IRIDEX CORP

Current report

our convertible note agreement contains restrictive and financial covenants that may limit our operating flexibility and the failure to comply with such covenants could cause our outstanding debt to become accelerated;

Current report

Servicing our existing and future debt, including the Note, may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.

Current report

On August 7, 2024, we issued the Note to Lind, which has a principal amount of $4,200,000, and we may, in the future, issue the Subsequent Note to Lind which would have a principal amount of up to $1,800,000. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Lind Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. We may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, the Securities Purchase Agreement and the Note contain, and any of our future debt agreements may contain, restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.

Current report

We may not have the ability to raise the funds necessary to settle repayments of the Note in cash, and our future debt may contain limitations on our ability to make cash payments as required by the Note.

Current report

Following the occurrence of a Change of Control (as defined in the Securities Purchase Agreement), Lind may require us to prepay, effective immediately prior to the consummation of such Change of Control, the Note in an amount equal to 105% of the outstanding principal amount of the Note as of such date. In addition, commencing 120 days from the issuance date of the Note, the Company will be required to repay the outstanding principal amount of the Note in twenty consecutive monthly installments of cash, Repayment Shares, or a combination of cash and Repayment Shares, at the Company’s option, provided that no portion of the outstanding principal amount may be paid in Repayment Shares unless such Repayment Shares (A) may be immediately resold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “1933 Act”), by a person that is not an affiliate of the Company, or (B) are registered for resale under the 1933 Act and a registration statement is in effect and lawfully usable to effect immediate sales of such Repayment Shares. If we do not meet the conditions for repayment in Repayment Shares, we will be required to make such monthly payments in cash. However, we may not have enough available cash or be able to obtain financing at the time we are required to make such payments on the Note or at its maturity. In addition, any cash payments would reduce the amount of cash available for our operations, which could have a material and adverse effect on our business.

Current report

Our ability to make cash payments in connection with the Note may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to make payments as required by the Note would constitute a default under the Note. A default under the Note could also lead to a default under agreements governing any of our existing or future indebtedness. Moreover, the occurrence of a Change of Control under the Note could constitute an event of default under other agreements. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness. Any failure by us to repay indebtedness, in each case, when required to do so pursuant to the terms of the Note, could have a material adverse effect on our business, financial condition, and results of operations.

Current report

Lind has conversion rights under the Note, the exercise of which could result in the issuance of a substantial amount of our common stock at a significant discount to the trading price of our common stock.

Current report

The Note is convertible at Lind’s option into shares of our common stock at an initial conversion price of $2.44, subject to any adjustments set forth in the Note. However, upon the occurrence of a Delisting Event or an Event of Default (each as defined in the Note), the Notewill become immediately due and payable, and Lind may declare an amount equal to 120% of the then outstanding principal amount of the Note due and payable, in addition to any other remedies under the Transaction Documents. Additionally, the occurrence of a Delisting Event, an Event of Default or an event which with the passage of time may result in an Event of Default, Lind may convert all or a portion of the outstanding principal amount of the Note at the lower of (i) the then-current conversion price and (ii) the greater of (a) eighty-percent (80%) of the average of the three (3) lowest daily VWAPs during the twenty (20) trading days prior to the delivery of the notice of conversion and (b) a floor price of $0.39, which would significantly dilute our stockholders. If we experience a Delisting Event or an Event of Default under the Note, we may experience a material adverse effect on our liquidity, financial condition, and results of operations.

Previous report

adverse developments affecting financial institutions, including bank failures;

Previous report

There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our commercial programs, product development efforts or other operations.

Previous report

Developing and commercializing products for the ophthalmology market is expensive, and we have incurred significant operating losses as result. Based on our current business plan as of the date hereof, there is substantial doubt regarding our ability to continue as a going concern. Our recurring losses, negative cash flows, ongoing strategic alternatives, and the need for additional financing raise doubt about our ability to continue to execute our business plan as currently intended. Furthermore, our cash forecasts are based on assumptions that may prove to be wrong, and we could use out available capital resources earlier than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may exhaust our available capital sooner than planned. See Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" of this Quarterly Report on Form 10-Q for a discussion of our expected cash runway.

Previous report

Moreover, as a result of recent volatile market conditions, the cost and availability of capital has been and may continue to be adversely affected. Continued turbulence in the U.S. market and economy may adversely affect our liquidity and financial condition, including our ability to access the capital markets to meet liquidity needs.

Previous report

To fund further operations, the Company will need to raise additional capital. The Company’s ability to continue as a going concern or meet the minimum liquidity requirements in the future is dependent on its ability to raise additional capital, of which there can be no assurance. If we are unable to obtain funding on a timely basis, increase sales or reduce expenses, we will be unable to continue to fund our operations, continue to sell our products, realize value from our assets, or discharge our liabilities in the normal course of business. Although management plans to reduce cash expenditures to alleviate such ongoing concerns, if we become unable to continue as a going concern, we could have to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, and stockholders could lose all or part of their investment. Additionally, our financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Thus, our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Previous report

macroeconomic conditions, including the impact of any future global pandemic on the global economy and financial markets;

Previous report

uncertainty in the global banking and financial services market;

Previous report

As we expand our existing international operations, we may encounter new risks in addition to the above factors. For example, as we focus on building our international sales and distribution networks in new geographic regions, we must continue to develop relationships with qualified local distributors and trading companies. If we are not successful in developing these relationships, we may not be able to grow sales in these geographic regions. These or other similar risks could adversely affect our revenues, profitability and the price of our common stock.

Previous report

Any growth in our sales and marketing organization may increase costs and create operational challenges without immediately offsetting benefits.

Previous report

Any growth in our sales and marketing organization may place a strain on our management, operating and financial systems and our sales, marketing and administrative resources as well as increase operating costs. For example, if we are unable to efficiently or effectively provide adequate training for our sales force and marketing organization, we may not be able to immediately or fully utilize marketing resources, generate new sales and offset operational challenges such as the cost of recruiting and hiring sales and marketing personnel. If we cannot effectively manage our operations and our costs, our business may not be able to grow effectively or we may grow at a slower pace.