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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27598

 

IRIDEX CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

77-0210467

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

1212 Terra Bella Avenue

Mountain View, California

 

94043-1824

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (650) 940-4700

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Class

 

Trading Symbol

 

Name of Exchange on Which Registered

Common Stock, par value $0.01 per share

 

IRIX

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

The number of shares of common stock, $0.01 par value, issued and outstanding as of August 11, 2022 was 15,985,622.

 


 

TABLE OF CONTENTS

 

Items

 

 

Page

 

 

 

 

PART I. FINANCIAL INFORMATION

5

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of July 2, 2022 and January 1, 2022

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 2, 2022 and July 3, 2021

6

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 2, 2022 and July 3, 2021

7

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholder's Equity for the three and six months ended July 2, 2022 and July 3, 2021

8

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended July 2, 2022 and July 3, 2021

9

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

24

 

 

 

 

Item 4.

 

Controls and Procedures

24

 

 

 

 

PART II. OTHER INFORMATION

25

 

 

 

 

Item 1.

 

Legal Proceedings

25

 

 

 

 

Item 1A.

 

Risk Factors

25

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

43

 

 

 

 

Item 4.

 

Mine Safety Disclosures

43

 

 

 

 

Item 5.

 

Other Information

43

 

 

 

 

Item 6.

 

Exhibits

44

 

 

 

 

Signatures

45

 

2


 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain future profitability;
the impact of the COVID-19 pandemic and related responses of business and governments to the pandemic on our operations and personnel, and on commercial activity and demand of our products, business operations, and results of operations;
customer acceptance and purchase of our existing products and new products;
our ability to maintain and expand our customer base;
competition from other products;
the impact of foreign currency exchange rate and interest rate fluctuations on our results and sales;
the pace of change and innovation in the markets in which we participate and the competitive nature of those markets;
our business strategy and our plan to build our business;
our ability to effectively manage our growth;
the success of our strategic partnership with Topcon Corporation;
our costs of manufacturing and reliance on third party manufacturers;
our ability to forecast and meet product demand;
our ability to discover defects in our products and systems;
our international expansion and sales strategy;
our operating results and cash flows;
our beliefs and objectives for future operations;
our relationships with third parties;
our ability to maintain, protect, and enhance our intellectual property rights;
our ability to maintain, protect, and enhance our information technology systems and data;
our ability to maintain our facilities in good working order;
our ability to recover the carrying value of goodwill;
the impact of expensing stock options and other equity awards;
our ability to successfully defend litigation brought against us;
our ability to indemnify our directors and officers;
our ability to repay indebtedness and have indebtedness forgiven;
our ability to successfully expand in our existing markets and into new markets;
sufficiency of cash to meet cash needs for at least the next 12 months;
our ability to comply with laws, policies, and regulations that currently apply or become applicable to our business both in the United States and internationally;

3


 

our ability to attract and retain qualified employees and key personnel, and source suppliers;
our ability to raise additional capital;
the future trading prices of our common stock; and
our ability to pay dividends in the future.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in and should be read in conjunction with the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

 

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

As used in this Quarterly Report on Form 10-Q, the terms “Company,” “IRIDEX,” “we,” “us” and “our” refer to IRIDEX Corporation, and its consolidated subsidiaries.

4


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

IRIDEX Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands except share and per share data)

 

 

 

July 2, 2022

 

 

January 1, 2022 (1)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,966

 

 

$

23,852

 

Accounts receivable, net of allowance for doubtful accounts of
$
264 as of July 2, 2022 and $268 as of January 1, 2022

 

 

6,808

 

 

 

6,610

 

Receivable from related party

 

 

2,429

 

 

 

3,106

 

Inventories

 

 

10,176

 

 

 

7,614

 

Prepaid expenses and other current assets

 

 

2,065

 

 

 

1,071

 

Total current assets

 

 

39,444

 

 

 

42,253

 

Property and equipment, net

 

 

431

 

 

 

428

 

Intangible assets, net

 

 

2,109

 

 

 

2,205

 

Goodwill

 

 

965

 

 

 

965

 

Operating lease right-of-use assets, net

 

 

2,098

 

 

 

2,565

 

Other long-term assets

 

 

599

 

 

 

271

 

Total assets

 

$

45,646

 

 

$

48,687

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,812

 

 

$

2,772

 

Payable to related party

 

 

180

 

 

 

627

 

Accrued compensation

 

 

2,303

 

 

 

3,192

 

Accrued expenses

 

 

1,697

 

 

 

1,575

 

Other current liabilities

 

 

868

 

 

 

1,098

 

Accrued warranty

 

 

131

 

 

 

100

 

Deferred revenue

 

 

2,367

 

 

 

2,355

 

Operating lease liabilities

 

 

994

 

 

 

927

 

Total current liabilities

 

 

12,352

 

 

 

12,646

 

Long-term liabilities:

 

 

 

 

 

 

Accrued warranty

 

 

76

 

 

 

58

 

Deferred revenue

 

 

12,540

 

 

 

10,930

 

Operating lease liabilities

 

 

1,222

 

 

 

1,729

 

Other long-term liabilities

 

 

24

 

 

 

25

 

Total liabilities

 

 

26,214

 

 

 

25,388

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value, 2,000,000 shares authorized, no shares
   issued and outstanding

 

 

 

 

 

 

Common stock, $0.01 par value:

 

 

 

 

 

 

Authorized: 30,000,000 shares;

 

 

 

 

 

 

Issued and outstanding 15,955,536 and 15,876,171 shares
as of July 2, 2022 and January 1, 2022, respectively

 

 

169

 

 

 

168

 

Additional paid-in capital

 

 

85,935

 

 

 

85,255

 

Accumulated other comprehensive income

 

 

129

 

 

 

45

 

Accumulated deficit

 

 

(66,801

)

 

 

(62,169

)

Total stockholders’ equity

 

 

19,432

 

 

 

23,299

 

Total liabilities and stockholders’ equity

 

$

45,646

 

 

$

48,687

 

 

(1)
Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 1, 2022.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

IRIDEX Corporation

Condensed Consolidated Statements of Operations

(Unaudited, in thousands except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 2, 2022

 

 

July 3, 2021

 

 

July 2, 2022

 

 

July 3, 2021

 

Total revenues

 

$

13,755

 

 

$

13,426

 

 

$

27,142

 

 

$

25,385

 

Cost of revenues

 

 

7,488

 

 

 

7,318

 

 

 

14,898

 

 

 

14,338

 

Gross profit

 

 

6,267

 

 

 

6,108

 

 

 

12,244

 

 

 

11,047

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,922

 

 

 

1,672

 

 

 

4,038

 

 

 

2,837

 

Sales and marketing

 

 

4,607

 

 

 

3,646

 

 

 

8,907

 

 

 

6,628

 

General and administrative

 

 

1,898

 

 

 

1,928

 

 

 

3,736

 

 

 

4,561

 

Total operating expenses

 

 

8,427

 

 

 

7,246

 

 

 

16,681

 

 

 

14,026

 

Loss from operations

 

 

(2,160

)

 

 

(1,138

)

 

 

(4,437

)

 

 

(2,979

)

Other (expense) income, net

 

 

(64

)

 

 

2,539

 

 

 

(158

)

 

 

2,378

 

(Loss) income from operations before provision for income taxes

 

 

(2,224

)

 

 

1,401

 

 

 

(4,595

)

 

 

(601

)

Provision for income taxes

 

 

17

 

 

 

8

 

 

 

37

 

 

 

16

 

Net (loss) income

 

$

(2,241

)

 

$

1,393

 

 

$

(4,632

)

 

$

(617

)

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.14

)

 

$

0.09

 

 

$

(0.29

)

 

$

(0.04

)

Diluted

 

$

(0.14

)

 

$

0.09

 

 

$

(0.29

)

 

$

(0.04

)

Weighted average shares used in computing net (loss) income
   per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

15,894

 

 

 

15,647

 

 

 

15,888

 

 

 

14,996

 

Diluted

 

 

15,894

 

 

 

16,307

 

 

 

15,888

 

 

 

14,996

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

IRIDEX Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 2, 2022

 

 

July 3, 2021

 

 

July 2, 2022

 

 

July 3, 2021

 

Net (loss) income

 

$

(2,241

)

 

$

1,393

 

 

$

(4,632

)

 

$

(617

)

Foreign currency translation adjustments

 

 

56

 

 

 

(10

)

 

 

84

 

 

 

28

 

Comprehensive (loss) income

 

$

(2,185

)

 

$

1,383

 

 

$

(4,548

)

 

$

(589

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

IRIDEX Corporation

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited, in thousands, except share data)

 

For the three months ended July 2, 2022

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balances, April 2, 2022

 

 

15,885,307

 

 

$

168

 

 

$

85,645

 

 

$

73

 

 

$

(64,560

)

 

$

21,326

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

344

 

 

 

 

 

 

 

 

 

344

 

Release of restricted stock, net of taxes paid

 

 

70,229

 

 

 

1

 

 

 

(54

)

 

 

 

 

 

 

 

 

(53

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

56

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,241

)

 

 

(2,241

)

Balances, July 2, 2022

 

 

15,955,536

 

 

$

169

 

 

$

85,935

 

 

$

129

 

 

$

(66,801

)

 

$

19,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended July 2, 2022

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balances, January 1, 2022

 

 

15,876,171

 

 

$

168

 

 

$

85,255

 

 

$

45

 

 

$

(62,169

)

 

$

23,299

 

Issuance of common stock under stock option plan

 

 

6,063

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

728

 

 

 

 

 

 

 

 

 

728

 

Release of restricted stock, net of taxes paid

 

 

73,302

 

 

 

1

 

 

 

(62

)

 

 

 

 

 

 

 

 

(61

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

84

 

 

 

 

 

 

84

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,632

)

 

 

(4,632

)

Balances, July 2, 2022

 

 

15,955,536

 

 

$

169

 

 

$

85,935

 

 

$

129

 

 

$

(66,801

)

 

$

19,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended July 3, 2021

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balances, April 3, 2021

 

 

15,522,809

 

 

$

165

 

 

$

84,419

 

 

$

19

 

 

$

(58,954

)

 

$

25,649

 

Issuance of common stock under stock option plan

 

 

20,222

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

280

 

 

 

 

 

 

 

 

 

280

 

Release of restricted stock, net of taxes paid

 

 

240,673

 

 

 

2

 

 

 

(514

)

 

 

 

 

 

 

 

 

(512

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

(10

)

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,393

 

 

 

1,393

 

Balances, July 3, 2021

 

 

15,783,704

 

 

$

167

 

 

$

84,265

 

 

$

9

 

 

$

(57,561

)

 

$

26,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended July 3, 2021

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balances, January 2, 2021

 

 

13,899,683

 

 

$

148

 

 

$

74,181

 

 

$

(19

)

 

$

(56,944

)

 

$

17,366

 

Issuance of common stock, net of issuance costs

 

 

1,618,122

 

 

 

16

 

 

 

9,862

 

 

 

 

 

 

 

 

 

9,878

 

Issuance of common stock under stock option plan

 

 

23,304

 

 

 

1

 

 

 

96

 

 

 

 

 

 

 

 

 

97

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

646

 

 

 

 

 

 

 

 

 

646

 

Release of restricted stock, net of taxes paid

 

 

242,595

 

 

 

2

 

 

 

(520

)

 

 

 

 

 

 

 

 

(518

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

 

 

 

28

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(617

)

 

 

(617

)

Balances, July 3, 2021

 

 

15,783,704

 

 

$

167

 

 

$