What changed in IRIDEX CORP's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of IRIDEX CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+250 added−110 removedSource: 10-K (2023-03-09) vs 10-K (2022-03-15)
Top changes in IRIDEX CORP's 2023 10-K
250 paragraphs added · 110 removed · 104 edited across 1 sections
- Item 1A. Risk Factors+250 / −110 · 104 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
104 edited+146 added−6 removed189 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
104 edited+146 added−6 removed189 unchanged
2022 filing
2023 filing
Biggest changeWe face quality control and other production issues that could materially and adversely impact our sales and financial results and the acceptance of our products. The manufacture of our infrared and visible laser consoles and related delivery devices is a highly complex and precise process. We may experience manufacturing difficulties, quality control issues or assembly constraints.
Biggest changeThe manufacture of our infrared and visible laser consoles and related delivery devices is a highly complex and precise process. We may experience manufacturing difficulties, quality control issues or assembly constraints. 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.
On March 2, 2021, we entered into a series of strategic transactions with Topcon, Topcon America Corporation (the “Investor”) and Topcon Medical Laser Systems, Inc., a subsidiary of Topcon ( “TMLS”), which included an asset purchase agreement with the TMLS, pursuant to which we acquired substantially all the assets (except for cash and cash equivalents) of the TMLS, including rights to the PASCAL product (as defined in Note 3 of the Notes to Consolidated Financial Statements) (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”).
On March 2, 2021, we entered into a series of strategic transactions with Topcon, Topcon America Corporation (the “Investor”) and Topcon Medical Laser Systems, Inc., a subsidiary of Topcon (“TMLS”), which included an asset purchase agreement with TMLS, pursuant to which we acquired substantially all the assets (except for cash and cash equivalents) of TMLS, including rights to the PASCAL product (as defined in Note 3 of the Notes to Consolidated Financial Statements) (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 TMLS’ assets including the rights to the PASCAL product (the “Transferred Assets”). We assumed only those liabilities arising after the closing in connection with the Transferred Assets.
Pursuant to the Asset Purchase Agreement, the transferred assets include substantially all of TMLS' assets including the rights to the 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 TMLS made certain customary representations and warranties and agreed to certain customary covenants. The Agreement provides that our company and the TMLS 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.
In the Asset Purchase Agreement, our company and TMLS made certain customary representations and warranties and agreed to certain customary covenants. The Agreement provides that our company and TMLS 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.
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 and our PASCAL product; 21 • recommendations and opinions by ophthalmologists, other clinicians, and their associated opinion leaders; • marketing and clinical study outcomes; • price of our products and prices of competing products and technologies, particularly in light of the current macro-economic environment where healthcare systems and healthcare operators are becoming increasingly price sensitive; • availability of competing products, technologies and alternative treatments; and • level of reimbursement for treatments administered with our products.
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, and our PASCAL product; • recommendations and opinions by ophthalmologists, other clinicians, and their associated opinion leaders; • marketing and clinical study outcomes; • price of our products and prices of competing products and technologies, particularly in light of the current macro-economic environment where healthcare systems and healthcare operators are becoming increasingly price sensitive; • availability of competing products, technologies and alternative treatments; and • level of reimbursement for treatments administered with our products.
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 COVID-19 pandemic has and may continue to cause adverse impacts on global economic activity which could negatively impact our business.
Concerns about consumer and investor confidence, volatile corporate profits and reduced capital spending, international conflicts, terrorist and military activity, civil unrest and pandemic-related illness could reduce customer orders or cause customer order cancellations. For example, the COVID-19 pandemic has and may continue to cause adverse impacts on global economic activity which could negatively impact our business.
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. 26 If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.
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. If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.
In addition, political and social turmoil related to international conflicts, such as that occurring in Russia and Ukraine, and terrorist acts may put further pressure on economic conditions in the United States and abroad. Weak economic conditions and declines in consumer spending and consumption may harm our operating results. Purchases of our products are often discretionary.
In addition, political and social turmoil related to international conflicts, such as that 23 occurring in Russia and Ukraine, and terrorist acts may put further pressure on economic conditions in the United States and abroad. Weak economic conditions and declines in consumer spending and consumption may harm our operating results. Purchases of our products are often discretionary.
If our revenue grows more slowly than we expect because of a delay in or a lack of market acceptance for our updated LIO, our business and financials will be adversely affected. 29 If product liability claims are successfully asserted against us, we may incur substantial liabilities that may adversely affect our business or results of operations.
If our revenue grows more slowly than we expect because of a delay in or a lack of market acceptance for our updated LIO, our business and financials will be adversely affected. If product liability claims are successfully asserted against us, we may incur substantial liabilities that may adversely affect our business or results of operations.
There could be a number of follow-on 20 effects from economic uncertainty on our business, including insolvency of key suppliers resulting in product delays, delays in customer payments of outstanding accounts receivable and/or customer insolvencies, counterparty failures negatively impacting our operations, and increasing expense or inability to obtain future financing.
There could be a number of follow-on effects from economic uncertainty on our business, including insolvency of key suppliers resulting in product delays, delays in customer payments of outstanding accounts receivable and/or customer insolvencies, counterparty failures negatively impacting our operations, and increasing expense or inability to obtain future financing.
Companies in the medical device industry have employed intellectual property litigation to gain a competitive advantage. 24 Numerous patents are held by others, including academic institutions and our competitors. Patent applications filed in the United States generally will be published eighteen months after the filing date.
Companies in the medical device industry have employed intellectual property litigation to gain a competitive advantage. Numerous patents are held by others, including academic institutions and our competitors. Patent applications filed in the United States generally will be published eighteen months after the filing date.
In addition, to maintain our gross margins we must continue to reduce the manufacturing cost of our products. If we cannot maintain our gross margins our business could be seriously harmed, particularly if the average selling price of our products decreases significantly without a corresponding increase in sales. Our promotional practices are subject to extensive government scrutiny.
In addition, to maintain our gross margins we must continue to reduce the manufacturing cost of our products. If we cannot maintain our gross margins our business could be seriously harmed, particularly if the average selling price of our products decreases significantly without a corresponding increase in sales. 27 Our promotional practices are subject to extensive government scrutiny.
Under the FD&C Act and the related regulations, the FDA regulates the design, development, clinical testing, manufacture, labeling, sale, distribution and promotion of medical devices. Before a new device can be introduced into the market, the product must be shown to meet regulatory requirements established by the FD&C Act and implemented by the FDA.
Under the FD&C Act and the related regulations, the FDA regulates the design, development, clinical 30 testing, manufacture, labeling, sale, distribution and promotion of medical devices. Before a new device can be introduced into the market, the product must be shown to meet regulatory requirements established by the FD&C Act and implemented by 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 27 Commission has jurisdiction over the advertising of all our products, which 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.
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.
Although the magnitude of the impact of the COVID-19 pandemic 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.
Any significant decline in market acceptance of our products or services or our revenues associated therewith may have a material adverse effect on our business, results of operations and financial condition. We face strong competition in our markets and expect the level of competition to grow in the foreseeable future.
Any significant decline in market acceptance of our products or our revenues associated therewith may have a material adverse effect on our business, results of operations and financial condition. We face strong competition in our markets and expect the level of competition to grow in the foreseeable future.
We generally grant our distributors exclusive territories for the sale of our 18 products in specified countries and regions . The amount and timing of resources dedicated by our distributors to the sales of our products is not within our control. Our international sales are largely dependent on the efforts of these third parties.
We generally grant our distributors exclusive territories for the sale of our products in specified countries and regions. The amount and timing of resources dedicated by our distributors to the sales of our products is not within our control. Our international sales are largely dependent on the efforts of these third parties.
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 22 regulation may have on us.
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.
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; 15 • compliance with product liability claims; • developments in trade policies; • tax laws; • federal, state and foreign laws, including changes to those laws; and • environmental requirements.
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; 18 • regulatory approval for clinical trials; • compliance with product liability claims; • developments in trade policies; • tax laws; • federal, state and foreign laws, including changes to those laws; and • environmental requirements.
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. 30 We are subject to federal, state and foreign laws governing our business practices which, if violated, could result in substantial penalties.
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. 34 We are subject to federal, state and foreign laws governing our business practices which, if violated, could result in substantial penalties.
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; • product and production issues; • performance of our international channel of distributors; • longer accounts receivable collection periods; • impact of recessions in global economies and availability of credit; • political and economic instability; • change in international regulatory agreements and requirements ; • trade sanctions and embargoes; • impact of international conflicts, terrorist and military activity, civil unrest; • foreign certification requirements, including continued ability to use the CE mark in Europe, and other local regulatory requirements; 19 • differing local product preferences and product requirements; • cultural differences; • changes in foreign medical reimbursement and coverage policies and programs; • reduced or limited protections of intellectual property rights in jurisdictions outside the United States; • potentially adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations; • protectionist, adverse and changing foreign governmental laws and regulations; • greater risk of our employees failing to comply with both U.S. and foreign laws, including anti-trust regulations, the U.S.
Our international operations and sales are subject to a number of risks and potential costs, including: • macroeconomic conditions, including the impact of the COVID-19 pandemic on the global economy and financial markets; • fluctuations in foreign currency exchange rates; • product and production issues; • performance of our international channel of distributors; • longer accounts receivable collection periods; • impact of recessions in global economies and availability of credit; • political and economic instability; • change in international regulatory agreements and requirements; • trade sanctions and embargoes; 22 • impact of international conflicts, terrorist and military activity, civil unrest; • foreign certification requirements, including continued ability to use the “CE” mark in Europe, and other local regulatory requirements; • differing local product preferences and product requirements; • cultural differences; • changes in foreign medical reimbursement and coverage policies and programs; • reduced or limited protections of intellectual property rights in jurisdictions outside the United States; • potentially adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations; • protectionist, adverse and changing foreign governmental laws and regulations; • greater risk of our employees failing to comply with both U.S. and foreign laws, including anti-trust regulations, the U.S.
As a result of our growth, our operating costs may escalate even faster than planned, and some of our internal systems may need to be enhanced or replaced.
As a result, our operating costs may escalate even faster than planned, and some of our internal systems may need to be enhanced or replaced.
Changes in U.S. tax laws could have a material adverse effect on our business, cash flow, results of operations or financial conditions.
Changes in U.S. tax laws could have a material adverse effect on our business, consolidated cash flow, results of operations or financial conditions.
Operational factors • our relationship with our strategic partner and main distributor, Topcon; • 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; • our growth; • 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; and • recalls of our products.
Operational factors • the success of our relationship with our strategic partner and main distributor Topcon; • quality control and production issues; • the complexity of our laser systems; • defects in our laser systems; • direct and independent sales forces and a network of international distributors to sell our products; • our growth; • 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; • costs, sales volumes, results of operations, and revenues; • the loss of key personnel; • meeting product demand; • dependence on sole source and limited source suppliers; • catastrophic loss; • 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; and • managing growth effectively.
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, ambulatory surgery centers, government affiliated groups and group purchasing organizations.
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, ambulatory surgical centers, government affiliated groups and group purchasing organizations.
Among other things, Congress has in the past proposed changes to and the repeal of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, collectively, the “Affordable Care Act,” and the current U.S. presidential administration has announced certain policy changes that could impact the availability of benefits under the Affordable Care Act.
Among other things, Congress has in the past proposed changes to and the repeal of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, collectively, the “Affordable Care Act”, and the current U.S. presidential administration has announced certain policy changes that could impact the availability of benefits under the Affordable Care Act.
Factors contributing to these fluctuations include the following: • general economic uncertainties, inflationary pressures and political concerns, including the impact of COVID-19 and the war between Russia and Ukraine; • changes in the prices at which we can sell our products, including the impact of changes in exchange rates; • 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; • any delays or reductions in product shipments, or product recalls, resulting from manufacturing, distribution or other operational issues; • the timing of the introduction and market acceptance of new products, product enhancements and new applications; • changes in demand for our existing line of ophthalmology products; • the cost and availability of components and subassemblies, including the willingness and ability of our sole or limited source suppliers to timely deliver components at the times and prices that we have planned; • our ability to maintain sales volumes at a level sufficient to cover fixed manufacturing and operating costs; • fluctuations in our product mix within ophthalmology products and foreign and domestic sales; • the effect of regulatory approvals and changes in domestic and foreign regulatory requirements; • our long and highly variable sales cycle; • changes in customers’ or potential customers’ budgets as a result of, among other things, reimbursement policies of government programs and private insurers for treatments that use our products; • variances in shipment volumes as a result of product, supply chain due to global constraints or other factors and training issues; and • increased product innovation costs.
Factors contributing to these fluctuations include the following: • general macroeconomic conditions, including inflationary pressures and political concerns, rising interest rates, the impact of the COVID-19 pandemic, and the war between Russia and Ukraine; • changes in the prices at which we can sell our products, including the impact of changes in exchange rates; • 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; • any delays or reductions in product shipments, or product recalls, resulting from manufacturing, distribution or other operational issues; • the timing of the introduction and market acceptance of new products, product enhancements and new applications; • changes in demand for our existing line of ophthalmology products; • the cost and availability of components and subassemblies, including the willingness and ability of our sole or limited source suppliers to timely deliver components at the times and prices that we have planned; • our ability to maintain sales volumes at a level sufficient to cover fixed manufacturing and operating costs; • fluctuations in our product mix within ophthalmology products and foreign and domestic sales; • the effect of regulatory approvals and changes in domestic and foreign regulatory requirements; • our long and highly variable sales cycle; • changes in customers’ or potential customers’ budgets as a result of, among other things, reimbursement policies of government programs and private insurers for treatments that use our products; • variances in shipment volumes as a result of product, supply chain due to global constraints or other factors and training issues; and • increased product innovation costs.
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.
The ultimate impact of the volatile macroeconomic conditions, including 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 COVID-19 pandemic (including restrictions on travel and transport and workforce pressures); the impact of the COVID-19 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 current volatile macroeconomic conditions, including the impact of the COVID-19 pandemic, subside.
There are risks associated with the use of independent manufacturers, including the following: • 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; • failure of suppliers to manufacture and assemble components and products to our specifications, and potentially reduced quality; and • inability to obtain components and products in a timely manner or at acceptable prices due to global supply chain constraints or other factors.
There are risks associated with the use of independent manufacturers, including the following: • the impact of macroeconomic conditions, including the COVID-19 pandemic and inflationary pressures 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; • failure of suppliers to manufacture and assemble components and products to our specifications, and potentially reduced quality; and • inability to obtain components and products in a timely manner or at acceptable prices due to global supply chain constraints or other factors.
All of our international revenues and costs for the fiscal year 2021 have been denominated in U.S. dollars except for sales transacted through our German subsidiary.
All of our international revenues and costs for the fiscal year 2022 have been denominated in U.S. dollars except for sales transacted through our German subsidiary.
Our business, results of operation and financial performance have been negatively impacted by the COVID-19 pandemic and related public health responses, such as social distancing protocols, and travel restrictions in countries and regions in which we have operations or manufacturing partners.
Our business, results of operation and financial performance have been negatively impacted by the COVID-19 pandemic and related public health responses, such as travel restrictions in countries and regions in which we have operations or manufacturing partners.
Financing and transactional risks • our ability to repay indebtedness; • efforts to acquire additional companies or product lines; • divestitures of our businesses or product lines; • raising additional capital; and • provisions in our charter documents, Delaware law and contractual provisions that could delay or prevent an acquisition or sale of our company.
Financing and transactional risks • divestitures of our businesses or product lines; • efforts to acquire additional companies or product lines; • raising additional capital; and • provisions in our charter documents, Delaware law and contractual provisions that could delay or prevent an acquisition or sale of our company.
If the FDA disagrees, and requires new clearances or approvals for the modifications, we may be required to recall and to stop marketing the modified devices, which could harm our operating results and require us to redesign our products. Our products may be misused, which could harm our reputation and our business.
If the FDA disagrees, and requires new clearances or approvals for the modifications, we may be required to recall and to stop marketing the modified devices, which could harm our operating results and require us to redesign our products.
We compete by providing features and services that are valued by our customers such as: enhanced product performance and clinical outcomes, ease of use, durability, versatility, customer training services and rapid repair of equipment. 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.
We compete by providing features and services that are valued by our customers such as: enhanced product performance and clinical outcomes, ease of use, durability, versatility, customer training services and rapid repair of equipment. Our principal ophthalmic laser competitors are Alcon Inc., Novartis AG, Bausch Health Companies Inc., Carl Zeiss Meditec AG, Lumenis Ltd., Nidek Co. Ltd., Lumibird, and Norlase.
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 California v. Texas case) .
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 California v. Texas case). In June 2021, the U.S.
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.
We are unable to predict the extent to which the COVID-19 pandemic and related macroeconomic impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives .
We are subject to macro-economic fluctuations in the U.S. and worldwide economy including inflationary pressures that may cause the cost of manufacturing our products or servicing our products to increase.
We are subject to macroeconomic fluctuations in the U.S. and worldwide economy including inflationary pressures that may cause the cost of manufacturing our products or servicing our products to increase.
In addition, our research and development process has been delayed due to the impact of COVID-19, and should COVID-19 economic restrictions worsen, it could delay and disrupt our research and development processes even further.
In addition, our research and development process has been delayed due to the impact of the COVID-19 pandemic, and should the current economic conditions worsen, it could delay and disrupt our research and development processes even further.
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.
Risks Relating to our Business The current macroeconomic conditions, including the effects of the COVID-19 pandemic and efforts to mitigate its impact have disrupted, and may continue to 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 the COVID-19 pandemic, all of which have had and expected to continue to have a material and adverse effect on our business, future revenues and financial condition.
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.
In addition, our customers may delay, cancel or redirect planned capital expenditures in order to focus resources on COVID-19 or in response to macroeconomic disruption related to the COVID-19 pandemic.
Under the Sunshine Act, Centers for Medicare & Medicaid Services (“CMS”) has the potential to impose penalties of up to $1.15 million per year for violations, depending on the circumstances, although enforcement has been negligible to date.
Under the Sunshine Act, Centers for Medicare & Medicaid Services (“CMS”) has the potential to impose penalties of up to $1.26 million per year for violations, depending on the circumstances and adjusted annually for inflation, although enforcement has been negligible to date.
Unless otherwise exempt, a device manufacturer must obtain marketing “clearance” through the 510(k) premarket notification process, or “approval” through the lengthier premarket approval application (“PMA”) process. Not all devices are eligible for the 510(k) clearance process.
Unless otherwise exempt, a device manufacturer must obtain marketing “clearance” through the 510(k) premarket notification process, or “approval” through the lengthier premarket approval application (“PMA”) process or other processes such as the “de novo” process. Not all devices are eligible for the 510(k) clearance process.
Similarly, Switzerland has changed its relationship with the EU and in May 2022, will require medical device manufacturers such as Iridex to contract with a Swiss Authorized Representative.
Similarly, Switzerland has changed its relationship with the EU and in May 2022, will require medical device manufacturers, including us, to contract with a Swiss Authorized Representative.
If our facilities were to experience catastrophic loss, our operations would be seriously harmed. Our facilities could be subject to catastrophic loss such as fire, flood, unpredictable power outages, or earthquake. 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.
Our facilities could be subject to catastrophic loss such as fire, flood, unpredictable power outages, or earthquake. 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 earthquakes, catastrophic wildfires, and intermittent power outages.
Currently our direct and independent sales forces within the United States consist of approximately 23 employees and two independent representative, respectively and our direct sales force in Germany consists of one employee. Our international independent distributors are managed by a team of five people.
Currently our 21 direct and independent sales forces within the United States consist of approximately 28 employees and two independent representatives, respectively, and our direct sales force in Germany consists of one employee. Our international independent distributors are managed by a team of seven people.
We cannot assure you that we will be successful in managing these or any other significant risks that we encounter in divesting a business or product line, and any divestiture we undertake could materially and adversely affect our business, financial condition, results of operations and cash flows, and may also result in a diversion of management attention, operational difficulties and losses. 31 If we fail to comply with environmental requirements, our business, financial condition, operating results and reputation could be adversely affected.
We cannot assure you that we will be successful in managing these or any other significant risks that we encounter in divesting a business or product line, and any divestiture we undertake could materially and adversely affect our business, financial condition, results of operations and cash flows, and may also result in a diversion of management attention, operational difficulties and losses.
In addition, we may need to raise additional capital to replace the revenue generated from the business or product line that is divested and we can provide no assurance that such capital will be available or available on terms that are acceptable to us.
In addition, we may not realize the expected value from the divestiture of a business or 25 product lines and may need to raise additional capital to replace the revenue generated from the business or product line that is divested. We can provide no assurance that such capital will be available or available on terms that are acceptable to us.
In addition, our information technology systems are potentially vulnerable to cyber-attacks or other data security breaches-whether by employees or others-which may expose sensitive data to unauthorized persons.
In addition, our information technology systems and those of our third-party service providers are potentially vulnerable to cyber-attacks or other data security breaches-whether by employees or others-which may expose sensitive data to unauthorized persons.
We derive, and expect to continue to derive, a large portion of our revenues from international sales. For the fiscal year 2021, our international sales were $28.3 million, or 52.6% of total revenues. We anticipate that international sales will continue to account for a significant portion of our revenues in the foreseeable future.
We derive, and expect to continue to derive, a large portion of our revenues from international sales. For the fiscal year 2022, our international sales were $27.8 million, or 48.8% of total revenues. We anticipate that international sales will continue to account for a significant portion of our revenues in the foreseeable future.
Our success and ability to compete is dependent, in part, upon our proprietary information. We rely on a combination of patents, trade secrets, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our intellectual property rights. We file patent applications to protect technology, inventions and improvements that are significant to the development of our business.
We rely on patents and proprietary rights to protect our intellectual property and business. Our success and ability to compete is dependent, in part, upon our proprietary information. We rely on a combination of patents, trade secrets, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our intellectual property rights.
If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information.
If we are unable to, or perceived or reported to have been or be unable to, prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may be exposed to claims, demands, and litigation or governmental investigations and other proceedings and suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information.
An adverse determination in a judicial or administrative proceeding and failure to obtain necessary licenses or develop alternate technologies could prevent us from manufacturing and selling our products, which would have a material adverse effect on our business, results of operations and financial condition.
An adverse determination in a judicial or administrative proceeding and failure to obtain necessary licenses or develop alternate technologies could prevent us from manufacturing and selling our products, which would have a material adverse effect on our business, results of operations and financial condition. 28 If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired.
If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired. Our future success depends upon the continued service of our key management, technical, sales, and other critical personnel. Our officers and other key personnel are employees-at-will, and we cannot provide assurance that we will be able to retain them.
Our future success depends upon the continued service of our key management, technical, sales, and other critical personnel. Our officers and other key personnel are employees-at-will, and we cannot provide assurance that we will be able to retain them.
New environmental laws and regulations will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our devices and products or how they are manufactured, which could have a material adverse effect on our business, operating results and financial condition.
New environmental laws and regulations will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our devices and products or how they are manufactured, which could have a material adverse effect on our business, operating results and financial condition. 35 Risks Relating to Ownership of Our Common Stock Our stock price has been and may continue to be volatile and an investment in our common stock could suffer a decline in value.
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.
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.
We have increased and continue to increase our internal sales and marketing functions. This growth may place a significant strain on our management, operating and financial systems and our sales, marketing, training and administrative resources.
Growth in our sales and marketing organization may increase costs and create operational challenges without immediately offsetting benefits. We have increased and continue to increase our internal sales and marketing functions. This growth may place a strain on our management, operating and financial systems and our sales, marketing, training and administrative resources.
Additionally, our sales forces’ operations have been disrupted by the COVID-19 pandemic, as travel is restricted and some services are being performed from home, all of which could have an impact on our ability to sell and distribute our products. Growth in our sales and marketing organization may create operational challenges without immediately offsetting benefits.
Additionally, our sales forces’ operations have been disrupted by the COVID-19 pandemic, as travel is restricted and some services are being performed from home, either permanently or temporarily, all of which could have an impact on our ability to sell and distribute our products.
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 the near term, we expect COVID-19 will continue to negatively impact the use of our products and the number of ophthalmic treatments and procedures performed.
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 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.
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.
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. 32 As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting.
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.
We rely on information technology systems to keep financial records and corporate records, communicate with staff and external parties and operate other critical functions, including sales and manufacturing processes. Our information technology systems are potentially vulnerable to disruption due to breakdown or malicious intrusion and computer viruses.
We rely on information technology systems to keep financial records and corporate records, communicate with staff and external parties and operate other critical functions, including sales and manufacturing processes.
The COVID-19 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. 16 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.
The COVID-19 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.
During the fourth quarter of fiscal year 2021, the trading price of our common stock fluctuated from a low of $5.62 per share to a high of $9.37 per share. During the fiscal year 2021, the trading price of our common stock fluctuated from a low of $2.18 per share to a high of $9.37 per share.
During the fourth quarter of fiscal year 2022, the trading price of our common stock fluctuated from a low of $2.00 per share to a high of $2.63 per share. During the fiscal year 2022, the trading price of our common stock fluctuated from a low of $2.00 per share to a high of $6.42 per share.
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. We evaluate the performance and strategic fit of all of our businesses and may sell businesses or product lines.
Divestitures 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. We have two main businesses: glaucoma and retina, domestic and international operations within each and many product lines within the two businesses.
Our products are typically purchased by doctors, clinics, hospitals and other users, which bill various third-party payers, such as governmental programs and private insurance plans, for the health care services provided to their patients. Changes in government legislation or regulation or in private third-party payers’ policies toward reimbursement for procedures employing our products may prohibit adequate reimbursement.
Our operating results may be adversely affected by uncertainty regarding healthcare reform measures and changes in third-party coverage and reimbursement policies. Our products are typically purchased by doctors, clinics, hospitals and other users, which bill various third-party payers, such as governmental programs and private insurance plans, for the health care services provided to their patients.
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.
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. 26 If we fail to comply with healthcare laws, we could face substantial penalties and financial exposure, and our business, operations and financial condition could be adversely affected.
The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by existing investors.
The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by existing investors. If we fail to comply with environmental requirements, our business, financial condition, operating results and reputation could be adversely affected.
The failure to obtain any additional future clinical or commercial collaborations and the resulting failure or success of such collaboration relationships could have a material adverse effect on our ability to introduce new products or applications and therefore could have a material adverse effect on our business, results of operations and financial condition. 23 If we cannot increase our sales volumes, reduce our costs or introduce higher margin products to offset potential reductions in the average unit price of our products, our operating results may suffer.
The failure to obtain any additional future clinical or commercial collaborations and the resulting failure or success of such collaboration relationships could have a material adverse effect on our ability to introduce new products or applications and therefore could have a material adverse effect on our business, results of operations and financial condition.
Risk 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; • the success of our partnership with Topcon: and • natural disasters, economic downturns, public health crises or political crises.
Item 1A. 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 • Current macroeconomic conditions, including related uncertainties and the COVID-19 pandemic and responsive measures.
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.
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. 29 If our facilities were to experience catastrophic loss, our operations would be seriously harmed.
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. 28 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.
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.
The physicians who operate our products are responsible for their use and the treatment regime for each individual patient. In addition, non-physicians, particularly in countries outside of the United States, or poorly trained or inexperienced physicians, may make use of our products.
In addition, non-physicians, particularly in countries outside of the United States, or poorly trained or inexperienced physicians, may make use of our products.
Some of our principal pharmaceutical competitors are Alcon, Inc., Allergan, Inc., Astellas Pharma Inc., Pfizer Inc., Regeneron Pharmaceuticals, Inc., Roche Holdings Ltd. (Genentech) and Bausch Health Companies Inc. Some of our competitors have substantially greater financial, engineering, product development, manufacturing, marketing and technical resources than we do. Some companies also have greater name recognition than us and long-standing customer relationships.
Some of our competitors have substantially greater financial, engineering, product development, manufacturing, marketing and technical resources than we do. Some companies also have greater name recognition than us and long-standing customer relationships.
Our technologies and products could be rendered obsolete by such developments. Any such developments could have a material adverse effect on our business, financial condition and results of operations. Our operating results may be adversely affected by uncertainty regarding healthcare reform measures and changes in third-party coverage and reimbursement policies.
Our technologies and products could be rendered obsolete by such developments. Any such developments could have a material adverse effect on our business, financial condition and results of operations.
Key personnel have left our company in the past, and there likely will be additional departures of key personnel from time to time in the future.
Key personnel have left our company in the past, and there likely will be additional departures of key personnel from time to time in the future. Additionally, our common stock is currently trading at a price below the exercise price of many of our outstanding options.
The laser performance standard imposes specific record-keeping, reporting, product testing and product labeling requirements. These requirements include affixing warning labels to laser products, as well as incorporating certain safety features in the design of laser products. The FDA enforces the QSR and laser performance standards through periodic unannounced inspections.
Because our products involve the use of lasers, our products also are covered by a performance standard for lasers set forth in FDA regulations. The laser performance standard imposes specific record-keeping, reporting, product testing and product labeling requirements. These requirements include affixing warning labels to laser products, as well as incorporating certain safety features in the design of laser products.
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. A successful claim brought against us in excess of our insurance coverage could have a material adverse effect on our business, results of operations and financial condition.
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.
As a result, Canada, the EU, China and other countries responded with retaliatory tariffs on certain United States exports. We cannot predict the effect these and potential additional tariffs will have on our business, including in the context of escalating trade tensions.
We cannot predict the effect these and potential additional tariffs will have on our business, including in the context of escalating trade tensions.
Significant developments resulting from recent and potential changes in U.S. trade policies could have a material adverse effect on us. Certain of our materials may be subject to the effects of various trade agreements, treaties and tariffs. The prior U.S. presidential administration has imposed tariffs on various goods from various countries, including China, Canada and the European Union (“EU”).
Any failure to effectively manage future growth could have a material adverse effect on our business, results of operations and financial condition. Significant developments resulting from recent and potential changes in U.S. trade policies could have a material adverse effect on us. Certain of our materials may be subject to the effects of various trade agreements, treaties and tariffs.
We market and sell our products for use by highly skilled physicians with specialized training and experience in the treatment of eye-related disorders. We, and our distributors, generally offer but do not require purchasers or operators of our products to attend training sessions, nor do we supervise the procedures performed with our products.
We, and our distributors, generally offer but do not require purchasers or operators of our products to attend training sessions, nor do we supervise the procedures performed with our products. The physicians who operate our products are responsible for their use and the treatment regime for each individual patient.
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