IRIDEX CORP 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on management’s evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of January 2, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even any effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of any internal control may vary over time. Our management assessed the effectiveness of the company’s internal control over financial reporting as of January 2, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment using those criteria, our management concluded that, as of January 2, 2021, our internal control over financial reporting is effective. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our independent registered public accounting firm. Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act. Inherent Limitations on Effectiveness of Controls Our management, including our Principal Executive Officer and Principal Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Item 9B. Other Information Not applicable. 68 PART III Certain information required by Part III has been omitted from this Form 10-K. This information is instead incorporated herein by reference to our definitive Proxy Statement, which we will file within 120 days after the end of our fiscal year pursuant to Regulation 14A in time for our Annual Meeting of Stockholders to be held in 2021. Item 10. Directors, Executive Officers and Corporate Governance The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our 2021 Annual Meeting of Stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended January 2, 2021 and is incorporated in this report by reference . Item 11. Executive Compensation The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. 69 P ART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed in Part II of this Annual Report on Form 10-K: Page in Form 10-K Report 1 . Index to Financial Statements Report of Independent Registered Public Accounting Firm 43 Consolidated Balance Sheets as of January 2, 2021 and December 28, 2019 45 Consolidated Statements of Operations for the years ended January 2, 2021 and December 28, 2019 46 Consolidated Statements of Comprehensive Loss for the years ended January 2, 2021 and December 28, 2019 47 Consolidated Statements of Stockholders’Equity for the years ended January 2, 2021 and December 28, 2019 48 Consolidated Statements of Cash Flows for the years ended January 2, 2021 and December 28, 2019 49 Notes to Consolidated Financial Statements 50 2 . Financial Statement Schedule Schedules have been omitted because they are either not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto. 3 . Exhibits Exhibit Index Exhibits Exhibit Title 3.1(1) (P) Amended and Restated Certificate of Incorporation of Registrant. 3.2(2) Amended and Restated Bylaws of Registrant. 4.1(3) Investor Rights Agreement, dated as of August 31, 2007, by and among the Registrant, BlueLine Capital Partners, LP; BlueLine Capital Partners III, LP and BlueLine Capital Partners II, LP. 4.2(4) Amendment No. 1 to Investor Rights Agreement, dated as of March 31, 2009. 4.3(25) Description of Capital Stock. 10.1(17) Fourth Amendment to Lease Agreement dated February 9, 2016 by and between Zappettini Investment Co. and the Registrant. 10.2(19) Form of Indemnification Agreement with directors and officers. 10.3(5) Lease Agreement dated December 6, 1996 by and between Zappettini Investment Co. and the Registrant, as amended pursuant to Amendment No. 1 dated September 15, 2003 and Amendment No. 2 dated December 22, 2008. 10.3.1(13) Third Amendment to Lease Agreement dated August 4, 2014 by and between Zappettini Investment Co. and the Registrant. 10.3.2(21) Fourth Amendment to Lease Agreement dated January 31, 2016 by and between ZIC 12112 Terra Bella LLC and the Registrant. 10.3.3(22) Triple Net Lease dated April 26, 2017 by and between ZIC 12112 Terra Bella LLC and the Registrant. 10.6(8)* 2005 Employee Stock Purchase Plan. 10.7(9)* 2008 Equity Incentive Plan, as amended. 10.8(10)* Form of 2008 Equity Incentive Plan Option Agreement. 10.9(11)* Form of Stand-Alone Stock Option Agreement. 10.10(3) Securities Purchase Agreement, dated August 31, 2007, by and among BlueLine Capital Partners, LP, BlueLine Capital Partners III, LP, BlueLine Capital Partners II, LP and the Registrant. 10.11(12)* Form of 2008 Equity Incentive Plan Restricted Stock Award Agreement. 70 Exhibits Exhibit Title 10.12(12)* Form of 2008 Equity Incentive Plan Restricted Stock Unit Award Agreement. 10.13(14)* Restricted Stock Unit Award Agreement granted to William M. Moore under the Company’s 2008 Equity Incentive Plan, as amended. 10.14(15)* Restricted Stock Unit Award Agreement granted to William M. Moore under the Company’s 2008 Equity Incentive Plan, as amended. 10.15(16)* Change in Control Severance Agreement dated March 30, 2015, between the Registrant and William M. Moore. 10.16(18)* Change in Control Severance Agreement dated as of December 6, 2017 by and between the Company and George Marcellino 10.17(19)* Offer Letter between the Company and Mr. Mokari effective as of May 13, 2016. 10.18(19)* Change in Control Severance Agreement, between the Company and Mr. Mokari . 10.19(20) Loan and Security Agreement, dated as of November 2, 2016, between IRIDEX Corporation and Silicon Valley Bank. 10.19.1(25) First Amendment to Loan and Security Agreement between IRIDEX Corporation and Silicon Valley Bank, executed on December 3, 2019. 10.19.2(25) Second Amendment to Loan and Security Agreement between IRIDEX Corporation and Silicon Valley Bank, executed on January 8, 2020. 10.19.3 Third Amendment to Loan and Security Agreement between IRIDEX Corporation and Silicon Valley Bank, executed on December 31, 2020. 10.20(23)* Offer Letter between the Company and Mr. Bruce effective as of May 20, 2019. 10.21(24)* Change in Control Severance Agreement dated as of October 25, 2019, between the Company and Mr. Bruce. 10.22(24)* Change in Control Severance Agreement dated as of October 25, 2019, between the Company and Mr. Mercer. 21.1 (1) (P) Subsidiaries of Registrant 23.1 Consent of BPM LLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on signature page). 31.1 Certification of Principal Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Principal Executive and Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. * Indicates a management contract or compensatory plan or arrangement. (1) Incorporated by reference to the Exhibits filed with the Registration Statement on Form SB-2 (No. 333-00320-LA) which was declared effective on February 15, 1996. 71 (2) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 8-K on April 1, 2019. (3) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 8-K on September 7, 2007. (4) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 8-K on April 6, 2009. (5) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 10-K for the year ended January 3, 2009. (8) Incorporated by reference to the appendix filed with the Registrant’s Proxy Statement for the Registrant’s 2004 Annual Meeting of Stockholders which was filed on April 30, 2004. (9 ) Incorporated by reference to the appendix filed with the Registrant’s Proxy Statement for the Registrant’s 2019 Annual Meeting of Stockholders which was filed on June 12, 2019. ( 10 ) Incorporated by reference to Exhibit 99.1 filed with Registrant’s Registration Statement on Form S-8 on November 21, 2008. (1 1 ) Incorporated by reference to Exhibit 99.(d)(5) filed with the Registration Statement on Form SC TO-I July 30, 2009. ( 1 2 ) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 10-Q for the quarter ended July 2, 2011. ( 13 ) Incorporated by reference to the Exhibit 10.1 filed with the Registrant’s Report on Form 10-Q filed on November 3, 2014. (14) Incorporated by reference to the Exhibit 10.1 filed with the Registrant’s Report on Form 8-K on March 27, 2013. ( 15 ) Incorporated by reference to the Exhibit 10.1 filed with the Registrant’s Report on Form 8-K on January 9, 2014. ( 16 ) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 10-Q on May 12, 2015. ( 17 ) Incorporated by reference to the Exhibit 10.1 filed with the Registrant’s Report on Form 10-K on March 31, 2016. ( 18 ) Incorporated by reference to the Exhibit 10.1 filed with the Registrant’s Report on Form 8-K on December 6, 2017. ( 19 ) Incorporated by reference to the Exhibits filed with the Registrant’s Report on Form 8-K on July 11, 2016, ( 20 ) Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Report on Form 8-K on November 3, 2016. ( 21 ) Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Report on Form 10-K on March 31, 2016. ( 22 ) Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Report on Form 8-K on May 1, 2017. ( 23 ) Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Report on Form 8-K/A on June 14, 2019. ( 24 ) Incorporated by reference to Exhibits filed with the Registrant’s Report on Form 8-K on October 28, 2019. (25) Incorporated by reference to Exhibits filed with the Registrant’s Report on Form 10-K on March 13, 2020. (P) Print filing. Trademark Acknowledgments IRIDEX, the IRIDEX logo, IRIS Medical, MicroPulse, OcuLight, EndoProbe, MicroPulse P3, G-Probe, G-Probe Illuminate, TruFocus LIO Premiere, IQ 577, IQ532, Cyclo G6, and TxCell are our registered trademarks. All other trademarks or trade names appearing in this Annual Report on Form 10-K are the property of their respective owners. 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Mountain View, State of California, on the 23rd day of March 2021. IRIDEX CORPORATION By: /s/ David I. Bruce David I. Bruce President and Chief Executive Officer /s/ Fuad Ahmad Fuad Ahmad Interim Chief Financial Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David I. Bruce and Fuad Ahmad, jointly and severally, their attorney-in-fact, each with full power of substitution, for him in any and all capacities, to sign on behalf of the undersigned any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and each of the undersigned does hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ David I. Bruce President and Chief Executive Officer March 23, 2021 (David I. Bruce) (Principal Executive Officer) /s/ Fuad Ahmad Interim Chief Financial Officer March 23, 2021 (Fuad Ahmad) (Principal Financial Officer) /s/ Robert Gunst Chairman of the Board March 23, 2021 (Robert Gunst) /s/ Doris Engibous Director March 23, 2021 (Doris Engibous) /s/ Robert Grove Director March 23, 2021 (Robert Grove) /s/ Kenneth E. Ludlum Director March 23, 2021 (Kenneth E. Ludlum) /s/ (Scott Shuda) Director March 23, 2021 (Scott Shuda) 73