IRIDEX (IRIX) 10-Q 10 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jul. 04, 2015	Jul. 24, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	IRIDEX CORP
Entity Central Index Key	1,006,045
Document Type	10-Q
Document Period End Date	Jul. 4, 2015
Amendment Flag	false
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--01-02
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,998,480

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jul. 04, 2015	Jan. 03, 2015	[1]
Current assets:
Cash and cash equivalents	$ 12,203	$ 13,303
Accounts receivable, net of allowance for doubtful accounts of $228 as of July 4, 2015 and $223 as of January 3, 2015	7,319	8,337
Inventories	10,171	9,119
Prepaid expenses and other current assets	615	510
Deferred income taxes - current	1,625	1,625
Total current assets	31,933	32,894
Property and equipment, net	1,079	735
Intangible assets, net	276	284
Goodwill	533	533
Deferred income taxes - long term	7,151	7,151
Other long-term assets	195	221
Total assets	41,167	41,818
Current liabilities:
Accounts payable	2,060	1,758
Accrued compensation	1,470	1,863
Accrued expenses	1,806	1,770
Accrued warranty	520	469
Deferred revenue	1,199	1,179
Total current liabilities	7,055	7,039
Long-term liabilities:
Other long-term liabilities	881	1,043
Total liabilities	7,936	8,082
Stockholders’ equity:
Common stock, $0.01 par value: Authorized: 30,000,000 shares: Issued and outstanding 10,019,871 and 9,786,695 shares as of July 4, 2015 and as of January 3, 2015, respectively	110	108
Additional paid-in capital	38,410	38,511
Accumulated deficit	(5,289)	(4,883)
Total stockholders’ equity	33,231	33,736
Total liabilities and stockholders’ equity	$ 41,167	$ 41,818
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jul. 04, 2015	Jan. 03, 2015
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 228	$ 223
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	10,019,871	9,786,695
Common stock, shares outstanding	10,019,871	9,786,695

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Income Statement [Abstract]
Total revenues	$ 9,033	$ 10,589	$ 19,829	$ 20,918
Cost of revenues	4,816	5,289	10,202	10,563
Gross profit	4,217	5,300	9,627	10,355
Operating expenses:
Research and development	1,482	1,306	2,763	2,500
Sales and marketing	2,158	2,056	4,229	3,804
General and administrative	1,324	1,538	2,979	3,054
Total operating expenses	4,964	4,900	9,971	9,358
(Loss) income from operations	(747)	400	(344)	997
Other expense, net	23	91	30	188
(Loss) income from operations before (benefit from) provision for income taxes	(770)	309	(374)	809
(Benefit from) provision for income taxes	(118)	12	32	25
Net (loss) income	$ (652)	$ 297	$ (406)	$ 784
Net (loss) income per share:
Basic	$ (0.07)	$ 0.03	$ (0.04)	$ 0.08
Diluted	$ (0.07)	$ 0.03	$ (0.04)	$ 0.07
Weighted average shares used in computing net (loss) income per common share:
Basic	10,027	9,922	9,948	9,943
Diluted	10,027	10,411	9,948	10,469

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net (loss) income	$ (652)	$ 297	$ (406)	$ 784
Other comprehensive income, net of tax	0	0	0	0
Comprehensive (loss) income	$ (652)	$ 297	$ (406)	$ 784

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015		Jun. 28, 2014
Operating activities:
Net (loss) income	$ (406)		$ 784
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	252		203
Change in fair value of earn-out liability	32		191
Stock-based compensation cost recognized	562		478
Provision for doubtful accounts			36
Changes in operating assets and liabilities:
Accounts receivable	1,018		50
Inventories	(1,052)		852
Prepaid expenses and other current assets	(105)		(10)
Other long-term assets	26		44
Accounts payable	302		(270)
Accrued compensation	(393)		(662)
Accrued expenses	52		(239)
Accrued warranty	51		38
Deferred revenue	20		(50)
Other long-term liabilities	26		(22)
Net cash provided by operating activities	385		1,423
Investing activities:
Acquisition of property and equipment	(588)		(344)
Payment on earn-out liability	(236)		(264)
Net cash used in investing activities	(824)		(608)
Financing activities:
Proceeds from stock option exercises	614		849
Repurchase of common stock	(670)		(2,246)
Taxes paid related to net share settlements of equity awards	(605)
Net cash used in financing activities	(661)		(1,397)
Net decrease in cash and cash equivalents	(1,100)		(582)
Cash and cash equivalents, beginning of period	13,303	[1]	13,444
Cash and cash equivalents, end of period	12,203		12,862
Cash paid during the period for:
Income taxes	$ 32		$ 47
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Basis of Presentation

Basis of Presentation	6 Months Ended
	Jul. 04, 2015
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Basis of Presentation	1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of IRIDEX Corporation (“IRIDEX”, the “Company”, “we”, “our”, or “us”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with management’s discussion and analysis of the Company’s financial condition and results of operations, contained in our Annual Report on Form 10-K for the fiscal year ended January 3, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on April 2, 2015. The results of operations for the three and six months ended July 4, 2015 are not necessarily indicative of the results for the year ending January 2, 2016 or any future interim period. The three and six month periods ended July 4, 2015 and June 28, 2014, each had 13 weeks. For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of December. Periodically, the Company adds a 53rd week to a year in order to end that year on the Saturday closest to the end of December.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jul. 04, 2015
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies The Company’s significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended January 3, 2015, which was filed with the SEC on April 2, 2015. Financial Statement Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates. The preparation of unaudited condensed consolidated financial statements in conformity with 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. We base our 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 our operating results. Revenue Recognition. Our revenues arise from the sale of laser consoles, delivery devices, consumables and service and support activities. Revenue from product sales is recognized upon receipt of a purchase order and product shipment provided that no significant obligations remain and collectibility is reasonably assured. Shipments are generally made with Free-On-Board (“FOB”) shipping point terms, whereby title passes upon shipment from our dock. Any shipments with FOB receiving point terms are recorded as revenue when the shipment arrives at the receiving point. Cost is recognized as product sales revenue is recognized. The Company’s sales may include post-sales obligations for training or other deliverables. For revenue arrangements such as these, we recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition, Multiple-Element Arrangements In international regions, we utilize distributors to market and sell our products. We recognize revenue upon shipment for sales to these independent, third-party distributors as we have no continuing obligations subsequent to shipment. Generally our distributors are responsible for all marketing, sales, installation, training and warranty labor coverage for our products. Our standard terms and conditions do not provide price protection or stock retention rights to any of our distributors. Royalty revenues are typically based on licensees’ net sales of products that utilize our technology and are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured, such as upon the earlier of the receipt of a royalty statement from the licensee or upon payment by the licensee. Taxes Collected from Customers and Remitted to Governmental Authorities. Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying consolidated statements of operations. Shipping and Handling Costs. Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented. Deferred Revenue. Revenue related to extended service contracts is deferred and recognized on a straight line basis over the period of the applicable service contract. Costs associated with these service arrangements are recognized as incurred. A reconciliation of the changes in the Company’s deferred revenue balance for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 687 636 Revenue recognized (667 ) (686 ) Balance, end of period $ 1,199 $ 1,083 Warranty. The Company generally provides a one to two year warranty on its products, which is accrued for upon shipment of products. Actual warranty costs incurred have not materially differed from those accrued. The Company’s warranty policy is applicable to products which are considered defective in their performance or fail to meet the product specifications. Warranty costs are reflected in the statement of operations as cost of revenues. A reconciliation of the changes in the Company’s warranty liability for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 183 134 Cost of warranty claims and adjustments (132 ) (96 ) Balance, end of period $ 520 $ 506 Recently Issued and Adopted Accounting Standards. In May 2014, as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) Revenue from Contracts with Customers. In June 2014, the FASB issued ASU 2014-12, “ Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. Management is evaluating the provisions of this statement, including which period to adopt, and has not determined what impact the adoption of ASU 2015-11 will have on the Company's consolidated financial position or results of operations.

Inventories

Inventories	6 Months Ended
	Jul. 04, 2015
Inventory Disclosure [Abstract]
Inventories	3. Inventories The components of the Company’s inventories as of July 4, 2015 and January 3, 2015 are as follows: (in thousands) July 4, January 3, Raw materials $ 3,686 $ 3,966 Work in process 2,099 1,609 Finished goods 4,386 3,544 Total inventories $ 10,171 $ 9,119

Goodwill and Intangible Assets

Goodwill and Intangible Assets	6 Months Ended
	Jul. 04, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill and Intangible Assets	4. Goodwill and Intangible Assets Goodwill. The carrying value of goodwill was $0.5 million as of July 4, 2015 and January 3, 2015. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. If, after assessing the totality of circumstances, an entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it is required to perform the two-step impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying value. However, an entity also has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead to potential impairment in future periods. The Company performed its annual impairment test during the second quarter of fiscal 2015 and determined that its goodwill was not impaired. Intangible Assets. The following table summarizes the components of gross and net intangible asset balances: July 4, 2015 January 3, 2015 (in thousands) Gross Accumulated Net Remaining Amortization Gross Accumulated Net Patents $ 720 $ 600 $ 120 Varies $ 720 $ 600 $ 120 Customer relations 240 84 156 9.75 years 240 76 164 Total $ 960 $ 684 $ 276 $ 960 $ 676 $ 284 Amortization expense totaled $8 thousand and $36 thousand for the six months ended July 4, 2015 and June 28, 2014, respectively. The amortization of customer relations was charged to sales and marketing expense and the amortization of patents was charged to cost of revenues. Future estimated amortization expense (in thousands): 2015 (six months) $ 46 2016 98 2017 16 2018 16 2019 16 Thereafter 84 Total $ 276

Fair Value Measurements

Fair Value Measurements	6 Months Ended
	Jul. 04, 2015
Fair Value Disclosures [Abstract]
Fair Value Measurements	5. 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 entity’s 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 data from actively quoted markets for substantially the full term of the financial instrument. — Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value. The carrying amounts of the Company’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as of July 4, 2015 and January 3, 2015, approximate fair value because of the short maturity of these instruments. As of July 4, 2015 and January 3, 2015, financial assets and liabilities measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows: July 4, 2015 January 3, 2015 Fair Value Measurements Fair Value Measurements (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Money market funds $ 11,846 — — $ 11,846 $ 11,846 — — $ 11,846 Liabilities: Earn-out liability — — $ 1,219 $ 1,219 $ — — $ 1,423 $ 1,423 The Company’s Level 1 financial assets are money market funds whose fair values are based on quoted market prices. The Company does not have any Level 2 financial assets or liabilities. The fair value of the earn-out liability arising from the acquisitions of RetinaLabs, Inc. and Ocunetics, Inc. is classified within Level 3 of the fair value hierarchy since it is based on significant unobservable inputs. The significant unobservable inputs include projected royalties and discount rates to present value the payments. A significant increase (decrease) in the projected royalty payments in isolation could result in a significantly higher (lower) fair value measurement and a significant increase (decrease) in the discount rate in isolation could result in a significantly lower (higher) fair value measurement. The fair value of the earn-out liability is calculated on a quarterly basis by the Company based on a collaborative effort of the Company’s operations, finance and accounting groups as additional information becomes available. Any change in the fair value adjustment is recorded in the statement of operations of that period. The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of July 4, 2015. As of July 4, 2015 Fair Value Valuation Significant Weighted Earn-out liability $ 1,219 Discounted cash flow Projected royalties $2,770 Discount rate 14.06% A reconciliation of the changes in the Company’s earn-out liability (Level 3 liability) for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance as of beginning of the period $ 1,423 $ 624 Payments against earn-out (236 ) (264 ) Change in fair value of earn-out liability 32 191 Balance as of the end of the period $ 1,219 $ 551 The earn-out liability is included in accrued expenses and other long-term liabilities in the condensed consolidated balance sheets. Any change in the fair value adjustment is recorded to other expense in the condensed consolidated statements of operations.

Stock Based Compensation

Stock Based Compensation	6 Months Ended
	Jul. 04, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock Based Compensation	6. Stock Based Compensation The Company accounts for stock-based compensation granted to employees and directors, including employees stock option awards, restricted stock and restricted stock units in accordance with ASC 718, Compensation – Stock Compensation The Company values options using the Black-Scholes option pricing model. Restricted stock and time-based restricted stock units are valued at the grant date fair value of the underlying common shares. Performance-based restricted stock units are valued using the Monte Carlo simulation model. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. The Monte Carlo simulation model incorporates assumptions for the holding period, risk-free interest rate, stock price volatility and dividend yield. 2008 Equity Incentive Plan. For the six months ended July 4, 2015, the only active stock-based compensation plan was the 2008 Equity Incentive Plan (the “Incentive Plan”). The terms of awards granted during the six months ended July 4, 2015 were consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 3, 2015. Summary of Stock Options The following table summarizes information regarding activity in our stock option plan during the six months ended July 4, 2015: Number of Weighted Aggregate Outstanding as of January 3, 2015 833,795 $ 4.88 Granted 95,700 $ 10.62 Exercised (167,189 ) $ 3.68 Canceled or forfeited (18,351 ) $ 5.98 Outstanding as of July 4, 2015 743,955 $ 5.86 $ 2,048 The weighted average grant date fair value of the options granted under the Company’s stock plans as calculated using the Black-Scholes option-pricing model was $4.40 and $4.09 per share for the three months ended July 4, 2015 and June 28, 2014, respectively. The weighted average grant date fair value of the options granted under the Company’s stock plans as calculated using the Black-Scholes option-pricing model was $4.57 and $4.09 per share for the six months ended July 4, 2015 and June 28, 2014, respectively. The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards (options) with the following weighted average assumptions: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Average risk free interest rate 1.51 % 1.45 % 1.27 % 1.48 % Expected life (in years) 4.55 years 4.5 years 4.55 years 4.5 years Dividend yield — % — % — % — % Average volatility 51 % 55 % 51 % 57 % Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of the Company’s stock, look-back volatilities and Company specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future. The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended July 4, 2015 and June 28, 2014: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Cost of revenues $ 56 $ 39 $ 123 $ 73 Research and development 53 26 132 48 Sales and marketing 45 28 104 60 General and administrative 75 141 203 297 $ 229 $ 234 $ 562 $ 478 Stock-based compensation expense capitalized to inventory was immaterial for the quarters ended July 4, 2015 and June 28, 2014. Occasionally, the Company will grant stock-based instruments to non-employees. During the six months ended July 4, 2015 and June 28, 2014, the amount of stock-based compensation related to non-employee options was not material. Information regarding stock options outstanding, vested and expected to vest and exercisable as of July 4, 2015 is summarized below: Number of Weighted Weighted Aggregate Options outstanding 743,955 $ 5.86 4.43 $ 2,048 Options vested and expected to vest 699,259 $ 5.72 4.35 $ 2,000 Options exercisable 384,668 $ 4.54 3.48 $ 1,453 The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of July 2, 2015, that would have been received by option holders had all option holders exercised their stock options as of that date. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the six months ended July 4, 2015 and June 28, 2014 was approximately $243 thousand and $566 thousand, respectively. As of July 4, 2015, there was $2.4 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements under the Incentive Plan. The cost is expected to be recognized over a weighted average period of 2.42 years. Summary of Restricted Stock Units and Awards Information regarding the restricted stock units activity for the six months ended July 4, 2015 is summarized below: Number Outstanding as of January 3, 2015 277,390 Restricted stock units granted 225,392 Restricted stock units released (207,340 ) Restricted stock units cancelled (80,000 ) Outstanding as of July 4, 2015 215,442 On January 9, 2015, the Company granted restricted stock unit awards for 56,000 shares of the Company’s common stock (the “Retention Award”) under the terms of the Company’s 2008 Equity Incentive Plan, as amended, to six executives of the Company. The Retention Award will vest over 4 years, with 20% of the Retention Award vesting on grant date and the remaining 80% vesting annually. The fair value at grant date of the restricted stock units was $485 thousand. On January 9, 2015, the Company also granted restricted stock unit awards for up to 110,000 shares of the Company’s common stock (the “Performance Award”) under the terms of the Company’s 2008 Equity Incentive Plan, as amended, to these same six executives of the Company. The number of shares issuable pursuant to the Market Performance Award will be based upon the Company’s stock average closing price during the 60 day period following the date the service condition is met. The Performance Award is expected to vest on January 9, 2019, given that no other vesting triggers occur prior to that date. To the extent that the market condition is not met, the Market Performance Award will not vest and will be cancelled. Utilizing the Monte Carlo simulation technique, which incorporated assumptions for the expected holding period, risk-free interest rate, stock price volatility and dividend yield, the fair value at grant date of these restricted stock units was $486 thousand. Compensation expense is recognized ratably until such time as the market condition is satisfied. On January 9, 2015, the Company granted a restricted stock unit award for up to 50,000 shares of the Company’s common stock (the “Market Performance Award”) under the terms of the Company’s 2008 Equity Incentive Plan, as amended, to the Company’s President and Chief Executive Officer. The number of shares issuable pursuant to the Market Performance Award will be based upon the Company’s stock average closing price during the 60 day period following the date the service condition is met. The Market Performance Award is expected to vest on January 9, 2019, given that no other vesting triggers occur prior to that date. To the extent that the market condition is not met, the Market Performance Award will not vest and will be cancelled. Utilizing the Monte Carlo simulation technique, which incorporated assumptions for the expected holding period, risk-free interest rate, stock price volatility and dividend yield, the fair value at grant date of these restricted stock units was $234 thousand. Compensation expense is recognized ratably until such time as the market condition is satisfied. The majority of the restricted stock units that were released in the six months ended July 4, 2015 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the restricted stock units on their release date as determined by the Company’s closing stock price. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the release and did not represent an expense to the Company. For the six months ended July 4, 2015, 207,340 shares of restricted stock units were released with an intrinsic value of approximately $1.9 million. The Company withheld 66,882 shares to satisfy approximately $605 thousand of employees’ minimum tax obligation on the released restricted stock units. Information regarding the restricted stock awards activity for the six months ended July 4, 2015 is summarized below: Number Outstanding as of January 3, 2015 2,445 Restricted stock awards granted 2,513 Restricted stock awards released (2,445 ) Outstanding as of July 4, 2015 2,513 Stock Repurchase Program. In February 2013, the Board of Directors approved a one year $3.0 million stock repurchase program that replaced the prior two year $4.0 million stock repurchase program. In February 2014, the Board of Directors approved the extension of the plan for an additional year. In July 2014, the Board of Directors approved an extension of the plan for an additional year and authorized an additional $3.0 million of stock repurchases. For the six months ended July 4, 2015, the Company has purchased 76,916 shares at an average price of $8.71 per share. As of July 4, 2015, the Company has repurchased 714,381 shares for approximately $5.8 million under this current program and the Company still has the authorization to purchase up to $0.2 million in common shares under the stock repurchase program. In August 2015, the Board of Directors approved a further extension of the plan for another year and authorized an additional $2.0 million of stock repurchases. See Item 2, Unregistered Sales of Equity Securities and Use of Proceeds in Part II, Other Information, for additional information.

Income Taxes

Income Taxes	6 Months Ended
	Jul. 04, 2015
Income Tax Disclosure [Abstract]
Income Taxes	7. Income Taxes Provision for Income Tax. The Company calculates its interim tax provision in accordance with the provisions of ASC 740-270 , Income Taxes; Interim Reporting Deferred Income Taxes. The Company accounts for income taxes in accordance with ASC 740, Income Taxes In the fourth quarter of fiscal year 2014, the Company's management determined, based on the Company's recent history of earnings coupled with its forecasted profitability that it is more likely than not that all of its federal and the majority of its state deferred tax assets will be realized in the foreseeable future. Accordingly, in the fourth quarter of fiscal year 2014, the Company released $9.2 million of valuation allowance against most of its deferred tax assets except for the California Research and Development Credits. The Company maintains the same positions as of July 4, 2015 and will reevaluate the position on a quarterly basis. Uncertain Tax Positions. The Company accounts for its uncertain tax positions in accordance with ASC 740. As of July 4, 2015, the Company had $0.9 million of unrecognized tax benefits. The Company is not aware of any other uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate during the fiscal year. The Company files U.S. federal and state returns, as well as foreign returns in France. The tax years 2008 to 2014 remain open in several jurisdictions, none of which have individual significance.

Computation of Basic and Dilute

Computation of Basic and Diluted Net Income Per Common Share	6 Months Ended
	Jul. 04, 2015
Earnings Per Share [Abstract]
Computation of Basic and Diluted Net Income Per Common Share	8. Computation of Basic and Diluted Net Income Per Common Share Basic net income per share is computed by dividing net income for the period by the weighted average number of shares outstanding during the period. Diluted net income per share is computed as follows: In periods of net income from continuing operations, diluted net income per share is computed by dividing net income for the period by the weighted average number of shares plus the weighted average common stock equivalents outstanding during the period. The Company excludes options from the computation of diluted weighted average shares outstanding if the exercise price of the options is greater than the average market price of the shares because the inclusion of these options would be anti-dilutive to earnings per share. In periods of net loss from continuing operations, the basic and diluted weighted average shares of common stock equivalents are the same because inclusion of common stock equivalents would be anti-dilutive. Accordingly, for the three months ended July 4, 2015 and June 28, 2014, stock options to purchase 743,955 and 123,393 shares, respectively, were excluded from the computation of diluted weighted average shares outstanding. For the six months ended July 4, 2015 and June 28, 2014, respectively, stock options to purchase 743,955 and 91,448 shares were excluded from the computation of diluted weighted average shares outstanding. A reconciliation of the numerator and denominator of basic and diluted net income per common share is provided as follows: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Numerator: Net (loss) income $ (652 ) $ 297 $ (406 ) $ 784 Denominator: Weighted average shares of common stock (basic) 10,027 9,922 9,948 9,943 Effect of dilutive stock options — 312 — 341 Effect of dilutive contingent shares — 177 — 185 Weighted average shares of common stock (diluted) 10,027 10,411 9,948 10,469 Per share data: Basic (loss) income per share $ (0.07 ) $ 0.03 $ (0.04 ) $ 0.08 Diluted (loss) income per share $ (0.07 ) $ 0.03 $ (0.04 ) $ 0.07

Business Segments

Business Segments	6 Months Ended
	Jul. 04, 2015
Segment Reporting [Abstract]
Business Segments	9. Business Segments The Company operates in one segment, ophthalmology. The Company develops, manufactures and markets medical devices. Our revenues arise from the sale of consoles, delivery devices, consumables, service and support activities. Revenue information shown by geographic region, based on the location at which each sale originates, is as follows: Three Months Ended Six Months Ended (in thousands) July 4, June 28, July 4, June 28, United States $ 5,391 $ 5,984 $ 10,972 $ 10,689 Europe 1,366 2,273 3,680 4,576 Rest of Americas 539 771 1,535 1,609 Asia/Pacific Rim 1,737 1,561 3,642 4,044 $ 9,033 $ 10,589 $ 19,829 $ 20,918 Revenues are attributed to countries based on location of end customers. No individual country accounted for more than 10% of the Company’s revenues, other than the United States, which accounted for 59.7% and 56.5% of revenues for the three month periods ended July 4, 2015 and June 28, 2014, respectively. For the six month period ended July 4, 2015 and June 28, 2014, the United States accounted for 55.3% and 51.1% of sales, respectively. No customer accounted for more than 10% of total revenues for the three and six month periods ended July 4, 2015 and June 28, 2014, respectively. No customer accounted for more than 10% of accounts receivable balance as of July 4, 2015. One customer accounted for approximately 13% of accounts receivable balance as of January 3, 2015.

Subsequent Events

Subsequent Events	6 Months Ended
	Jul. 04, 2015
Subsequent Events [Abstract]
Subsequent Events	10. Subsequent Events In August 2015, the Board of Directors approved a further extension of the stock repurchase plan for another year and authorized an additional $2.0 million of stock repurchases. The Company has evaluated subsequent events and has concluded that no other subsequent events that require disclosure in the financial statements have occurred since the quarter ended July 4, 2015.

Summary of Significant Accoun17

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jul. 04, 2015
Accounting Policies [Abstract]
Financial Statement Presentation	Financial Statement Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates	Use of Estimates. The preparation of unaudited condensed consolidated financial statements in conformity with 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. We base our 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 our operating results.
Revenue Recognition	Revenue Recognition. Our revenues arise from the sale of laser consoles, delivery devices, consumables and service and support activities. Revenue from product sales is recognized upon receipt of a purchase order and product shipment provided that no significant obligations remain and collectibility is reasonably assured. Shipments are generally made with Free-On-Board (“FOB”) shipping point terms, whereby title passes upon shipment from our dock. Any shipments with FOB receiving point terms are recorded as revenue when the shipment arrives at the receiving point. Cost is recognized as product sales revenue is recognized. The Company’s sales may include post-sales obligations for training or other deliverables. For revenue arrangements such as these, we recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition, Multiple-Element Arrangements In international regions, we utilize distributors to market and sell our products. We recognize revenue upon shipment for sales to these independent, third-party distributors as we have no continuing obligations subsequent to shipment. Generally our distributors are responsible for all marketing, sales, installation, training and warranty labor coverage for our products. Our standard terms and conditions do not provide price protection or stock retention rights to any of our distributors. Royalty revenues are typically based on licensees’ net sales of products that utilize our technology and are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured, such as upon the earlier of the receipt of a royalty statement from the licensee or upon payment by the licensee.
Taxes Collected from Customers and Remitted to Governmental Authorities	Taxes Collected from Customers and Remitted to Governmental Authorities. Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying consolidated statements of operations.
Shipping and Handling Costs	Shipping and Handling Costs. Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented.
Deferred Revenue	Deferred Revenue. Revenue related to extended service contracts is deferred and recognized on a straight line basis over the period of the applicable service contract. Costs associated with these service arrangements are recognized as incurred. A reconciliation of the changes in the Company’s deferred revenue balance for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 687 636 Revenue recognized (667 ) (686 ) Balance, end of period $ 1,199 $ 1,083
Warranty	Warranty. The Company generally provides a one to two year warranty on its products, which is accrued for upon shipment of products. Actual warranty costs incurred have not materially differed from those accrued. The Company’s warranty policy is applicable to products which are considered defective in their performance or fail to meet the product specifications. Warranty costs are reflected in the statement of operations as cost of revenues. A reconciliation of the changes in the Company’s warranty liability for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 183 134 Cost of warranty claims and adjustments (132 ) (96 ) Balance, end of period $ 520 $ 506
Recently Issued and Adopted Accounting Standards	Recently Issued and Adopted Accounting Standards. In May 2014, as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) Revenue from Contracts with Customers. In June 2014, the FASB issued ASU 2014-12, “ Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. Management is evaluating the provisions of this statement, including which period to adopt, and has not determined what impact the adoption of ASU 2015-11 will have on the Company's consolidated financial position or results of operations.

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Tables)	6 Months Ended
	Jul. 04, 2015
Accounting Policies [Abstract]
Reconciliation of Changes in Deferred Revenue	A reconciliation of the changes in the Company’s deferred revenue balance for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 687 636 Revenue recognized (667 ) (686 ) Balance, end of period $ 1,199 $ 1,083
Reconciliation of Changes in Warranty Liability	A reconciliation of the changes in the Company’s warranty liability for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 183 134 Cost of warranty claims and adjustments (132 ) (96 ) Balance, end of period $ 520 $ 506

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jul. 04, 2015
Inventory Disclosure [Abstract]
Components of Inventories	The components of the Company’s inventories as of July 4, 2015 and January 3, 2015 are as follows: (in thousands) July 4, January 3, Raw materials $ 3,686 $ 3,966 Work in process 2,099 1,609 Finished goods 4,386 3,544 Total inventories $ 10,171 $ 9,119

Goodwill and Intangible Assets

Goodwill and Intangible Assets (Tables)	6 Months Ended
	Jul. 04, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Summary of Components of Gross and Net Intangible Asset	The following table summarizes the components of gross and net intangible asset balances: July 4, 2015 January 3, 2015 (in thousands) Gross Accumulated Net Remaining Amortization Gross Accumulated Net Patents $ 720 $ 600 $ 120 Varies $ 720 $ 600 $ 120 Customer relations 240 84 156 9.75 years 240 76 164 Total $ 960 $ 684 $ 276 $ 960 $ 676 $ 284
Amortization of Sales and Marketing Expense and Cost of Revenue	The amortization of customer relations was charged to sales and marketing expense and the amortization of patents was charged to cost of revenues. Future estimated amortization expense (in thousands): 2015 (six months) $ 46 2016 98 2017 16 2018 16 2019 16 Thereafter 84 Total $ 276

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	6 Months Ended
	Jul. 04, 2015
Fair Value Disclosures [Abstract]
Financial Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis	As of July 4, 2015 and January 3, 2015, financial assets and liabilities measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows: July 4, 2015 January 3, 2015 Fair Value Measurements Fair Value Measurements (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Money market funds $ 11,846 — — $ 11,846 $ 11,846 — — $ 11,846 Liabilities: Earn-out liability — — $ 1,219 $ 1,219 $ — — $ 1,423 $ 1,423
Quantitative Information about the Inputs and Valuation Methodologies Used for Fair Value Measurements	The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of July 4, 2015. As of July 4, 2015 Fair Value Valuation Significant Weighted Earn-out liability $ 1,219 Discounted cash flow Projected royalties $2,770 Discount rate 14.06%
Reconciliation of the Changes in the Company's Earn-Out - Cash (Level 3 Liabilities) Balance	A reconciliation of the changes in the Company’s earn-out liability (Level 3 liability) for the six months ended July 4, 2015 and June 28, 2014 is as follows: Six Months Ended (in thousands) July 4, June 28, Balance as of beginning of the period $ 1,423 $ 624 Payments against earn-out (236 ) (264 ) Change in fair value of earn-out liability 32 191 Balance as of the end of the period $ 1,219 $ 551

Stock Based Compensation (Table

Stock Based Compensation (Tables)	6 Months Ended
	Jul. 04, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Summary of Activity in Stock Option Plan	The following table summarizes information regarding activity in our stock option plan during the six months ended July 4, 2015: Number of Weighted Aggregate Outstanding as of January 3, 2015 833,795 $ 4.88 Granted 95,700 $ 10.62 Exercised (167,189 ) $ 3.68 Canceled or forfeited (18,351 ) $ 5.98 Outstanding as of July 4, 2015 743,955 $ 5.86 $ 2,048
Weighted Average Assumptions for Fair Value Estimate of Stock-Based Awards (Options)	The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards (options) with the following weighted average assumptions: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Average risk free interest rate 1.51 % 1.45 % 1.27 % 1.48 % Expected life (in years) 4.55 years 4.5 years 4.55 years 4.5 years Dividend yield — % — % — % — % Average volatility 51 % 55 % 51 % 57 %
Stock-Based Compensation Expense	The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended July 4, 2015 and June 28, 2014: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Cost of revenues $ 56 $ 39 $ 123 $ 73 Research and development 53 26 132 48 Sales and marketing 45 28 104 60 General and administrative 75 141 203 297 $ 229 $ 234 $ 562 $ 478
Summary of Stock Options Outstanding, Vested and Expected to Vest and Exercisable	Occasionally, the Company will grant stock-based instruments to non-employees. During the six months ended July 4, 2015 and June 28, 2014, the amount of stock-based compensation related to non-employee options was not material. Information regarding stock options outstanding, vested and expected to vest and exercisable as of July 4, 2015 is summarized below: Number of Weighted Weighted Aggregate Options outstanding 743,955 $ 5.86 4.43 $ 2,048 Options vested and expected to vest 699,259 $ 5.72 4.35 $ 2,000 Options exercisable 384,668 $ 4.54 3.48 $ 1,453
Restricted Stock Units and Awards	Information regarding the restricted stock units activity for the six months ended July 4, 2015 is summarized below: Number Outstanding as of January 3, 2015 277,390 Restricted stock units granted 225,392 Restricted stock units released (207,340 ) Restricted stock units cancelled (80,000 ) Outstanding as of July 4, 2015 215,442 Information regarding the restricted stock awards activity for the six months ended July 4, 2015 is summarized below: Number Outstanding as of January 3, 2015 2,445 Restricted stock awards granted 2,513 Restricted stock awards released (2,445 ) Outstanding as of July 4, 2015 2,513

Computation of Basic and Dilu23

Computation of Basic and Diluted Net Income Per Common Share (Tables)	6 Months Ended
	Jul. 04, 2015
Earnings Per Share [Abstract]
Reconciliation of Numerator and Denominator of Basic and Diluted Net Income Per Common Share	A reconciliation of the numerator and denominator of basic and diluted net income per common share is provided as follows: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, Numerator: Net (loss) income $ (652 ) $ 297 $ (406 ) $ 784 Denominator: Weighted average shares of common stock (basic) 10,027 9,922 9,948 9,943 Effect of dilutive stock options — 312 — 341 Effect of dilutive contingent shares — 177 — 185 Weighted average shares of common stock (diluted) 10,027 10,411 9,948 10,469 Per share data: Basic (loss) income per share $ (0.07 ) $ 0.03 $ (0.04 ) $ 0.08 Diluted (loss) income per share $ (0.07 ) $ 0.03 $ (0.04 ) $ 0.07

Business Segments (Tables)

Business Segments (Tables)	6 Months Ended
	Jul. 04, 2015
Segment Reporting [Abstract]
Revenue Information by Geographic Region	Revenue information shown by geographic region, based on the location at which each sale originates, is as follows: Three Months Ended Six Months Ended (in thousands) July 4, June 28, July 4, June 28, United States $ 5,391 $ 5,984 $ 10,972 $ 10,689 Europe 1,366 2,273 3,680 4,576 Rest of Americas 539 771 1,535 1,609 Asia/Pacific Rim 1,737 1,561 3,642 4,044 $ 9,033 $ 10,589 $ 19,829 $ 20,918

Summary of Significant Accoun25

Summary of Significant Accounting Policies - Reconciliation of Changes in Deferred Revenue (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015		Jun. 28, 2014
Reconciliation of the changes in the Company's deferred revenue balance
Balance, beginning of period	$ 1,179	[1]	$ 1,133
Additions to deferral	687		636
Revenue recognized	(667)		(686)
Balance, end of period	$ 1,199		$ 1,083
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Summary of Significant Accoun26

Summary of Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Jul. 04, 2015
Minimum
Summary Of Significant Accounting Policies [Line Items]
Products warranty period	1 year
Maximum
Summary Of Significant Accounting Policies [Line Items]
Products warranty period	2 years

Summary of Significant Accoun27

Summary of Significant Accounting Policies - Reconciliation of Changes in Warranty Liability (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015		Jun. 28, 2014
Reconciliation of the changes in the Company's warranty liability
Balance, beginning of period	$ 469	[1]	$ 468
Accruals for product warranties	183		134
Cost of warranty claims and adjustments	(132)		(96)
Balance, end of period	$ 520		$ 506
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Jul. 04, 2015	Jan. 03, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 3,686	$ 3,966
Work in process	2,099	1,609
Finished goods	4,386	3,544
Total inventories	$ 10,171	$ 9,119	[1]
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Goodwill and Intangible Asset29

Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jan. 03, 2015	[1]
Goodwill And Intangible Assets Disclosure [Abstract]
Carrying value of goodwill	$ 533		$ 533
Amortization expense	$ 8	$ 36
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Goodwill and Intangible Asset30

Goodwill and Intangible Assets - Summary of Components of Gross and Net Intangible Asset (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015	Jan. 03, 2015
Schedule of Intangible Assets
Gross Carrying Amount	$ 960	$ 960
Accumulated Amortization	684	676
Net Carrying Amount	276	284	[1]
Patents
Schedule of Intangible Assets
Gross Carrying Amount	720	720
Accumulated Amortization	600	600
Net Carrying Amount	$ 120	120
Remaining Amortization Period	Varies
Customer Relations
Schedule of Intangible Assets
Gross Carrying Amount	$ 240	240
Accumulated Amortization	84	76
Net Carrying Amount	$ 156	$ 164
Useful Lives	9 years 9 months
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Goodwill and Intangible Asset31

Goodwill and Intangible Assets - Amortization of Sales and Marketing Expense and Cost of Revenue (Details) - USD ($) $ in Thousands	Jul. 04, 2015	Jan. 03, 2015	[1]
Future estimated amortization expense
2015 (six months)	$ 46
2,016	98
2,017	16
2,018	16
2,019	16
Thereafter	84
Net Carrying Amount	$ 276	$ 284
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended January 3, 2015.

Fair Value Measurements - Finan

Fair Value Measurements - Financial Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jul. 04, 2015	Jan. 03, 2015
Money Market Funds
Assets:
Assets, Fair Value Measurements	$ 11,846	$ 11,846
Level 1 | Money Market Funds
Assets:
Assets, Fair Value Measurements	11,846	11,846
Earn Out Liability
Liabilities:
Liabilities, Fair Value Measurements	1,219	1,423
Earn Out Liability | Level 3
Liabilities:
Liabilities, Fair Value Measurements	$ 1,219	$ 1,423

Fair Value Measurements - Quant

Fair Value Measurements - Quantitative Information about the Inputs and Valuation Methodologies Used for Fair Value Measurements (Details) - Earn Out Liability - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015	Jan. 03, 2015
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 1,219	$ 1,423
Level 3
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	1,219	$ 1,423
Level 3 | Discounted Cash Flow
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 1,219
Valuation Technique, Earn-out liability	Discounted cash flow
Level 3 | Discounted Cash Flow | Weighted Average
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 2,770
Weighted Average, Discount rate	14.06%
Level 3 | Discounted Cash Flow | Minimum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 669
Weighted Average, Discount rate	10.33%
Level 3 | Discounted Cash Flow | Maximum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 3,377
Weighted Average, Discount rate	27.00%

Fair Value Measurements - Recon

Fair Value Measurements - Reconciliation of the Changes in the Company's Earn-Out - Cash (Level 3 Liabilities) Balance (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014
Reconciliation of the changes in the Company's earn-out - cash (Level 3 liabilities) balance
Balance as of beginning of the period	$ 1,423	$ 624
Payments against earn-out	(236)	(264)
Change in fair value of earn-out liability	32	191
Balance as of the end of the period	$ 1,219	$ 551

Stock Based Compensation - Summ

Stock Based Compensation - Summary of Activity in Stock Option Plan (Details) - 6 months ended Jul. 04, 2015 - USD ($) $ / shares in Units, $ in Thousands	Total
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract]
Outstanding, Number of Shares, Beginning Balance	833,795
Number of Shares, Options Granted	95,700
Number of Shares, Options Exercised	(167,189)
Number of Shares, Options Cancelled or forfeited	(18,351)
Outstanding, Number of Shares, Ending Balance	743,955
Weighted Average Exercise Price Per Share, Beginning Balance	$ 4.88
Weighted Average Exercise Price Per Share , Options Granted	10.62
Weighted Average Exercise Price Per Share, Options Exercised	3.68
Weighted Average Exercise Price Per Share, Options Cancelled or forfeited	5.98
Weighted Average Exercise Price Per Share, Ending Balance	$ 5.86
Aggregate Intrinsic Value, Ending Balance	$ 2,048

Stock Based Compensation (Detai

Stock Based Compensation (Details Textual)	Jan. 09, 2015USD ($)Executivesshares	Jul. 04, 2015USD ($)$ / sharesshares	Jun. 28, 2014$ / shares	Jul. 04, 2015USD ($)$ / sharesshares	Jun. 28, 2014USD ($)$ / shares	Aug. 10, 2015USD ($)	Jul. 31, 2014USD ($)	Feb. 28, 2013USD ($)	Feb. 28, 2012USD ($)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average grant date fair value of the options granted | $ / shares		$ 4.40	$ 4.09	$ 4.57	$ 4.09
Dividend yield		0.00%	0.00%	0.00%	0.00%
Total intrinsic value of options exercised				$ 243,000	$ 566,000
Total unrecognized compensation cost related to non-vested stock-based compensation arrangements		$ 2,400,000		$ 2,400,000
Cost is expected to be recognized over a weighted average period				2 years 5 months 1 day
Stock repurchase program authorized amount		$ 5,800,000		$ 5,800,000			$ 3,000,000	$ 3,000,000	$ 4,000,000
Stock repurchase, shares | shares				76,916
Shares repurchased price, per share | $ / shares				$ 8.71
Repurchase of shares | shares		714,381		714,381
Remaining common stock value authorized to purchase under stock repurchase program		$ 200,000		$ 200,000
Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock repurchase program additional amount authorized						$ 2,000,000
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted | shares				225,392
Number of Shares, Restricted stock units released | shares				207,340
Restricted stock units released, intrinsic value				$ 1,900,000
Restricted stock units released, Shares withheld | shares				66,882
Restricted stock units released, value withheld				$ 605,000
Restricted Stock Units (RSUs) | Retention Award
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted | shares	56,000
Number of executives | Executives	6
Award investing period				4 years
Weighted grant date fair value of restricted stock units granted	$ 485,000
Restricted Stock Units (RSUs) | Performance Award
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted | shares	110,000
Number of executives | Executives	6
Award investing period				4 years
Weighted grant date fair value of restricted stock units granted	$ 486,000
Period consider for calculation of average stock price performance after awards vesting				60 days
Restricted Stock Units (RSUs) | Market Performance Award
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted | shares	50,000
Award investing period				4 years
Weighted grant date fair value of restricted stock units granted	$ 234,000
Period consider for calculation of average stock price performance after awards vesting				60 days
Vesting on Grant Date | Restricted Stock Units (RSUs) | Retention Award
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of retention award vesting	20.00%
Vesting Annually | Restricted Stock Units (RSUs) | Retention Award
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of retention award vesting				80.00%

Stock Based Compensation - Weig

Stock Based Compensation - Weighted Average Assumptions for Fair Value Stock-Based Awards (Options) (Details)	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Weighted average assumptions for fair value estimate of stock-based awards (options)
Average risk free interest rate	1.51%	1.45%	1.27%	1.48%
Expected life (in years)	4 years 6 months 18 days	4 years 6 months	4 years 6 months 18 days	4 years 6 months
Dividend yield	0.00%	0.00%	0.00%	0.00%
Average volatility	51.00%	55.00%	51.00%	57.00%

Stock Based Compensation - Stoc

Stock Based Compensation - Stock Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 229	$ 234	$ 562	$ 478
Cost of revenues
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	56	39	123	73
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	53	26	132	48
Sales and marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	45	28	104	60
General and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 75	$ 141	$ 203	$ 297

Stock Based Compensation - Su39

Stock Based Compensation - Summary of Stock Options Outstanding, Vested and Expected to Vest and Exercisable (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jul. 04, 2015	Jan. 03, 2015
Stock options outstanding, exercisable and expected to vest
Options outstanding, Number of Shares	743,955	833,795
Options vested and expected to vest, Number of Shares	699,259
Options exercisable, Number of Shares	384,668
Options outstanding, Weighted Average Exercise Price	$ 5.86	$ 4.88
Options vested and expected to vest, Weighted Average Exercise Price	5.72
Options exercisable, Weighted Average Exercise Price	$ 4.54
Options outstanding, Weighted Average Remaining Contractual Life (years)	4 years 5 months 5 days
Options vested and expected to vest, Weighted Average Remaining Contractual Life (years)	4 years 4 months 6 days
Options exercisable, Weighted Average Remaining Contractual Life (years)	3 years 5 months 23 days
Options outstanding, Aggregate Intrinsic Value	$ 2,048
Options vested and expected to vest, Aggregate Intrinsic Value	2,000
Options exercisable, Aggregate Intrinsic Value	$ 1,453

Stock Based Compensation - Rest

Stock Based Compensation - Restricted Stock Units and Awards (Details)	6 Months Ended
	Jul. 04, 2015shares
Restricted Stock Awards
Restricted stock units and awards
Number of Shares, Beginning Balance	2,445
Restricted stock units granted	2,513
Number of Shares, Restricted stock units released	(2,445)
Number of Shares, Ending Balance	2,513
Restricted Stock Units (RSUs)
Restricted stock units and awards
Number of Shares, Beginning Balance	277,390
Restricted stock units granted	225,392
Number of Shares, Restricted stock units released	(207,340)
Number of Shares, Restricted stock units cancelled	(80,000)
Number of Shares, Ending Balance	215,442

Income Taxes (Details Textual)

Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Income Taxes [Line Items]
Provision for income taxes	$ (118)	$ 12	$ 32	$ 25
Release of deferred tax assets valuation allowance			(9,200)
Unrecognized tax benefits recognition impact on income tax rate	$ 900		$ 900
Earliest Tax Year
Income Taxes [Line Items]
Open Tax Year			2,008
Latest Tax Year
Income Taxes [Line Items]
Open Tax Year			2,014

Computation of Basic and Dilu42

Computation of Basic and Diluted Net Income Per Common Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Stock option
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares that were excluded from the computation of diluted weighted average shares outstanding	743,955	123,393	743,955	91,448

Computation of Basic and Dilu43

Computation of Basic and Diluted Net Income Per Common Share - Reconciliation of Numerator and Denominator of Basic and Diluted Net Income Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Numerator:
Net (loss) income	$ (652)	$ 297	$ (406)	$ 784
Denominator:
Weighted average shares of common stock (basic)	10,027	9,922	9,948	9,943
Effect of dilutive stock options		312		341
Effect of dilutive contingent shares		177		185
Weighted average shares of common stock (diluted)	10,027	10,411	9,948	10,469
Per share data:
Basic (loss) income per share	$ (0.07)	$ 0.03	$ (0.04)	$ 0.08
Diluted (loss) income per share	$ (0.07)	$ 0.03	$ (0.04)	$ 0.07

Business Segments (Details Text

Business Segments (Details Textual)	3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 04, 2015Customer	Jun. 28, 2014Customer	Jul. 04, 2015SegmentCustomer	Jun. 28, 2014Customer	Jan. 03, 2015Customer
Segment Reporting Information [Line Items]
Number of operating segments | Segment			1
Number of customers accounted for more than ten percent of revenue	0	0	0	0
Number of customers accounted for more than ten percent of account receivable			0		1
Customer Concentration Risk | Accounts Receivable
Segment Reporting Information [Line Items]
Percentage of concentration risk					13.00%
United States | Customer Concentration Risk | Revenue, Total
Segment Reporting Information [Line Items]
Percentage of concentration risk	59.70%	56.50%	55.30%	51.10%
Maximum | Customer Concentration Risk | Revenue, Total
Segment Reporting Information [Line Items]
Percentage of concentration risk	10.00%	10.00%	10.00%	10.00%
Maximum | Customer Concentration Risk | Accounts Receivable
Segment Reporting Information [Line Items]
Percentage of concentration risk			10.00%

Business Segments - Revenue Inf

Business Segments - Revenue Information by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 9,033	$ 10,589	$ 19,829	$ 20,918
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	5,391	5,984	10,972	10,689
Europe
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	1,366	2,273	3,680	4,576
Rest of Americas
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	539	771	1,535	1,609
Asia/Pacific Rim
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 1,737	$ 1,561	$ 3,642	$ 4,044

Subsequent Events (Details Text

Subsequent Events (Details Textual)	Aug. 10, 2015USD ($)
Subsequent Event
Subsequent Event [Line Items]
Stock repurchase program additional amount authorized	$ 2,000,000