IRIDEX (IRIX) 10-Q 10 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Oct. 03, 2015	Oct. 23, 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	Oct. 3, 2015
Amendment Flag	false
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--01-02
Trading Symbol	IRIX
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,945,820

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015	[1]
Current assets:
Cash and cash equivalents	$ 10,213	$ 13,303
Accounts receivable, net of allowance for doubtful accounts of $149 as of October 3, 2015 and $223 as of January 3, 2015	7,736	8,337
Inventories	11,184	9,119
Prepaid expenses and other current assets	666	510
Deferred income taxes - current	1,625	1,625
Total current assets	31,424	32,894
Property and equipment, net	1,089	735
Intangible assets, net	272	284
Goodwill	533	533
Deferred income taxes - long term	7,149	7,151
Other long-term assets	184	221
Total assets	40,651	41,818
Current liabilities:
Accounts payable	2,559	1,758
Accrued compensation	1,311	1,863
Accrued expenses	1,536	1,770
Accrued warranty	528	469
Deferred revenue	1,211	1,179
Total current liabilities	7,145	7,039
Long-term liabilities:
Other long-term liabilities	686	1,043
Total liabilities	7,831	8,082
Stockholders’ equity:
Common stock, $0.01 par value: Authorized: 30,000,000 shares; Issued and outstanding 9,940,122 and 9,786,695 shares as of October 3, 2015 and as of January 3, 2015, respectively	110	108
Additional paid-in capital	37,557	38,511
Accumulated deficit	(4,847)	(4,883)
Total stockholders’ equity	32,820	33,736
Total liabilities and stockholders’ equity	$ 40,651	$ 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	Oct. 03, 2015	Jan. 03, 2015
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 149	$ 223
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	9,940,122	9,786,695
Common stock, shares outstanding	9,940,122	9,786,695

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Income Statement [Abstract]
Total revenues	$ 9,815	$ 10,118	$ 29,644	$ 31,036
Cost of revenues	4,974	4,969	15,176	15,532
Gross profit	4,841	5,149	14,468	15,504
Operating expenses:
Research and development	1,237	1,096	4,000	3,596
Sales and marketing	2,234	1,980	6,463	5,784
General and administrative	1,227	1,467	4,206	4,521
Total operating expenses	4,698	4,543	14,669	13,901
Income (loss) from operations	143	606	(201)	1,603
Other income (expense), net	164	(112)	134	(300)
Income (loss) from operations before (benefit from) provision for income taxes	307	494	(67)	1,303
(Benefit from) provision for income taxes	(135)	4	(103)	29
Net income	$ 442	$ 490	$ 36	$ 1,274
Net income per share:
Basic	$ 0.04	$ 0.05	$ 0	$ 0.13
Diluted	$ 0.04	$ 0.05	$ 0	$ 0.12
Weighted average shares used in computing net income per common share:
Basic	9,972	9,869	9,956	9,918
Diluted	10,094	10,255	10,142	10,397

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 442	$ 490	$ 36	$ 1,274
Other comprehensive income, net of tax	0	0	0	0
Comprehensive income	$ 442	$ 490	$ 36	$ 1,274

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015		Sep. 27, 2014
Operating activities:
Net income	$ 36		$ 1,274
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	389		307
Change in fair value of earn-out liability	(129)		303
Stock-based compensation cost recognized	725		722
Provision for doubtful accounts	36		49
Deferred income taxes	2
Changes in operating assets and liabilities:
Accounts receivable	565		(282)
Inventories	(2,065)		1,001
Prepaid expenses and other current assets	(156)		28
Other long-term assets	37		65
Accounts payable	801		(436)
Accrued compensation	(552)		(389)
Accrued expenses	(180)		(73)
Accrued warranty	59		70
Deferred revenue	32		42
Other long-term liabilities	46		(21)
Net cash (used in) provided by operating activities	(354)		2,660
Investing activities:
Acquisition of property and equipment	(731)		(472)
Payment on earn-out liability	(328)		(361)
Net cash used in investing activities	(1,059)		(833)
Financing activities:
Proceeds from stock option exercises	747		1,182
Repurchase of common stock	(1,543)		(3,411)
Repurchase of vested stock options	(275)
Taxes paid related to net share settlements of equity awards	(606)
Net cash used in financing activities	(1,677)		(2,229)
Net decrease in cash and cash equivalents	(3,090)		(402)
Cash and cash equivalents, beginning of period	13,303	[1]	13,444
Cash and cash equivalents, end of period	10,213		13,042
Cash paid during the period for:
Income taxes	$ 33		$ 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	9 Months Ended
	Oct. 03, 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 nine months ended October 3, 2015 are not necessarily indicative of the results for the year ending January 2, 2016 or any future interim period. The three and nine month periods ended October 3, 2015 and September 27, 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 includes 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	9 Months Ended
	Oct. 03, 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 nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 1,068 1,095 Revenue recognized (1,036 ) (1,053 ) Balance, end of period $ 1,211 $ 1,175 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 nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 267 207 Cost of warranty claims and adjustments (208 ) (137 ) Balance, end of period $ 528 $ 538 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. “Revenue from Contracts with Customers, Deferral of the Effective Date”. 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 this standard will have on the Company's consolidated financial position or results of operations.

Inventories

Inventories	9 Months Ended
	Oct. 03, 2015
Inventory Disclosure [Abstract]
Inventories	3. Inventories The components of the Company’s inventories as of October 3, 2015 and January 3, 2015 are as follows: (in thousands) October 3, January 3, Raw materials $ 3,838 $ 3,966 Work in process 1,943 1,609 Finished goods 5,403 3,544 Total inventories $ 11,184 $ 9,119

Goodwill and Intangible Assets

Goodwill and Intangible Assets	9 Months Ended
	Oct. 03, 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 October 3, 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 ended July 4, 2015 and determined that its goodwill was not impaired. As of October 3, 2015, the Company had not identified any factors that indicated there was an impairment of its goodwill and determined that no additional impairment analysis was then required. Intangible Assets. The following table summarizes the components of gross and net intangible asset balances: October 3, 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 88 152 9.50 years 240 76 164 Total $ 960 $ 688 $ 272 $ 960 $ 676 $ 284 Amortization expense totaled $12 thousand and $40 thousand for the nine months ended October 3, 2015 and September 27, 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 (three months) $ 4 2016 16 2017 54 2018 98 2019 16 Thereafter 84 Total $ 272

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Oct. 03, 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 October 3, 2015 and January 3, 2015, approximate fair value because of the short maturity of these instruments. As of October 3, 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: October 3, 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 $ 10,046 — — $ 10,046 $ 11,846 — — $ 11,846 Liabilities: Earn-out liability — — $ 966 $ 966 $ — — $ 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 October 3, 2015. As of October 3, 2015 Fair Value Valuation Significant Weighted Earn-out liability $ 966 Discounted cash flow Projected royalties $2,934 Discount rate 11.54% A reconciliation of the changes in the Company’s earn-out liability (Level 3 liability) for the nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance as of beginning of the period $ 1,423 $ 624 Payments against earn-out (328 ) (361 ) Change in fair value of earn-out liability (129 ) 303 Balance as of the end of the period $ 966 $ 566 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	9 Months Ended
	Oct. 03, 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 nine months ended October 3, 2015, the only active stock-based compensation plan was the 2008 Equity Incentive Plan (the “Incentive Plan”). The terms of awards granted during the nine months ended October 3, 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 nine months ended October 3, 2015: Number of Weighted Aggregate Outstanding as of January 3, 2015 833,795 $ 4.88 Granted 117,800 $ 9.92 Exercised (205,943 ) $ 3.63 Canceled or forfeited (153,966 ) $ 4.44 Outstanding as of October 3, 2015 591,686 $ 6.43 $ 1,030 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 $2.77 and $3.54 per share for the three months ended October 3, 2015 and September 27, 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 $4.23 and $4.06 per share for the nine months ended October 3, 2015 and September 27, 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 Nine Months Ended October 3, September 27, October 3, September 27, Average risk free interest rate 1.30 % 1.56 % 1.27 % 1.49 % Expected life (in years) 4.55 years 4.50 years 4.55 years 4.50 years Dividend yield — % — % — % — % Average volatility 47 % 54 % 50 % 56 % 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 nine months ended October 3, 2015 and September 27, 2014: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, Cost of revenues $ 49 $ 37 $ 172 $ 110 Research and development 21 27 153 75 Sales and marketing 42 26 146 86 General and administrative 51 154 254 451 $ 163 $ 244 $ 725 $ 722 Stock-based compensation expense capitalized to inventory was immaterial for the quarters ended October 3, 2015 and September 27, 2014. Occasionally, the Company will grant stock-based instruments to non-employees. During the nine months ended October 3, 2015 and September 27, 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 October 3, 2015 is summarized below: Number of Weighted Weighted Aggregate Options outstanding 591,686 $ 6.43 4.19 $ 1,030 Options vested and expected to vest 554,357 $ 6.31 4.10 $ 1,009 Options exercisable 293,854 $ 5.14 3.11 $ 761 The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of October 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 nine months ended October 3, 2015 and September 27, 2014 was approximately $144 thousand and $354 thousand, respectively. As of October 3, 2015, there was $1.9 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 2.45 years. Summary of Restricted Stock Units and Awards Information regarding the restricted stock units activity for the nine months ended October 3, 2015 is summarized below: Number Outstanding as of January 3, 2015 277,390 Restricted stock units granted 225,392 Restricted stock units released (209,193 ) Restricted stock units cancelled (146,000 ) Outstanding as of October 3, 2015 147,589 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. Compensation expense is recognized ratably over the vesting period. 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 nine months ended October 3, 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 nine months ended October 3, 2015, 209,193 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 $606 thousand of employees’ minimum tax obligation on the released restricted stock units. Information regarding the restricted stock awards activity for the nine months ended October 3, 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 October 3, 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. 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. For the nine months ended October 3, 2015, the Company has purchased 120,356 shares at an average price of $7.25 per share. As of October 3, 2015, the Company has repurchased 834,737 shares for approximately $6.6 million under this current program and the Company still has the authorization to purchase up to $1.1 million in common shares under the stock repurchase program. On September 9, 2015, the Company made a payment to James H. Mackaness, the Company’s former Chief Financial Officer and Chief Operating Officer, of approximately $275 thousand in cash in exchange for Mr. Mackaness’ agreement to cancel vested stock options exercisable for an aggregate of 92,656 shares of the Company’s common stock. This payment to Mr. Mackaness was made using funds authorized and available under the stock repurchase program discussed above, and resulted in a reduction of the approximate dollar value of shares that may yet be purchased under this program. See Item 2, Unregistered Sales of Equity Securities and Use of Proceeds in Part II, Other Information, for additional information.

Income Taxes

Income Taxes	9 Months Ended
	Oct. 03, 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 October 3, 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 October 3, 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	9 Months Ended
	Oct. 03, 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 October 3, 2015 and September 27, 2014, stock options to purchase 282,474 and 106,527 shares, respectively, were excluded from the computation of diluted weighted average shares outstanding. For the nine months ended October 3, 2015 and September 27, 2014, respectively, stock options to purchase 234,958 and 228,241 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 Nine Months Ended October 3, September 27, October 3, September 27, Numerator: Net income $ 442 $ 490 $ 36 $ 1,274 Denominator: Weighted average shares of common stock (basic) 9,972 9,869 9,956 9,918 Effect of dilutive stock options 117 256 174 313 Effect of dilutive contingent shares 5 130 12 166 Weighted average shares of common stock (diluted) 10,094 10,255 10,142 10,397 Per share data: Basic income per share $ 0.04 $ 0.05 $ 0.00 $ 0.13 Diluted income per share $ 0.04 $ 0.05 $ 0.00 $ 0.12

Business Segments

Business Segments	9 Months Ended
	Oct. 03, 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 Nine Months Ended (in thousands) October 3, September 27, October 3, September 27, United States $ 5,791 $ 5,547 $ 16,763 $ 16,236 Europe 2,083 2,011 5,763 6,587 Rest of Americas 506 822 2,041 2,431 Asia/Pacific Rim 1,435 1,738 5,077 5,782 $ 9,815 $ 10,118 $ 29,644 $ 31,036 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 59.0% and 54.8% of revenues for the three month periods ended October 3, 2015 and September 27, 2014, respectively. For the nine month period ended October 3, 2015 and September 27, 2014, the United States accounted for 56.5% and 52.3% of sales, respectively. No customer accounted for more than 10% of total revenues for the three and nine month periods ended October 3, 2015 and September 27, 2014, respectively. No customer accounted for more than 10% of accounts receivable balance as of October 3, 2015. One customer accounted for approximately 13% of accounts receivable balance as of January 3, 2015.

Subsequent Events

Subsequent Events	9 Months Ended
	Oct. 03, 2015
Subsequent Events [Abstract]
Subsequent Events	10. Subsequent Events The Company has evaluated subsequent events and has concluded that no subsequent events that require disclosure in the financial statements have occurred since the quarter ended October 3, 2015.

Summary of Significant Accoun17

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Oct. 03, 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 nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 1,068 1,095 Revenue recognized (1,036 ) (1,053 ) Balance, end of period $ 1,211 $ 1,175
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 nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 267 207 Cost of warranty claims and adjustments (208 ) (137 ) Balance, end of period $ 528 $ 538
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. “Revenue from Contracts with Customers, Deferral of the Effective Date”. 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 this standard will have on the Company's consolidated financial position or results of operations.

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Oct. 03, 2015
Accounting Policies [Abstract]
Reconciliation of Changes in Deferred Revenue	A reconciliation of the changes in the Company’s deferred revenue balance for the nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 1,179 $ 1,133 Additions to deferral 1,068 1,095 Revenue recognized (1,036 ) (1,053 ) Balance, end of period $ 1,211 $ 1,175
Reconciliation of Changes in Warranty Liability	A reconciliation of the changes in the Company’s warranty liability for the nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance, beginning of period $ 469 $ 468 Accruals for product warranties 267 207 Cost of warranty claims and adjustments (208 ) (137 ) Balance, end of period $ 528 $ 538

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Oct. 03, 2015
Inventory Disclosure [Abstract]
Components of Inventories	The components of the Company’s inventories as of October 3, 2015 and January 3, 2015 are as follows: (in thousands) October 3, January 3, Raw materials $ 3,838 $ 3,966 Work in process 1,943 1,609 Finished goods 5,403 3,544 Total inventories $ 11,184 $ 9,119

Goodwill and Intangible Assets

Goodwill and Intangible Assets (Tables)	9 Months Ended
	Oct. 03, 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: October 3, 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 88 152 9.50 years 240 76 164 Total $ 960 $ 688 $ 272 $ 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 (three months) $ 4 2016 16 2017 54 2018 98 2019 16 Thereafter 84 Total $ 272

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Oct. 03, 2015
Fair Value Disclosures [Abstract]
Financial Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis	As of October 3, 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: October 3, 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 $ 10,046 — — $ 10,046 $ 11,846 — — $ 11,846 Liabilities: Earn-out liability — — $ 966 $ 966 $ — — $ 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 October 3, 2015. As of October 3, 2015 Fair Value Valuation Significant Weighted Earn-out liability $ 966 Discounted cash flow Projected royalties $2,934 Discount rate 11.54%
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 nine months ended October 3, 2015 and September 27, 2014 is as follows: Nine Months Ended (in thousands) October 3, September 27, Balance as of beginning of the period $ 1,423 $ 624 Payments against earn-out (328 ) (361 ) Change in fair value of earn-out liability (129 ) 303 Balance as of the end of the period $ 966 $ 566

Stock Based Compensation (Table

Stock Based Compensation (Tables)	9 Months Ended
	Oct. 03, 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 nine months ended October 3, 2015: Number of Weighted Aggregate Outstanding as of January 3, 2015 833,795 $ 4.88 Granted 117,800 $ 9.92 Exercised (205,943 ) $ 3.63 Canceled or forfeited (153,966 ) $ 4.44 Outstanding as of October 3, 2015 591,686 $ 6.43 $ 1,030
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 Nine Months Ended October 3, September 27, October 3, September 27, Average risk free interest rate 1.30 % 1.56 % 1.27 % 1.49 % Expected life (in years) 4.55 years 4.50 years 4.55 years 4.50 years Dividend yield — % — % — % — % Average volatility 47 % 54 % 50 % 56 %
Stock-Based Compensation Expense	The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and nine months ended October 3, 2015 and September 27, 2014: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, Cost of revenues $ 49 $ 37 $ 172 $ 110 Research and development 21 27 153 75 Sales and marketing 42 26 146 86 General and administrative 51 154 254 451 $ 163 $ 244 $ 725 $ 722
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 nine months ended October 3, 2015 and September 27, 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 October 3, 2015 is summarized below: Number of Weighted Weighted Aggregate Options outstanding 591,686 $ 6.43 4.19 $ 1,030 Options vested and expected to vest 554,357 $ 6.31 4.10 $ 1,009 Options exercisable 293,854 $ 5.14 3.11 $ 761
Restricted Stock Units and Awards	Information regarding the restricted stock units activity for the nine months ended October 3, 2015 is summarized below: Number Outstanding as of January 3, 2015 277,390 Restricted stock units granted 225,392 Restricted stock units released (209,193 ) Restricted stock units cancelled (146,000 ) Outstanding as of October 3, 2015 147,589 Information regarding the restricted stock awards activity for the nine months ended October 3, 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 October 3, 2015 2,513

Computation of Basic and Dilu23

Computation of Basic and Diluted Net Income Per Common Share (Tables)	9 Months Ended
	Oct. 03, 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 Nine Months Ended October 3, September 27, October 3, September 27, Numerator: Net income $ 442 $ 490 $ 36 $ 1,274 Denominator: Weighted average shares of common stock (basic) 9,972 9,869 9,956 9,918 Effect of dilutive stock options 117 256 174 313 Effect of dilutive contingent shares 5 130 12 166 Weighted average shares of common stock (diluted) 10,094 10,255 10,142 10,397 Per share data: Basic income per share $ 0.04 $ 0.05 $ 0.00 $ 0.13 Diluted income per share $ 0.04 $ 0.05 $ 0.00 $ 0.12

Business Segments (Tables)

Business Segments (Tables)	9 Months Ended
	Oct. 03, 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 Nine Months Ended (in thousands) October 3, September 27, October 3, September 27, United States $ 5,791 $ 5,547 $ 16,763 $ 16,236 Europe 2,083 2,011 5,763 6,587 Rest of Americas 506 822 2,041 2,431 Asia/Pacific Rim 1,435 1,738 5,077 5,782 $ 9,815 $ 10,118 $ 29,644 $ 31,036

Summary of Significant Accoun25

Summary of Significant Accounting Policies - Reconciliation of Changes in Deferred Revenue (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015		Sep. 27, 2014
Reconciliation of the changes in the Company's deferred revenue balance
Balance, beginning of period	$ 1,179	[1]	$ 1,133
Additions to deferral	1,068		1,095
Revenue recognized	(1,036)		(1,053)
Balance, end of period	$ 1,211		$ 1,175
[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)	9 Months Ended
	Oct. 03, 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	9 Months Ended
	Oct. 03, 2015		Sep. 27, 2014
Reconciliation of the changes in the Company's warranty liability
Balance, beginning of period	$ 469	[1]	$ 468
Accruals for product warranties	267		207
Cost of warranty claims and adjustments	(208)		(137)
Balance, end of period	$ 528		$ 538
[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	Oct. 03, 2015	Jan. 03, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 3,838	$ 3,966
Work in process	1,943	1,609
Finished goods	5,403	3,544
Total inventories	$ 11,184	$ 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 ($)	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Jan. 03, 2015	[1]
Goodwill And Intangible Assets Disclosure [Abstract]
Carrying value of goodwill	$ 533,000		$ 533,000
Impairment of goodwill	0
Amortization expense	$ 12,000	$ 40,000
[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	9 Months Ended
	Oct. 03, 2015	Jan. 03, 2015
Schedule of Intangible Assets
Gross Carrying Amount	$ 960	$ 960
Accumulated Amortization	688	676
Net Carrying Amount	272	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	88	76
Net Carrying Amount	$ 152	$ 164
Useful Lives	9 years 6 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	Oct. 03, 2015	Jan. 03, 2015	[1]
Future estimated amortization expense
2015 (three months)	$ 4
2,016	16
2,017	54
2,018	98
2,019	16
Thereafter	84
Net Carrying Amount	$ 272	$ 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	Oct. 03, 2015	Jan. 03, 2015
Money Market Funds
Assets:
Assets, Fair Value Measurements	$ 10,046	$ 11,846
Level 1 | Money Market Funds
Assets:
Assets, Fair Value Measurements	10,046	11,846
Earn Out Liability
Liabilities:
Liabilities, Fair Value Measurements	966	1,423
Earn Out Liability | Level 3
Liabilities:
Liabilities, Fair Value Measurements	$ 966	$ 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	9 Months Ended
	Oct. 03, 2015	Jan. 03, 2015
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 966	$ 1,423
Level 3
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	966	$ 1,423
Level 3 | Discounted Cash Flow
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 966
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	$ 2,934
Weighted Average, Discount rate	11.54%
Level 3 | Discounted Cash Flow | Minimum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 169
Weighted Average, Discount rate	10.35%
Level 3 | Discounted Cash Flow | Maximum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 3,147
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	9 Months Ended
	Oct. 03, 2015	Sep. 27, 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	(328)	(361)
Change in fair value of earn-out liability	(129)	303
Balance as of the end of the period	$ 966	$ 566

Stock Based Compensation - Summ

Stock Based Compensation - Summary of Activity in Stock Option Plan (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Oct. 03, 2015USD ($)$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract]
Outstanding, Number of Shares, Beginning Balance | shares	833,795
Number of Shares, Options Granted | shares	117,800
Number of Shares, Options Exercised | shares	(205,943)
Number of Shares, Options Cancelled or forfeited | shares	(153,966)
Outstanding, Number of Shares, Ending Balance | shares	591,686
Weighted Average Exercise Price Per Share, Beginning Balance	$ 4.88
Weighted Average Exercise Price Per Share , Options Granted	9.92
Weighted Average Exercise Price Per Share, Options Exercised	3.63
Weighted Average Exercise Price Per Share, Options Cancelled or forfeited	4.44
Weighted Average Exercise Price Per Share, Ending Balance	$ 6.43
Aggregate Intrinsic Value, Ending Balance | $	$ 1,030

Stock Based Compensation (Detai

Stock Based Compensation (Details Textual)	Sep. 09, 2015USD ($)shares	Jan. 09, 2015USD ($)Executivesshares	Oct. 03, 2015USD ($)$ / sharesshares	Sep. 27, 2014$ / shares	Oct. 03, 2015USD ($)$ / sharesshares	Sep. 27, 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			$ 2.77	$ 3.54	$ 4.23	$ 4.06
Dividend yield			0.00%	0.00%	0.00%	0.00%
Total intrinsic value of options exercised					$ 144,000	$ 354,000
Total unrecognized compensation cost related to non-vested stock-based compensation arrangements			$ 1,900,000		$ 1,900,000
Cost is expected to be recognized over a weighted average period					2 years 5 months 12 days
Stock repurchase program authorized amount			$ 6,600,000		$ 6,600,000			$ 3,000,000	$ 3,000,000	$ 4,000,000
Stock repurchase, shares | shares					120,356
Shares repurchased price, per share | $ / shares					$ 7.25
Repurchase of shares | shares			834,737		834,737
Remaining common stock value authorized to purchase under stock repurchase program			$ 1,100,000		$ 1,100,000
Stock repurchase program additional amount authorized							$ 2,000,000
Cash paid to former chief financial officer and chief operating officer to cancel agreement of vested stock option	$ 275,000				$ 275,000
Number of shares, options canceled | shares					153,966
James H. Mackaness
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares, options canceled | shares	92,656
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					209,193
Restricted stock units released, intrinsic value					$ 1,900,000
Restricted stock units released, Shares withheld | shares					66,882
Restricted stock units released, value withheld					$ 606,000
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		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Weighted average assumptions for fair value estimate of stock-based awards (options)
Average risk free interest rate	1.30%	1.56%	1.27%	1.49%
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	47.00%	54.00%	50.00%	56.00%

Stock Based Compensation - Stoc

Stock Based Compensation - Stock Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 163	$ 244	$ 725	$ 722
Cost of revenues
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	49	37	172	110
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	21	27	153	75
Sales and marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	42	26	146	86
General and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 51	$ 154	$ 254	$ 451

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	9 Months Ended
	Oct. 03, 2015	Jan. 03, 2015
Stock options outstanding, exercisable and expected to vest
Options outstanding, Number of Shares	591,686	833,795
Options vested and expected to vest, Number of Shares	554,357
Options exercisable, Number of Shares	293,854
Options outstanding, Weighted Average Exercise Price	$ 6.43	$ 4.88
Options vested and expected to vest, Weighted Average Exercise Price	6.31
Options exercisable, Weighted Average Exercise Price	$ 5.14
Options outstanding, Weighted Average Remaining Contractual Life (years)	4 years 2 months 9 days
Options vested and expected to vest, Weighted Average Remaining Contractual Life (years)	4 years 1 month 6 days
Options exercisable, Weighted Average Remaining Contractual Life (years)	3 years 1 month 10 days
Options outstanding, Aggregate Intrinsic Value	$ 1,030
Options vested and expected to vest, Aggregate Intrinsic Value	1,009
Options exercisable, Aggregate Intrinsic Value	$ 761

Stock Based Compensation - Rest

Stock Based Compensation - Restricted Stock Units and Awards (Details)	9 Months Ended
	Oct. 03, 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	(209,193)
Number of Shares, Restricted stock units cancelled	(146,000)
Number of Shares, Ending Balance	147,589

Income Taxes (Details Textual)

Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Income Taxes [Line Items]
(Benefit from) provision for income taxes	$ (135)	$ 4	$ (103)	$ 29
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		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 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	282,474	106,527	234,958	228,241

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		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Numerator:
Net income	$ 442	$ 490	$ 36	$ 1,274
Denominator:
Weighted average shares of common stock (basic)	9,972	9,869	9,956	9,918
Effect of dilutive stock options	117	256	174	313
Effect of dilutive contingent shares	5	130	12	166
Weighted average shares of common stock (diluted)	10,094	10,255	10,142	10,397
Per share data:
Basic income per share	$ 0.04	$ 0.05	$ 0	$ 0.13
Diluted income per share	$ 0.04	$ 0.05	$ 0	$ 0.12

Business Segments (Details Text

Business Segments (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 03, 2015Customer	Sep. 27, 2014Customer	Oct. 03, 2015SegmentCustomer	Sep. 27, 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	59.00%	54.80%	56.50%	52.30%

Business Segments - Revenue Inf

Business Segments - Revenue Information by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 9,815	$ 10,118	$ 29,644	$ 31,036
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	5,791	5,547	16,763	16,236
Europe
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	2,083	2,011	5,763	6,587
Rest of Americas
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	506	822	2,041	2,431
Asia/Pacific Rim
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 1,435	$ 1,738	$ 5,077	$ 5,782