Financial Analysis

11. Leases and Commitments and Contingencies Operating Leases We lease our main operating facility in Mountain View, California, under a non-cancelable operating lease through August 31, 2026 . There are no further options or rights to extend the term of this lease. Our other operating lease commitments consist of facility and office equipment leases. Operating lease expense was $ 1.1 million for both fiscal years ended January 3, 2026 and December 28, 2024 . Cash paid for operating leases totaled $ 1.2 million and $ 1.1 million, respectively for fiscal years 2025 and 2024. As of January 3, 2026 , the weighted average discount rate used in calculating the present value of lease payments was 5.5 % and the remaining lease term for our operating leases was 1.1 years. The following represents maturities of operating lease liabilities as of January 3, 2026 (in thousands): Fiscal Year Operating Lease Payments 2026 720 2027 50 2028 46 2029 10 Total lease payments 826 Less: Imputed interest ( 29 ) Total lease liabilities 797 Non-current portion of lease liabilities ( 98 ) Current portion of lease liabilities $ 699 Purchase Commitments. Our purchase commitments consist primarily of non-cancellable purchase orders with vendors to manufacture certain components and ophthalmic instruments. As of January 3, 2026 , our future minimum payments through fiscal year 2028 for our purchase commitments were approximately $ 24.8 million, with $ 24.6 million committed for the next 12 months. Licens …

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10. Convertible Preferred Shares and Convertible Debt On March 18, 2025, the Company filed a Certificate of Designation, Preferences and Rights of the Series B Preferred Stock (the Series B Certificate of Designation) authorizing the Company to issue up to 1,000,000 shares of authorized undesignated preferred stock as shares of Series B Preferred stock, par value $ 0.01 per share (the Series B Preferred Stock). At the Companys annual meeting of stockholders held on June 11, 2025 (the Annual Meeting), the Companys stockholders approved an amendment and restatement of the Companys Amended and Restated Certificate of Incorporation (the Charter) in the form of the Amended and Restated Certificate of Incorporation (the Restated Charter) which, among other matters, authorized 1,000,000 shares are designated as Series B Preferred Stock and 1,000,000 shares of undesignated preferred stock, for a total of 2,000,000 shares of preferred stock and reestablished the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the preferred stock, including the Company s Series B Preferred Stock, which, with respect to the Series B Preferred Stock and except as noted in the Companys definitive proxy statement filed with the SEC on April 28, 2025 as supplemented by its definitive additional materials filed with the SEC on May 20, 2025 and June 2, 2025, are substantially the same rights for the Series B Preferred Stock as are …

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4. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable dat …

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"14. Income Taxes Loss from operations before provision for income taxes was comprised of the following (in thousands): Year Ended Year Ended January 3, 2026 December 28, 2024 United States $ ( 5,050 ) $ ( 8,679 ) Foreign 670 ( 163 ) Total $ ( 4,380 ) $ ( 8,842 ) The provision for income taxes includes (in thousands): Year Ended Year Ended January 3, 2026 December 28, 2024 Current: Federal $ $ State 6 5 Foreign 50 60 56 65 Deferred: Federal 1 State 1 2 1 3 Provision for income taxes $ 57 $ 68 The Companys effective tax rate differs from the statutory federal income tax rate as shown in the following schedule: Year Ended Year Ended January 3, 2026 December 28, 2024 Amount Percent Amount Percent Income taxes at statutory federal rate ( 921 ) 21.0 % ( 1,857 ) 21.0 % State and local taxes, net of federal income tax effect* 6 ( 0.1 )% 7 ( 0.1 )% Foreign tax effects Germany Change in valuation allowance ( 58 ) 1.3 % ( 10 ) 0.1 % Other 43 ( 1.0 )% 63 ( 0.7 )% Elimination ( 74 ) 1.7 % 41 ( 0.5 )% Effect of cross-border tax laws Global intangible low-taxed income 31 ( 0.7 )% 41 ( 0.5 )% Nontaxable or nondeductible items Other 25 ( 0.6 )% 25 ( 0.2 )% Stock-based compensation ( 10 ) 0.2 % ( 152 ) 1.7 % Excess Tax (Benefit) or Deficit on Stock Awards 202 ( 4.6 )% 431 ( 4.9 )% Interest and premium related to Convertible Debt 324 ( 7.4 )% Change in valuation allowance 469 ( 10.7 )% 1,461 ( 16.5 )% Tax Credits ( 0.6 )% R&D Credit 57 ( 1.3 )% 54 Changes in unrecognized tax benefits ( 23 …

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Recently Adopted Accounting Standards In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09 Income Taxes (Topics 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Companys annual periods after December 15, 2024. The Company adopted this ASU during the fourth quarter of fiscal year 2025. The adopted ASU had no material impact on the Company's consolidated financial statements as it only impacted disclosures. Recent Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU 2024-03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. This update will be effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. As this accounting standard only impacts disclosures, it will not have a material impact on the Companys consolidated financial statements. In July 2025 , the FASB issued ASU 2025-05 Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, providing a practical expedient availa …

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13. Employee Benefit Plan We have a plan known as the Iridex Corporation Profit Sharing/401(k) Plan to provide retirement benefits through the deferred salary deductions for substantially all U.S. employees. Employees may contribute up to 15 % of their annual compensation to the plan, limited to a maximum amount set by the Internal Revenue Se rvice. The plan also provides for Company contributions at the discretion of the Company. In the years ended January 3, 2026 and December 28, 2024, the Company made $ 0.2 million wo rth of total matching contributions in each period.

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3. Related Party - Topcon As of January 3, 2026, Topcon holds a 9.3 % voting interest in the Company. It currently does not have significant influence over the Companys operations. Topcon resells certain of our products as our exclusive distributor in certain international regions. At the same time, the Company also purchases certain raw materials from Topcon. During fiscal year 2025 , the Companys revenues related to Topcon amounted to approximately $ 17.0 million, including $ 1.5 million recognized as exclusive distribution rights revenue. During fiscal year 2024 , the Companys revenues related to Topcon amounted to approximately $ 16.3 million, including $ 1.5 million recognized exclusive distribution rights revenue. The Companys purchases from Topcon during fiscal year 2025 and 2024 amounte d to $ 0.6 million and $ 1.0 million, respectively. As of January 3, 2026, the amounts receivable from and payable to Topcon were $ 1.9 million and $ 0.1 million, respectively. As of December 28, 2024 , the amounts receivable from and payable to Topcon were $ 2.5 million and $ 0.6 million, respectively. …

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15. Business Segments and Geographical Information The Company's chief operating decision maker has been identified as the chief executive officer , who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. For the purpose of internal reporting and managements operation review, the Company's chief executive officer and management personnel do not segregate the Groups business by revenue stream or geography. Management has determined that the Company has one operating segment, ophthalmology. The measure of segment assets is reported on the Consolidated Balance Sheets as total consolidated assets. The revenue, costs and expenses, and the net income for the reportable segment are the same as those presented on the Consolidated Statements of Operations. Substantially all of our long-term assets are located in the U.S. We develop, manufacture and market medical devices. Our revenues arise from the sale of consoles, delivery devices, consumables, service and support activities. Revenue information shown by product is as follows (in thousands): Year Ended January 3, 2026 December 28, 2024 Cyclo G6 $ 13,843 $ 12,697 Retina 30,280 27,827 Other(1) 8,552 8,145 Total revenues $ 52,675 $ 48,669 (1) In cludes service contract revenues of $ 1.3 million and $ 1.4 million recognized during fiscal years 2025 and 2024 , respectively. Includes $ 1.5 million recognized revenue related to the exclusive distribution rights during fis …

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"2. Summary of Significant Accounting Policies Financial Statement Presentation The consolidated financial statements include the accounts of Iridex and the Company's wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have reclassified certain prior period amounts to conform to current period presentation. The Company's fiscal year ends on the Saturday closest to December 31. Fiscal year 2025 ended on January 3, 2026 (fiscal year 2025), which had 53 weeks of operations. Fiscal 2024 ended on December 28, 2024 (fiscal year 2024 ), which had 52 weeks of operations. Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Companys operating results. Cas …

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12. Stockholders Equity 2008 Equity Incentive Plan. On June 11, 2008, the shareholders approved the adoption of the 2008 Equity Incentive Plan, (the Incentive Plan). There are no material changes in the Incentive Plan from the 1998 Stock Plan (the 1998 Plan). In 2014, 2017, 2018, 2019, 2021, 2023, and 2025 the stockholders approved an amendment to the Incentive Plan for purposes of complying with Section 162(m) of the Internal Revenue Code of 1986, as am ended, to increase the share reserve under the Incentive Plan, and to make certain other amendments to the terms of the Incentive Plan. The maximum aggregate number of shares that may be awarded and sold under the Incentive Plan, as amended, is 6,850,000 sh ares plus any shares subject to stock options or similar awards granted under the 1998 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 1998 Plan that are forfeited to us on or after February 23, 2008, which was the date the 1998 Plan expired. The following table represents the shares activity and the total number of shares available for grant under the Incentive Plan: Shares Available for Grant Balances as of December 30, 2023 332,993 Options granted ( 40,900 ) Restricted stock granted ( 862,869 ) Options cancelled or forfeited 1,104,104 Awards cancelled 46,109 Balances as of December 28, 2024 579,437 Shares added 1,000,000 Options granted ( 778,305 ) Restricted stock granted ( 264,387 ) O …

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17. Subsequent Events On March 9, 2026, IRIDEX Corporation (the Company) and SFIII Hellyer, LLC and SFIII FOS Hellyer Holding, LLC (the Landlord) entered into a triple net lease (the Lease) pursuant to which the Company will lease office space located at 5215 Hellyer Avenue in San Jose, California (the Leased Space) as the Companys new corporate headquarters. The Leased Space consists of approximately 30,784 square feet. The Lease term is anticipated to commence on July 1, 2026 or such earlier date as the Company begins occupancy of the Leased Space for its business operations. The term of the Lease is 90 months from the commencement date. The Company has the right to extend the term of the Lease for an additional 60 months at the greater of (a) the Rent (as defined in the Lease) payable prior the commencement of the Option Term (as defined in the Lease) and (b) the then-prevailing Market Rent (as defined in the Lease). The Lease provides that minimum rent will abate during the six-month period following the commencement date. The annual minimum rent, to be paid in equal monthly installments, will be approximately $ 646,464 for the full initial lease year and increase to approximately $ 665,857 for the second full lease year. Thereafter, minimum rent will increase by approximately 3.0 % per annum over the rest of the initial Lease term. The Company is also responsible for paying its share of operating expenses, taxes, and utilities. The Lease includes various covenants, indem …

SubsequentEventsTextBlock · excerpt; the full note is in the filing