient outreach strategy. So, first, is radio still the main marketing channel. And second, what are the current barriers to get the patients become aware of your device and what other marketing strategies are you contemplating?

Okay. So, I think [indiscernible]. This is will. So, right now – and I’ll talk primarily for the US, but it’s similar outside the US as well. The majority of our outreach is through radio ads. So, we are conducting radio ads. We’ll go into a market and conduct radio ads basically during the day and at night. A lot of blind individuals will be up at night as well. So, we will conduct radio ads. We give them a 1-800 number to call into. And then, as we described earlier, we have a couple of layers of screening that we go through now. And I can kind of give you an update on where we’re at. So, in the US, through our outreach efforts, we have 218 patients in our database now. And these patients have – the 218, all of them have been through a screening with our customer service folks here in California. So, they’ve gone through a screening and we’ve asked them some basic questions around – do you have Retinitis Pigmentosa, what level of sigh do you have and things like that. What we have now that I talked about earlier then is what we call kind of a clinical screen. Again, it’s via the phone and it's done by one of a couple of people that we have contracts with who are medical professionals to conduct these phone screens. And out of that 218, we have 23 that have successfully passed this clinical phone screen. And of that 23 then, 18 are currently in the process of being scheduled for an evaluation at one of our implanting centers and five have been evaluated and deemed good candidates for surgery and are now awaiting surgery. And I think – either four or five of those…

Yes, sure. I have a follow-up on that. So, why haven’t you guys run a social media campaign? I know your targeted patients probably can’t use social media for obvious reasons, but their friends and family do. So, why not a social media campaign?

We do. I don’t have like a summary of it now, but we do have outreach through social media. So, we distribute a lot of company information as well as new stories related to the to the company through social media. We actually have a firm that we work with to reach out and to make sure we’re populating social media with updates and stories and things of patient interest like that. I’d just say the – and we do have – if you look at our database of patients, we certainly have – we certainly have gained some of those patients from social media outreach and from inquiries from social media through our website potentially. But I’d still say, probably the overwhelming majority of them come from the radio ads that are very specific in targeting patients.

Okay, sounds good. Thanks a lot. That’s all from me.

Okay, great. Thanks.

Thank you for you question. Our next question comes from the line of Dallas Salazar with Atlas Consulting. Your line is open. Please proceed.

Hey, guys. Thanks for taking questions. I might have missed this earlier in the Q, but now that the 2017 reimbursement rate is set for the Argus II, are you guys seeing an uptick in implant volumes? And then secondarily, can you contextualize kind of the level of activity for expectations, sort of your internal expectations so far?

Sure, I can address that. We did talk about that earlier. But let me give you the highlights. Yes, the new reimbursement rate in the US of $150,000, it’s definitely a very good thing for the company. We had issues with reimbursement last year. And the majority the first quarter of last year, reimbursement rate was $50,000 below what we were selling the device for. So, we did not have – hardly any actually Medicare surgeries during that time period. What’s important, though, I think is the overall reimbursement rate and how we’re pricing, so that we’re pricing at a point where the institution not only gets reimbursed for our device, but all the related cost of the surgery. And that's where we’re at right now. So, we feel really good about the reimbursement rate. We feel good about our pricing and our pricing strategy, and I’d say all of the feedback from our customers has been the same that they don't view reimbursement or the cost of the device or the procedure as an impediment for them going forward. But we did mention – I think it's worth mentioning again that we think the number one reason that we’re going to experience higher demand in the US in 2017 or higher implant levels is because of our focus on the Centers of Excellence program and the work we’ve done to only address maybe price or the economics of doing a case, but all the work we’ve done to make sure that there is kind of an aggressive, but efficient patient outreach program that the sites are well trained to do the programming, that it doesn't take two days, it’s down to half-day. Starting mid-year, they get reimbursed for that. And then, finally, that there’s a good system in place to ensure all the patients get the necessary rehab and the people who are providing the rehab are getting proper instruction, so that each patient gets equally good chance to have a good outcome and to get the most from their device. So, we think it’s a combination of all of these things that are really giving the centers in the US much more confidence to move forward. As far as what does that translate to, we’re not – we still aren’t giving guidance, although what we’ve said is we expect a strong Q1. We did mention that we have either a scheduled or completed 15 cases in Q1. And I’ll also say that we’re already seeing cases scheduled – quite a few cases scheduled out in Q2 right now. So, we’re comfortable that we’re going to see increased volumes and we think it's going to carry over from Q1 into Q2. And at this point, there’s no reason to believe the full year in the US is not stronger than it's been in the past.

Thank you, guys. Appreciate the reiteration. That’s all that I have.

Sure, thanks.

Thank you for your question. There are no further questions on the line. I will turn it back over to Will McGuire. Thank you for your participation in our call today. As always, we appreciate the support of our shareholders as we pursue our common goal of restoring vision to the blind. Have a great day.

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