IRIDEX CORP
For the period ended Dec 28, 2024. Filed Mar 27, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 27, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-30; filed 2024-03-29.
0000950170-24-038650
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-28; filed 2025-03-27.
0000950170-25-046107
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 99 previous paragraphs and 107 current paragraphs.
62 unchanged; 30 reworded; 15 added; 6 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Impact of the new Local Coverage Determination on our Business
Current report
During 2024 Local Coverage Determination ("LCD") L37531, relating to Micro-Invasive Glaucoma Surgery (MIGS), was adopted as scheduled became effective for services performed on or after November 17, 2024. We believe the reimbursement limitations created by the new LCD has potential to significantly increase physician interest in and use of Iridex’s advanced laser-based treatments for glaucoma.
Current report
The new LCD clarifies that treatments performed using Iridex’s laser consoles and probes are not MIGS procedures, and thus, Iridex’s Cyclo G6® product family is unaffected by the new reimbursement limitations. Iridex’s proprietary MicroPulse® and Continuous Wave laser therapies for glaucoma have been adopted by physicians around the globe as effective tools for managing and slowing the progression of glaucoma. Currently, Iridex sells more than 50,000 Cyclo G6 probes per year.
Current report
In addition to creating some reimbursement advantages for Iridex’s glaucoma treatments in the United States, the LCD creates opportunity to capture more physician attention to the significant clinical benefits of our products, particularly MicroPulse Transscleral Laser Therapy (MPTLT). Our laser procedures are noninvasive, repeatable, and can be utilized to treat patients across a far broader range of glaucoma’s progression, whether before, after, or even coincident to MIGS procedures.
Current report
The final LCD, L37531, which went into effect on November 17, 2024, provides the following reimbursement limitations:
Current report
MIGS is not considered a first line treatment for mild-moderate glaucoma.
Current report
A combination of a surgical MIGS procedure and an aqueous shunt cannot be performed at the same time of service in the same eye.
Current report
Phacoemulsification/intraocular lens placement performed with a combination of MIGS procedures, (e.g., cataract + stent + canaloplasty or goniotomy) at the same time of service in the same eye is non-covered.
Current report
Research and development expenses decreased by $1.4 million or 20.2% from $6.8 million in 2023 to $5.4 million in 2024. Spending on investment in new and expanded products decreased as we completed prior projects. In 2024 we also implemented cost savings measures including reductions in workforce that resulted in lower headcount expenses.
Current report
Sales and marketing expenses decreased by $3.6 million or 22.5%, from $16.2 million in 2023 to $12.6 million in 2024. The decrease in 2024 was related to our cost savings measures, including reductions in workforce that resulted in lower headcount expenses, lower consulting, travel expenses, and lower tradeshows and public relations expenses, partially offset by increases in bonus and clinical studies expenses.
Current report
General and administrative expenses increased by $1.1 million or 11.8% from $8.7 million in 2023 to $9.8 million in 2024. The increase is primarily due to higher consulting costs and deal related legal expenses, partially offset by lower ERP implementation expenses.
Current report
Other Income (Expense), Net
Current report
Management evaluates whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about our ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.
Current report
The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern. For the year ended December 28, 2024, we implemented cost savings initiatives to increase operational efficiencies across all departments, which we expect will decrease our operating expenses and increase working capital through March 29, 2026. Based on these cost savings initiatives implemented by us and the issuance of the $3.4 million senior convertible promissory note to Lind, management believes we have alleviated substantial doubt about our ability to satisfy our liquidity needs over the next 12 months.
Current report
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 Company’s consolidated financial statements.
Removed paragraphs (6)
Previous report
R&D expenses decreased by $0.3 million or 4.8% from $7.2 million in 2022 to $6.8 million in 2023. Spending on investment in PASCAL product line and on new and expanded product portfolio decreased as we completed these projects.
Previous report
Sales and marketing expenses decreased by $1.9 million or 10.7%, from $18.2 million in 2022 to $16.2 million in 2023. The decrease was related to lower marketing and advertising costs as we recently completed the release of a new system product in the fourth quarter of fiscal 2022.
Previous report
General and administrative expenses increased by $1.2 million or 15.8% from $7.6 million in 2022 to $8.7 million in 2023. The increase was attributable to increases in higher personnel and other related expenses, including separation costs incurred in the second fiscal quarter of fiscal year 2023 and legal expenses for general corporate matters.
Previous report
Other Income, Net
Previous report
We had a Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank providing for up to $8.0 million secured revolving loan facility which expired on December 1, 2023. We are currently in the process of negotiating the renewal and new terms for the Loan Agreement.
Previous report
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 “Measurement of Credit Losses on Financial Instruments,” which amended the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which amended the effective date for certain qualified entities to fiscal years beginning after December 15, 2022. On January 1, 2023, the Company adopted ASU No. 2016-13, using the modified retrospective approach by applying a cumulative effect adjustment of $0.2 million to the opening balance of accumulated deficit.
Reworded paragraphs (30)
Previous wording
In 2023 and 2022, our products were sold in the United States and Germany predominantly through a direct sales force and internationally (aside from Germany) primarily through independent distributors. Total revenues in 2023 and 2022 were $51.9 million and $57.0 million, respectively. We generated net losses of $9.6 million and $7.5 million in 2023 and 2022, respectively.
Current wording
In 2024 and 2023, our products were sold in the United States and Germany predominantly through a direct sales force and internationally (aside from Germany) primarily through independent distributors. Total revenues in 2024 and 2023 were $48.7 million and $51.9 million, respectively. We generated net losses of $8.9 million and $9.6 million in 2024 and 2023, respectively.
Previous wording
Current macroeconomic conditions exhibit challenges that can affect capital equipment purchasing demand and timing, including recessionary fears, inflation concerns, heightened interest rates as a result of government actions to combat inflation, and uncertainty in the global banking and financial services market, as well as other geopolitical developments, have impacted and may continue to impact business spending and the economy as a whole. As a result, we have seen customers extend purchase decision cycles. We have also experienced some demand softness due to pricing effects from the strength of the U.S. Dollar that have impacted and may continue to impact our operations.
Current wording
Current macroeconomic conditions exhibit challenges that can affect capital equipment purchasing demand and timing, including recessionary fears, tariffs, trade wars, unexpected changes in taxes or policies, inflation concerns, changing interest rates, as well as other geopolitical uncertainties, have impacted and may continue to impact business spending and the economy as a whole. As a result, we have seen customers extend purchase decision cycles. We have also experienced some demand softness due to pricing effects from the strength of the U.S. dollar that have impacted and may continue to impact our operations.
Previous wording
The macroeconomic conditions on our business and operations remains uncertain, and it is not possible for us to predict the duration and extent to which they will affect our business, future results of operations, and financial condition.
Current wording
The macroeconomic conditions on our business and operations remain uncertain, and it is not possible for us to predict the duration and extent to which they will affect our business, future results of operations, and financial condition.
Previous wording
Our fiscal year ends on the Saturday closest to December 31. Fiscal 2023 ended on December 30, 2023 and fiscal 2022 ended on December 31, 2022. Fiscal years 2023 and 2022 each included 52 weeks of operations.
Current wording
Our fiscal year ends on the Saturday closest to December 31. Fiscal year 2024 ended on December 28, 2024 and fiscal year 2023 ended on December 30, 2023. Fiscal years 2024 and 2023 each included 52 weeks of operations.
Previous wording
Our total revenues decreased by $5.1 million or 9.0% from $57.0 million in 2022 to $51.9 million in 2023. The decrease was driven by an overall softer demand in our retina product line, and lower royalties due to the expiration of licensed patents.
Current wording
Our total revenues decreased by $3.2 million or 6.2% from $51.9 million in 2023 to $48.7 million in 2024. The decrease was driven by softer demand in our Glaucoma and Retina product lines, and by lower royalties due to the expiration of licensed patents.
Previous wording
While we believe that demand for our products remains strong, however the overall capital expenditure landscape within hospitals, surgical centers and physician offices may continue to be negatively impacted by persistent macroeconomic concerns.
Current wording
While we believe that the market for our products remains strong, the overall capital expenditure landscape within hospitals, surgical centers and physician offices may continue to be negatively impacted by the persistent macroeconomic concerns discussed above.
Previous wording
Gross profit decreased by $3.6 million or 14.0% from $25.4 million in 2022 to $21.8 million in 2023. Gross margin increased by 2.5% from 44.5% in 2022 to 42.0% in 2023. The decrease in gross margin was the result of lower overhead absorption in the current period and a more favorable product mix in the prior year.
Current wording
Gross profit decreased by $2.3 million or 10.6% from $21.8 million in 2023 to $19.5 million in 2024. Gross margin decreased by 1.9% from 42.0% in 2023 to 40.1% in 2024. The decrease in gross margin was driven by lower revenues and higher manufacturing overhead absorbed by less revenue.
Previous wording
Other income, net amounted to $0.5 million in 2023 and $60 thousand in 2022. Other income, net, consisted primarily of interest income or expense and foreign currency gain or loss.
Current wording
Other expense, net amounted to $0.5 million in 2024 and other income, net amounted $0.5 million in 2023. Other income, net, consisted primarily of interest income or expense and foreign currency gain or loss. Other expenses increased primarily due to interest paid on amortization of loan expenses related to the Lind transaction.
Previous wording
We recorded a provision for income taxes of $90 thousand for the year ended December 30, 2023 compared to $65 thousand for the year ended December 31, 2022. The effective tax rate for the year ended December 30, 2023 was negative 0.8% compared to an effective tax rate of negative 0.9% for the year ended December 31, 2022. Our effective tax rate increase is due mainly to the change in valuation allowance. The income tax valuation allowance was $25.4 million at the end of 2023 compared to $23.1 million at the end of 2022.
Current wording
We recorded a provision for income taxes of $68 thousand for the year ended December 28, 2024 compared to $90 thousand for the year ended December 30, 2023. The effective tax rate for the years ended December 28, 2024 and December 30, 2023, were both negative 0.8%.
Previous wording
As of December 30, 2023, we had cash and cash equivalents of $7.0 million and working capital of $14.5 million compared to cash and cash equivalents of $13.9 million and working capital of $23.3 million as of December 31, 2022.
Current wording
As of December 28, 2024, we had cash and cash equivalents of $2.4 million and working capital of $7.0 million compared to cash and cash equivalents of $7.0 million and working capital of $14.5 million as of December 30, 2023.
Previous wording
Net cash used in operating activities was $6.7 million in 2023 compared to net cash used in operating activities of $9.5 million in 2022. The decrease in net cash used in operating activities, expressed in direct cash flow terms, was primarily due to cash provided by inventory, receivable from related party, prepaids, and other long-term assets, offset by increases in cash used in accounts payable and deferred revenue. During 2022, the company added approximately $3.5 million to inventory and prepaid materials to mitigate supply chain constraints, which were resolved in 2023.
Current wording
Net cash used in operating activities was $7.3 million in 2024 compared to net cash used in operating activities of $6.7 million in 2023. The increase in net cash used in operating activities, expressed in direct cash flow terms, was primarily due to cash used in inventory, prepaids, deferred revenue and accrued expenses, partially offset by decreases in cash paid to accounts payable and increased cash collections from accounts receivable.
Previous wording
During 2023, net cash used in investing activities was $109 thousand for capital expenditures. During 2022, net cash used in investing activities was $0.3 million for capital expenditures.
Current wording
During 2024, net cash used in investing activities was $13 thousand for capital expenditures. During 2023, net cash used in investing activities was $109 thousand for capital expenditures.
Previous wording
During 2023, net cash used in financing activities was $5 thousand, primarily from payroll taxes related to net share settlement of equity awards partially offset by the net proceeds arising from the proceeds from stock option exercises. During
Current wording
During 2024, net cash provided by financing activities was $2.6 million, primarily from net proceeds of $3.4 million from issuance of a senior convertible promissory note payable to Lind partially offset by $0.5 million debt issuance costs and $0.2 million payments to the note were payable to Lind. During 2023, net cash used in financing activities was $5 thousand, primarily from payroll taxes related to net share settlement of equity awards partially offset by the net proceeds arising from the proceeds from stock option exercises.
Previous wording
We have historically funded our operations primarily through sales of our products to customers, and through common stock and borrowing arrangements. As of December 30, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $7.0 million. We have incurred net losses over the last several years, and as of December 30, 2023, have an accumulated deficit of approximately $79.0 million. We expect to continue to incur operating losses and negative cash flows from operations.
Current wording
We have historically funded our operations primarily through sales of our products to customers, and through common stock and borrowing arrangements. As of December 28, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $2.4 million. We have incurred net losses over the last several years, and as of December 28, 2024, have an accumulated deficit of approximately $88.0 million. We may continue to incur operating losses and negative cash flows from operations.
Previous wording
We believe our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs over the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced products and our costs to implement new manufacturing technologies. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
Current wording
We believe our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs over the next 12 months. Our future capital requirements will depend on many factors, including our growth rates, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced products and our costs to implement new manufacturing technologies. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
Previous wording
Our revenues arise from the sale of laser consoles, delivery devices, consumables, service, and support activities. We also derive revenue from royalties from third parties which are typically based on licensees’ net sales of products that utilize our technology. Our revenue is recognized in accordance with ASC 606, “Revenue from Contracts with Customers.” We recognize revenue using the five-step model: (1) identifying the contract with the customer, (2) identifying the performance obligations in the contract, (3) determining expected transaction price, (4) allocating the transaction price to the distinct performance obligations in the contract, and (5) recognizing revenue when (or as) the performance obligations are satisfied.
Current wording
Our revenues arise from the sale of laser consoles, delivery devices, consumables, service, and support activities. We also derive revenue from royalties from third parties which are typically based on the licensees’ net sales of products that utilize our technology. Our revenue is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606,“Revenue from Contracts with Customers.” We recognize revenue using the five-step model: (1) identifying the contract with the customer, (2) identifying the performance obligations in the contract, (3) determining expected transaction price, (4) allocating the transaction price to the distinct performance obligations in the contract, and (5) recognizing revenue when (or as) the performance obligations are satisfied.
Previous wording
We recognize revenue from product sale at a point in time subject to the allocation of transaction price to additional performance obligations, if any.
Current wording
We recognize revenue from product sales at a point in time subject to the allocation of transaction price to additional performance obligations, if any.
Previous wording
Service Contracts: We offer a standard two-year warranty on all system sales. We also offer a service contract which is sold to customers in incremental, one-year periods which begin subsequent to the expiration of the standard two-year warranty. The customer can opt to purchase the service contract at the time of the system sale or after the initial system sale.
Current wording
Service Contracts: We offer a standard two-year warranty on all system sales. We also offer a service contract which is sold to customers in incremental, one-year periods that begin subsequent to the expiration of the standard two-year warranty. The customer can opt to purchase the service contract at the time of the system sale or after the initial system sale.
Previous wording
We recognize revenue from system repairs (outside of warranty) at a point in time. When the customer requests repairs from us subsequent to the expiration of the standard warranty and outside of a service contract, these repair contracts are considered separate from the initial sale, and as such, revenue is recognized as the repair services are rendered and the performance obligation satisfied.
Current wording
We recognize revenue from system repairs (outside of warranty) at a point in time. When the customer requests repairs from us subsequent to the expiration of the standard warranty and outside of a service contract, these repair contracts are considered separate from the initial sale. As such, revenue is recognized as the repair services are rendered and the performance obligation satisfied.
Previous wording
Royalty Revenue: We have royalty agreements with four customers related to sale of our intellectual property. Under the terms of these agreements, three customers are required to remit a percentage of sales to us as the sales occur and one customer made an upfront prepayment for royalties.
Current wording
Royalty Revenue: We have royalty agreements with two customers related to the sale of our intellectual property. Under the terms of these agreements, one customer is to remit a percentage of sales to us as the sales occur and one customer is to remit fixed amount royalty payments based on the quantity sold as the sales occur.
Previous wording
The arrangements with three customers are for sales-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies. Therefore, we recognize revenue at a point in time, only as the subsequent sale occurs. However, we note that such sales being reported by the licensee with a quarter in arrear, such revenue is recognized at the time it is reported and paid by the licensee given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals. For the arrangement with one customer, we concluded that there is one combined performance obligation to be satisfied. Therefore, we recognize revenue related to this arrangement over time.
Current wording
The arrangements with three customers are for sales-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies. Therefore, we recognize revenue at a point in time, only as the subsequent sale occurs. However, we note that such sales being reported by the licensee with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the licensee given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals. For the arrangement with one customer, we concluded that there is one combined performance obligation to be satisfied. Therefore, we recognize revenue related to this arrangement over time.
Previous wording
Exclusive Distribution Rights: In March 2021, we entered into a distribution agreement with Topcon, pursuant to which we granted Topcon exclusive right to distribute our retina and glaucoma products in certain geographies outside the United States. The exclusivity arrangement with Topcon obligates us to provide training, customer support and exclusive territorial rights to Topcon for certain international regions, for a period of 10 years, commencing upon regulatory approval to transfer existing (non-exclusive) distribution rights from the current distributors in those regions to Topcon. We have the right to terminate the exclusive distribution rights granted to Topcon for any of the regions at any point in time during the 10-year exclusivity term for a termination fee that is based on a multiple of 1.2 times the revenue generated by us in 2019 for the respective region. We determined that the exclusivity rights, training and customer support represents a single combined performance obligation for each region, to be recognized as exclusivity fee revenue on a straight-line basis over the 10-year period for each region, commencing on the date that regulatory approval is obtained for each region, based on the Standalone Selling Price (“SSP”) for such combined performance obligation for each region. The estimated fair value of the exclusive distribution rights for all regions combined totaled approximately $14.8 million. Of this amount, we fully constrained and returned to Topcon the arrangement fee allocated to Belarus (approximately $0.2 million recorded as customer deposit under Other current liabilities) because obtaining the necessary regulatory approvals and termination of existing distributor relationship was not feasible. During fiscal years ended 2023 and 2022, $1.5 million and $1.3 million in revenue related to the exclusive distribution rights was recorded, respectively.
Current wording
Exclusive Distribution Rights: On March 2, 2021, we entered into a distribution agreement (“Distribution Agreement”) with Topcon, pursuant to which we granted Topcon the exclusive right to distribute the our retina and glaucoma products in certain geographies outside the United States. The exclusivity arrangement with Topcon obligates us to provide training, customer support, and exclusive territorial rights to Topcon for certain international regions, for a period of 10 years, commencing upon regulatory approval to transfer existing (non-exclusive) distribution rights from the current distributors in those regions to Topcon. We has the right to terminate the exclusive distribution rights granted to Topcon for any of the regions at any point in time during the 10 year exclusivity term for a termination fee that is based on a multiple of 1.2 times the revenue generated by us in 2019 for the respective region. We determined that the exclusivity rights, training, and customer support represents a single combined performance obligation for each region, to be recognized as exclusivity fee revenue on a straight-line basis over the 10 year period for each region, commencing on the date that regulatory approval is obtained for each region, based on the standalone selling price for such combined performance obligation for each region. The estimated fair value of the exclusive distribution rights for all regions combined totaled approximately $14.8 million. Of this amount, we fully-constrained and returned to Topcon the arrangement fee allocated to Belarus (approximately $0.2 million) because obtaining the necessary regulatory approvals and termination of existing distributor relationship was not feasible. During fiscal years ended 2024 and 2023, $1.5 million in revenue related to the exclusive distribution rights was recorded each year.
Previous wording
We recognized assets from certain costs incurred to obtain revenue contracts. These costs relate to sales commissions arising from the sale of our products. The costs are considered incremental and recoverable of obtaining revenue contracts with customers. These deferred costs are amortized on a straight-line basis over the estimated period of benefit, which typically ranges from 2 to 3 years. As of December 30, 2023 and December 31, 2022, we recognized deferred costs incurred to obtain revenue contracts with customers, net of accumulated amortization, of $0.2 million and $0.2 million, respectively, and included these amounts in Prepaid expenses and other current assets and Other long-term assets in our consolidated balance sheets. Amortization expense was $105 thousand and $36 thousand, respectively, for the fiscal years ended December 30, 2023 and December 31, 2022. There were no impairment expenses for both the fiscal years ended December 30, 2023 and December 31, 2022, respectively.
Current wording
We recognized assets from certain costs incurred to obtain revenue contracts. These costs relate to sales commissions arising from the sale of our products. The costs are considered incremental and recoverable of obtaining revenue contracts with customers. These deferred costs are amortized on a straight-line basis over the estimated period of benefit, which typically ranges from 2 to 3 years. These deferred costs are amortized on a straight-line basis over the estimated period of benefit, which typically ranges from 2 to 3 years. As of December 28, 2024 and December 30, 2023, we recognized deferred costs incurred to obtain revenue contracts with customers, net of accumulated amortization, of $0.2 million and included these amounts in Prepaid expenses and other current assets and Other long-term assets in our consolidated balance sheets. Amortization expense was $146 thousand and $105 thousand, respectively, for the fiscal years ended December 28, 2024 and December 30, 2023. There were no impairment expenses for both the fiscal years ended December 28, 2024 and December 30, 2023, respectively.
Previous wording
Sales commissions that do not represent incremental and recoverable costs of obtaining a contract are expensed as incurred. As a practical expedient, we will not recognize such sales commission as a contract asset but rather recognize as expense when incurred if the amortization period of the asset that we would have otherwise recognized is one year or less.
Current wording
Sales commissions that do not represent incremental and recoverable costs of obtaining a contract are expensed as incurred. As a practical expedient, we will not recognize such sales commission as a contract asset but rather recognize as an expense when incurred if the amortization period of the asset that we would have otherwise recognized is one year or less.
Previous wording
We recognized an asset from the costs incurred to fulfill a contract. These costs relate directly and must be incurred to satisfy performance obligations on certain specific contract with a customer. These costs are expected to be recovered over time and are amortized on a systematic basis that is consistent with the recognition of revenue to which it relates. As of December 30, 2023 and December 31, 2022, we recognized deferred costs incurred to fulfill a contract with a customer, net of accumulated amortization, of $0.7 million and $0.8 million, respectively, and included these amounts in Prepaid expenses and other current assets and Other long-term assets in the Company’s consolidated balance sheets. Amortization expense was $83 thousand and $62 thousand, respectively, for the fiscal years ended December 30, 2023 and December 31, 2022. There were no impairment expenses for both the fiscal years ended December 30, 2023 and December 31, 2022, respectively.
Current wording
We recognized an asset from the costs incurred to fulfill a contract. These costs relate directly and must be incurred to satisfy performance obligations on certain specific contract with a customer. These costs are expected to be recovered over time and are amortized on a systematic basis that is consistent with the recognition of revenue to which it relates. As of December 28, 2024 and December 30, 2023, we recognized deferred costs incurred to fulfill a contract with a customer, net of accumulated amortization, of $0.6 million and $0.7 million, respectively, and included these amounts in Prepaid expenses and other current assets and Other long-term assets in our consolidated balance sheets. Amortization expense was $83 thousand, for the fiscal years ended December 28, 2024 and December 30, 2023. There were no impairment expenses for both the fiscal years ended December 28, 2024 and December 30, 2023.
Previous wording
Similarly, management must make estimates regarding the collectibility of accounts receivable. We are exposed to credit risk in the event of non-payment by customers to the extent of amounts recorded on the consolidated balance sheets. As sales increase the level of accounts receivable would likely also increase. In addition, in the event that customers were to delay their payments to us, the levels of accounts receivable would likely also increase. We maintain provision for credit losses for estimated losses resulting from the inability of our customers to make required payments. The provision for credit losses is based on past payment history with the customer, analysis of the customer’s current financial condition, the aging of the accounts receivable balance, customer concentration and other known factors.
Current wording
Similarly, management must make estimates regarding the collectability of accounts receivable. We are exposed to credit risk in the event of non-payment by customers to the extent of amounts recorded on the consolidated balance sheets. As sales increase the level of accounts receivable would likely also increase. In addition, in the event that customers were to delay their payments to us, the levels of accounts receivable would likely also increase. We maintain provision for credit losses for estimated losses resulting from the inability of our customers to make required payments. The provision for credit losses is based on past payment history with the customer, analysis of the customer’s current financial condition, the aging of the accounts receivable balance, customer concentration and other known factors.
Previous wording
We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Under ASC 740, the liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We annually evaluate the realizability of our deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. As of December 30, 2023, based on our recent history of losses and its forecasted losses, management believes on the more likely than not basis that a full valuation allowance is required. Accordingly, as of December 30, 2023, we provided a full valuation allowance on our federal and state deferred tax assets.
Current wording
We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Under ASC 740, the liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We annually evaluate the realizability of our deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. In 2024, based on our history of earnings and our forecasted losses, we believe on the more likely than not basis that a full valuation allowance is required. Accordingly, in the fourth quarter of fiscal year 2024, we provided a full valuation allowance on our federal and state deferred tax assets.
Previous wording
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Current wording
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Previous wording
In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
Current wording
In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied retrospectively to all prior periods presented in the financial statements. We adopted this ASU on December 31, 2023 with no material impact on our consolidated financial statements. The required segment disclosures are included above.
Previous wording
In December 2023, the 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 our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
Current wording
In December 2023, the 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 our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our consolidated financial statement disclosures.
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Previous report — wording carried elsewhere
2022, net cash used in financing activities was $0.1 million, primarily from payroll taxes related to net share settlement of equity awards partially offset by the net proceeds arising from the proceeds from stock option exercises.