What changed in this filing

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Item 1. Business

2021-03-23 compared with 2020-03-13 · 264 added, 120 removed, 760 unchanged (34% of the section changed)

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Our laser probes consist of the following product lines:

Glaucoma – Probes used in our glaucoma product line include our patented MicroPulse P3 (“MP3”) probe and G-Probe;

Glaucoma – Probes used in our glaucoma product line include our patented MicroPulse P3 ® Probe, G-Probe ® and G-Probe Illuminate ® ;

Surgical Retina – Our surgical retina probes include our EndoProbe ® family of products used in vitrectomy procedures.

Ophthalmologists typically use our laser systems in hospital operating rooms (“ORs”) and ambulatory surgical centers (“ASCs”), as well as their offices and clinics.

In ORs and ASCs, ophthalmologists use our laser systems with either an indirect laser ophthalmoscope or a consumable, single use MP3 probe, G-Probe or EndoProbe.

Our products are sold in the United States and Germany predominantly through a direct sales force and internationally (aside from Germany) primarily through independent distributors.

In ORs and ASCs, ophthalmologists use our laser systems with either an indirect laser ophthalmoscope or a consumable, single use MicroPulse P3 probe, G-Probe , G-Probe Illuminate or EndoProbe.

In 2020 and 2019, our products were sold in the United States and Germany predominantly through a direct sales force and internationally (aside from Germany) primarily through independent distributors.

Total revenues in 2020 and 2019 were $36.3 million and $43.4 million, respectively.

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We can also be reached at our website at www.IRIDEX.com, however, the information on, or that can be accessed through, our website is not part of this report.

Impact of COVID-19 to our Business

The COVID-19 pandemic continues to create significant uncertainty in global markets, which has disrupted and harmed, and may continue to disrupt and harm, the Company's business, financial condition, and results of operations.

Beginning in the middle of March 2020, the pandemic and responses thereto contributed to a decrease in the demand for our products, primarily due to most hospitals ceasing elective surgical procedures.

This impact continued through the fourth quarter of 2020.

The extent of the impact of COVID-19 on the Company's operational and financial performance will depend on certain developments, including but not limited to the duration and spread of the outbreak, duration of local, state and federal issued public health orders, impact on our customers and our sales cycles, impact on our employees and impact on regional and worldwide economies and markets in general, all of which are uncertain and cannot be predicted.

For more information on risks associated with the COVID-19 pandemic, see the section titled “Risk Factors” in Item 1A of Part I.

For more information on the impact of COVID-19 on our business, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 7 of Part II.

Our Market Opportunity

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Glaucoma is a progressive, chronic disease and vision loss resulting from glaucoma currently cannot be regained.

According to Market Scope, in 2018, an estimated 129.9 million people worldwide had glaucoma, but only about 30% will be diagnosed as having it.

According to Market Scope’s 2020 Laser Market Report, an estimated 101.6 million people worldwide suffer from glaucoma and an additional 42.2 million people suffer from ocular hypertension, for a total of almost 143.8 million candidates for glaucoma treatment.

Market Scope expects this to grow at a compounded rate of 2.6 percent through 2025.

Glaucoma is most commonly associated with elevated levels of pressure within the eye, or intraocular pressure (“IOP”).

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Currently, reducing IOP is the only proven treatment for glaucoma with treatments primarily focused on improving the flow of aqueous humor through the eye’s trabecular meshwork and uveoscleral outflow pathways.

Global sales of products used to diagnose and treat glaucoma are expected to total $5.8 billion in 2018, according to Market Scope’s 2018 Global Glaucoma Surgical Device Report.

Pharmaceutical products represent a majority of this revenue estimate but have significa nt shortcomings.

Global sales of products used to diagnose and treat glaucoma were expected to total $5.8 billion in 2018, according to Market Scope’s 2018 Global Glaucoma Surgical Device Report.

Pharmaceutical products represent a majority of this revenue estimate but have significant shortcomings.

Pharmaceuticals are typically the first treatment method prescribed for glaucoma.

These pharmaceutical treatments are commonly self-administered in drop form by the patients.

Patients often have difficulties applying the pharmaceutical dr ops properly and may fail to appropriately or timely apply the medication, which may significantly reduce the effectiveness of the pharmaceutical.

This poor adherence to and lack of persistence with glaucoma medication regimens have been documented in nume rous independent studies, which often place the incidence of patient noncompliance up to or above 50%, particularly in patients on two or more prescription eye drops.

Even when administered correctly, pharmaceuticals have demonstrated reduced efficacy ove r time.

Patients often have difficulties applying the pharmaceutical drops properly and may fail to appropriately or timely apply the medication, which may significantly reduce the effectiveness of the eye drops.

This poor adherence to and lack of persistence with glaucoma medication regimens have been documented in numerous independent studies, which often place the incidence of patient noncompliance up to or above 50%, particularly in patients on two or more prescription eye drops.

Even when administered correctly, pharmaceuticals have demonstrated reduced efficacy over time.

When pharmaceuticals lose their effectiveness, appropriate treatment options are determined based on the progression and severity of the disease and include traditional laser therapy (e.g.

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An estimated 463 million people worldwide had diabetes in 2019, according to the International Diabetes Federation.

The federation predicts as many as 438 million will have diabetes globally by 2030.

The federation predicts that there will be 578 million people with diabetes by 2030, and as many as 700 million will have diabetes globally by 2045.

Previous clinical publications, such as an article cited at the U.S.

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There is a growing body of clinical evidence that has been published over the past 10 years that demonstrates that MicroPulse therapy is clinically effective with limited tissue damage for the treatment of glaucoma and retinal diseases.

Currently, we have developed three applications of ou r MicroPulse technology for the treatment of eye diseases:

Currently, we have developed three applications of our MicroPulse technology for the treatment of eye diseases:

MicroPulse Applications

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The ciliary body controls various ocular functions including aqueous humor production, and it helps facilitate the reduction of aqueous humor via outflow channels.

MicroPulse transscleral laser therapy (“TLT”) is a non-incisional treatment that is believed to reduce IOP primarily through uveoscleral outflow.

MicroPulse transscleral laser therapy (“TLT”) is a non-incisional treatment that reduces IOP primarily through uveoscleral outflow.

Numerous peer-reviewed published clinical studies have demonstrated MicroPulse TLT as a safe and clinically effective treatment to lower patients’ IOP and reduce the number of topical eye drops and oral medications across a wide spectrum of glaucoma types and disease severity.

Glaucoma specialists and comprehensive ophthalmologists incorporate MicroPulse TLT prior to, concurrent with, and after other surgical therapies.

It’s a repeatable procedure which doesn’t impact the patients’ quality of life nor does it inhibit future interventions.

It’s a repeatable procedure which does not impact the patients’ quality of life nor does it inhibit future interventions.

Glaucoma - trabecular meshwork outflow

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It is believed that the MLT procedure improves trabecular meshwork outflow and thus lowers IOP.

We believe that the MLT procedure provides incremental clinical benefits relative to other laser trabeculoplasty procedures such as SLT.

According to studies, MLT procedure provides incremental clinical benefits relative to other laser trabeculoplasty procedures such as SLT.

Medical Retina - DME

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We believe that the treatment of DME with MicroPulse laser therapy has several competitive advantages over alternate therapies with respect to long term vision stability, visual function, and cost effectiveness.

We are one of the worldwide leaders in developing, manufacturing, marketing, selling and servicing innovative medical laser systems and associated instrumentation for the treatment of sight-threatening eye diseases.

We are a worldwide leader in developing, manufacturing, marketing, selling and servicing innovative medical laser systems and associated instrumentation for the treatment of sight-threatening eye diseases.

Our strategy is to leverage our existing brand and distribution channel in the ophthalmology market to promote the adoption of MicroPulse as a viable treatment alternative for glaucoma and retinal diseases and consequently to commercialize a broad array of products that:

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Provide economic benefits to healthcare systems.

To achieve these goals, we are pursuing a number of organic initiatives that we anticipate will be supplemented from time to time by acquisitions.

To achieve these goals, we are pursuing a number of organic initiatives that we anticipate will be supplemented from time to time by acquisitions, such as the asset acquisition recently completed with one of the subsidiaries for Topcon Corporation.

We anticipate that the successful execution of this strategy will lead to profitable growth and enhanced shareholder value.

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We currently offer three basic product categories:

1) laser consoles, 2) delivery devices which are optical-mechanical products that mount to ophthalmologists’ diagnostic equipment and transmit the laser and 3) single-use disposable probes that transmit the laser light to a targeted region within the inside of an eye.

Laser Consoles

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The Cyclo G6 ® is an infrared (810nm) laser designed to treat patients diagnosed with a range of glaucoma disease states.

The Cyclo G6 system is sold with a family of probes that are disposable, including our patented MP3 probe that utilizes our MicroPulse technology and our G-Probe.

The Cyclo G6 system is sold with a family of probes that are disposable, including our patented MicroPulse P3 Probe that utilizes our MicroPulse technology, our G-Probe and our G-Probe Illuminate.

Medical retina:

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OcuLight laser systems.

Our OcuLight TX, OcuLight GL, and OcuLightGLx lasers deliver visible green (532nm) laser light.

Our OcuLight SL and OcuLightSLx lasers deliver infrared (810 nm) laser light.

Our OcuLight ® TX, OcuLight GL, and OcuLight GLx lasers deliver visible green (532nm) laser light.

Our OcuLight SL and OcuLight SLx lasers deliver infrared (810 nm) laser light.

Delivery Devices

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MicroPulse P3 Probe.

The MP3 Probe is used with our Cyclo G6 laser system to perform MicroPulse TLT.

The MP3 is used on an anesthetized eye in the doctor’s office or in the OR.

The MicroPulse P3 ® Probe is used with our Cyclo G6 laser system to perform MicroPulse TLT.

The MicroPulse P3 Probe is used on an anesthetized eye in the doctor’s office or in the OR.

The non-incisional procedure takes just a few minutes and results in minimal post-operative recovery for the patient.

MicroPulse TLT may be used to treat a wide variety of glaucoma types, including open-angle and closed-angle glaucoma, and a broad range of disease severity.

Since the launch of the MP3 probe in 2015, we have worked with physicians to optimize treatment tec hniques and clinical outcomes.

Since the launch of the M icroPuls P3 P robe , we have worked with physicians to optimize treatment techniques and clinical outcomes.

During our collaborations, we learned that minor ergonomic probe modifications could facilitate easier use and result in more consistent clinical outcomes.

In the fourth quarter of fiscal year 2019, we released a revised MP3 (Rev 2) probe that reflects these modifications.

In the fourth quarter of fiscal year 2019, we released a revised M icroPulse P3 P robe that reflects these modifications.

Initial feedback from approximately 150 physicians has been very positive in terms of better viewing of the treatment area, ease of treating small eyes and deep-set eyes, more intuitive probe orientation and placement, better stabilization of the probe on the eye, and improved light coupling to the tissue.

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We have close working relationships with researchers, clinicians and practicing physicians around the world who provide new ideas, evaluate prototypes and assist us in validating new products and new applications before they are introduced.

Our internal research and development (“R&D”) activities are performed by a current team of nine engineers and regulatory professionals with experience in various aspects of medical products, laser systems, delivery devices, clinical techniques, and regulatory affairs with a focus on introducing innovative products which satisfy the unmet and emerging needs of our customers.

Our internal research and development (“R&D”) activities are performed by a current team of eight engineers and regulatory professionals with experience in various aspects of medical products, laser systems, delivery devices, clinical techniques, and regulatory affairs with a focus on introducing innovative products which satisfy the unmet and emerging needs of our customers.

The core competencies of the team include:

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Our products are currently sold for use by ophthalmologists specializing in the treatment of eye disease in retina, glaucoma and pediatric eye diseases.

Other customers include research and teaching hospitals, government installations, surgical centers, hospitals, and office clinics (outpatient).

No single customer or distributor accounted for 10% or more of total revenues in fiscal years 2019 and 2018.

Other customers include research and teaching hospitals, government installations, surgical centers, hospitals, veterinary practices, and office clinics (outpatient).

We seek to provide superior customer support and service and believe that our customer service and technical support distinguish our product offerings from those of our competitors.

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Sales and Marketing

We sell and market our products in the United States and Germany predominantly through our direct sales force and internationally (aside from Germany) primarily through independent distributors.

In 2020 and 2019, we sold and marketed our products in the United States and Germany predominantly through our direct sales force and internationally (aside from Germany) primarily through independent distributors.

Currently we have a direct sales force of 16 employees who are engaged in sales efforts within the United States, 1 in Germany and 5 personnel engaged in managing our distribution sales efforts internationally.

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Registrar during its annual audit.

Any loss of certification would have a material adverse effect on our business, results of operations and financial condition.

Any loss of certification could have a material adverse effect on our business, results of operations and financial condition.

We rely on third parties to manufacture substantially all of the components used in our products, although we assemble critical subassemblies and the final product at our facility in Mountain View, California.

Some of these suppliers and manufacturers are sole source.

We have some long-term or volume purchase ag reements with our suppliers but currently purchase most components on a purchase order basis.

We have some long-term or volume purchase agreements with our suppliers but currently purchase most components on a purchase order basis.

These components may not be available in the quantities required, on reasonable terms, or at all.

Financial or other difficulties faced by our suppliers or signif icant changes in demand for these components or materials could limit their availability.

Any failures by our third-party suppliers to adequately perform may delay the submission of products for regulatory approval, impair our ability to deliver products o n a timely basis or otherwise impair our competitive position.

Financial or other difficulties faced by our suppliers or significant changes in demand for these components or materials could limit their availability.

Any failures by our third-party suppliers to adequately perform may delay the submission of products for regulatory approval, impair our ability to deliver products on a timely basis or otherwise impair our competitive position.

Competition in the market for laser systems and delivery devices used for ophthalmic treatment procedures is intense and is expected to increase.

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Our principal ophthalmic laser competitors are Alcon, Inc., Novartis AG, Bausch Health Companies Inc., Carl Zeiss Meditec AG, Ellex Medical Lasers, Ltd., Lumenis Ltd, Nidek Co.

Ltd., Quantel Medical SA and Topcon Corporation.

Ltd., Quantel Medical SA, OD-OS GmbH and A.R.C.

We also compete with alternative glaucoma surgical device companies such as Alcon, Inc., Allergan, Inc., Glaukos Corporation, New World Medical, Inc.

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Our proprietary information agreements with our employees and consultants contain provisions requiring such individuals to assign to us, without additional consideration, any inventions conceived or reduced to practice by them while employed or retained by us, subject to customary exceptions.

We can provide no assurance that our employees and consultants will abide by the provisions of these agreements and that our confidential information and trade secrets will be protected.

Government Regulation

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If the device is classified as Class I or II, and if it is not exempt, a 510(k) pre-market notification will be required for marketing.

Under FDA regulations, Class I devices are subject to general controls (for example, labeling, pre-market notification and adherence to Quality System Regulations (“Q SRs”) requirements).

Under FDA regulations, Class I devices are subject to general controls (for example, labeling, pre-market notification and adherence to Quality System Regulations (“QSRs”) requirements).

Class II devices receive marketing clearance through a 510(k) pre-market notification.

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In that case, a 510(k) will be the route to market.

A 510(k) clearance will be granted if the submitted information es tablishes that the proposed device is substantially equivalent to a legally marketed Class I or II medical device, or to a Class III medical device for which the FDA has not called for a PMA.

The FDA may determine that a proposed device is not substantiall y equivalent to a legally marketed device or that additional information or data are needed before a substantial equivalence determination can be made.

A request for additional data may require that clinical studies of the device’s safety and efficacy be p erformed.

Commercial distribution of a device for which a 510(k) notification is required can begin only after the FDA issues an order finding the device to be substantially equivalent to a previously cleared device.

A 510(k) clearance will be granted if the submitted information establishes that the proposed device is substantially equivalent to a legally marketed Class I or II medical device, or to a Class III medical device for which the FDA has not called for a PMA.

The FDA may determine that a proposed device is not substantially equivalent to a legally marketed device or that additional information or data are needed before a substantial equivalence determination can be made.

A request for additional data may require that clinical studies of the device’s safety and efficacy be performed.

In the United States, commercial distribution of a device for which a 510(k) notification is required can begin only after the FDA issues an order finding the device to be substantially equivalent to a previously cleared device.

The FDA has recently been requiring a more rigorous demonstration of substantial equivalence than in the past.

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A “not substantially equivalent” determination, or a request for additional information, could delay the market introduction of new products that fall into this category and could have a material adverse effect on our business, financial condition and results of operations.

For any of our products that are cleared through the 510(k) process, modifications or enhancements that could significantly affect the safety or efficacy of the device or that constitute a major change to the intended use of the device will require new 510(k) submissions.

We have obtained 510(k) clearances for all of our marketed products.

For any of our products that are cleared through the 510(k) process, modifications or enhancements that could significantly affect the safety or effectiveness of the device or that constitute a major change to the intended use of the device will require new 510(k) submissions.

We have obtained 510(k) clearances for all of our products marketed within the United States that require 510(k) clearance.

We have also modified aspects of our products since receiving regulatory clearance, and we have submitted 510(k)s for those modifications as required by FDA regulations.

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The FDA will refuse to issue any export certificate if significant outstanding QSR violations exist.

We are also regulated under the Radiation Control provision s (originally enacted as the Radiation Control for Health and Safety Act of 1968) which are located in Sections 531 through 542 of the FD&C Act, which requires laser products to comply with performance standards, including design and operation requirements , and manufacturers to certify in product labeling and in reports to the FDA that their products comply with all such standards.

The law also requires laser manufacturers to file new product and annual reports, maintain manufacturing, testing and sales rec ords and report product defects.

We are also regulated under the Radiation Control provisions (originally enacted as the Radiation Control for Health and Safety Act of 1968) which are located in Sections 531 through 542 of the FD&C Act, which requires laser products to comply with performance standards, including design and operation requirements, and manufacturers to certify in product labeling and in reports to the FDA that their products comply with all such standards.

The law also requires laser manufacturers to file new product and annual reports, maintain manufacturing, testing and sales records and report product defects.

Various warning labels must be affixed and certain protective devices installed, depending on the class of the product.

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In addition, changes in government regulation or in private third-party payers’ policies may limit or eliminate reimbursement for procedures employing our products, which could have a material adverse effect on our business, results of operations and financial condition.

Doctors, clinics, hospitals and other users of our products may not obtain adequate reimbursement for use of our p roducts from third-party payers.

While we believe that the laser procedures using our products have generally been reimbursed, payers may deny coverage and reimbursement for our products if they determine that the device was not reasonable and necessary fo r the purpose used, was investigational or was not cost-effective.

Doctors, clinics, hospitals and other users of our products may not obtain adequate reimbursement for use of our products from third-party payers.

While we believe that the laser procedures using our products have generally been reimbursed, payers may deny coverage and reimbursement for our products if they determine that the device was not reasonable and necessary for the purpose used, was investigational or was not cost-effective.

Backlog and Seasonality

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For example, our European sales during the third quarter are generally lower due to many businesses being closed for the summer vacation season.

As of December 28, 2019, we had a total of 94 full-time equivalent employees engaged in our ongoing operations, including 37 in operations (including manufacturing, quality, logistics and service), 36 in sales and marketing which does not include 4 consultants and one independent sales representative, 9 in R&D and 12 in finance and administration.

Human Capital

Our employees are our human capital and they are our greatest strength and most valuable resource.

As of January 2, 2021, we had a total of 89 full-time equivalent employees engaged in our ongoing operations, including 37 in operations (including manufacturing, quality, logistics and service), 33 in sales and marketing which does not include four consultants and one independent sales representative, eight in R&D and 11 in finance and administration.

We also employ, from time to time, a number of temporary and part-time employees as well as consultants on a contract basis.

As of December 28, 2019, we had 38 such persons serving in such roles.

Our future success will depend in part on our ability to attract, train, retain and motivate highly qualified employees, who are in great demand.

We may not be successful in attracting and retaining such personnel.

As of January 2, 2021, we had 39 such persons serving in such roles.

Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

We continuously invest in our workforce by seeking to create a diverse, inclusive, and safe work environment where our employees can learn, innovate, and deliver their best.

We are committed to being inclusive to enable our workforce and customers to succeed.

Our employees are not represented by a collective bargaining organization, and we have never experienced a work stoppage or strike.

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R isk Factors

Risk Factor Summary

Our business operations are subject to numerous risks, factors and uncertainties outside of our control that could cause our actual results to be harmed, including risks regarding the following:

General economic factors

the COVID-19 pandemic and responsive measures;

natural disasters, economic downturns, public health crises or political crises.

Operational factors

our relationship with our strategic partner and distributor, Topcon Corporation;

quality control and production issues;

the complexity of our laser systems;

defects in our laser systems;

costs, sales volumes, results of operations, and revenues;

direct and independent sales forces and a network of international distributors to sell our products;

dependence on international sales;

new products and applications and improving existing products;

fluctuations in our sales and operating results;

the ophthalmology market;

competition in our industry;

the collaborative relationships used to enhance products and applications;

the loss of key personnel;

meeting product demand;

dependence on sole source and limited source suppliers;

disruptions to our information technology system and breaches of data security;

maintaining relationships with health care providers;

the misuse of our products;

our reputation and brand;

the inability of our customers to obtain credit or material increases in interest rates;

recalls of our products.

Regulatory and Legal factors

healthcare reform measures;

third-party coverage and reimbursement policies;

compliance with healthcare laws;

our compliance with potential governmental, regulatory and other legal proceedings relative to advertising, promotion and marketing;

patents and proprietary rights related to our intellectual property;

compliance with government regulations, including the FDA’s quality system regulation and laser performance standards;

regulatory approval for clinical trials;

compliance with product liability claims;

developments in trade policies;

federal, state and foreign laws;

environmental requirements.

Financing and Transactional Risks

our ability to repay indebtedness and have indebtedness forgiven;

efforts to acquire additional companies or product lines;

divestitures of our businesses or product lines;

raising additional capital;

provisions in our charter documents, Delaware law and contractual provisions that could delay or prevent an acquisition or sale of our company.

Governance Risks and Risks related to Ownership of our Common Stock

the volatility of the trading price of our common stock;

our intention not to pay dividends for the foreseeable future;

the publication of research about us by analysts;

the concentration of ownership of our common stock;

our ability to maintain an effective system of internal control over financial reporting.

Factors That May Affect Future Results

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Risks Relating to our Business

The effects of the COVID-19 pandemic have disrupted, and may continue to significantly disrupt, our operations, including our ability to manufacture and supply products and perform research and development activities, our customers’ usage of our products as demand declines in elective surgeries in response to COVID-19, all of which have had and expected to continue to have a material and adverse effect on our business, future revenues and financial condition.

We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

Our business, results of operation and financial performance have been negatively impacted by the COVID-19 pandemic and related public health responses, such as shelter-in-place orders, social distancing protocols, and travel restrictions in many of the countries and regions in which we have operations or manufacturing partners.

Due to these impacts and measures, we have experienced and may continue to experience significant and unpredictable reductions in the demand for our products as healthcare customers divert medical resources and priorities towards the treatment of diseases related to COVID-19.

In addition, our customers may delay, cancel or redirect planned capital expenditures in order to focus resources on COVID-19 or in response to economic disruption related to COVID-19.

For example, during the fiscal year ended January 2, 2021, we experienced significant decline in treatment and procedure volume worldwide, as healthcare systems diverted resources to meet the increasing demands of managing COVID-19.

In addition, the American College of Surgeons, U.S.

surgeon general, and medical societies are evaluating the risks of minimally invasive surgeries in the presence of infectious diseases, which we expect will continue to negatively impact the usage of our products and the number of ophthalmic treatments and procedures performed.

If these recommendations continue to remain in place and the volume of elective procedures remains low, our results of operations and financial condition will continue to be adversely affected.

As a result of the COVID-19 outbreak around the world, we have adopted several measures including instructing employees to work from home while under shelter-in-place orders, slowing our manufacturing operations, and restricting non-critical business travel by our employees.

In April and May of 2020, following shelter-in-place orders, the Company operated with limited personnel at our facilities to continue essential operations.

In June 2020, we implemented return-to-work phases in conjunction with a social distancing protocol to safely continue essential operations to best meet customer demands in light of the pandemic.

This pandemic has caused disruption and delays in our ability to operate and manufacture, test and assemble products in our internal facilities, particularly in our Mountain View, California facility, and has limited our ability to continue certain research and development activities which could materially and adversely affect our ability to develop new products and technologies on the timelines we previously anticipated.

The COVID-19 pandemic has created economic uncertainty and volatility in the financial markets around the world, resulting in an economic downturn that has affected and will likely continue to affect demand for our products and impact our results of operations.

As a result, this may lead to a period of regional, national, and global economic slowdown or regional, national, or global recessions that would curtail or delay spending by hospitals and affect demand for our products as well as increase the risk of customer defaults or delays in payments.

Our customers may terminate or amend their agreements for the purchase, lease, or service of our products due to bankruptcy, lack of liquidity, lack of funding, operational failures, or other reason.

The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to:

the recommendations by medical authorities on whether hospitals should and may perform elective surgical procedures;

hospitals abilities and willingness to devote resources to elective surgical procedures;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures);

the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity;

the availability of federal, state, local or non-U.S.

funding programs;

general economic uncertainty in key global markets and financial market volatility;

global economic conditions and levels of economic growth;

and the pace of recovery when the COVID-19 pandemic subsides.

Although the magnitude of the impact of COVID-19 on our business operations remains uncertain and difficult to predict, and this remains a highly dynamic situation, we have experienced and will continue to experience in subsequent periods, disruptions to our business that will likely continue to adversely impact our business, financial condition and results of operations.

We may not be successful in our strategic partnership with Topcon Corporation and the relationship may divert resources away from existing operations or expose us to liabilities, which could adversely affect our business, results of operations and financial condition.

On March 2, 2021, we entered into a series of strategic transactions with Topcon Corporation (“Topcon”) Topcon America Corporation (the “Investor”) and Topcon Medical Laser Systems, Inc., a subsidiary of Topcon (the “Seller”), which included an asset purchase agreement with the Seller, pursuant to which we acquired substantially all the assets (except for cash and cash equivalents) of the Seller, including rights to the Seller’s PASCAL product (the “Asset Purchase Agreement”), (ii) Topcon and our company entered into a distribution agreement dated March 2, 2021, pursuant to which we granted Topcon the exclusive right to distribute our retina and glaucoma products in certain geographies outside the United States (the “Distribution Agreement”), (iii) pursuant to an investment agreement dated March 2, 2021 (the “Investment Agreement”) the Investor acquired 1,618,122 shares of the our Common Stock for an aggregate purchase price of $10 million (the “Shares”).

Pursuant to the Asset Purchase Agreement, the transferred assets include substantially all of the Seller’s assets including the rights to the Seller’s PASCAL product (the “Transferred Assets”).

We assumed only those liabilities arising after the closing in connection with the Transferred Assets.

In the Asset Purchase Agreement, our company and the Seller made certain customary representations and warranties and agreed to certain customary covenants.

The Agreement provides that our company and the Seller will each indemnify the other for losses arising from certain breaches of the Agreement and for certain other liabilities subject to customary caps and deductibles.

If there are claims under the indemnification provisions for which we are liable we will need to use some or all our cash to settle those claims.

Pursuant to the Distribution Agreement, we appointed Topcon as the exclusive distributor of our glaucoma and retina products, including Seller’s PASCAL product, in certain countries outside of the United States.

Topcon agreed to use commercially reasonable efforts to commercialize our products in each region throughout the territory, including achieving certain sales baselines by product category and region.

If Topcon fails to achieve the baselines in a region, we will have the right to, subject to payment of a fee, terminate Topcon’s appointment in such region.

The Distribution Agreement and Topcon’s appointment will, unless terminated earlier, continue on a country-by-country basis for a period of ten (10) years from the date exclusivity is granted.

The Distribution Agreement includes customary termination rights and effects of termination, including a termination for convenience right in favor of Topcon and, subject to payment of a fee, a termination right in our favor upon a change of control of our company.

As a result of the Distribution Agreement, we anticipate terminating our relationships with our current distributors in certain geographies and using Topcon as our exclusive distributor.

If we are unable to terminate our existing relationships with current distributors, or if Topcon is unable to generate as much revenue under the Distribution Agreement as we receive from our current distributors, our business, results of operations and financial condition could be adversely affected.

If there are claims under the indemnification provisions of the Distribution Agreement for which we are liable or we are unable to terminate our relationships with our current distributors, we will need to use some or all our cash to settle those claims or make payments to Topcon pursuant to the terms of the Distribution Agreement.

We are investing a substantial amount of time , resources and efforts in connection with our relationship with Topcon, including commercializ ing our products in certain geographies and working to achiev e certain sales baselines by product category and region .

All of these actions divert resources away from our other initiatives and operations particularly with respect to product sales in the United States.

These efforts may not result in the anticipated additional products, efficiencies or revenues for our c ompany , which could adversely affect our business, operating results and financial condition as a result.

We have incurred indebtedness under the CARES Act which may be subject to audit, may not be forgivable and may eventually have to be repaid.

Any repayment of such indebtedness may limit the funds available to us and may restrict our flexibility in operating our business or otherwise adversely affect our results of operations.

In April 2020, the Company received an aggregate principal amount of approximately $2.5 million U.S.

Small Business Administration Loan (the “SBA Loan”) pursuant to the Payroll Protection Program (“PPP”), established under the CARES Act.

The SBA Loan is subject to forgiveness under the PPP upon the Company’s request to the extent that the proceeds are used to pay expenses permitted by the PPP, including payroll costs, covered rent and mortgage obligations, and covered utility payments.

In September 2020, the Company submitted an application for forgiveness of the entire amount due on the loan.

Amounts outstanding under the loan will bear a fixed interest rate of 1.00% per annum with a maturity date of April 22, 2022, two years from commencement date.

All payments are deferred for 18 months for the Company with interest accruing over the entire period of the SBA Loan.

Department of the Treasury has announced that it will conduct audits for PPP loans that exceed $2 million.

Should we be audited or reviewed by the U.S.

Department of the Treasury or the U.S.

Small Business Administration as a result of the SBA Loan or filing an application for forgiveness or otherwise, such audit or review could result in the diversion of management’s time and attention, generate negative publicity and cause us to incur legal and reputational costs.

If we were to be audited and receive an adverse outcome in such an audit, we could be required to return the full amount of the SBA Loan and may potentially be subject to civil and criminal fines and penalties.

We may not have the resources to repay the SBA Loan if required to do so by the federal government.

The Company cannot provide assurance that the principal and interest amounts under the PPP Loan will be forgiven.

If all or substantially all of the SBA Loan is not forgiven or it is subsequently determined that it must be repaid, we may be required to use a substantial portion of our cash flows from operations to pay interest and principal on the SBA Loan.

Although we currently have no intention of repaying the SBA Loan, we may decide to repay it in the future.

Any such repayment of the SBA Loan will reduce the funds available to us for working capital, capital expenditures, and other corporate purposes and may limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans, and other investments or divert funds that are otherwise necessary to run our business.

We cannot assure you that our business will generate sufficient cash flow from operations or that future financing will be available to us in amounts sufficient to enable us to make required and timely repayments on our indebtedness, or to fund our operations.

To date, we have used a substantial amount of cash for operating activities, and we cannot assure you when we will begin to generate cash from operating activities in amounts sufficient to service our debt.

Additionally, though we believe we are eligible for the SBA Loan under the PPP, our receipt of the SBA Loan could result in negative publicity, or expose us to liability under the federal False Claims Act, which prohibits the known filing of a false claim or the known use of false statements to obtain payment from the federal government, if it is determined that we were in fact not eligible to take the SBA Loan in the first instance.

In addition, although we are reviewing and may seek additional available benefits under the CARES Act, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all.

Certain of the benefits under the CARES Act have not previously been administered on the present scale or at all.

Government or third party program administrators may be unable to cope with the volume of applications in the near term and any benefits we receive may not be as extensive as those for which we apply, may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we contemplate.

government or any other governmental authority agrees to provide additional crisis relief assistance that we accept, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.

We cannot assure you that any such government crisis relief assistance will not significantly limit our corporate activities or be on terms that are favorable to us.

Such restrictions and terms could adversely impact our business and limit our operations and revenue as a result.

We face quality control and other production issues that could materially and adversely impact our sales and financial results and the acceptance of our products.

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If our sales increase substantially, we may need to increase our production capacity and may not be able to do so in a timely, effective or cost-efficient manner.

We may not be able to manufacture sufficient quantities of our products, which may require that we qualify other manufacturers for our products.

We may not be able to manufacture sufficient quantities of our products, which

may require that we qualify other manufacturers for our products.

Furthermore, we may experience delays, disruptions, capacity constraints or quality control problems in our manufacturing operations.

In the past several years, we have experienced supply chain, production and training issues as we have expanded our product lines and sales volumes, and may experience similar issues in the future as we continue to grow our business.

For example, we contract with a manufacturing company located in Wuhan, China for certain laser systems scheduled for release in the latter half of 2020.

Due to the COVID-19 or coronavirus outbreak in China, release of our manufacturing process and launch of these new laser systems may be delayed or disrupted, and we may need to incur costs to replace or shift this manufacturing process elsewhere.

For example, we have contracted with a manufacturing company located in Wuhan, China for certain laser systems scheduled for release in the first half of 2021.

Due to the COVID-19 outbreak, release of our manufacturing process and launch of these new laser systems may be delayed or disrupted, and we may need to incur costs to replace or shift this manufacturing process elsewhere.

These issues have caused, and may in the future cause, us to reduce or delay the shipment of our products and incur costs to service or replace products already shipped to customers.

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legal actions by our customers.

The occurrence of any one or more of the foregoing factors could seriously harm our business, financia l condition and results of operations.

We rely on our direct and independent sales forces and network of international distributors to sell our products and any failure to maintain our sales force and distributor relationships could harm our business.

The occurrence of any one or more of the foregoing factors could seriously harm our business, financial condition and results of operations.

We rely on our direct and independent sales forces and international distributors to sell our products and if we lose our sales force or distributor relationships, it could harm our business.

Our ability to sell our products and generate revenues depends upon our direct and independent sales forces within the United States, direct sales force in Germany and relationships with independent international distributors.

Currently our direct and independent sales forces within the United States consist of approximately 16 employees and one independent representative, respectively and our direct sales force in Germany consists of one employee.

Our international independent distributors are managed by a team of 5 people.

Our international independent distributors are managed by a team of five people.

We generally grant our distributors exclusive territories for the sale of our products in specified countries.

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Our international sales are largely dependent on the efforts of these third parties.

If any distributor breaches the terms of its distribution agreement with us or fails to generate sales of our products, we may be forced to replace the distributor and our ability to sell our products into that exclusive sales territory would be adversely affected.

We do not have any long-term employment contracts with the members of our direct sales force.

We may be unable to replace our direct sales force personnel with individuals of equivalent technical expertise and qualifications, which may harm our revenues and our ability to maintain market share.

Similarly, our independent and distributor agreements are generally terminable at will by either party and independents and distributors may terminate their relationships with us, which would affect our sales and results of operations.

We may be unable to recruit and retain qualified personnel in Germany as part of our direct sales team.

Similarly, our independent contractor and distributor agreements are generally terminable at will by either party and independent contractors and distributors may terminate their relationships with us, which would affect our sales and results of operations.

Any loss of the members of our existing direct or indirect sales organizations, or any failure to execute on our plans to further develop our sales function, could have an adverse impact on our business, results of operations and financial condition.

Additionally, our sales forces’ operations have been disrupted by the COVID-19 pandemic, as many are no longer allowed to travel and must instead perform their services from home, which could have an impact on their ability to sell and distribute our products.

Growth in our sales and marketing organization may create operational challenges without immediately offsetting benefits.

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If we cannot effectively manage our expanding operations and our costs, we may not be able to grow effectively or we may grow at a slower pace, and our business could be adversely affected.

It can take six months or longer before our internal sales representatives are fully trained and productive in selling our solution to prospective clients.

This ramp period presents a number of operational challenges as the cost of recruiting, hiring and carrying new sales representatives cannot be offset by the revenue such new sales representatives produce until after they complete their ramp periods.

If we cannot reliably develop our sales representatives to a productive level, or if we lose productive representatives in whom we have heavily invested, our future growth rates and revenue will suffer.

It can take six months or longer before our internal sales representatives are fully trained and productive in selling our product to prospective clients.

This ramp up period presents a number of operational challenges as the cost of recruiting, hiring and carrying new sales representatives cannot be offset by the revenue such new sales representatives produce until after they complete their ramp up periods.

We depend on international sales for a significant portion of our operating results.

We derive, and expect to continue to derive, a large portion of our revenues from international sales.

For the fiscal year ended December 28, 2019 , our international sales were $21.2 million, or 48.7% of total revenues.

For the fiscal year 2020, our international sales were $17.0 million, or 46.9% of total revenues.

We anticipate that international sales will continue to account for a significant portion of our revenues in the foreseeable future.

All of our international revenues and costs for the fiscal year ended December 28, 2019 have been denominated in U.S.

dollars except for a sale transacted through our German subsidiary.

All of our international revenues and costs for the fiscal year 2020 have been denominated in U.S.

dollars except for sales transacted through our German subsidiary.

As a result, an increase in the value of the U.S.

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Our international operations and sales are subject to a number of risks and potential costs, including:

the impact of the COVID-19 pandemic on the global economy and financial markets;

fluctuations in foreign currency exchange rates;

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political and economic instability;

change in international regulatory agreements and requirements ;

trade sanctions and embargoes;

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Due to the complexities and uncertainties associated with ophthalmic research and development, products we are currently developing may not complete the development process or obtain the regulatory approvals required to market such products successfully.

In addition, our research and development process has been slowed by the impact of COVID-19, and should the COVID-19 economic restrictions worsen, it could delay and disrupt our research and development processes even further.

Successful commercialization of new products and new applications will require that we effectively transfer production processes from research and development to manufacturing and effectively coordinate with our suppliers.

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Concerns about consumer and investor confidence, volatile corporate profits and reduced capital spending, international conflicts, terrorist and military activity, civil unrest and pandemic illness could reduce customer orders or cause customer order cancellations.

For example, the spread of coronavirus may cause adverse impacts on global economic activity which could negatively impact our business.

For example, the COVID-19 pandemic has and may continue to cause adverse impacts on global economic activity which could negatively impact our business.

In addition, political and social turmoil related to international conflicts and terrorist acts may put further pressure on economic conditions in the United States and abroad.

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Factors contributing to these fluctuations include the following:

general economic uncertainties and political concerns, including the impact of COVID-19;

changes in the prices at which we can sell our products, including the impact of changes in exchange rates;

general economic uncertainties and political concerns;

introduction of new products, product enhancements and new applications by our competitors, including new drugs, entry of new competitors into our markets, pricing pressures and other competitive factors;

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Our operating results in future quarters and years may be below expectations, which would likely cause the price of our common stock to fall.

We rely on continued market acceptance of our existing products and any decline in sales of our existing products would adversely affect our busine ss and results of operations.

We rely on continued market acceptance of our existing products and any decline in sales of our existing products would adversely affect our business and results of operations.

We currently market visible and infrared medical laser systems and delivery devices to the ophthalmology market.

We believe that continued and increased sales, if any, of these medical laser systems is dependent upon a number of factors including the following:

the impact of COVID-19 pandemic on timing of ophthalmic treatment procedures;

acceptance of product performance, features, ease of use, scalability and durability, including with respect to our MicroPulse laser photocoagulation systems;

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level of reimbursement for treatments administered with our products.

In addition, we derive a meaningful portion of our sales in the form of recurring revenues from selling consumable instrumentation, including our MP3 and EndoProbe devices.

In addition, we derive a meaningful portion of our sales in the form of recurring revenues from selling consumable instrumentation, including our Cyclo G6 probe and EndoProbe devices.

Our ability to increase recurring revenues from the sale of consumable products will depend primarily upon the features of our current products and product innovation, the quality of, ease of use and prices of our products, including the relationship to prices of competing products.

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Our principal ophthalmic laser competitors are Alcon, Inc., Novartis AG, Bausch Health Companies Inc., Carl Zeiss Meditec AG, Ellex Medical Lasers, Ltd., Lumenis Ltd., Nidek Co.

Ltd., Quantel Medical SA, and Topcon Corporation.

Ltd., Quantel Medical SA, OD-OS GmbH and A.R.C.

We also compete with alternative glaucoma surgical device companies such as Alcon, Inc., Allergan, Inc., Glaukos Corporation, New World Medical, Inc.

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To raise capital, we may sell common stock, convertible securities or other equity-linked securities in one or more transactions at prices and in a manner we determine from time to time.

If we sell additional equity securities, our existing stockholders ma y be materially diluted.

If we sell additional equity securities, our existing stockholders may be materially diluted.

Additionally, new investors could gain rights, preferences and privileges senior to those of existing holders of our common stock.

We may also issue debt securities, which may impose restrictive covenants on our operations or other wise adversely affect the holdings or the rights of our stockholders.

Sales or issuances of a substantial amount of securities, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

As of December 28, 2019, we had 13,785,233 shares of common stock outstanding, all of which shares were, and continue to be, eligible for sale in the public market, subject in some cases to compliance with the requirements of Rule 144, including the volume limitations and manner of sale requirements.

Future resales of our common stock by our existing stockholders could cause the market price of our common stock to decline.

As of December 28, 2019, holders of an aggregate of 973,204 shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our other stockholders.

In addition, the shares of common stock subject to outstanding options and Restricted Stock Units under our 2008 Equity Incentive Plan and the shares reserved for future issuance under the Incentive Plan may become eligible for sale in the public markets in the future, subject to certain legal and control limitations.

We may also issue debt securities, which may impose restrictive covenants on our operations or otherwise adversely affect the holdings or the rights of our stockholders.

We may sell shares or other securities in any offering at a price per share that is less than the price per share paid by existing investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

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presidential administration has announced certain policy changes that could impact the availability of benefits under the Affordable Care Act.

For example, tax reform legislation enacted at the end of 2017 eliminates the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019 (the “individual mandate”).

We anticipate continued Congressional interest in modifying provisions of the Affordable Care Act, particularly given the recent ruling in Texas v.

Azar to invalidate the law as unconstitutional.

For example, tax reform legislation enacted at the end of 2017 eliminated the tax penalty for individuals who did not maintain sufficient health insurance coverage beginning in 2019 (the “individual mandate”).

We anticipate continued Congressional interest in modifying provisions of the Affordable Care Act.

At this time, it remains unclear whether there will be any changes made to or any repeal of the Affordable Care Act, with respect to certain of its provisions or in its entirety or related administrative policies.

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We are unable to predict what legislation or regulation, if any, relating to the health care industry or third-party coverage and reimbursement may be enacted in the future at the state or federal level, or what effect such legislation or regulation may have on us.

Furthermore, existing legislation and regulation related to the health care industry and third-party coverage reimbursement, including the Affordable Care Act, has been subject to judicial challenge, and may be subject to similar challenges from time to time in the future (such as the ongoing Texas v.

Denial of coverage and reimbursement of our products, or the revocation or changes to coverage and reimbursement policies, could have a material adverse effect on our business, results of operations and financial condition.

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Our personnel, systems, procedures and controls may not be adequate to support our future operations.

Any f ailure to effectively manage future growth could have a material adverse effect on our business, results of operations and financial condition.

Any failure to effectively manage future growth could have a material adverse effect on our business, results of operations and financial condition.

We rely on patents and proprietary rights to protect our intellectual property and business.

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We file patent applications to protect technology, inventions and improvements that are significant to the development of our business.

Our patent portfolio includes 23 active United States patents and 5 active foreign patents on the technologies related to our products and processes.

In addition, we have 4 patent applications pending in the United States and 12 foreign patent applications pending.

As of January 2, 2021, our patent portfolio includes 25 active United States patents and seven active foreign patents on the technologies related to our products and processes.

In addition, as of January 2, 2021, we have seven patent applications pending in the United States and 12 foreign patent applications pending.

Our patent applications may not be approved.

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In addition, the integration of replacement personnel could be time consuming, may cause additional disruptions to our operations, and may be unsuccessful.

Efforts to acquire additional companies or product lines may divert our managerial resources away from our business operations, and if we complete additional acquisitions, we may incur or assume additional liabilities or experience integration problems.

As part of our growth strategy, we seek to acquire businesses or product lines for various reasons, including adding new products, adding new customers, increasing penetration with existing customers, adding new manufacturing capabilities or expanding into new geographic markets.

Our ability to successfully grow through acquisitions depends upon our ability to

identify, negotiate, complete and integrate suitable acquisitions and to obtain any necessary financings.

These efforts could divert the attention of our management and key personnel from our business operations.

If we complete future acquisitions, we may also experience:

difficulties integrating any acquired products into our existing business;

difficulties in integrating an acquired company’s technologies, services, employees, customers, partners, business operations and administrative and software management systems with ours;

delays in realizing the benefits of the acquired products;

diversion of our management’s time and attention from other business concerns;

adverse customer reaction to the product acquisition;

increases in expenses.

Moreover, we cannot assure you that the anticipated benefits of any acquisition or investment would be realized or that we would not be exposed to unknown liabilities.

In connection with these types of transactions, we may issue additional equity securities that would dilute the ownership interest of existing investors or earnings per share, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures and become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.

These challenges related to acquisitions or investments could adversely affect our business, operating results and financial condition.

If we fail to accurately forecast demand for our product and component requirements for the manufacture of our product, we could incur additional costs or experience manufacturing delays and may experience lost sales or significant inventory carrying costs.

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We have some long term or volume purchase agreements with our suppliers and currently purchase components and fully-assembled products on a purchase order basis.

Some of our suppliers and manufacturers are sole or limited sources.

Some of our suppliers and manufacturers are sole or limited source suppliers.

In addition, some of these suppliers are relatively small private companies whose operations may be disrupted or discontinued at any time.

There are risks associated with the use of independent manufacturers, including the following:

unavailability of shortages or limitations on the ability to obtain supplies of components and products in the quantities that we require;

the impact of COVID-19 on global supply chains and market stability;

unavailability of shortages or limitations on the ability to obtain supplies of components and products in the quantities that we require, or that satisfy the environmental requirements to which we are subject;

delays in delivery or failure of suppliers to deliver critical components and products on the dates we require;

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Any failures by our vendors to adequately supply limited and sole source components or products may impair our ability to offer our existing products, delay the submission of new products for regulatory approval and market introduction, materially harm our business and financial condition and cause our stock price to decline.

Establishing our own capabilities to manufacture these components or products would be expensive and could significantly decrease our profit margins.

Establishing our own

capabilities to manufacture these components or products would be expensive and could significantly decrease our profit margins.

Our business, results of operations and financial condition would be adversely affected if we are unable to continue to obtain components or fully-assembled products in the quantity and quality desired and at the prices we have budgeted.

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All of our research and development activities, manufacturing, our corporate headquarters and other critical business operations are located near major earthquake faults in Mountain View, California.

California can experience catastrophic wildfires, as well as intermittent power outages.

California can experience earthquakes, catastrophic wildfires, and intermittent power outages.

Any such loss at any of our facilities caused by fires, flooding, power outages, or earthquakes could disrupt our operations, delay production, shipments and revenue and result in large expense to repair and replace our facilities.

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At the same time, relationships with these individuals and entities are the subject of heightened scrutiny and may present the potential for healthcare compliance risks.

We market our products to numerous health care providers, including physicians, hospitals, ASCs, government affiliated groups and group purchasing organizations.

We market our products to numerous health care providers, including physicians, hospitals, ambulatory surgery centers, government affiliated groups and group purchasing organizations.

We have developed and strive to maintain close relationships with members of each of these groups who assist in product research and development and advise us on how to satisfy the full range of surgeon and patient needs.

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Not all devices are eligible for the 510(k) clearance process.

Depending upon the type, complexity and novelty of the device and the nature of the disease or disorder to be treated, the FDA process can take several years, require extensive clinical testing and result in significant expenditures.

Depending upon the type, complexity and novelty of the device and the nature of the disease or disorder to be treated, the PMA process can take several years, require extensive clinical testing and result in significant expenditures.

Even if regulatory clearance or approval is obtained, later discovery of previously unknown safety issues may result in restrictions on the product, including withdrawal of the product from the market.

Other countries also have extensive regulations regarding clinical trials and testing prior to new product introductions.

Our failure to obtain government approvals or any delays in receipt of such approvals would have a material adverse effect on our business, results of operations and financial condition.

Our failure to obtain

government approvals or any delays in receipt of such approvals would have a material adverse effect on our business, results of operations and financial condition.

The FDA imposes a broad range of additional requirements on medical device companies.

Our products must be produced in compliance with the Quality System Regulation (“QSR”) and our manufacturing facilities are subject to establishment registration and devi ce listing requirements from the FDA, and similar requirements from certain state authorities, and ongoing periodic inspections by the FDA, including unannounced inspections for compliance with applicable requirements.

We are subject to monitoring, recordk eeping, and reporting obligations for medical device adverse events and malfunctions;

Our products must be produced in compliance with the Quality System Regulation (“QSR”) and our manufacturing facilities are subject to establishment registration and device listing requirements from the FDA, and similar requirements from certain state authorities, and ongoing periodic inspections by the FDA, including unannounced inspections for compliance with applicable requirements.

We are subject to monitoring, recordkeeping, and reporting obligations for medical device adverse events and malfunctions;

notification of our products’ defects or failure to comply with the FDA’s laser regulations;

and reporting of recalls, corrections, or removals of our products.

The FDA a lso imposes requirements for the labeling of our products, and places limitations on claims we are permitted to make about our products in promotional labeling.

The Federal Trade Commission has jurisdiction over the advertising of all of our products, whic h are non-restricted devices, and exercises oversight in coordination with the FDA.

The FDA also imposes requirements for the labeling of our products, and places limitations on claims we are permitted to make about our products in promotional labeling.

The Federal Trade Commission has jurisdiction over the advertising of all of our products, which are non-restricted devices, and exercises oversight in coordination with the FDA.

Noncompliance with the applicable requirements can result in, among other things, regulatory citations (including “483 Observations”) and Warning Letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, withdrawal of marketing approvals, and criminal prosecution.

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The Medical Device Regulation (“MDR”) will replace the current medical device directives (93/42/EEC), and it substantially changes the way that medical devices are brought to market in the EU and how they maintain compliance throughout the product’s life cycle.

Due to the UK’s exit from EU (“Brexit”), different rules will apply in Great Britain (England, Wales and Scotland), Northern Ireland and the EU after the Brexit transition period, which began January 1, 2021.

Additionally, the new revision 4 of the clinical evaluation report guidance document (MEDDEV 2.7.1) severely restricts the use of substantial equivalence for new products, resulting in the need for formal clinical trial data for most new products.

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Our failure to take satisfactory corrective action in response to an adverse QSR inspection or our failure to comply with applicable laser performance standards could result in enforcement actions, including a public warning letter, a shutdown of our manufacturing operations, a recall of our products, civil or criminal penalties, or other sanctions, which would cause our sales and business to suffer.

If we modify one of our FDA cleared devices, we may need to submit a new 510(k), or potentially a PMA, and if clearance or app roval is not obtained, it would prevent us from selling our modified products or cause us to redesign our products.

If we modify one of our FDA cleared devices, we may need to submit a new 510(k), or potentially a PMA, and if clearance or approval is not obtained, it would prevent us from selling our modified products or cause us to redesign our products.

Any modifications to an FDA-cleared device that would significantly affect its safety or effectiveness or that would constitute a major change in its intended use would require a new 510(k) clearance or possibly a PMA.

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Our termination request is pending.

We recently obtained FDA clearance for an updated TruFocus LIO Premiere™ device.

We obtained FDA clearance for an updated TruFocus LIO Premiere ® device.

The updated device includes expanded user instructions and minor design changes.

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We may be subject to product liability claims from time to time.

Our products are highly complex and some are used to treat extremely delicate eye tissue.

We believe we maintain adequate levels of product liability insurance.

Our products are highly complex and the risk of significant patient injury is more likely with products and procedures involving the eye.

Use of our products incorrectly can result in temporary or permanent loss in vision, burns, scarring, blind spots or other injuries of the eye and we may periodically become subject to product liability lawsuits as a result.

We believe we maintain adequate levels of product liability insurance to cover such claims subject to certain deductibles.

However, product liability insurance is expensive and we might not be able to obtain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us, if at all.

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Certain of our materials may be subject to the effects of various trade agreements, treaties and tariffs.

The current U.S.

The recent U.S.

presidential administration has imposed tariffs on various goods from various countries, including China, Canada and the European Union (“EU”), and announced intentions to impose furthermore significant tariffs on certain United States imports.

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The comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United States on December 22, 2017 and includes, among other items, a reduction in the federal corporate income tax rate from 35% to 21%, certain interest expense deduction limitations and changes in the timing of certain taxable income.

We are required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring our U.S.

We are required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S.

deferred tax assets and liabilities and reassessing the net realizability of our deferred tax assets and liabilities.

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However, changes in law, interpretations, and facts may result in adjustments to these amounts.

Based on the Company’s net operating loss carryovers and valuation allowance, there is no impact to its consolidated financial statements as a result of the accounting for the tax effects of the Tax Act.

Based on the our net operating loss carryovers and valuation allowance, there is no impact to its consolidated financial statements as a result of the accounting for the tax effects of the Tax Act.

Subsequent legislations, guidance, regulations or audits that differ from our prior assumptions and interpretations, or other factors which were not anticipated at the time we estimated our tax provision could have a material adverse effect on our business, cash flow, results of operations or financial condition.

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These changes could have an adverse impact on our ability to manufacture and market our devices and products.

Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions and to obtain any necessary financings.

These efforts could divert the attention of our management and key personnel from our business operations.

If we complete future acquisitions, we may also experience:

difficulties integrating any acquired products into our existing business;

difficulties in integrating an acquired company’s technologies, services, employees, customers, partners, business operations and administrative and software management systems with ours;

delays in realizing the benefits of the acquired products;

diversion of our management’s time and attention from other business concerns;

adverse customer reaction to the product acquisition;

increases in expenses.

Moreover, we cannot assure you that the anticipated benefits of any acquisition or investment would be realized or that we would not be exposed to unknown liabilities.

These challenges related to acquisitions or investments could adversely affect our business, operating results and financial condition.

Divestitures of some of our businesses or product lines may materially and adversely affect our financial condition, results of operations or cash flows and require us to raise additional capital to replace revenue from those business units or product lines.

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Failure to meet these standards could limit the ability to market our products in those regions which require compliance with such standards or subject us to fines and penalties.

Examples of such standards include laws governing the hazardous material content of our devices and products, such as the EU Directive 2011/65/EU relating to Restrictions on the Use of Certain Hazardous Substances “RoHS Directive, and the EU Directive 2012/19/EU on Waste Electrical and Electronic Equipment.

Examples of such standards include laws governing the hazardous material content of our devices and products, such as the EU Directive 2015/863 which is known as “RoHS 3” and that relates to Restrictions on the Use of Certain Hazardous Substances and the EU Directive 2012/19/EU on Waste Electrical and Electronic Equipment.

Similar laws and regulations have been passed or are pending in several other jurisdictions and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations.

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Our stock price has been and may continue to be volatile and an investment in our common stock could suffer a decline in value.

The trading price of our common stock has been subject to wide fluctuations in response to a variety of factors, some of which are beyond our control, including changes in foreign currency exchange rates, quarterly variations in our operating results, announcements by us or our competitors of new products or of significant clinical achievements, changes in market valuations of other similar companies in our industry and general market conditions.

During the fiscal year ended December 28, 2019 , the trading price of our common stock fluctuated from a low of $1.57 per share to a high of $5.61 per share.

During the fourth fiscal quarter ended December 28, 2019 , the trading price of our common stock fluctuated from $1.77 per share to a high of $2.57 per share.

results, announcements by us or our competitors of new products or of significant clinical achievements, changes in market valuations of other similar companies in our industry and general market conditions.

During the fourth quarter of fiscal year 2020, the trading price of our common stock fluctuated from a low of $1.

62 per share to a high of $2.

9 1 per share.

During the fiscal year 2020, the trading price of our common stock fluctuated from a low of $1.40 per share to a high of $3.64 per share.

On March 10, 2021, our stock price closed at $7.30 per share.

There can be no assurance that our common stock trading price will not suffer declines.

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Substantial sales by such investors could cause our stock price to decline.

Our directors, executive officers, current five percent or greater stockholders and affiliated entities together beneficially own a significant portion of our common stock outstanding as of December 28, 2019 .

Our directors, executive officers, current five percent or greater stockholders and affiliated entities together beneficially own a significant portion of our common stock outstanding.

Having such a concentration of ownership may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from seeking to acquire, a majority of our outstanding common stock or control of our board of directors through a proxy solicitation.

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Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

In the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.

In the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, that

our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.

Our charter documents, anti-takeover provisions of Delaware law, and contractual provisions could delay or prevent an acquisition or sale of our company.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business