0000950170-23-021294 | 10-Q | XBRL Viewer

Business Segments (Tables)

3 Months Ended

Apr. 01, 2023

Schedule of Revenue Information by Product

Revenue information shown by product group is as follows (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
Cyclo G6	$	3,669	$	3,540
Retina		7,214		7,301
Other(1)		2,823		2,546
Total revenues	$	13,706	$	13,387

(1) Includes service contract revenues of $383 thousand and $362 thousand recognized during the three months ended April 1, 2023 and April 2, 2022, respectively. Includes $364 thousand and $277 thousand recognized revenue related to the exclusive

distribution rights during the three months ended April 1, 2023 and April 2, 2022, respectively. Other also includes revenues from paid service, royalty, freight and legacy G probes.

Revenue Information by Geographic Region

Revenue information shown by geographic region, based on the sales destination, is as follows (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
United States	$	6,774	$	6,543
Europe, Middle East and Africa		4,177		3,431
Asia/Pacific Rim		2,143		2,853
Rest of Americas		612		560
Total revenues	$	13,706	$	13,387

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Statement of Comprehensive Income [Abstract]
Net loss	$ (2,090)	$ (2,391)
Foreign currency translation adjustments	(11)	28
Comprehensive loss	$ (2,101)	$ (2,363)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Stockholders' Equity and Stock-Based Compensation - Summary of Stock Options (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 01, 2023 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract]
Outstanding, Number of Shares, Beginning Balance \| shares	2,232,967
Number of Shares, Options Granted \| shares	17,400
Number of Shares, Options Exercised \| shares	(17,499)
Number of Shares, Options Cancelled or forfeited \| shares	(84,854)
Outstanding, Number of Shares, Ending Balance \| shares	2,148,014
Outstanding, Weighted Average Exercise Price Per Share, Beginning Balance \| $ / shares	$ 4.27
Weighted Average Exercise Price Per Share, Options Granted \| $ / shares	2.28
Weighted Average Exercise Price Per Share, Options Exercised \| $ / shares	2.16
Weighted Average Exercise Price Per Share, Options Cancelled or forfeited \| $ / shares	4.06
Outstanding, Weighted Average Exercise Price Per Share, Ending Balance \| $ / shares	$ 4.28
Aggregate Intrinsic Value, Ending Balance \| $	$ 1

Accounts Receivable and Allowance for Credit Losses (Tables)

3 Months Ended

Apr. 01, 2023

Allowance for Credit Loss [Abstract]

Summary of Activity in Allowance for Credit Losses for Accounts Receivable

The following table presents the activity in the allowance for credit losses for accounts receivable by pool type for three months ended April 1, 2023 (in thousands):


	Domestic			International			Total
Balance, beginning of period	$	(235	)	$	(155	)	$	(390	)
Impact of adoption of ASU 2016-13		141			103			244
Balance, end of period	$	(94	)	$	(52	)	$	(146	)

Inventories (Tables)

3 Months Ended

Apr. 01, 2023

Inventory Disclosure [Abstract]

Components of Inventories

The components of the Company’s inventories as of April 1, 2023 and December 31, 2022 are as follows:


	April 1, 2023		December 31, 2022
Raw materials	$	6,481	$	5,820
Work in process		397		320
Finished goods		4,363		4,468
Total inventories	$	11,241	$	10,608

Summary of Significant Accounting Policies - Reconciliation of Changes in Deferred Revenue (Details) - USD ($)
$ in Thousands

3 Months Ended

Apr. 01, 2023

Apr. 02, 2022

Dec. 31, 2022

^[1]

Reconciliation of the changes in the Company's deferred revenue balance

Balance, beginning of period

$ 14,153

$ 13,285

Additions to deferral

368

2,380

Revenue recognized

(785)

(778)

Balance, end of period

13,736

14,887

Non-current portion of deferred revenue

11,312

12,531

$ 11,742

Current portion of deferred revenue

$ 2,424

$ 2,356

$ 2,411

[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 December 31, 2022.

Inventories - Components of Inventories (Details) - USD ($)
$ in Thousands

Apr. 01, 2023

Dec. 31, 2022

Inventory Disclosure [Abstract]

Raw materials

$ 6,481

$ 5,820

Work in process

397

320

Finished goods

4,363

4,468

Total inventories

$ 11,241

$ 10,608

^[1]

[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 December 31, 2022.

Related Party - Topcon - Additional Information (Details) - USD ($)
$ in Thousands

3 Months Ended

Apr. 01, 2023

Apr. 02, 2022

Dec. 31, 2022

Total revenues

$ 13,706

$ 13,387

Receivable from related party

3,828

$ 3,539

^[1]

Payable to related party

$ 123

^[1]

Topcon [Member]

Ownership percentage

10.10%

Topcon America Corporation [Member]

Total revenues

$ 4,300

4,000

Purchases from related party

100

Receivable from related party

3,800

3,500

Payable to related party

100

$ 15

Distribution Rights [Member]

Revenue Recognized

400

300

Distribution Rights [Member] | Topcon America Corporation [Member]

Revenue Recognized

$ 400

$ 300

[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 December 31, 2022.

Leases and Commitments and Contingencies (Tables)

3 Months Ended

Apr. 01, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Maturities of Operating Lease Liabilities

The following represents maturities of operating lease liabilities as of April 1, 2023 (in thousands):


Fiscal Year	Operating Lease Payments
Remainder of 2023 (nine months)	$	825
2024		723
2025		12
2026		10
Total lease payments		1,570
Less: Imputed interest		(52	)
Total lease liabilities	$	1,518

Stockholders' Equity and Stock-Based Compensation - Summary of Stock Options Outstanding, Vested, Expected to Vest and Exercisable (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 01, 2023	Dec. 31, 2022
Stock options outstanding, exercisable and expected to vest
Options outstanding, Number of Shares	2,148,014	2,232,967
Options vested and expected to vest, Number of Shares	2,086,540
Options exercisable, Number of Shares	976,337
Options outstanding, Weighted Average Exercise Price	$ 4.28	$ 4.27
Options vested and expected to vest, Weighted Average Exercise Price	4.30
Options exercisable, Weighted Average Exercise Price	$ 4.87
Options outstanding, Weighted Average Remaining Contractual Life (Years)	4 years 11 months 15 days
Options vested and expected to vest, Weighted Average Remaining Contractual Life (Years)	4 years 11 months 1 day
Options exercisable, Weighted Average Remaining Contractual Life (Years)	3 years 9 months 3 days
Options outstanding, Aggregate Intrinsic Value	$ 1
Options vested and expected to vest, Aggregate Intrinsic Value	1
Options exercisable, Aggregate Intrinsic Value	$ 1

Summary of Significant Accounting Policies - Additional Information (Details)
$ in Thousands

3 Months Ended

12 Months Ended

Apr. 01, 2023

USD ($)

Customer

Apr. 02, 2022

USD ($)

Customer

Dec. 31, 2022

USD ($)

Customer

Jan. 01, 2022

Jan. 01, 2023

USD ($)

Oct. 01, 2022

Disclosure Summary Of Significant Accounting Policies [Line Items]

Service contract warranty period

1 year

Service contract, period to determine nature of sale

60 days

Arrangement fee

$ 200

Fair value of distribution right

14,800

Amortization cost

$ 0

Impairments expenses

Deferred revenue recognized

500

700

Non-current portion of deferred revenue pertains to exclusivity fee deferred revenue

10,800

Current portion of deferred revenue pertains to exclusivity fee deferred revenue

$ 1,500

Products warranty period

2 years

Capitalized implementation costs amortization period

5 years

Amortization expense

$ 0

Accumulated deficit

(71,562)

$ (69,716)

^[1]

Adoption of ASU 2016-13

Disclosure Summary Of Significant Accounting Policies [Line Items]

Accumulated deficit

$ 200

Prepaid Expenses and Other Current Assets and Other Long Term Assets

Disclosure Summary Of Significant Accounting Policies [Line Items]

Deferred costs incurred

743

Capitalized implementation costs

1,000

Revenue, Total

Disclosure Summary Of Significant Accounting Policies [Line Items]

Amortization cost

Impairments expenses

$ 0

Revenue, Total | Minimum

Disclosure Summary Of Significant Accounting Policies [Line Items]

Amortization period

2 years

Revenue, Total | Maximum [Member]

Disclosure Summary Of Significant Accounting Policies [Line Items]

Amortization period

3 years

Revenue, Total | Prepaid Expenses and Other Current Assets and Other Long Term Assets

Disclosure Summary Of Significant Accounting Policies [Line Items]

Deferred costs incurred

$ 149

Revenue, Total | Topcon [Member] | Customer Concentration Risk

Disclosure Summary Of Significant Accounting Policies [Line Items]

Number of customers | Customer

Accounts Receivable | Topcon [Member] | Customer Concentration Risk

Disclosure Summary Of Significant Accounting Policies [Line Items]

Number of customers | Customer

Percentage of accounts receivable accounted

35.00%

Accounts Receivable | Topcon [Member] | Customer Concentration Risk | One Customer

Disclosure Summary Of Significant Accounting Policies [Line Items]

Percentage of accounts receivable accounted

37.00%

Accounts Receivable | Topcon [Member] | Customer Concentration Risk | One Customer | Minimum

Disclosure Summary Of Significant Accounting Policies [Line Items]

Customer and supplier accounted percentage of total revenues, accounts receivable and purchases

10.00%

Accounts Receivable | Topcon [Member] | Credit Concentration Risk

Disclosure Summary Of Significant Accounting Policies [Line Items]

Number of customers | Customer

Revenue, Total | Customer Concentration Risk | No Customer | Minimum

Disclosure Summary Of Significant Accounting Policies [Line Items]

Customer and supplier accounted percentage of total revenues, accounts receivable and purchases

10.00%

Revenue, Total | Topcon [Member] | Customer Concentration Risk

Disclosure Summary Of Significant Accounting Policies [Line Items]

Percentage of accounts receivable accounted

32.00%

30.00%

Revenue, Total | Topcon [Member] | Customer Concentration Risk | One Customer | Minimum

Disclosure Summary Of Significant Accounting Policies [Line Items]

Customer and supplier accounted percentage of total revenues, accounts receivable and purchases

10.00%

Distribution Rights [Member]

Disclosure Summary Of Significant Accounting Policies [Line Items]

Revenue Recognized

$ 400

$ 300

Royalty Agreements

Disclosure Summary Of Significant Accounting Policies [Line Items]

Number of customers | Customer

[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 December 31, 2022.

Stockholders' Equity and Stock-Based Compensation - Stock-Based Compensation Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 473	$ 384
Cost of revenues
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	61	60
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	52	29
Sales and marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	121	122
General and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 239	$ 173

Goodwill and Intangible Assets - Estimated Future Amortization Expense (Details) $ in Thousands	Apr. 01, 2023 USD ($)
Estimated future amortization expense
Remainder of 2023 (nine months)	$ 252
2024	335
2025	323
2026	319
2027	319
Thereafter	346
Net Carrying Amount	$ 1,894

Business Segments

3 Months Ended

Apr. 01, 2023

Segment Reporting [Abstract]

Business Segments

12. Business Segments

The Company operates in one segment, ophthalmology. The Company develops, manufactures and markets medical devices. Our revenues arise from the sale of consoles, delivery devices, consumables, service, and support activities.

Revenue information shown by product group is as follows (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
Cyclo G6	$	3,669	$	3,540
Retina		7,214		7,301
Other(1)		2,823		2,546
Total revenues	$	13,706	$	13,387

distribution rights during the three months ended April 1, 2023 and April 2, 2022, respectively. Other also includes revenues from paid service, royalty, freight and legacy G probes.

Revenue information shown by geographic region, based on the sales destination, is as follows (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
United States	$	6,774	$	6,543
Europe, Middle East and Africa		4,177		3,431
Asia/Pacific Rim		2,143		2,853
Rest of Americas		612		560
Total revenues	$	13,706	$	13,387

Revenues are attributed to countries based on the location of end customers.

Other than the United States, the Netherlands accounted for at least 10% of the Company’s revenues during the three months ended April 1, 2023, representing 16%. Other than the United States, Japan and the Netherlands accounted for at least 10% of the Company’s revenues during the three months ended April 2, 2022, representing 12% and 10%, respectively. The United States accounted for 49.4% and 48.9% of revenues for the three months ended April 1, 2023 and April 2, 2022, respectively.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599

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+ Details

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands

Apr. 01, 2023

Dec. 31, 2022

Current assets:

Cash and cash equivalents

$ 11,048

$ 13,922

^[1]

Accounts receivable, net of allowance for credit losses of $146 as of April 1, 2023 and $0 as of December 31, 2022

^[2]

6,931

6,229

^[1]

Receivable from related party

3,828

3,539

^[1]

Inventories

11,241

10,608

^[1]

Prepaid expenses and other current assets

1,650

1,468

^[1]

Total current assets

34,698

35,766

^[1]

Property and equipment, net

449

462

^[1]

Intangible assets, net

1,894

1,977

^[1]

Goodwill

965

^[1]

Operating lease right-of-use assets, net

1,423

1,665

^[1]

Other long-term assets

1,551

1,455

^[1]

Total assets

40,980

42,290

^[1]

Current liabilities:

Accounts payable

3,546

3,858

^[1]

Payable to related party

123

^[1]

Accrued compensation

2,813

2,448

^[1]

Accrued expenses

2,132

1,548

^[1]

Other current liabilities

882

968

^[1]

Accrued warranty

196

168

^[1]

Deferred revenue

2,424

2,411

^[1]

Operating lease liabilities

1,046

1,037

^[1]

Total current liabilities

13,162

12,453

^[1]

Long-term liabilities:

Accrued warranty

124

106

^[1]

Deferred revenue

11,312

11,742

^[1]

Operating lease liabilities

472

732

^[1]

Other long-term liabilities

^[1]

Total liabilities

25,096

25,059

^[1]

Commitments and contingencies (Note 8)

Stockholders’ equity:

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

^[1]

Common stock, $0.01 par value: Authorized: 30,000,000 shares; Issued and outstanding 16,007,161 and 15,989,662 shares as of April 1, 2023 and December 31, 2022, respectively

169

^[1]

Additional paid-in capital

87,312

86,802

^[1]

Accumulated other comprehensive loss

(35)

(24)

^[1]

Accumulated deficit

(71,562)

(69,716)

^[1]

Total stockholders’ equity

15,884

17,231

^[1]

Total liabilities and stockholders’ equity

$ 40,980

$ 42,290

^[1]

[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 December 31, 2022.
[2]	Prior to our adoption of Accounting Standard Update 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” on January 1, 2023, the allowance for credit losses related to accounts receivable was not applicable and is therefore presented as $0 at December 31, 2022. See Note 3 for additional details.

Computation of Basic and Diluted Net Loss Per Share (Tables)

3 Months Ended

Apr. 01, 2023

Earnings Per Share [Abstract]

Reconciliation of Numerator and Denominator of Basic and Diluted Net Loss Per Common Share

A reconciliation of the numerator and denominator of basic and diluted net loss per common share is provided as follows (in thousands except per share data):


	Three Months Ended
	April 1, 2023			April 2, 2022
Numerator:
Net loss	$	(2,090	)	$	(2,391	)
Denominator:
Weighted average shares of common stock (basic)		16,001			15,881
Weighted average shares of common stock (diluted)		16,001			15,881
Per share data:
Basic net loss per share	$	(0.13	)	$	(0.15	)
Diluted net loss per share	$	(0.13	)	$	(0.15	)

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands

Total

Cumulative Effect Period of Adoption Adjustment

Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit

Cumulative Effect Period of Adoption Adjustment

Beginning Balance, value at Jan. 01, 2022

$ 23,299

$ 168

$ 85,255

$ 45

$ (62,169)

Beginning Balance, shares at Jan. 01, 2022

15,876,171

Issuance of common stock under stock option plan

$ 0

Issuance of common stock under stock option plan, shares

6,063

Stock-based compensation expense

384

Release of restricted stock, net of taxes paid

(8)

$ 0

(8)

Release of restricted stock, net of taxes paid, shares

3,073

Other comprehensive income (loss)

Net loss

(2,391)

Ending Balance, value at Apr. 02, 2022

21,326

$ 168

85,645

(64,560)

Ending Balance, shares at Apr. 02, 2022

15,885,307

Beginning Balance, value at Dec. 31, 2022

$ 17,231

^[1]

$ 169

86,802

(24)

(69,716)

Beginning Balance, shares at Dec. 31, 2022

15,989,662

Issuance of common stock under stock option plan

$ 37

$ 0

Issuance of common stock under stock option plan, shares

17,499

Stock-based compensation expense

$ 473

473

Other comprehensive income (loss)

(11)

Net loss

(2,090)

Ending Balance, value at Apr. 01, 2023

$ 15,884

$ 169

$ 87,312

$ (35)

$ (71,562)

Ending Balance, value (Adoption of ASU 2016-13) at Apr. 01, 2023

$ 244

Ending Balance, shares at Apr. 01, 2023

16,007,161

[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 December 31, 2022.

Accounts Receivable and Allowance for Credit Losses

3 Months Ended

Apr. 01, 2023

Allowance for Credit Loss [Abstract]

Accounts Receivable and Allowance for Credit Losses

3. Accounts Receivable and Allowance for Credit Losses

Trade Receivables

The Company has trade receivables with various individual customers such as private businesses, hospitals, universities, government and non-profit entities, and distributors. The Company has determined that geography is the similar risk characteristic to pool our trade receivables balances, and accordingly, groups such balances into either the domestic pool or the international pool. The domestic pool is primarily comprised of individual customers, and the international pool is primarily comprised of distributors.

The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in trade receivables as of the balance sheet date. We assess the adequacy of the allowance for credit losses on a quarterly basis based on historical information and current economic conditions and forecasts. Subsequent changes in the allowance for credit losses are recorded in current earnings and reversal of previous losses are permitted under the current guidance.

While we believe we have exercised prudent judgment and applied reasonable assumptions, there can be no assurance that in the future, changes in economic conditions or other factors would not cause changes in the financial health of our customers. If the financial health of our customers deteriorates, the timing and level of payments received could be impacted and therefore, could result in a change to our estimated losses.

The following table presents the activity in the allowance for credit losses for accounts receivable by pool type for three months ended April 1, 2023 (in thousands):


	Domestic			International			Total
Balance, beginning of period	$	(235	)	$	(155	)	$	(390	)
Impact of adoption of ASU 2016-13		141			103			244
Balance, end of period	$	(94	)	$	(52	)	$	(146	)

Fair Value Measurements - Financial Assets Measured and Recognized at Fair Value on a Recurring Basis (Details) - Fair Value Measurements Recurring - Money Market Funds - USD ($) $ in Thousands	Apr. 01, 2023	Dec. 31, 2022
Assets:
Assets, Fair Value Measurements	$ 8,497	$ 12,496
Level 1
Assets:
Assets, Fair Value Measurements	8,497	12,496
Level 2
Assets:
Assets, Fair Value Measurements	0	0
Level 3
Assets:
Assets, Fair Value Measurements	$ 0	$ 0

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Apr. 01, 2023	May 04, 2023
Cover [Abstract]
Entity Registrant Name	IRIDEX CORP
Entity Central Index Key	0001006045
Document Type	10-Q
Document Period End Date	Apr. 01, 2023
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Trading Symbol	IRIX
Entity Filer Category	Non-accelerated Filer
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity File Number	0-27598
Entity Tax Identification Number	77-0210467
Entity Address, Address Line One	1212 Terra Bella Avenue
Entity Address, City or Town	Mountain View
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94043-1824
City Area Code	650
Local Phone Number	940-4700
Entity Common Stock, Shares Outstanding		16,007,161
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, par value $0.01 per share
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022	Dec. 31, 2022
Income Taxes [Line Items]
Provision for income taxes	$ 12,000	$ 20,000
Unrecognized tax benefits			$ 1,400,000
Unrecognized tax benefits recognition impact on income tax rate			$ 0
Federal
Income Taxes [Line Items]
Income tax returns examination period	3 years
Minimum
Income Taxes [Line Items]
Income tax returns examination period	3 years
Maximum \| State Jurisdictions
Income Taxes [Line Items]
Income tax returns examination period	5 years

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Stockholders' Equity and Stock-Based Compensation

3 Months Ended

Apr. 01, 2023

Share-Based Payment Arrangement [Abstract]

Stockholder' Equity and Stock Based Compensation

9. Stockholders’ Equity and Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock-based compensation granted to employees and directors, including stock option awards, restricted stock and restricted stock units (“RSUs”) in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee’s service period. The Company recognizes compensation expense on a ratable basis over the requisite service period of the award.

The Company values options using the Black-Scholes option pricing model. Time-based RSUs are valued at the grant date fair value of the underlying common shares. Performance-based RSUs without market conditions are valued at grant date fair value of the underlying common shares. Performance-based RSUs granted with market conditions and performance-based stock options with market conditions are valued using the Monte Carlo simulation model. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. The Monte Carlo simulation model incorporates assumptions for the holding period, risk-free interest rate, stock price volatility and dividend yield.

2008 Equity Incentive Plan.

The terms of awards granted during the three months ended April 1, 2023 were consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three months ended April 1, 2023 and April 2, 2022 (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
Cost of revenues	$	61	$	60
Research and development		52		29
Sales and marketing		121		122
General and administrative		239		173
	$	473	$	384

Stock-based compensation expense capitalized to inventory was immaterial for the three months ended April 1, 2023 and April 2, 2022.

As of April 1, 2023, there was $1.9 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements. The cost is expected to be recognized over a weighted average period of 1.57 years.

Summary of Stock Options

The following table summarizes stock options information during the three months ended April 1, 2023:


	Number of Shares			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2022		2,232,967		$	4.27
Granted		17,400			2.28
Exercised		(17,499	)		2.16
Canceled or forfeited		(84,854	)		4.06
Outstanding as of April 1, 2023		2,148,014		$	4.28	$	1

The weighted average grant date fair value of the options granted was $1.39 and $2.85 per share for the three months ended April 1, 2023 and April 2, 2022, respectively.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock-based awards (options) with the following weighted average assumptions:


	Three Months Ended
	April 1, 2023			April 2, 2022
Average risk free interest rate		3.83	%		2.43	%
Expected life (in years)	4.41			4.5
Dividend yield		—	%		—	%
Average volatility		76	%		76	%

Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of the Company’s stock, look-back volatilities and Company-specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future.

Information regarding stock options outstanding, vested, expected to vest, and exercisable as of April 1, 2023 is summarized below:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (thousands)
Options outstanding		2,148,014	$	4.28		4.96	$	1
Options vested and expected to vest		2,086,540	$	4.30		4.92	$	1
Options exercisable		976,337	$	4.87		3.76	$	1

The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of April 1, 2023, that would have been received by option holders had all option holders exercised their stock options as of that date. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the three months ended April 1, 2023 and April 2, 2022 was approximately $4 thousand and $19 thousand, respectively.

Summary of RSUs

Information regarding RSUs activity for the three months ended April 1, 2023 is summarized below:


	Number of Shares
Outstanding as of December 31, 2022		473,029
RSUs forfeited		(30,960	)
Outstanding as of April 1, 2023		442,069

Income Taxes

3 Months Ended

Apr. 01, 2023

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

Provision for Income Tax

The Company calculates its interim tax provision in accordance with the provisions of ASC Topic 740-270, Income Taxes; Interim Reporting. For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes. The Company also computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods in which they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur. The Company recorded a provision for income tax of $12 thousand and $20 thousand for the three months ended April 1, 2023 and April 2, 2022, respectively.

Deferred Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. As of the first quarter of fiscal year 2023, based on the Company’s recent history of losses and its forecasted losses, management believes on the more likely than not basis that a full valuation allowance is required. Accordingly, the Company continues to provide a full valuation allowance on its federal and states deferred tax assets.

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740. As of December 31, 2022, the Company had $1.4 million of unrecognized tax benefits, none of the unrecognized tax benefits would result in a change in the Company’s effective tax rate if recognized in future years.

The Company is not aware of any other uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in this estimate during the fiscal year.

The Company is subject to United States federal income tax as well as to income taxes in state jurisdictions. The Company’s federal and state income tax returns are open to examination by tax authorities for three years and three-to-five years, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Apr. 01, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 146	$ 0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	16,007,161	15,989,662
Common stock, shares outstanding	16,007,161	15,989,662

Inventories

3 Months Ended

Apr. 01, 2023

Inventory Disclosure [Abstract]

Inventories

5. Inventories

The components of the Company’s inventories as of April 1, 2023 and December 31, 2022 are as follows:


	April 1, 2023		December 31, 2022
Raw materials	$	6,481	$	5,820
Work in process		397		320
Finished goods		4,363		4,468
Total inventories	$	11,241	$	10,608

Leases and Commitments and Contingencies

3 Months Ended

Apr. 01, 2023

Commitments and Contingencies Disclosure [Abstract]

Leases and Commitments and Contingencies

8. Leases and Commitments and Contingencies

Operating Leases

Our operating leases consist of facility and office equipment leases. Operating lease expense was $0.3 million for both the three months ended April 1, 2023 and April 2, 2022. The weighted average discount rate used in calculating the present value of lease payments was 4.9%. As of April 1, 2023, the weighted average remaining lease term for our operating leases was 1.5 years.

The following represents maturities of operating lease liabilities as of April 1, 2023 (in thousands):


Fiscal Year	Operating Lease Payments
Remainder of 2023 (nine months)	$	825
2024		723
2025		12
2026		10
Total lease payments		1,570
Less: Imputed interest		(52	)
Total lease liabilities	$	1,518

Purchase Commitments

Our purchase commitments consist primarily of non-cancellable purchase commitments with vendors to manufacture certain components and ophthalmic instrumentation. As of April 1, 2023, our future minimum payments through fiscal year 2024 for our purchase commitments were approximately $18.5 million, with $16.8 million committed for the next 12 months.

Indemnities

We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties (generally our business partners or customers) in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to our products. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments that we could be required to make under these agreements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal.

We have entered into indemnification agreements with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature. These agreements also require us to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified and to make good faith determination whether or not it is practicable for us to obtain directors and officers insurance. We currently have directors and officers liability insurance.

Legal Proceedings

From time to time, we may be involved in legal proceedings arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Stockholders' Equity and Stock-Based Compensation - Weighted Average Assumptions for Fair Value Stock-Based Awards (Options) (Details)	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Weighted average assumptions for fair value estimate of stock-based awards (options)
Average risk free interest rate	3.83%	2.43%
Expected life (in years)	4 years 4 months 28 days	4 years 6 months
Dividend yield	0.00%	0.00%
Average volatility	76.00%	76.00%

Business Segments - Additional Information (Details) - Segment	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Segment Reporting Information [Line Items]
Number of operating segments	1
JAPAN \| Geographic Concentration Risk \| Revenue, Total
Segment Reporting Information [Line Items]
Percentage of accounts receivable accounted		12.00%
United States \| Geographic Concentration Risk \| Revenue, Total
Segment Reporting Information [Line Items]
Customer and supplier accounted percentage of total revenues, accounts receivable and purchases	49.40%	48.90%
NETHERLANDS \| Geographic Concentration Risk \| Revenue, Total
Segment Reporting Information [Line Items]
Percentage of accounts receivable accounted	16.00%	10.00%
NETHERLANDS \| Geographic Concentration Risk \| Revenue, Total \| Minimum
Segment Reporting Information [Line Items]
Customer and supplier accounted percentage of total revenues, accounts receivable and purchases	10.00%	10.00%

Goodwill and Intangible Assets - Summary of Components of Gross and Net Intangible Asset (Details) - USD ($)
$ in Thousands

3 Months Ended

Apr. 01, 2023

Dec. 31, 2022

Schedule of Intangible Assets

Gross Carrying Amount

$ 3,140

Accumulated Amortization

1,246

1,163

Net Carrying Amount

1,894

1,977

^[1]

Customer relationships

Schedule of Intangible Assets

Gross Carrying Amount

340

Accumulated Amortization

238

230

Net Carrying Amount

$ 102

110

Remaining Amortization Life

4 years

Developed technology

Schedule of Intangible Assets

Gross Carrying Amount

$ 1,900

1,900

Accumulated Amortization

339

272

Net Carrying Amount

$ 1,561

1,628

Remaining Amortization Life

5 years 10 months 9 days

Trade names

Schedule of Intangible Assets

Gross Carrying Amount

$ 300

300

Accumulated Amortization

Net Carrying Amount

$ 231

239

Remaining Amortization Life

6 years 11 months 1 day

Patents [Member]

Schedule of Intangible Assets

Gross Carrying Amount

$ 600

600

Accumulated Amortization

600

Net Carrying Amount

$ 0

[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 December 31, 2022.

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Operating activities:
Net loss	$ (2,090)	$ (2,391)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	144	119
Amortization of operating lease right-of-use assets	242	233
Stock-based compensation	473	384
Changes in operating assets and liabilities:
Accounts receivable	(453)	(434)
Receivable from related party	(289)	(303)
Inventories	(629)	(1,469)
Prepaid expenses and other current assets	(182)	(695)
Other long-term assets	(96)	(8)
Accounts payable	(313)	683
Payable to related party	108	272
Accrued compensation	366	(867)
Accrued expenses	584	71
Accrued warranty	46	35
Deferred revenue	(417)	1,602
Operating lease liabilities	(251)	(239)
Other liabilities	(86)	(246)
Net cash used in operating activities	(2,843)	(3,253)
Investing activities:
Acquisition of property and equipment	(43)	(26)
Net cash used in investing activities	(43)	(26)
Financing activities:
Proceeds from stock option exercises	37	14
Taxes paid related to net share settlements of equity awards	0	(8)
Net cash provided by financing activities	37	6
Effect of foreign exchange rate changes	(25)	42
Net decrease in cash and cash equivalents	(2,874)	(3,231)
Cash and cash equivalents, beginning of period	13,922	23,852
Cash and cash equivalents, end of period	11,048	20,621
Supplemental disclosure of non-cash activities:
Transfer of inventory to (from) property and equipment	$ 4	$ (20)

Leases and Commitments and Contingencies - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Thousands	Apr. 01, 2023 USD ($)
Lessee, Operating Lease, Liability, to be Paid [Abstract]
Remainder of 2023 (nine months)	$ 825
2024	723
2025	12
2026	10
Total lease payments	1,570
Less: Imputed interest	(52)
Total lease liabilities	$ 1,518

Fair Value Measurements

3 Months Ended

Apr. 01, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

7. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

•

Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

•

Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

The carrying amounts of the Company’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as of April 1, 2023 and December 31, 2022, approximate fair value because of the short maturity of these instruments.

As of April 1, 2023 and December 31, 2022, financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):


	As of April 1, 2023								As of December 31, 2022
	Fair Value Measurements								Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	8,497	$	—	$	—	$	8,497	$	12,496	$	—	$	—	$	12,496

The Company’s Level 1 financial assets are money market funds whose fair values are based on quoted market prices. The Company does not have any Level 2 and Level 3 financial assets or liabilities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Business Segments - Schedule of Revenue Information by Product (Details) - USD ($)
$ in Thousands

3 Months Ended

Apr. 01, 2023

Apr. 02, 2022

Entity Wide Information Revenue From External Customer [Line Items]

Total revenues

$ 13,706

$ 13,387

Cyclo G6

Entity Wide Information Revenue From External Customer [Line Items]

Total revenues

3,669

3,540

Retina

Entity Wide Information Revenue From External Customer [Line Items]

Total revenues

7,214

7,301

Other

Entity Wide Information Revenue From External Customer [Line Items]

Total revenues

^[1]

$ 2,823

$ 2,546

[1]

distribution rights during the three months ended April 1, 2023 and April 2, 2022, respectively. Other also includes revenues from paid service, royalty, freight and legacy G probes.

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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+ Details

Stockholders' Equity and Stock-Based Compensation (Tables)

3 Months Ended

Apr. 01, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation Expenses

The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three months ended April 1, 2023 and April 2, 2022 (in thousands):


	Three Months Ended
	April 1, 2023		April 2, 2022
Cost of revenues	$	61	$	60
Research and development		52		29
Sales and marketing		121		122
General and administrative		239		173
	$	473	$	384

Summary of Stock Options

The following table summarizes stock options information during the three months ended April 1, 2023:


	Number of Shares			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2022		2,232,967		$	4.27
Granted		17,400			2.28
Exercised		(17,499	)		2.16
Canceled or forfeited		(84,854	)		4.06
Outstanding as of April 1, 2023		2,148,014		$	4.28	$	1

Weighted Average Assumptions for Fair Value Estimate of Stock-Based Awards (Options)

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock-based awards (options) with the following weighted average assumptions:


	Three Months Ended
	April 1, 2023			April 2, 2022
Average risk free interest rate		3.83	%		2.43	%
Expected life (in years)	4.41			4.5
Dividend yield		—	%		—	%
Average volatility		76	%		76	%

Summary of Stock Options Outstanding, Vested, Expected to Vest and Exercisable

Information regarding stock options outstanding, vested, expected to vest, and exercisable as of April 1, 2023 is summarized below:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (thousands)
Options outstanding		2,148,014	$	4.28		4.96	$	1
Options vested and expected to vest		2,086,540	$	4.30		4.92	$	1
Options exercisable		976,337	$	4.87		3.76	$	1

Restricted Stock Units

Information regarding RSUs activity for the three months ended April 1, 2023 is summarized below:


	Number of Shares
Outstanding as of December 31, 2022		473,029
RSUs forfeited		(30,960	)
Outstanding as of April 1, 2023		442,069

Computation of Basic and Diluted Net Loss Per Share - Additional Information (Details) - shares	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Stock options and RSUs
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares that were excluded from the computation of diluted weighted average shares outstanding	2,301,437	1,707,698

Leases and Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Commitments And Contingencies [Line Items]
Operating lease, expenses	$ 0.3	$ 0.3
Operating lease, weighted average discount rate	4.90%
Operating lease, weighted average remaining lease term	1 year 6 months
Future minimum purchase commitment payments	$ 16.8
Future minimum purchase commitment payments	$ 18.5

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Income Statement [Abstract]
Total revenues	$ 13,706	$ 13,387
Cost of revenues	7,768	7,410
Gross profit	5,938	5,977
Operating expenses:
Research and development	1,749	2,116
Sales and marketing	4,283	4,300
General and administrative	2,250	1,838
Total operating expenses	8,282	8,254
Loss from operations	(2,344)	(2,277)
Other income (expense), net	266	(94)
Loss from operations before provision for income taxes	(2,078)	(2,371)
Provision for income taxes	12	20
Net loss	$ (2,090)	$ (2,391)
Net loss per share:
Basic	$ (0.13)	$ (0.15)
Diluted	$ (0.13)	$ (0.15)
Weighted average shares used in computing net (loss) income per common share:
Basic	16,001	15,881
Diluted	16,001	15,881

Business Segments - Revenue Information by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 13,706	$ 13,387
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	6,774	6,543
Europe, Middle East and Africa
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	4,177	3,431
Asia/Pacific Rim
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	2,143	2,853
Rest of Americas
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 612	$ 560

- Definition

+ References

+ Details

Goodwill and Intangible Assets (Tables)

3 Months Ended

Apr. 01, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Components of Gross and Net Intangible Asset

The following table summarizes the components of gross and net of intangible assets carrying amounts (in thousands):


	April 1, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Amortization Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	340	$	238	$	102	4.00 Years	$	340	$	230	$	110
Developed technology		1,900		339		1,561	5.86 Years		1,900		272		1,628
Trade names		300		69		231	6.92 Years		300		61		239
Patents		600		600		-	None		600		600		-
	$	3,140	$	1,246	$	1,894		$	3,140	$	1,163	$	1,977

Estimated Future Amortization Expense

Estimated future amortization expense for purchased intangible assets is as follows (in thousands):


Fiscal Year:
Remainder of 2023 (nine months)	$	252
2024		335
2025		323
2026		319
2027		319
Thereafter		346
Total	$	1,894

Computation of Basic and Diluted Net Loss Per Share - Reconciliation of Numerator and Denominator of Basic and Diluted Net Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Numerator:
Net loss	$ (2,090)	$ (2,391)
Denominator:
Weighted average shares of common stock (basic)	16,001	15,881
Weighted average shares of common stock (diluted)	16,001	15,881
Per share data:
Basic net loss per share	$ (0.13)	$ (0.15)
Diluted net loss per share	$ (0.13)	$ (0.15)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

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+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Related Party - Topcon

3 Months Ended

Apr. 01, 2023

Related Party - Topcon

4. Related Party - Topcon

Topcon holds a 10.1% voting interest in the Company, which qualifies it to be a principal owner considered a related party, even though it currently does not have significant influence over the Company’s operations.

Topcon resells certain of our products as our exclusive distributor in certain international regions. At the same time, the Company also purchases certain raw materials from Topcon. During the three months ended April 1, 2023, the Company’s revenues related to Topcon amounted to approximately $4.3 million, including $0.4 million recognized exclusive distribution rights revenue. During the three months ended April 2, 2022, the Company’s revenues related to Topcon amounted to approximately $4.0 million, including $0.3 million recognized exclusive distribution rights revenue. The Company’s purchases from Topcon during the three months ended April 1, 2023 amounted to approximately $0.1 million. As of April 1, 2023, the amounts receivable from and payable to Topcon were $3.8 million and $0.1 million, respectively. As of December 31, 2022, the amounts receivable from and payable to Topcon were $3.5 million and $15 thousand, respectively.

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Apr. 01, 2023

Accounting Policies [Abstract]

Financial Statement Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results.

Revenue Recognition

Our revenues arise from the sale of laser consoles, delivery devices, consumables, service, and support activities. We also derive revenue from royalties from third parties which are typically based on the licensees’ net sales of products that utilize our technology. Our revenue is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers.” The Company recognizes revenue using the five-step model: (1) identifying the contract with the customer, (2) identifying the performance obligations in the contract, (3) determining expected transaction price, (4) allocating the transaction price to the distinct performance obligations in the contract, and (5) recognizing revenue when (or as) the performance obligations are satisfied.

The Company has the following revenue transaction types: (1) Product Sale Only, (2) Service Contracts, (3) System Repairs (outside of warranty), (4) Royalty Revenue and (5) Exclusive Distribution Rights.

(1)

Product Sale Only: The Company’s products consist of laser consoles, delivery devices and consumable instrumentation, including laser probes. The Company’s products are currently sold for use by ophthalmologists specializing in the treatment of glaucoma and retinal diseases. Inside the United States and Germany the products are sold directly to the end users. In other countries outside of the United States and Germany, the Company utilizes independent, third-party distributors to market and sell the Company’s products. There is no continuing obligation after shipment is made to these distributors.

The Company recognizes revenue from product sale at a point in time subject to the allocation of transaction price to additional performance obligations, if any.

(2)

Service Contracts: The Company offers a standard two-year warranty on all system sales. The Company also offers a service contract which is sold to customers in incremental, one-year periods which begin subsequent to the expiration of

the standard two-year warranty. The customer can opt to purchase the service contract at the time of the system sale or after the initial system sale.

The Company recognizes revenue from service contracts ratably over the service period. Revenue recognition for the sale of a service contract is largely dependent on the timing of the sale as follows:

Service Contract Sale in Conjunction with System Sale: If the customer opts to purchase a service contract at the time of the system sale, the Company allocates the transaction price of the distinct performance obligations in the contract by determining stand-alone selling price using historical pricing net of any variable consideration or discounts to specifically allocate to a particular performance obligation.

Service Contract Sale Subsequent to System Sale: If the customer opts to purchase a service contract after the initial system sale, the Company determines the amount of time that has elapsed since the initial system sale. If the service contract is purchased within 60 days of the initial sale, the Company considers this sale to be an additional element of the original sale and allocates the transaction price of the distinct performance obligations in the contract by determining stand-alone selling price using historical pricing net of any variable consideration or discounts to specifically allocate to a particular performance obligation. If the service contract is purchased subsequent to 60 days after the initial sale, the sale of the service contract is deemed a separate contract and is deferred at the selling price and recognized ratably over the extended warranty period as the performance obligation is satisfied.

(3)

System Repairs (outside of warranty): Customers will occasionally request repairs from the Company subsequent to the expiration of the standard warranty and outside of a service contract.

The Company recognizes revenue from system repairs (outside of warranty) at a point in time. When the customer requests repairs from the Company subsequent to the expiration of the standard warranty and outside of a service contract, these repair contracts are considered separate from the initial sale, and as such, revenue is recognized as the repair services are rendered and the performance obligation satisfied.

(4)

Royalty Revenue: The Company has royalty agreements with four customers related to sale of the Company’s intellectual property. Under the terms of these agreements, three customers are to remit a percentage of sales to the Company as the sales occur and one customer made an upfront prepayment for royalties.

The arrangements with three customers are for sales-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies. Therefore, the Company recognizes revenue at a point in time, only as the subsequent sale occurs. However, the Company notes that such sales being reported by the licensee with a quarter in arrear, such revenue is recognized at the time it is reported and paid by the licensee given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals. For the arrangement with one customer, the Company had concluded that there is one combined performance obligation to be satisfied. Therefore, the Company recognizes revenue related to this arrangement over time.

(5)

Exclusive Distribution Rights: On March 2, 2021, the Company and Topcon Corporation (“Topcon”) entered into a distribution agreement (“Distribution Agreement”), pursuant to which the Company granted Topcon the exclusive right to distribute the Company’s retina and glaucoma products in certain geographies outside the United States. The exclusivity arrangement with Topcon obligates the Company to provide training, customer support, and exclusive territorial rights to Topcon for certain international regions, for a period of 10 years, commencing upon regulatory approval to transfer existing (non-exclusive) distribution rights from the current distributors in those regions to Topcon. The Company has the right to terminate the exclusive distribution rights granted to Topcon for any of the regions at any point in time during the 10-year exclusivity term for a termination fee that is based on a multiple of 1.2 times the revenue generated by the Company in 2019 for the respective region. Management has determined that the exclusivity rights, training, and customer support represents a single combined performance obligation for each region, to be recognized as exclusivity fee revenue on a straight-line basis over the 10-year period for each region, commencing on the date that regulatory approval is obtained for each region, based on the standalone selling price for such combined performance obligation for each region. The estimated fair value of the exclusive distribution rights for all regions combined totaled approximately $14.8 million. Of this amount, management has fully-constrained and returned to Topcon the arrangement fee allocated to Belarus (approximately $0.2 million) because obtaining the necessary regulatory approvals and termination of existing distributor relationship was not feasible. For the three months ended April 1, 2023 and April 2, 2022, $0.4 million and $0.3 million in revenue related to the exclusive distribution rights was recorded, respectively.

Costs of Obtaining Revenue Contracts

The Company recognized assets from certain costs incurred to obtain revenue contracts. These costs relate to sales commissions arising from the sale of our products. The costs are considered incremental and recoverable of obtaining revenue contracts with customers. These deferred costs are amortized on a straight-line basis over the estimated period of benefit, which typically ranges

from 2 to 3 years. As of April 1, 2023, the Company recognized deferred costs incurred to obtain revenue contracts with customers, net of accumulated amortization, of $149 thousand, and included these amounts in Prepaid expenses and other current assets and Other long-term assets in the Company’s condensed consolidated balance sheets. Amortization expense was $19 thousand and $0 for the three months ended April 1, 2023 and April 2, 2022, respectively. There were no impairment expenses for both the three months ended April 1, 2023 and April 2, 2022, respectively.

Sales commissions that do not represent incremental and recoverable costs of obtaining a contract are expensed as incurred. As a practical expedient, the Company will not recognize such sales commission as a contract asset but rather recognize as expense when incurred if the amortization period of the asset that the Company would have otherwise recognized is one year or less.

Contract Fulfillment Costs

The Company recognized an asset from the costs incurred to fulfill a contract. These costs relate directly and must be incurred to satisfy performance obligations on certain specific contract with a customer. These costs are expected to be recovered over time and are amortized on a systematic basis that is consistent with the recognition of revenue to which it relates. As of April 1, 2023, the Company recognized deferred costs incurred to fulfill a contract with a customer, net of accumulated amortization, of $743 thousand, and included these amounts in Prepaid expenses and other current assets and Other long-term assets in the Company’s condensed consolidated balance sheets. Amortization expense was $21 thousand and $0 for the three months ended April 1, 2023 and April 2, 2022, respectively. There were no impairment expenses for both the three months ended April 1, 2023 and April 2, 2022, respectively.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use (“ROU”) assets, net and Operating lease liabilities in our condensed consolidated balance sheets. As of April 1, 2023 and December 31, 2022, the Company was not a party to finance lease arrangements.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Under the available practical expedient, we account for the lease and non-lease components as a single lease component.

Concentration of Credit Risk

Our cash and cash equivalents are deposited in demand and money market accounts. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand.

We market our products to distributors and end-users throughout the world. Sales to international distributors are generally made on open credit terms and letters of credit. Management performs ongoing credit evaluations of our customers and maintains an allowance for potential credit losses. Historically, we have not experienced any significant losses related to individual customers or a group of customers in any particular geographic area. For the three months ended April 1, 2023 one customer, Topcon, accounted for more than 10% of total revenues, representing 32%. For the three months ended April 2, 2022, one customer, Topcon, accounted for more than 10% of total revenues, representing 30%. As of April 1, 2023, one customer, Topcon, accounted for over 10% of our accounts receivable, representing 35%. As of December 31, 2022, one customer, Topcon, accounted for more than 10% of our accounts receivable, representing 37%.

Taxes Collected from Customers and Remitted to Governmental Authorities

Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying condensed consolidated statements of operations.

Shipping and Handling Costs

Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented.

Deferred Revenue

Deferred revenue represents contract liabilities and exclusivity fees. Revenue related to service contracts is deferred and recognized on a straight-line basis over the period of the applicable service contract. Costs associated with these service arrangements are recognized as incurred. Revenue related to exclusivity fees is deferred and recognized over the related exclusivity period.

A reconciliation of the changes in the Company’s deferred revenue balance for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	14,153		$	13,285
Additions to deferral		368			2,380
Revenue recognized		(785	)		(778	)
Balance, end of period		13,736			14,887
Non-current portion of deferred revenue		11,312			12,531
Current portion of deferred revenue	$	2,424		$	2,356

During the three months ended April 1, 2023 and April 2, 2022, approximately $0.5 million and $0.7 million were recognized pertaining to amounts deferred as of December 31, 2022 and January 1, 2022, respectively. As of April 1, 2023, approximately $10.8 million of the non-current portion of deferred revenue and $1.5 million of the current portion of deferred revenue pertain to exclusivity distribution rights deferred revenue.

Warranty

The Company currently provides a two-year full warranty on its products. The associated costs of these warranties are accrued for upon shipment of the products. The Company’s warranty policy is applicable to products which are considered defective in their performance or fail to meet the product specifications. Warranty costs are reflected in the condensed consolidated statements of operations as cost of revenues.

A reconciliation of the changes in the Company’s warranty liability for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	274		$	158
Accruals for product warranties		34			27
Cost of warranty claims		(89	)		(56	)
Adjustment to pre-existing warranties		101			64
Balance, end of period	$	320		$	193

Implementation Costs Incurred in a Cloud Computing Service Arrangement

The Company is currently implementing a new enterprise resource planning (“ERP”) system. The new ERP system operates in a cloud-based environment. The Company concluded that this cloud computing arrangement does not include a license, and therefore, will account for this arrangement as one that is a service contract. As of April 1, 2023, the Company capitalized $1.0 million in implementation costs, included in Prepaid expenses and other current assets and Other long-term assets in the Company’s condensed consolidated balance sheets. The Company will amortize the capitalized implementation costs over five years on a straight-line basis once the ERP system is ready for use. There were no amortization expenses for both the three months ended April 1, 2023 and April 2, 2022.

Reclassifications

Certain reclassifications have been made to the prior year financial statements included in these condensed consolidated financial statements to conform to the current year presentation. The reclassifications had no impact on previously reported total assets, total liabilities and net loss or accumulated deficit.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 “Measurement of Credit Losses on Financial Instruments,” which amended the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which amended the effective date for certain qualified entities to fiscal years beginning after December 15, 2022. On January 1, 2023, the Company adopted ASU No. 2016-13, using the modified retrospective approach by applying a cumulative effect adjustment of $0.2 million to the opening balance of accumulated deficit.

Recently Adopted Accounting Standards

Goodwill and Intangible Assets

3 Months Ended

Apr. 01, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill

The carrying value of goodwill was $1.0 million as of both April 1, 2023 and December 31, 2022.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performs an annual impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceed the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill carrying amount of the reporting unit

should be considered when measuring the goodwill impairment loss, if applicable. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead to potential impairment in future periods. The Company performed its annual impairment test during the second quarter of fiscal year 2022 and determined that its goodwill was not impaired.

As of April 1, 2023, the Company had not identified any factors that indicated there was an impairment of its goodwill and determined that no additional impairment analysis was then required.

Intangible Assets

The following table summarizes the components of gross and net of intangible assets carrying amounts (in thousands):


	April 1, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Amortization Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	340	$	238	$	102	4.00 Years	$	340	$	230	$	110
Developed technology		1,900		339		1,561	5.86 Years		1,900		272		1,628
Trade names		300		69		231	6.92 Years		300		61		239
Patents		600		600		-	None		600		600		-
	$	3,140	$	1,246	$	1,894		$	3,140	$	1,163	$	1,977

For the three months ended April 1, 2023 and April 2, 2022, amortization expense totaled $83 thousand and $48 thousand, respectively.

The amortization of developed technology was charged to research and development expense and the amortization of customer relations and trade names was charged to sales and marketing expense. Estimated future amortization expense for purchased intangible assets is as follows (in thousands):


Fiscal Year:
Remainder of 2023 (nine months)	$	252
2024		335
2025		323
2026		319
2027		319
Thereafter		346
Total	$	1,894

Accounts Receivable and Allowance for Credit Losses - Summary of Activity in Allowance for Credit Losses for Accounts Receivable (Details) $ in Thousands	3 Months Ended
	Apr. 01, 2023 USD ($)
Accounts Receivable, Allowance for Credit Loss [Line Items]
Balance, beginning of period	$ (390)
Balance, end of period	(146)
Adoption of ASU 2016-13
Accounts Receivable, Allowance for Credit Loss [Line Items]
Impact of adoption of ASU 2016-13	244
Domestic
Accounts Receivable, Allowance for Credit Loss [Line Items]
Balance, beginning of period	(235)
Balance, end of period	(94)
Domestic \| Adoption of ASU 2016-13
Accounts Receivable, Allowance for Credit Loss [Line Items]
Impact of adoption of ASU 2016-13	141
International
Accounts Receivable, Allowance for Credit Loss [Line Items]
Balance, beginning of period	(155)
Balance, end of period	(52)
International \| Adoption of ASU 2016-13
Accounts Receivable, Allowance for Credit Loss [Line Items]
Impact of adoption of ASU 2016-13	$ 103

Basis of Presentation

3 Months Ended

Apr. 01, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of IRIDEX Corporation (“IRIDEX”, the “Company”, “we”, “our”, or “us”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with management’s discussion and analysis of the Company’s financial condition and results of operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 9, 2023. The results of operations for the three months ended April 1, 2023 and April 2, 2022 are not necessarily indicative of the results for the fiscal year ending December 30, 2023 or any future interim period. The three months ended April 1, 2023 and April 2, 2022 each had 13 weeks. For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of December. Periodically, the Company includes a 53rd week to a year in order to end that year on the Saturday closest to the end of December.

Summary of Significant Accounting Policies - Reconciliation of Changes in Warranty Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Reconciliation of the changes in the Company's warranty liability
Balance, beginning of period	$ 274	$ 158
Accruals for product warranties	34	27
Cost of warranty claims	(89)	(56)
Adjustment to pre-existing warranties	101	64
Balance, end of period	$ 320	$ 193

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Apr. 01, 2023

Accounting Policies [Abstract]

Reconciliation of Changes in Deferred Revenue

A reconciliation of the changes in the Company’s deferred revenue balance for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	14,153		$	13,285
Additions to deferral		368			2,380
Revenue recognized		(785	)		(778	)
Balance, end of period		13,736			14,887
Non-current portion of deferred revenue		11,312			12,531
Current portion of deferred revenue	$	2,424		$	2,356

Reconciliation of Changes in Warranty Liability

A reconciliation of the changes in the Company’s warranty liability for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	274		$	158
Accruals for product warranties		34			27
Cost of warranty claims		(89	)		(56	)
Adjustment to pre-existing warranties		101			64
Balance, end of period	$	320		$	193

Summary of Significant Accounting Policies

3 Months Ended

Apr. 01, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 9, 2023.

Financial Statement Presentation

Use of Estimates

Revenue Recognition

(1)

The Company recognizes revenue from product sale at a point in time subject to the allocation of transaction price to additional performance obligations, if any.

(2)

the standard two-year warranty. The customer can opt to purchase the service contract at the time of the system sale or after the initial system sale.

(3)

System Repairs (outside of warranty): Customers will occasionally request repairs from the Company subsequent to the expiration of the standard warranty and outside of a service contract.

(4)

(5)

Costs of Obtaining Revenue Contracts

Contract Fulfillment Costs

Leases

Under the available practical expedient, we account for the lease and non-lease components as a single lease component.

Concentration of Credit Risk

Taxes Collected from Customers and Remitted to Governmental Authorities

Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying condensed consolidated statements of operations.

Shipping and Handling Costs

Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented.

Deferred Revenue

A reconciliation of the changes in the Company’s deferred revenue balance for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	14,153		$	13,285
Additions to deferral		368			2,380
Revenue recognized		(785	)		(778	)
Balance, end of period		13,736			14,887
Non-current portion of deferred revenue		11,312			12,531
Current portion of deferred revenue	$	2,424		$	2,356

Warranty

A reconciliation of the changes in the Company’s warranty liability for the three months ended April 1, 2023 and April 2, 2022 is as follows:


	Three Months Ended
	April 1, 2023			April 2, 2022
Balance, beginning of period	$	274		$	158
Accruals for product warranties		34			27
Cost of warranty claims		(89	)		(56	)
Adjustment to pre-existing warranties		101			64
Balance, end of period	$	320		$	193

Implementation Costs Incurred in a Cloud Computing Service Arrangement

Reclassifications

Recently Adopted Accounting Standards

Business Segments - Schedule of Revenue Information by Product (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2023	Apr. 02, 2022
Entity Wide Information Revenue From External Customer [Line Items]
Total revenues	$ 13,706	$ 13,387
Distribution Rights [Member]
Entity Wide Information Revenue From External Customer [Line Items]
Revenue Recognized	400	300
Service Contract Revenues
Entity Wide Information Revenue From External Customer [Line Items]
Total revenues	383	362
Service Contract Revenues \| Distribution Rights [Member]
Entity Wide Information Revenue From External Customer [Line Items]
Revenue Recognized	$ 364	$ 277

- Definition

+ References

+ Details

Stockholders' Equity and Stock-Based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSUs)	3 Months Ended
	Apr. 01, 2023 shares
Restricted stock units
Outstanding, Number of Shares, Beginning Balance	473,029
Number of Shares, RSUs forfeited	(30,960)
Outstanding, Number of Shares, Ending Balance	442,069

Computation of Basic and Diluted Net Loss Per Share

3 Months Ended

Apr. 01, 2023

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Loss Per Share

11. Computation of Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. Common stock equivalents consist of incremental common shares issuable upon the exercise of stock options, and the release (vesting) of RSUs and awards and are calculated under the treasury stock method. Common stock equivalent shares from unexercised stock options, and unvested RSUs and awards are excluded from the computation for periods in which we incur a net loss or if the exercise price of such options is greater than the average market price of our common stock for the period as their effect would be anti-dilutive.

For the three months ended April 1, 2023 and April 2, 2022, potential shares from stock options and RSUs totaling 2,301,437 and 1,707,698 shares, respectively, were excluded from the computation of diluted weighted average shares outstanding.

A reconciliation of the numerator and denominator of basic and diluted net loss per common share is provided as follows (in thousands except per share data):


	Three Months Ended
	April 1, 2023			April 2, 2022
Numerator:
Net loss	$	(2,090	)	$	(2,391	)
Denominator:
Weighted average shares of common stock (basic)		16,001			15,881
Weighted average shares of common stock (diluted)		16,001			15,881
Per share data:
Basic net loss per share	$	(0.13	)	$	(0.15	)
Diluted net loss per share	$	(0.13	)	$	(0.15	)

Goodwill and Intangible Assets - Additional Information (Details) - USD ($)

3 Months Ended

Apr. 01, 2023

Apr. 02, 2022

Dec. 31, 2022

^[1]

Goodwill and Intangible Assets Disclosure [Abstract]

Carrying value of goodwill

$ 965,000

Impairment of goodwill

Amortization expense

$ 83,000

$ 48,000

[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 December 31, 2022.

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Fair Value Measurements (Tables)

3 Months Ended

Apr. 01, 2023

Fair Value Disclosures [Abstract]

Financial Assets Measured and Recognized at Fair Value on a Recurring Basis


	As of April 1, 2023								As of December 31, 2022
	Fair Value Measurements								Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	8,497	$	—	$	—	$	8,497	$	12,496	$	—	$	—	$	12,496

Stockholders' Equity and Stock-Based Compensation - Additional Information (Details) - USD ($)		3 Months Ended
	Apr. 01, 2023	Apr. 01, 2023	Apr. 02, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation cost related to non-vested share-based compensation arrangements	$ 1,900,000	$ 1,900,000
Cost is expected to be recognized over a weighted average period	1 year 6 months 25 days
Weighted-average grant date fair value of the options granted		$ 1.39	$ 2.85
Total intrinsic value of options exercised		$ 4,000	$ 19,000
Dividends issued		$ 0