UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF THE SECURITIES
     EXCHANGE  ACT  OF  1934

     For the quarterly period ended June 28, 2003

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE  ACT  OF  1934

     For the Transition period from              to

                         Commission File Number: 0-27598

                               IRIDEX CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                          77-0210467
- -------------------------------------                 -------------------------
   (State or other jurisdiction of                        (I.R.S. employer
    incorporation or organization)                       identification No.)


                             1212 TERRA BELLA AVENUE
                      MOUNTAIN VIEW, CALIFORNIA 94043-1824
          (Address of principal executive offices, including zip code)

                                 (650) 940-4700
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.

                   (1) Yes [X]  No [ ]; (2) Yes [X]  No [ ]

The  number of shares of common stock, $.01 par value, issued and outstanding as
of  August  5,  2003  was  6,919,285.

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act.)  Yes  [ ]  No  [X]



                               IRIDEX CORPORATION

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
     PART I. FINANCIAL INFORMATION

     ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

               Condensed Consolidated Balance Sheets as of June 28, 2003
               and December 28, 2002                                           3

               Condensed Consolidated Statements of Operations for the three
               and six months ended June 28, 2003 and June 29, 2002            4

               Condensed Consolidated Statements of Cash Flows for the six
               months ended June 28, 2003 and June 29, 2002                    5

               Condensed Consolidated Statements of Comprehensive Loss for the
               three and six months ended June 28, 2003 and June 29, 2002      6

               Notes to Condensed Consolidated Financial Statements            7

     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS                                          11

     ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     26

     ITEM 4.   CONTROLS AND PROCEDURES                                        26

     PART II.  OTHER INFORMATION

     ITEM 1.   LEGAL PROCEEDINGS                                              27

     ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                       27

     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                 27

     ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS               27

     ITEM 5.  OTHER INFORMATION                                               28

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                29

     SIGNATURE                                                                30

     CERTIFICATION UNDER SECTION 302(A) OF SARBANES-OXLEY ACT OF 2002         30


                                        2


PART I.  FINANCIAL INFORMATION

Item  1.  Condensed  Consolidated  Financial  Statements
- --------------------------------------------------------



                               IRIDEX CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                                   JUNE 28,    DECEMBER 28,
                                                 ------------  ------------
                                                     2003         2002
                                                 ------------  -----------
                                                 (unaudited)
                                                         
                        ASSETS
                        ------
Current assets:
  Cash and cash equivalents . . . . . . . . . .  $     8,121   $    9,186
  Available-for-sale securities . . . . . . . .        5,016        2,356
  Accounts receivable, net. . . . . . . . . . .        6,389        8,037
  Inventories . . . . . . . . . . . . . . . . .       10,404       10,725
  Prepaids and other current assets . . . . . .        1,105          751
                                                 ------------  -----------
    Total current assets. . . . . . . . . . . .       31,035       31,055
  Property and equipment, net . . . . . . . . .          729          950
  Deferred income taxes . . . . . . . . . . . .        2,267        2,267
                                                 -----------  ------------
    Total assets. . . . . . . . . . . . . . . .  $    34,031   $   34,272
                                                 ============  ===========

         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------
Current liabilities:
  Accounts payable. . . . . . . . . . . . . . .  $       892   $      657
  Accrued expenses. . . . . . . . . . . . . . .        3,305        3,417
                                                 ------------  -----------
    Total liabilities . . . . . . . . . . . . .        4,197        4,074
                                                 ------------  -----------
Stockholders' equity:
  Common stock. . . . . . . . . . . . . . . . .           70           70
  Additional paid-in capital. . . . . . . . . .       23,652       23,631
  Accumulated other comprehensive income (loss)           (1)           3
  Treasury stock. . . . . . . . . . . . . . . .         (430)        (430)
  Retained earnings . . . . . . . . . . . . . .        6,543        6,924
                                                 ------------  -----------
    Total stockholders' equity. . . . . . . . .       29,834       30,198
                                                 ------------  -----------
    Total liabilities and stockholders' equity.  $    34,031   $  34,272
                                                 ============  ===========


    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        3



                                          IRIDEX CORPORATION
                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                             (UNAUDITED)

                                                               THREE MONTHS ENDED  SIX MONTHS ENDED
                                                               JUNE 28,  JUNE 29,  JUNE 28, JUNE 29,
                                                                 2003     2002      2003      2002
                                                                -------  -------  --------  --------
                                                                                
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $7,435   $7,433   $14,661   $14,396
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . .   4,315    4,312     8,303     8,190
                                                                -------  -------  --------  --------
      Gross profit . . . . . . . . . . . . . . . . . . . . . .   3,120    3,121     6,358     6,206
                                                                -------  -------  --------  --------

Operating expenses:
 Research and development. . . . . . . . . . . . . . . . . . .   1,047    1,320     1,997     2,465
 Sales, general and administrative . . . . . . . . . . . . . .   2,564    2,512     5,028     4,799
                                                                -------  -------  --------  --------
Total operating expenses . . . . . . . . . . . . . . . . . . .   3,611    3,832     7,025     7,264
                                                                -------  -------  --------  --------

Loss from operations . . . . . . . . . . . . . . . . . . . . .    (491)    (711)     (667)   (1,058)
      Interest and other income, net . . . . . . . . . . . . .      51       54       105        97
                                                                -------  -------  --------  --------
Loss before benefit from income taxes. . . . . . . . . . . . .    (440)    (657)     (562)     (961)
  Benefit from income taxes. . . . . . . . . . . . . . . . . .     141      210       181       307
                                                                -------  -------  --------  --------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ (299)  $ (447)  $  (381)  $  (654)
                                                                =======  =======  ========  ========

Net loss per common share-basic and diluted. . . . . . . . . .  $(0.04)  $(0.07)  $ (0.06)  $ (0.10)
                                                                =======  =======  ========  ========

Shares used in per common share basic and diluted calculations   6,919    6,861     6,916     6,849
                                                                =======  =======  ========  ========


  The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        4



                                                IRIDEX CORPORATION
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (IN THOUSANDS)
                                                    (UNAUDITED)

                                                                                               SIX MONTHS ENDED
                                                                                             JUNE 28,    JUNE 29,
                                                                                               2003        2002
                                                                                            ----------  ----------
                                                                                                  
Cash flows from operating activities:
 Net loss  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    (381)  $    (654)
 Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
   Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        394         437
   Provision for inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (66)         70
   Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     (8)
   Changes in operating assets and liabilities:
     Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,648       1,114
     Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        387         654
     Prepaids and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .       (354)         57
     Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        235        (447)
     Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (112)       (220)
                                                                                            ----------  ----------
   Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .      1,751       1,003
                                                                                            ----------  ----------

Cash flows from investing activities:
 Purchases of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .     (4,506)     (2,555)
 Proceeds from maturity of available-for-sale securities . . . . . . . . . . . . . . . . .      1,842       3,359
 Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .       (173)       (189)
                                                                                            ----------  ----------
   Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . .     (2,837)        615
                                                                                            ----------  ----------

Cash flows from financing activities:
 Issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         21         120
                                                                                            ----------  ----------
   Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . .         21         120
                                                                                            ----------  ----------
     Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . .     (1,065)      1,738

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . .      9,186       4,613
                                                                                            ----------  ----------

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . .  $   8,121   $   6,351
                                                                                            ==========  ==========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 Change in unrealized losses on available-for-sale securities                               $      (4)  $      (5)
                                                                                            ==========  ==========


  The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        5



                               IRIDEX CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                    THREE MONTHS ENDED       SIX MONTHS ENDED

                                   JUNE 28,    JUNE 29,    JUNE 28,    JUNE 29,
                                     2003        2002        2003        2002
                                  ----------  ----------  ----------  ----------
                                                          
Net loss . . . . . . . . . . . .  $    (299)  $    (447)  $    (381)  $    (654)
Other comprehensive loss:
 Change in unrealized gain on
   available-for-sale securities         (2)         (3)         (4)         (5)
                                  ----------  ----------  ----------  ----------

Comprehensive loss . . . . . . .  $    (301)  $    (450)  $    (385)  $    (659)
                                  ==========  ==========  ==========  ==========


    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        6

                               IRIDEX CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS  OF  PRESENTATION

     The  accompanying  unaudited condensed consolidated financial statements of
IRIDEX  Corporation  ("the  Company")  have  been  prepared  in  accordance with
generally  accepted  accounting  principles  in the United States of America 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 generally accepted accounting principles
for  complete  financial  statements.  In  the  opinion  of  management,  all
adjustments,  consisting  of  normal recurring adjustments, considered necessary
for  a  fair  presentation  have  been  included.

     The  condensed  consolidated  financial  statements  should  be  read  in
conjunction  with  the  audited financial statements and notes thereto, together
with  management's discussion and analysis of financial condition and results of
operations,  contained  in  our Annual Report on Form 10-K, which was filed with
the  Securities  and  Exchange  Commission  on  March  28,  2003. The results of
operations  for  the  three  and  six  month periods ended June 28, 2003 are not
necessarily indicative of the results for the year ending January 3, 2004 or any
future  interim  period.

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 December 28, 2002 which was filed with
the  Securities  and  Exchange  Commission  on  March  28,  2003.  The Company's
significant accounting policies have not materially changed as of June 28, 2003.

3.   WARRANTY

     The  Company  accrues  for  an  estimated  warranty  cost  upon shipment of
products  in accordance with SFAS No. 5, "Accounting for Contingencies."  Actual
warranty  costs  incurred  have not materially differed from those accrued.  The
Company's warranty policy is effective for shipped products which are considered
defective  or  fail  to  meet  the  product  specifications.  Warranty costs are
reflected  in  the statement of operations as a cost of sales.  A reconciliation
of  the  changes  in  the Company's warranty liability for the six months ending
June  28,  2003  follows  (in  thousands):

Balance  at  the  beginning  of  the  period               $  796
- -----------------------------------------------------------------
Accruals  for  warranties  issued  during  the  period        642
- -----------------------------------------------------------------
Settlements  made  in  kind  during  the  period             (721)
- -----------------------------------------------------------------
Balance  at  the  end  of  the  period                       $717
- -----------------------------------------------------------------


                                        7

4.   ACCOUNTING  FOR  STOCK-BASED  COMPENSATION

     The  Company  accounts  for  stock-based  compensation  arrangements  in
accordance  with  provisions  of  Accounting  Principles  Board  Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees" ("APB 25") and complies with the
disclosure  provisions  of  Statement of Financial Accounting Standards No. 123,
"Accounting  for  Stock-Based Compensation" ("SFAS 123"), as amended by SFAS No.
148  "Accounting  for  Stock-Based Compensation - Transition and Disclosure - an
Amendment  of  FASB  Statement  No.  123."

     Under  APB 25, compensation expense for grants to employees is based on the
difference,  if  any,  on  the  date of the grant, between the fair value of the
Company's stock and the option's exercise price. SFAS 123 defines a "fair value"
based  method  of  accounting  for  an  employee  stock option or similar equity
investment.  The  pro  forma  disclosure  of the difference between compensation
expense  included  in  net  loss and the related cost measured by the fair value
method  is  presented  in  the table at the end of this note. To comply with pro
forma  reporting  requirements  of SFAS 123, compensation cost is also estimated
for the fair value of Employee Stock Purchase Plan ("ESPP") issuances, which are
included  in  the  pro  forma  totals  below.

     The  Company  accounts  for  equity  instruments issued to non-employees in
accordance  with the provisions of SFAS 123 and Emerging Issues Task Force Issue
No.  96-18,  "Accounting  for  Equity  Instruments that are Issued to Other Than
Employees,  or  in  Conjunction  with  Selling  Goods and Services." Stock-based
compensation  expense  related  to  stock  options  granted  to non-employees is
recognized  on  a  straight-line  basis  as  the  stock  options are earned. The
stock-based  compensation expense will fluctuate as the deemed fair market value
of  the  common  stock  fluctuates.  There  were no equity instruments issued to
non-employees during the three and six months ended June 28, 2003.

     The following table, pursuant to SFAS 123, provides a reconciliation of net
loss  to  pro forma net loss as if the fair value method had been applied to all
employee  awards  (in  thousands,  except  per  share  data):



                                          Three Months Ended        Six Months Ended
                                       ------------------------  -----------------------
                                        June 28,     June 29,     June 28,    June 29,
                                          2003         2002         2003        2002
- -------------------------------------  ----------  ------------  ----------  -----------
                                                                 
Net loss, as reported                  $    (299)  $      (447)  $    (381)  $     (654)
- -------------------------------------  ----------  ------------  ----------  -----------
Add:  Total stock based compensation
expense determined under fair value
based method for all awards to
employees                                   (104)         (104)       (221)        (279)
- -------------------------------------  ----------  ------------  ----------  -----------
Pro forma net loss                     $    (403)  $      (551)  $    (602)  $     (933)
- -------------------------------------  ==========  ============  ==========  ===========
Basic and diluted net loss per share:
- -------------------------------------
As reported                            $   (0.04)  $     (0.07)  $   (0.06)  $    (0.10)
- -------------------------------------  ==========  ============  ==========  ===========
Pro forma                              $   (0.06)  $     (0.08)  $   (0.09)  $    (0.14)
- -------------------------------------  ==========  ============  ==========  ===========



                                        8

     The  determination  of  fair  value  of  all options granted by the Company
includes  assumptions  on expected volatility, risk free interest rate, expected
term  and  expected  dividends.

5.   INVENTORIES  (IN  THOUSANDS):

     Inventories  are  stated  at  the lower of cost or market. Cost is based on
     actual  sales  computed  on  a first in, first out basis. The components of
     inventories  consist  of  the  following:



                                                  JUNE 28,    DECEMBER 28,
                                                    2003          2002
                                                ------------  -------------
                                                (unaudited)
                                                        
Raw materials and work in progress . . . . . .  $      5,784  $       6,511
Finished goods . . . . . . . . . . . . . . . .         4,620          4,214
                                                ------------  -------------
Total inventories. . . . . . . . . . . . . . .  $     10,404  $      10,725
                                                ============  =============


6.   COMPUTATIONS  OF  NET  LOSS  PER  COMMON  SHARE

     Basic  and  diluted  net loss per common share are computed by dividing net
loss  for  the  period  by the weighted average number of shares of common stock
outstanding  during  the period.  The calculation of diluted net loss per common
share  excludes  potential  common  stock  if  their  effect  is  anti-dilutive.
Potential  common  stock consists of incremental common shares issuable upon the
exercise  of  stock  options.  Basic  and  diluted net loss per common share are
equivalent  for  all  periods  presented due to the Company's net loss position.

     During  the  three  and six months ended June 28, 2003, options to purchase
1,837,487  shares  at  a weighted average exercise price of $5.27 per share were
outstanding,  but  were not included in the computations of diluted net loss per
common  share because their effect was antidilutive. For the three and six month
periods  ended  June 29, 2002 options to purchase 1,614,037 shares at a weighted
average  price  of  $5.29  per  share  were  outstanding but not included in the
computations  of  diluted  net  loss  per  common share because their effect was
antidilutive.  These  options could dilute earnings per share in future periods.

7.   BUSINESS  SEGMENTS  (UNAUDITED)

     We  operate  in  two  reportable segments: the ophthalmology medical device
segment  and  the  dermatology  medical  device  segment.  In  both segments, we
develop,  manufacture  and  market medical devices.  Our revenues arise from the
sale  of  consoles,  delivery  devices,  disposables  and  service  and  support
activities.

     Information  on reportable segments for the three and six months ended June
28,  2003  and  June  29,  2002  is  as  follows  (in  thousands):


                                        9



                     Three Months Ended June 28, 2003              Three Months Ended June 29, 2002
              ---------------------------------------------  ---------------------------------------------
              Ophthalmology   Dermatology                    Ophthalmology   Dermatology
                 Medical        Medical                         Medical        Medical
                 Devices        Devices          Total          Devices        Devices          Total
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
                                                                         
Sales         $        6,019  $      1,416  $        7,435   $        5,679  $      1,754  $        7,433
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Direct Cost
of Goods
Sold                   2,047           681           2,728            1,797           727           2,524
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Direct
Gross
Margin                 3,972           735           4,707            3,882         1,027           4,909
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Total
Unallocated
Costs                                               (5,147)                                        (5,566)
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Pre-tax
income
(loss)                                                (440)                                          (657)
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------

                    Six Months Ended June 28, 2003                  Six Months Ended June 29, 2002
              ------------------------------------------  ------------------------------------------------
              Ophthalmology   Dermatology                  Ophthalmology   Dermatology
                 Medical        Medical                       Medical        Medical
                 Devices        Devices         Total         Devices        Devices         Total
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
                                                                       
Sales         $  11,742       $      2,919  $     14,661   $       10,756  $      3,640  $     14,396
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Direct Cost
of Goods
Sold              4,014              1,387         5,401            3,469         1,601         5,070
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Direct
Gross
Margin            7,728              1,532         9,260            7,287         2,039         9,326
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Total
Unallocated
Costs                                             (9,822)                                     (10,287)
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------
Pre-tax
income
(loss)                                              (562)                                        (961)
- ------------  --------------  ------------  ---------------  --------------  ------------  ---------------



     Indirect costs of manufacturing, research and development, and selling,
general and administrative costs are not allocated to the segments.

     The Company's assets and liabilities are not evaluated on a segment basis.
Accordingly, no disclosure on segment assets and liabilities is provided.

8.   RECENT  ACCOUNTING  PRONOUNCEMENTS

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS No. 150 is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the statement and
still existing at the beginning of the interim period of adoption. We do not
expect the adoption of SFAS No. 150 to have a significant impact on our
financial position or results of operations


                                       10

ITEM 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This  Quarterly  Report  on  Form  10-Q  contains  trend analysis and other
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as  amended, such as statements relating to levels of future sales and operating
results,  actual  order rate and market acceptance of our products; expectations
for  future  sales  growth,  generally,  and  the  potential for production cost
decreases and higher gross margins; our anticipated ability to contain costs and
results  of asset management efforts; favorable Center for Medicare and Medicaid
coverage  decisions  regarding  AMD procedures that use our products; results of
clinical  studies  and  risks  associated  with bringing new products to market,
general  economic  conditions  and levels of international sales. In some cases,
forward-looking  statements  can  be  identified  by terminology, such as "may,"
"will,"  "should,"  "expects,"  "plans," "anticipates," "believes," "estimates,"
"predicts," "intends," "potential," "continue," or the negative of such terms or
other  comparable terminology. These statements involve known and unknown risks,
uncertainties  and other factors which may cause our actual results, performance
or  achievements  to  differ  materially from those expressed or implied by such
forward-looking  statement, including as a result of the factors set forth under
"Factors  That  May Affect Future Operating Results" and other risks detailed in
our  Annual Report on Form10-K filed with the Securities and Exchange Commission
on  March  28, 2003 and detailed from time to time in our reports filed with the
Securities  and  Exchange Commission. The reader is cautioned not to place undue
reliance  on  these  forward-looking  statements,  which  reflect  management's
analysis  only  as  of the date of this Form 10-Q. We undertake no obligation to
update  such  forward-looking  statements  to  reflect  events  or circumstances
occurring  after  the  date  of  this  report.


RESULTS  OF  OPERATIONS

     The  following  table  sets forth certain operating data as a percentage of
sales  (unaudited)  for  the  periods  indicated.



                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                        JUNE 28,    JUNE 29,   JUNE 28,   JUNE 29,
                                          2003        2002       2003       2002
                                       ----------  ----------  ---------  ---------
                                                              
Sales. . . . . . . . . . . . . . . .       100.0%      100.0%     100.0%     100.0%
Cost of sales. . . . . . . . . . . .        58.0        58.0       56.6       56.9
                                       ----------  ----------  ---------  ---------
  Gross profit . . . . . . . . . . .        42.0        42.0       43.4       43.1
                                       ----------  ----------  ---------  ---------
Operating expenses:
  Research and development . . . . .        14.1        17.8       13.6       17.1
  Sales, general and administrative         34.5        33.7       34.3       33.3
                                       ----------  ----------  ---------  ---------
    Total operating expenses . . . .        48.6        51.5       47.9       50.4
                                       ----------  ----------  ---------  ---------

Loss from operations . . . . . . . .        (6.6)       (9.5)      (4.5)      (7.3)
  Interest and other income, net . .         0.7         0.7        0.7        0.7
                                       ----------  ----------  ---------  ---------
Loss before benefit from income taxes       (5.9)       (8.8)      (3.8)      (6.6)
Benefit from income taxes. . . . . .         1.9         2.8        1.2        2.1
                                       ----------  ----------  ---------  ---------
Net loss . . . . . . . . . . . . . .        (4.0)%      (6.0)%     (2.6)%     (4.5)%
                                       ==========  ==========  =========  =========



                                       11

     The following table sets forth for the periods indicated the amount of
sales for our operating segments and sales as a percentage of total sales.



                                Three Months Ended                             Six Months Ended
                   --------------------------------------------  ----------------------------------------------
                      June 28, 2003          June 29, 2002          June 28, 2003            June 29, 2002
                   ---------------------  ---------------------  ---------------------  -----------------------
                    Amount   Percentage    Amount   Percentage    Amount   Percentage     Amount    Percentage
                              of total               of total               of total                 of total
                               sales                   sales                  sales                   sales
                   --------  -----------  --------  -----------  --------  -----------  ----------  -----------
                                                                            

    Domestic       $  4,680        62.9%  $  4,744        63.8%  $  9,220        62.9%  $    8,743        60.7%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
    International     2,755        37.1%     2,689        36.2%     5,441        37.1%       5,653        39.3%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
Total              $  7,435       100.0%  $  7,433       100.0%  $ 14,661       100.0%  $   14,396       100.0%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
Ophthalmology:
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
    Domestic       $  3,628        48.8%  $  3,220        43.3%  $  7,050        48.1%  $    6,037        41.9%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
    International     2,391        32.2%     2,459        33.1%     4,692        32.0%       4,719        32.8%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
Total              $  6,019        81.0%  $  5,679        76.4%  $ 11,742        80.1%  $   10,756        74.7%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
Dermatology:
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
    Domestic       $  1,052        14.1%  $  1,524        20.5%  $  2,170        14.8%  $    2,706        18.8%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
    International       364         4.9%       230         3.1%       749         5.1%         934         6.5%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------
Total              $  1,416        19.0%  $  1,754        23.6%  $  2,919        19.9%  $    3,640        25.3%
- -----------------  --------  -----------  --------  -----------  --------  -----------  ----------  -----------


Combined  Ophthalmology  and  Dermatology

Sales

     Sales for the three months ended June 28, 2003 were $7.4 million and at the
same  level when compared to the corresponding three month period ended June 29,
2002.  An  increase  in  ophthalmology  sales  of  $0.3  million was offset by a
decrease  in  dermatology  sales of $0.3 million for the three months ended June
28,  2003.  Sales for the six months ended June 28, 2003 increased 1.8% to $14.7
million  from $14.4 million for the six months ended June 29, 2002.  For the six
month  period  the overall increase was driven primarily by an increase in sales
of  our ophthalmology products of $1.0 million offset by a $0.7 million decrease
in  sales  of  our  dermatology  products.

     Domestic  sales were $4.7 million for the three month period ended June 28,
2003  and  at  approximately the same level as the three month period ended June
29,  2002.  For  the  six  months  ended  June 28, 2003 domestic sales increased


                                       12

5.5%  to  $9.2 million from $8.7 million. The overall increase for the six month
period was driven mainly by $1.0 million in increased sales of our ophthalmology
products offset by a $0.5 million decrease in sales of our dermatology products.

     International sales were $2.8 million for the three months ended June 28,
2003 and $2.7 million for the comparable prior year three-month period primarily
as a result of $0.1 million in increased sales of our dermatology products. For
the six months ended June 28, 2003 international sales decreased 3.8% to $5.4
million from $5.7 million for the six months ended June 29, 2002. The decrease
in international sales during this period was driven mainly by $0.2 million in
decreased sales of our dermatology products.

     We continue to face challenges marketing and selling our products in the
current difficult economic environment, both domestically and internationally,
and expect to face these challenges for the foreseeable future. See "-Factors
That May Affect Future Results - Our Business has been Adversely Impacted by the
Worldwide Economic Slowdown and Related Uncertainties."

     Ophthalmology Sales

     Ophthalmology  sales  increased  6.0%  to $6.0 million for the three months
ended  June 28, 2003 from $5.7 million for the three months ended June 29, 2002.
For  the  six  months  ended June 28, 2003 ophthalmology sales increased 9.2% to
$11.7 million from $10.8 million for the comparable prior year six-month period.
Domestic  ophthalmology  sales  increased  12.7%  to  $3.6 million for the three
months  ended  June  28,  2003  from  $3.2 million for the comparable prior year
three-month  period.  The increase in domestic sales during this period occurred
mainly  as  a  result  of  $0.3 million in increased unit sales of visible laser
systems,  including  the  Millennium Endolase module, which is incorporated as a
component  of  Bausch and Lomb's Millennium Microsurgical System, and because of
an  increase  in  service and delivery device revenue.  For the six months ended
June  28, 2003 domestic ophthalmology sales increased 16.8% to $7.1 million from
$6.0  million  for  the  comparable  prior  year  six  month  period.  Domestic
ophthalmology  sales  increased  during  this  period mainly as a result of $1.0
million  in  increased  unit  sales  of  visible  laser  systems,  including the
Millennium  Endolase  module.   International ophthalmology sales decreased 2.8%
to  $2.4  million for the three months ended June 28, 2003 from $2.5 million for
the  comparable  prior  year  three-month period.  The decrease in international
ophthalmology  sales for this period was due mainly to $0.2 million in decreased
unit  sales  of  our  infrared laser systems offset by $0.1 million in increased
unit  sales  of our visible laser systems.  For the six month periods ended June
28,  2003  and  June  29, 2002 international ophthalmology sales remained at the
same  level  at  $4.7  million.

     Dermatology  Sales

     Dermatology  sales  decreased  19.3%  to  $1.4 million for the three months
ended  June 28, 2003 from $1.8 million for the three months ended June 29, 2002.
Domestic  dermatology  sales  decreased  31% to $1.1 million for the three month
period  ended  June  28, 2003 from $1.5 million for the three month period ended
June 29, 2002. The decrease in domestic dermatology sales was due primarily to a
$0.3  million  decrease  in  unit  sales  of  products as well as a $0.2 million
decrease  in  average  selling  prices  of  dermatology  products. International
dermatology  sales  increased  from  $0.2  million to $0.4 million for the three
months ended June 28, 2003. This increase in international dermatology sales for
this  period  was  driven mainly by an increase of $0.2 million in unit sales of
dermatology  products.  For the six months ended June 28, 2003 dermatology sales
decreased  19.8% to $2.9 million from $3.6 million for the comparable prior year
six-month period. Domestic dermatology sales decreased 19.8% to $2.2 million for
the  six  months  ended June 28, 2003 from $2.7 million for the comparable prior
year  six-month  period.  The  decrease  in  domestic dermatology sales for this
period  was  due  mainly to a $0.2 million decrease in unit sales of products as
well  as  to  a  $0.3  million decrease in average selling prices of dermatology
products.


                                       13

International  dermatology  sales  decreased by $0.2 million to $0.7 million for
the  six  months  ended June 28, 2003 from $0.9 million for the comparable prior
six-month  period.  The  decrease in international dermatology sales for the six
month  period  ended  June 28, 2003 was driven mainly by decreased unit sales of
dermatology  products.

     Gross Profit. Our gross profit was $3.1 million, and 42% as a percentage of
net  sales, for both of the three month periods ended June 28, 2003 and June 29,
2002.  For  the  six months ended June 28, 2003, gross profit as a percentage of
net  sales  increased  slightly to 43.4% as compared to 43.1% for the six months
ended  June 29, 2002. For the six month period ended June 28, 2003, the increase
in  gross  profit as a percentage of net sales was primarily due to a beneficial
impact  of 1.0% related to decreased direct product costs and product mix, a net
beneficial  impact of 0.8% related to lower warranty charges, offset by 0.8% for
decreased  average selling prices and increased overhead costs of 0.7%. Although
increasing competition has continued to result in reduced average selling prices
for  some of our products, we intend to continue our efforts to reduce inventory
and  the  overall cost of manufacturing and thereby mitigate the impact of price
reductions  on  our gross profit. See "-Factors that May Affect Future Results -
If  We  Cannot  Increase Our Sales Volumes, Reduce Our Costs or Introduce Higher
Margin  Products  to  Offset  Anticipated Reductions in the Average Unit Selling
Price of our Products, Our Operating Results May Suffer." Overall, we expect our
gross  profit  margins  to  continue to fluctuate due to changes in the relative
proportions  of  domestic  and  international  sales,  mix  of sales of existing
products,  pricing,  product costs and a variety of other factors. See "-Factors
That  May  Affect  Future  Results  -  Our  Operating Results May Fluctuate from
Quarter  to  Quarter  and  Year  to  Year."

     Research  and  Development.  For  the three months ended June 28, 2003, our
research  and  development expenses of $1.0 million decreased by $0.3 million or
20.7%  from  $1.3  million  for the three months ended June 29, 2002.  Likewise,
research  and  development  expenses  decreased  as a percentage of net sales to
14.1%  for  the  three  months ended June 28, 2003 from 17.8% for the comparable
prior year three-month period.  The decrease in research and development expense
in  absolute dollars and as a percentage of net sales for the three month period
ended  June  28, 2003 was due primarily to $0.2 million in reduced payroll costs
associated with a reduction in force in June 2002 and a $0.1 million decrease in
new project spending.  For the six month period ended June 28, 2003 research and
development  expense  decreased  19.0% to $2.0 million from $2.5 million for the
comparable  prior  year six month period.  As a percentage of net sales research
and  development  expense decreased to 13.6% from 17.1% for the comparable prior
year  six  month  period.  The  decrease  in research and development expense in
absolute  dollars  and  as  a percentage of sales for the six month period ended
June  28,  2003  was  due  primarily  to  $0.3  million of reduced payroll costs
associated with a reduction in force in June 2002, $0.1 million in decreased new
project  spending  and  $0.1  million  in  decreased  clinical  spending.

     Sales,  General  and  Administrative. Our sales, general and administrative
expenses  increased  by 2.1% to $2.6 million for the three months ended June 28,
2003 from $2.5 million for the three months ended June 29, 2002. As a percentage
of  net sales, sales, general and administrative expenses increased to 34.5% for
the  three  months  ended June 28, 2003 from 33.7% for the comparable prior year
three-month period. The increase in sales, general and administrative expense in
absolute  dollars and as a percentage of sales for the three month period ending
June  28,  2003  was  due  primarily to $0.1 million in increased non-commission
related  selling  activities,  a  $0.1  million  net  increase in administrative
spending,  which included consulting, insurance and accounting fees, offset by a
$0.1  million  decrease in marketing and administrative payroll costs associated
with  a reduction in force in June 2002. For the six months ended June 28, 2003,
sales,  general  and  administrative  expenses increased by 4.8% to $5.0 million
from  $4.8  million  for  the  comparable  period  in  2002.  Sales, general and
administrative  expenses as a percentage of net sales increased to 34.3% for the
six months ended June 28, 2003 from 33.3% for the comparable period in 2002. The
increase  in absolute dollars and as a percentage of net sales for the six month


                                       14

period  ended  June  28,  2003  was  due  primarily to $0.2 million in increased
non-commission  related  selling  activities,  a  $0.2  million  increase  in
administrative  spending  associated  with  consulting, insurance and accounting
fees,  offset by a $0.2 million decrease in reduced marketing and administrative
personnel  costs  associated  with  a  reduction  in  force  in  June  2002.

     Interest  and  Other Income, net. For the three months ended June 28, 2003,
we  realized  net  interest  and other income of $0.05 million, which was at the
same  level as the comparable quarter in 2002. For the six months ended June 29,
2003,  net  interest  and other income was $0.1 million and at approximately the
same  level  as  the  six  month  period  ended  June  29,  2002.

     Income  Taxes.  The  effective  income tax rate for the three month periods
ending  June 28, 2003 and June 29, 2002 was 32%. The tax rates for these periods
was  lower  than the Federal and State combined statutory rate of 40% because of
certain  tax  benefits  associated with tax credits for research and development
activities.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  June  28, 2003, our primary sources of liquidity included cash and cash
equivalents  and  available-for-sale securities in the aggregate amount of $13.1
million.  In  addition,  we have available $4.0 million under our unsecured line
of  credit  which bears interest at the bank's prime rate and expires in October
2003.  As  of  June  28,  2003, no borrowings were outstanding under this credit
facility.  We  expect  to renew the line of credit in October 2003 assuming that
the  terms  continue  to  be  acceptable.

     During the six months ended June 28, 2003, we used $1.1 million in cash and
cash  equivalents.  During  this  period,  operating  activities  provided  $1.8
million  of cash.  Sources of cash from operating activities included a decrease
in  net  accounts  receivable  of  $1.6 million, depreciation of $0.4 million, a
decrease  in net inventories of $0.4 million and an increase in accounts payable
of  $0.2  million,  offset in part, by uses of cash including a net loss of $0.4
million,  an  increase  in  prepaid  expenses  of $0.3 million and a decrease in
accrued  expenses  of  $0.1  million.  The  decrease  in accounts receivable and
inventories  resulted from focused asset management efforts to increase our cash
position.  We  will  continue  to  place a high priority on our asset management
efforts to further increase our cash position.  The increase in prepaid expenses
related  to  a  prepayment  to  a  supplier  of  a  product  that we distribute.

     Investing  activities used $2.8 million in cash and cash equivalents during
the  six months ended June 28, 2003, primarily due to net purchases of available
for  sale  securities  of  $2.7  million and $0.2 million for the acquisition of
property  and  equipment.

     Net  cash provided by financing activities during the six months ended June
28, 2003 was $21,000 which resulted from the issuance of common stock.

     We believe that, based on current estimates, our cash, cash equivalents and
available-for-sale  securities  together with cash generated from operations and
our credit facility will be sufficient to meet our anticipated cash requirements


                                       15

for  the  next  12  months.  However,  if  the current economic downturn remains
protracted,  we may need to expend our cash reserves to fund our operations. Our
liquidity  could be negatively affected by a decline in demand for our products,
the  need  to invest in new product development or reductions in spending by our
customers  as  a  result  of  the continuing economic downturn or other factors.
There  can  be  no  assurance  that  additional debt or equity financing will be
available  when  required or, if available, can be secured on terms satisfactory
to  us.  See  "-Factors  That May Affect Future Results - We May Need Additional
Capital, which May Not Be Available, and Our Ability to Grow may be Limited as a
Result."

CRITICAL  ACCOUNTING  POLICIES

     The  Company's  significant accounting policies are disclosed in our Annual
Report  on  Form  10-K for the year ended December 28, 2002 which was filed with
the  Securities  and  Exchange  Commission  on  March  28,  2003.

RECENT ACCOUNTING PRONOUNCEMENTS

     In  May  2003,  the  FASB  issued  SFAS  No.  150,  "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No.  150 establishes standards for how an issuer classifies and measures certain
financial  instruments with characteristics of both liabilities and equity. SFAS
No.  150  is  effective for financial instruments entered into or modified after
May  31,  2003, and otherwise is effective at the beginning of the first interim
period  beginning  after  June  15,  2003.  SFAS No. 150 is to be implemented by
reporting  the  cumulative  effect  of  a  change in an accounting principle for
financial  instruments  created  before  the  issuance date of the statement and
still  existing  at  the  beginning of the interim period of adoption. We do not
expect  the  adoption  of  SFAS  No.  150  to  have  a significant impact on our
financial  position  or  results  of  operations

FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS

     We  Rely  on  Continued  Market Acceptance of Our Existing Products and Any
Decline  in  Sales  of Our Existing Products Would Adversely Affect Our Business
and  Results  of  Operations.  We  currently  market  visible and infrared light
semiconductor-based  photocoagulator  medical  laser  systems  to the ophthalmic
market.  We  also  market  a  visible  and  infrared  light  semiconductor-based
photocoagulator  medical laser system to the dermatology market. We believe that
continued  and  increased  sales,  if  any,  of  these  medical laser systems is
dependent  upon  a  number  of  factors  including  the  following:

          -    Product performance, features, ease of use, scalability and
               durability;

          -    Recommendations and opinions by ophthalmologists, dermatologists,
               clinicians, plastic surgeons and their associated opinion
               leaders;

          -    Price of our products and prices of competing products and
               technologies;

          -    Availability of competing products, technologies and alternative
               treatments;

          -    Willingness of ophthalmologists and dermatologists to convert to
               semiconductor-based or infrared laser systems from alternative
               technologies; and


                                       16

          -    Level of reimbursement for treatments administered with our
               products.

Any  significant  decline  in  market  acceptance  of  our products would have a
material  adverse  effect  on  our business, results of operations and financial
condition.

     We  Face  Strong  Competition  in  Our  Markets  and  Expect  the  Level of
Competition  to  Grow  in the Foreseeable Future.  Competition in the market for
devices  used  for  ophthalmic  and  dermatology  treatments  is  intense and is
expected  to increase.  This market is also characterized by rapid technological
innovation and change and our products could be rendered obsolete as a result of
future  innovations.  Our  competitive  position  depends on a number of factors
including  product  performance, characteristics and functionality, ease of use,
scalability,  durability  and  cost.  Our principal competitors in ophthalmology
are Lumenis Ltd., Nidek, Inc., Carl Zeiss, Inc., Alcon Inc. and Quantel.  All of
these  companies  currently offer a competitive semiconductor-based laser system
in  ophthalmology.  Our  principal  competitors in dermatology are Lumenis Ltd.,
Laserscope,  Candela  Corporation and Altus Medical Inc and Palomar Technologies
Some  competitors  have  substantially  greater  financial, engineering, product
development,  manufacturing, marketing and technical resources than we do.  Some
companies  also  have  greater  name  recognition  than  we do and long-standing
customer  relationships.  In  addition  to  other  companies  that  manufacture
photocoagulators,  we compete with pharmaceuticals, other technologies and other
surgical  techniques.  Some  medical  companies,  academic  and  research
institutions, or others, may develop new technologies or therapies that are more
effective  in  treating conditions targeted by us or are less expensive than our
current or future products.  Any such developments could have a material adverse
effect  on  our  business,  financial  condition  and  results  of  operations.

     Our  Future  Success  Depends  on  Our  Ability to Develop and Successfully
Introduce  New  Products  and New Applications.  Our future success is dependent
upon,  among  other  factors, our ability to develop, obtain regulatory approval
of,  manufacture  and  market  new  products.  In October 2002, we announced the
introduction  of  a  number  of new products, specifically the OcuLight Symphony
multi-wavelength laser delivery system, an expanded EndoProbe product line and a
5  mm  Large  Spot Slit Lamp Adapter.  We also announced the Millennium Endolase
module,  which  we  manufacture  to  be  included  in Bausch & Lomb's Millennium
Microsurgical  System.  Successful  commercialization  of these new products and
new  applications will require that we effectively transfer production processes
from  research  and development to manufacturing and effectively coordinate with
our  suppliers.  In  addition,  we  must  successfully  sell  and achieve market
acceptance  of  new  products and applications and enhanced versions of existing
products.  The  extent  of, and rate at which, market acceptance and penetration
are  achieved  by  future  products  is  a  function  of  many variables.  These
variables  include  price,  safety,  efficacy,  reliability, marketing and sales
efforts,  the  development  of  new  applications  for  these  products,  the
availability  of third-party reimbursement of procedures using our new products,
the  existence  of  competing products and general economic conditions affecting
purchasing  patterns.  Our  ability  to market and sell new products may also be
subject  to  government regulation, including approval by the United States Food
and Drug Administration, or FDA, and foreign government agencies. Any failure in
our  ability  to  successfully  develop  and  introduce new products or enhanced
versions  of existing products and achieve market acceptance of new products and
new  applications  could have a material adverse effect on our operating results
and  would  cause  our  net  revenues  to  decline.

     Our Business Has Been Adversely Impacted By the Worldwide Economic Slowdown
and  Related  Uncertainties.  Weaker  economic  conditions  worldwide  have
contributed  to  the  continued  slowdown  in our business in general.  This has
resulted  in  reduced  demand  for  some  of  our products, excess manufacturing
capacity  under  current  market  conditions  and  higher  overhead  costs, as a
percentage of revenue.  In particular, demand for our dermatology products, such


                                       17

as  the Apex 800, has been impacted. Recent political and social turmoil in many
parts  of the world may continue to adversely impact global economic conditions.
These  political,  social  and  economic  conditions  and  related  economic
uncertainties  make  it  difficult for us, our customers and our distributors to
forecast orders and sales of our products and, accordingly, plan future business
activities. This level of uncertainty strongly challenges our ability to operate
profitably  or  grow our business. If the economic or market conditions continue
to further deteriorate, this may have a material adverse impact on our financial
position,  results  of  operation  and  cash  flows.

     If  We  Cannot  Increase  Our  Sales Volumes, Reduce Our Costs or Introduce
Higher  Margin  Products  to  Offset  Anticipated Reductions in the Average Unit
Price  of  Our  Products,  Our operating Results May Suffer. We have experienced
declines  in  the  average  unit price of our products and expect to continue to
suffer  from  declines in the future. The average unit price of our products may
decrease  in  the  future  in  response  to  changes in product mix, competitive
pricing  pressures,  new product introductions by us or our competitors or other
factors.  If  we  are  unable  to offset the anticipated decrease in our average
selling  prices  by increasing our sales volumes, our net revenues will decline.
In  addition,  to  maintain  our  gross  margins, we must continue to reduce the
manufacturing  cost  of  our  products  and contain our operating costs. We will
continue  to  place a high priority on our cost containment and asset management
efforts.  Additional  measures  to  contain  costs  and  reduce  expenses may be
undertaken  if  revenues  and  market conditions do not improve. Further, should
average  unit  prices  of  our  current  products  decline,  we must develop and
introduce  new  products  and  product  enhancements  with higher margins. If we
cannot  maintain  our  gross  margins,  our  business could be seriously harmed,
particularly  if  the  average  selling  price  of  our  products  decreases
significantly  without  a  corresponding  increase in sales. If we are unable to
contain  costs  and manage our assets, our operating results could be harmed and
our  liquidity  and  capital  resources  adversely  affected.

     We  Face  Risks  of  Manufacturing.  The  manufacture  of  our infrared and
visible  light  photocoagulators  and  the  related delivery devices is a highly
complex  and precise process.  We assemble critical subassemblies and all of our
final  products at our facility in Mountain View, California.  We may experience
manufacturing  difficulties,  quality  control  issues  or assembly constraints,
particularly  with  regard to new products that we may introduce.  We may not be
able  to  manufacture  sufficient  quantities of our products, which may require
that  we  qualify  other  manufacturers  for  our products.  We do not currently
intend to utilize any external manufacturers for our products.   Furthermore, we
may  experience  delays,  disruptions,  capacity  constraints or quality control
problems  in our manufacturing operations and, as a result, product shipments to
our  customers could be delayed, which would negatively impact our net revenues.

     We  Depend  on  Sole  Source  or Limited Source Suppliers. We rely on third
parties to manufacture substantially all of the components used in our products,
including  optics,  laser  diodes and crystals. We have some long term or volume
purchase  agreements  with  our suppliers and currently purchase components on a
purchase  order  basis.  Some  of  our  suppliers  and manufacturers are sole or
limited  source.  In  addition,  some  of  these  suppliers are relatively small
private  companies  that may discontinue their operations at any time. There are
risks  associated  with  the  use  of  independent  manufacturers, including the
following:

          -    unavailability  of,  shortages  or  limitations on the ability to
               obtain  supplies of components in the quantities that we require;

          -    delays  in  delivery  or failure of suppliers to deliver critical
               components  on  the  dates  we  require;

          -    failure  of  suppliers  to  manufacture  components  to  our
               specifications,  and  potentially  reduced  quality;  and

          -    inability  to  obtain  components  at  acceptable  prices.


                                       18

Our  business  and  operating  results  may  suffer from the lack of alternative
sources  of supply for critical sole and limited source components.  The process
of  qualifying  suppliers  is  complex,  requiring  extensive  testing  and
interoperability  with  our  products,  and  may be lengthy, particularly as new
products  are  introduced.  New  suppliers  would  have  to  be  educated in our
production  processes.  In addition, the use of alternate components may require
design  alterations to our products and additional product testing under FDA and
relevant  foreign  regulatory  agency  guidelines,  which  may  delay  sales and
increase  product  costs.  Any  failures  by  our  vendors  to adequately supply
limited  and sole source components may impair our ability to offer our existing
products,  delay  the  submission  of  new  products for regulatory approval and
market  introduction,  materially  harm our business and financial condition and
cause  our  stock  price  to  decline.  Establishing  our  own  capabilities  to
manufacture these components would be expensive and could significantly decrease
our  profit  margins.  We  do  not  currently intend to manufacture any of these
components.  Our  business,  results of operations and financial condition would
be  adversely  affected if we are unable to continue to obtain components in the
quantity  and  quality  desired  and  at  the  prices  we  have  budgeted.

     We Depend on International Sales for a Significant Portion of Our Operating
Results.  We  derive,  and  expect to continue to derive, a large portion of our
revenue  from international sales. For the three months ended June 28, 2003, our
international sales were $2.8million or 37.1% of total sales. We anticipate that
international  sales  will  continue to account for a significant portion of our
revenues in the foreseeable future. None of our international revenues and costs
have  been  denominated  in  foreign currencies. As a result, an increase in the
value  of the U.S. dollar relative to foreign currencies makes our products more
expensive and thus less competitive in foreign markets. The factors stated above
could  have  a  material  adverse effect on our business, financial condition or
results  of  operations. Our international operations and sales are subject to a
number  of  risks  including:

          -    longer  accounts  receivable  collection  periods;

          -    impact  of  recessions in economies outside of the United States;

          -    foreign  certification  requirements, including continued ability
               to  use  the  "CE"  mark  in  Europe;

          -    reduced or limited protections of intellectual property rights in
               jurisdictions  outside  the  United  States;

          -    potentially  adverse  tax  consequences;  and

          -    multiple protectionist, adverse and changing foreign governmental
               laws  and  regulations.

Any  one  or  more  of  these factors stated above could have a material adverse
effect  on  our  business,  financial  condition  or results of operations.  For
additional  discussion  about  our  foreign  currency  risks,  see  Item  3,
"Quantitative  and  Qualitative  Disclosures  About  Market  Risk."

     Our  Operating  Results May be Adversely Affected by Changes in Third Party
Coverage  and  Reimbursement  Policies  and any Uncertainty Regarding Healthcare
Reform Measures.  Our ophthalmology products are typically purchased by doctors,
clinics,  hospitals and other users, which bill various third-party payers, such


                                       19

as  governmental  programs  and  private  insurance  plans,  for the health care
services  provided  to  their  patients.  Third-party  payers  are  increasingly
scrutinizing  and  challenging  the  coverage  of  new products and the level of
reimbursement for covered products.  Doctors, clinics, hospitals and other users
of  our  products  may not obtain adequate reimbursement for use of our products
from  third-party  payers.  While we believe that the laser procedures using our
products  have  generally  been  reimbursed,  payers  may  deny  coverage  and
reimbursement  for  our  products  if  they  determine  that  the device was not
reasonable  and  necessary  for the purpose used, was investigational or was not
cost-effective.  In  addition,  third  party payers may not initiate coverage of
new  procedures  using  our  products for a significant period.  For example, in
September  2000,  the Center for Medicare and Medicaid Services, or CMS, advised
that claims for reimbursement for certain age related macular degeneration (AMD)
procedures  which  use  our  OcuLight  SLx  laser system, could be submitted for
reimbursement,  with  coverage and payment to be determined by the local medical
carriers  at  their  discretion.  To  date,  only three carriers-Noridian Mutual
Insurance,  which  is  the  CMS  Part  B  Carrier for Alaska, Arizona, Colorado,
Hawaii,  Iowa,  Nevada,  North  Dakota,  Oregon,  South  Dakota,  Washington and
Wyoming;  Cigna,  which  is the carrier for North Carolina, Tennessee and Idaho;
and  National  Heritage Insurance, which is the carrier for California-have made
coverage decisions approving the use of the Transpupillary Thermotherapy, or TTT
protocol  for  the  treatment  of  wet  AMD.  No  other  carriers  have approved
reimbursement  of such AMD procedures using the OcuLight SLx, and domestic sales
of the OcuLight SLx laser system continue to be limited until more local medical
carriers  reimburse for performing such AMD procedures or until CMS advises that
claims  for  these  procedures  may be submitted directly to CMS at the national
level.

     Changes  in  government legislation or regulation or in private third-party
payers'  policies toward reimbursement for procedures employing our products may
prohibit  adequate  reimbursement.  There  have been a number of legislative and
regulatory  proposals  to  change  the  healthcare  system,  reduce the costs of
healthcare  and  change  medical  reimbursement  policies.  Doctors,  clinics,
hospitals  and  other users of our products may decline to purchase our products
to the extent there is uncertainty regarding reimbursement of medical procedures
using  our  products  and  any  healthcare  reform  measures.  Further  proposed
legislation,  regulation  and policy changes affecting third party reimbursement
are  likely.  We  are  unable to predict what legislation or regulation, if any,
relating  to  the health care industry or third-party coverage and reimbursement
may  be enacted in the future, or what effect such legislation or regulation may
have  on us. However, denial of coverage and reimbursement of our products would
have  a  material  adverse  effect  on  our  business, results of operations and
financial  condition.

     We  are  Dependent  on  the  Successful  Outcome  of Clinical Trials of Our
Products  and  New  Applications  Using Our Products. Our success will depend in
part  on  the  successful  outcome  of  clinical  trials of our products and new
applications  using  our  products.  Clinical  trials  are  long,  expensive and
uncertain  processes.  We  are  currently  supporting  several  ongoing clinical
trials, including, for example, the TTT4CNV clinical trial. The TTT4CNV clinical
trial  is  a  multi-center,  prospective,  placebo-controlled,  randomized trial
conducted  at  22  centers  in  the United States. This clinical trial is a post
marketing study performed within the FDA cleared indications of the OcuLight SLx
and  is  being  conducted  to  determine  whether  TTT laser treatment using our
OcuLight  SLx  infrared laser system and Large Spot Slit Lamp Adapter can reduce
the  risk  of  vision  loss  for patients with wet AMD. In order to successfully
commercialize  the  use  of our OcuLight SLx for TTT procedures, we must be able
to,  among  other  things,  demonstrate  with  substantial  evidence  from
well-controlled  clinical  trials  where  TTT  procedures using the Oculight SLx
product are both safe and effective. This process may take a number of years. In
March  2003,  we announced that the Executive Committee for the TTT4CNV clinical
trial accepted the recommendations of the independent Data and Safety Monitoring
Committee  that  an  adequate  number  of  patients  were  enrolled  to detect a
clinically relevant difference between outcomes in TTT-treated eyes and patients


                                       20

not  being  treated. We cannot assure you that results from the TTT4CNV clinical
trial will prove to be successful. If the future results of the TTT4CNV clinical
trial  or  any other clinical trial regarding our products fails to validate the
safety  and  effectiveness  of  treatments  using  our  products, our ability to
generate revenues from new products or new applications using our products would
be  adversely  affected  and  our  business  would  be  harmed.

     Our  Operating  Result  May  Fluctuate  from Quarter to Quarter and Year to
Year.  Our  sales  and  operating results may vary significantly from quarter to
quarter  and from year to year in the future. Our operating results are affected
by  a  number  of  factors,  many  of  which  are  beyond  our  control. Factors
contributing  to  these  fluctuations  include  the  following:

     -    General  economic  uncertainties  and  political  concerns;

     -    The  timing of the introduction and market acceptance of new products,
          product  enhancements  and  new  applications;

     -    Changes  in demand for our existing line of dermatology and ophthalmic
          products;

     -    The  cost  and availability of components and subassemblies, including
          the  ability  of  our  sole  or  limited  source  suppliers to deliver
          components  at  the  times  and  prices  that  we  have  planned;

     -    Fluctuations  in  our  product  mix between dermatology and ophthalmic
          products  and  foreign  and  domestic  sales;

     -    The effect of regulatory approvals and changes in domestic and foreign
          regulatory  requirements;

     -    Introduction  of  new  products,  product  enhancements  and  new
          applications  by  our  competitors,  entry of new competitors into our
          markets,  pricing  pressures  and  other  competitive  factors;

     -    Our  long  and  highly  variable  sales  cycle;

     -    Decreases  in  the  prices  at  which  we  can  sell  our  products;

     -    Changes  in customers' or potential customers' budgets as a result of,
          among  other things, reimbursement policies of government programs and
          private  insurers  for  treatments  that  use  our  products;  and

     -    Increased  product  development  costs.

In  addition to these factors, our quarterly results have been, and are expected
to  continue  to  be,  affected  by  seasonal  factors.

Our  expense  levels  are  based,  in  part, on expected future sales.  If sales
levels  in  a  particular  quarter do not meet expectations, we may be unable to
adjust  operating  expenses  quickly  enough  to compensate for the shortfall of
sales, and our results of operations may be adversely affected.  In addition, we
have historically made a significant portion of each quarter's product shipments
near  the end of the quarter.  If that pattern continues, any delays in shipment
of  products  could  have a material adverse effect on results of operations for
such  quarter.  Due  to  these  and  other  factors,  we believe that quarter to


                                       21

quarter  and  year  to year comparisons of our past operating results may not be
meaningful.  You  should  not  rely on our results for any quarter or year as an
indication  of our future performance.  Our operating results in future quarters
and  years  may be below expectations, which would likely cause the price of our
common  stock  to  fall.

We  Rely  on Our Direct Sales Force and Network of International Distributors to
Sell  Our  Products  and  any  Failure  to  Maintain  Our Direct Sales Force and
Distributor  Relationships  Could  Harm  Our  Business.  Our ability to sell our
products  and  generate  revenue  depends upon our direct sales force within the
United States and relationships with independent distributors outside the United
States.  As  of  June  28, 2003 our direct sales force consisted of 15 employees
and we maintained relationships with 50 independent distributors internationally
selling  our  products  into 107 countries.  We generally grant our distributors
exclusive  territories for the sale of our products in specified countries.  The
amount and timing of resources dedicated by our distributors to the sales of our
products  is  not  within  our  control.  Our  international  sales are entirely
dependent on the efforts of these third parties.  If any distributor breaches or
fails  to  generate  sales  of  our  products,  we  may be forced to replace the
distributor  and  our  ability  to  sell  our products into that exclusive sales
territory  would  be  adversely  affected.

We do not have any long-term employment contracts with the members of our direct
sales  force.  We may be unable to replace our direct sales force personnel with
individuals  of  equivalent  technical  expertise  and qualifications, which may
limit  our  revenues  and our ability to maintain market share.  The loss of the
services  of  these  key  personnel  would  harm  our  business.  Similarly, our
distributorship  agreements are generally terminable at will by either party and
distributors  may  terminate their relationships with us, which would affect our
international  sales  and  results  of  operations.

     We  Depend  on Collaborative Relationships to Develop, Introduce and Market
New  Products,  Product Enhancements and New Applications.  We have entered into
collaborative  relationships  with  academic  medical  centers and physicians in
connection  with  the  research  and  development  and  clinical  testing of our
products.  We  plan  to  collaborate  with  third  parties  to  develop  and
commercialize  existing  and  new  products.  In  October 2002, we announced our
collaboration  with  Bausch & Lomb to design and manufacture a solid-state green
wavelength  (532)  nm)  laser  photocoagulator  module,  called  the  Millennium
Endolase  module.  The  Millennium Endolase module is designed to be a component
of  Bausch  &  Lomb's  ophthalmic  surgical  suite  product  offering and is not
expected  to be sold as a stand-alone product.  Sales of the Millennium Endolase
module are dependent upon the actual order rate from and shipment rate to Bausch
&  Lomb,  which depends on the efforts of our partner and is beyond our control.
We  cannot  assure  you  that our relationship with Bausch & Lomb will result in
further  sales  of  our  Millennium  Endolase module.  Our collaborators may not
pursue  further  development  and  commercialization  of products resulting from
collaborations  with  us or may not devote sufficient resources to the marketing
and  sale  of such products.  Traditionally, our reliance on others for clinical
development,  manufacturing  and  distribution  of  our  products  may result in
unforeseen  problems.  Further, our collaborative partners may develop or pursue
alternative  technologies  either  on their own or in collaboration with others.
If  a  collaborator  elects  to  terminate its agreement with us, our ability to
develop,  introduce,  market  and sell the product may be significantly impaired
and  we  may  be forced to discontinue altogether the product resulting from the
collaboration.  We  may  not  be  able  to  negotiate  alternative collaboration
agreements on acceptable terms, if at all.  The failure of any current or future
collaboration  efforts  could  have  a material adverse effect on our ability to
introduce  new  products  or  applications  and  therefore could have a material
adverse  effect  on our business, results of operations and financial condition.

     We  Rely  on  Patents  and  Proprietary  Rights to Protect our Intellectual
Property  and  Business. Our success and ability to compete is dependent in part


                                       22

upon  our  proprietary  information.  We rely on a combination of patents, trade
secrets,  copyright  and  trademark  laws,  nondisclosure  and other contractual
agreements  and  technical measures to protect our intellectual property rights.
We  file  patent applications to protect technology, inventions and improvements
that  are  significant  to  the development of our business. We have been issued
fourteen  United  States  patents  and  two  foreign patents on the technologies
related to our products and processes. We have approximately five pending patent
applications  in  the  United States and six foreign pending patent applications
that  have  been filed. Our patent applications may not be approved. Any patents
granted now or in the future may offer only limited protection against potential
infringement and development by our competitors of competing products. Moreover,
our  competitors,  many  of  which  have  substantial  resources  and  have made
substantial  investments  in  competing  technologies, may seek to apply for and
obtain  patents  that will prevent, limit or interfere with our ability to make,
use  or  sell  our  products  either  in  the  United States or in international
markets.

     In  addition  to patents, we rely on trade secrets and proprietary know-how
which  we  seek  to protect, in part, through proprietary information agreements
with  employees,  consultants  and  other  parties.  Our proprietary information
agreements  with  our  employees  and  consultants  contain  industry  standard
provisions  requiring  such  individuals  to  assign  to  us  without additional
consideration  any  inventions  conceived  or  reduced to practice by them while
employed  or  retained  by  us,  subject  to  customary exceptions.  Proprietary
information  agreements  with employees, consultants and others may be breached,
and  we  may not have adequate remedies for any breach.  Also, our trade secrets
may  become  known  to  or  independently  developed  by  competitors.

     The  laser  and  medical  device  industry  is  characterized  by  frequent
litigation  regarding  patent and other intellectual property rights.  Companies
in the medical device industry have employed intellectual property litigation to
gain  a  competitive  advantage.  Numerous patents are held by others, including
academic  institutions  and our competitors.  Until recently patent applications
were  maintained  in  secrecy  in  the  United  States until the patents issued.
Patent  applications  filed  in  the United States after November 2000 generally
will  be published eighteen months after the filing date.  However, since patent
applications  continue  to  be maintained in secrecy for at least some period of
time,  both  within  the  United States and with regards to international patent
applications,  we  cannot  assure  you that our technology does not infringe any
patents  or  patent  applications  held by third parties.  We have, from time to
time, been notified of, or have otherwise been made aware of, claims that we may
be  infringing  upon patents or other proprietary intellectual property owned by
others.  If  it  appears necessary or desirable, we may seek licenses under such
patents  or proprietary intellectual property.  Although patent holders commonly
offer  such  licenses,  licenses under such patents or intellectual property may
not  be  offered  or  the  terms  of any offered licenses may not be reasonable.

     Any  claims,  with  or  without  merit,  and  regardless  of whether we are
successful  on  the merits, would be time-consuming, result in costly litigation
and  diversion  of  technical and management personnel, cause shipment delays or
require  us  to  develop  noninfringing  technology  or to enter into royalty or
licensing agreements.   An adverse determination in a judicial or administrative
proceeding  and  failure  to  obtain  necessary  licenses  or  develop alternate
technologies could prevent us from manufacturing and selling our products, which
would  have a material adverse effect on our business, results of operations and
financial  condition.

     We  Are  Subject  To  Government  Regulation Which May Cause Us to Delay or
Withdraw  the Introduction of New Products or New Applications for Our Products.
The  medical  devices  that  we  market and manufacture are subject to extensive
regulation  by  the FDA and by foreign and state governments.  Under the Federal
Food,  Drug  and Cosmetic Act and the related regulations, the FDA regulates the


                                       23

design, development, clinical testing, manufacture, labeling, sale, distribution
and  promotion  of  medical devices.  Before a new device can be introduced into
the  market,  the  product  must  undergo  rigorous  testing  and  an  extensive
regulatory  approval process implemented by the FDA under federal law.  A device
manufacturer  must  obtain  market clearance through either the 510(k) premarket
notification  process  or  the lengthier premarket approval application process.
Depending  upon the type, complexity and novelty of the device and the nature of
the  disease  or disorder to be treated, the FDA process can take several years,
require extensive clinical testing and result in significant expenditures.  Even
if regulatory approval is obtained, later discovery of previously unknown safety
issues  may  result  in restrictions on the product, including withdrawal of the
product  from  the  market.  Other  countries  also  have  extensive regulations
regarding  clinical  trials and testing prior to new product introductions.  Our
failure  to  obtain  government  approvals  or  any  delays  in  receipt of such
approvals  would  have  a  material  adverse  effect on our business, results of
operations  and  financial  condition.

     The FDA imposes additional regulations on manufacturers of approved medical
devices.  We  are  required to comply with the applicable FDA good manufacturing
practice  regulations,  which  include  quality  control  and  quality assurance
requirements,  as  well  as  maintenance  of  records  and  documentation.  Our
manufacturing  facilities are subject to ongoing periodic inspections by the FDA
and corresponding state agencies, including unannounced inspections, and must be
licensed  as  part  of  the  product  approval process before being utilized for
commercial  manufacturing.  Noncompliance  with  the applicable requirements can
result  in,  among  other things, fines, injunctions, civil penalties, recall or
seizure  of  products,  total or partial suspension of production, withdrawal of
marketing approvals, and criminal prosecution. The FDA also has the authority to
request  repair,  replacement or refund of the cost of any device we manufacture
or  distribute.  Any  of these actions by the FDA would materially and adversely
affect  our  ability  to  continue operating our business and the results of our
operations.

     In  addition,  we  are also subject to varying product standards, packaging
requirements,  labeling  requirements,  tariff  regulations,  duties  and  tax
requirements.  As  a  result of our sales in Europe, we are required to have all
products  "CE"  registered,  an  international  symbol  affixed  to all products
demonstrating  compliance  with  the  European  Medical Device Directive and all
applicable  standards.  While  currently  all  of  our released IRIS Medical and
IRIDERM products are products are CE registered, continued registration is based
on  successful  review  of  the  process  by our European Registrar during their
annual  audit.  Any loss of registration would have a material adverse effect on
our  business,  results  of  operations  and  financial  condition.

     If  Product  Liability  Claims are Successfully Asserted Against Us, We may
Incur  Substantial Liabilities That May Adversely Affect Our Business or Results
of  Operations. We may be subject to product liability claims in the future. Our
products  are  highly  complex and some are used to treat extremely delicate eye
tissue  and  skin  conditions on and near a patient's face. Although we maintain
product liability insurance with coverage limits of $11.0 million per occurrence
and  an  annual  aggregate  maximum  of  $12.0  million,  our  coverage from our
insurance  policies  may  not  be  adequate.  Product  liability  insurance  is
expensive.  We  might  not  be able to obtain product liability insurance in the
future  on acceptable terms or in sufficient amounts to protect us, if at all. A
successful  claim  brought  against us in excess of our insurance coverage could
have  a  material  adverse  effect  on  our  business, results of operations and
financial  condition.

     If  We  Fail  to  Accurately  Forecast Demand For Our Product and Component
Requirements For the Manufacture of Our Product, We Could Incur Additional Costs
or  Experience Manufacturing Delays and May Experience Lost Sales or Significant
Inventory Carrying Costs.  We use quarterly and annual forecasts based primarily
on  our  anticipated  product  orders  to  plan  our  manufacturing  efforts and
determine  our  requirements for components and materials.  It is very important


                                       24

that  we  accurately  predict both the demand for our product and the lead times
required  to  obtain  the  necessary  components  and materials.  Lead times for
components  vary  significantly  and  depend  on numerous factors, including the
specific  supplier,  the  size  of  the order, contract terms and current market
demand  for  such components.  If we overestimate the demand for our product, we
may  have excess inventory, which would increase our costs.  If we underestimate
demand  for  our  product  and,  consequently,  our  component  and  materials
requirements,  we  may  have  inadequate  inventory,  which  could interrupt our
manufacturing,  delay delivery of our product to our customers and result in the
loss  of  customer  sales.  Any of these occurrences would negatively impact our
business  and  operating  results.

     If  We  Fail  to Manage Growth Effectively, Our Business Could Be Disrupted
Which Could Harm Our Operating Results. We have experienced, and may continue to
experience  growth  in our business. We have made and, although we are currently
in  a  global  economic  downturn,  expect  to  continue  to  make  significant
investments to enable our future growth through, among other things, new product
development  and clinical trials for new applications and products. We must also
be  prepared  to  expand  our  work  force  and  to  train,  motivate and manage
additional employees as the need for additional personnel arises. Our personnel,
systems,  procedures  and  controls  may  not  be adequate to support our future
operations.  Any  failure  to  effectively  manage  future  growth  could have a
material  adverse  effect  on  our business, results of operations and financial
condition.

     If  Our  Facilities  Were  To  Experience Catastrophic Loss, Our Operations
Would  Be Seriously Harmed. Our facilities could be subject to catastrophic loss
such  as  fire,  flood  or  earthquake.  All  of  our  research  and development
activities,  manufacturing,  our  corporate  headquarters  and  other  critical
business  operations  are located near major earthquake faults in Mountain View,
California. Any such loss at any of our facilities could disrupt our operations,
delay  production,  shipments  and revenue and result in large expense to repair
and  replace  our  facilities.

     We May Need Additional Capital, which May Not Be Available, and Our Ability
to Grow May be Limited as a Result.  We believe that our existing cash balances,
available-for-sale  securities,  credit  facilities and cash flow expected to be
generated  from  future  operations  will  be  sufficient  to  meet  our capital
requirements  at least through the next 12 months.  However, we may be required,
or  could elect, to seek additional funding prior to that time.  The development
and  marketing  of  new  products  and  associated  support personnel requires a
significant  commitment  of  resources.  If  cash  from  available  sources  is
insufficient,  we  may  need  additional  capital, which may not be available on
favorable  terms,  if  at all.  If we cannot raise funds on acceptable terms, we
may  not  be  able  to develop or enhance our products, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
Any  inability  to  raise  additional capital when we require it would seriously
harm  our  business.

     Our  Stock Price Has Been and May Continue to be Volatile and an Investment
in  Our  Common  Stock Could Suffer a Decline in Value. The trading price of our
common  stock  has been subject to wide fluctuations in response to a variety of
factors, some of which are beyond our control, including quarterly variations in
our operating results, announcements by us or our competitors of new products or
of  significant  clinical  achievements,  changes  in market valuations of other
similar companies in our industry and general market conditions. We receive only
limited attention by securities analysts and may experience an imbalance between
supply  and  demand  for our common stock resulting from low trading volumes. In
addition,  the  stock  market has experienced extreme volatility in the last few
years  that has often been unrelated to the performance of particular companies.
These  broad  market  fluctuations could have a significant impact on the market
price  of  our  common  stock  regardless  of  our  performance.


                                       25

ITEM 3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURE  ABOUT  MARKET  RISK

QUANTITATIVE  DISCLOSURES

     We  are  exposed  to  market  risks  inherent  in our operations, primarily
related  to  interest  rate  risk  and  currency  risk.  These  risks arise from
transactions  and  operations entered into in the normal course of business.  We
do  not  use derivatives to alter the interest characteristics of our marketable
securities  or  our  debt  instruments.  We  have  no  holdings of derivative or
commodity  instruments.

     Interest  Rate Risk. We are subject to interest rate risks on cash and cash
equivalents,  available-for-sale  marketable securities and any future financing
requirements.  Interest  rate risks related to marketable securities are managed
by  managing  maturities  in  our  marketable  securities  portfolio. We have no
long-term  debt  as  of  June  28,  2003.

     The  fair  value of our investment portfolio or related income would not be
significantly  impacted  by  changes  in  interest  rates  since  the marketable
securities  maturities do not exceed fiscal year 2002 and the interest rates are
primarily  fixed.

QUALITATIVE  DISCLOSURES

     Interest Rate Risk. Our primary interest rate risk exposures relate to:

          -    The available-for-sale securities will fall in value if market
               interest rates increase.

          -    The impact of interest rate movements on our ability to obtain
               adequate financing to fund future operations.

     We  have  the  ability  to  hold  at  least  a  portion of the fixed income
investments  until maturity and therefore would not expect the operating results
or  cash  flows  to  be affected to any significant degree by a sudden change in
market  interest  rates  on  its  short-  and  long-term  marketable  securities
portfolio.

     Management  evaluates  our  financial  position  on  an  ongoing  basis.

Currency  Rate  Risk.

     We  do  not  hedge  any balance sheet exposures against future movements in
foreign  exchange  rates.  The exposure related to currency rate movements would
not  have  a  material  impact  on  future  net  income  or  cash  flows.

ITEM 4.  CONTROLS  AND  PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     Within  90  days  prior  to  the  filing date of this quarterly report (the
"Evaluation  Date"),  our  President  and  Chief  Executive  Officer, who is our
principal  executive  officer,  and  our Chief Financial Officer and Senior Vice
President,  Finance  and Administration, who is our principal financial officer,
performed  an  evaluation


                                       26

of  the effectiveness of our "disclosure controls and procedures" (as defined in
Rules  13a-14(c)  and 15(d)-14(c) of the Securities and Exchange Act of 1934, as
amended).  Based  on  that evaluation, our President and Chief Executive Officer
and  our  Chief  Financial  Officer  and  Senior  Vice  President  Finance  and
Administration  concluded  that,  as  of  the  Evaluation  Date,  our disclosure
controls and procedures were effective to ensure that material information about
IRIDEX  Corporation  and  our  consolidated  subsidiaries is made known to us by
others  within  those  entities,  particularly  during  the period in which this
quarterly  report  was  being  prepared.

CHANGES  IN  INTERNAL  CONTROLS

     There have been no significant changes in our internal controls or in other
factors  that could significantly affect our internal controls subsequent to the
Evaluation  Date,  including  any  corrective actions with regard to significant
deficiencies  and  material  weaknesses.

PART  II.  OTHER  INFORMATION

ITEM  1.   LEGAL  PROCEEDINGS
None.

ITEM  2.   CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS
None.

ITEM  3.   DEFAULTS  UPON  SENIOR  SECURITIES
None.

ITEM  4.   SUBMISSION  OF  MATTERS  TO  VOTE  OF  SECURITY  HOLDERS

     Our  Annual  Meeting  of  Stockholders was held on June 4, 2003 in Mountain
View,  California.  Of  the  6,919,285 shares outstanding as of the record date,
6,386,168  were  present or represented by proxy at the meeting.  The results of
the  voting  on  the  matters  submitted  to  the  stockholders  are as follows:

     1.     To  elect  six  (6) directors to serve for the ensuing year or until
their  successors  are  duly  elected  and  qualified.

             Name                  Votes For               Votes Withheld
      -------------------         -----------            ------------------
      Theodore Boutacoff           5,864,360                  521,808

      James L. Donovan             5,864,360                  521,808

      John M. Nehra                5,903,060                  483,108

      Donald L. Hammond            5,963,660                  422,508

      Joshua Makower, M.D.         5,963,660                  422,508

      Robert K. Anderson           5,393,329                  992,839


                                       27

     2.   To  approve an amendment to the 1998 Stock Plan to increase the number
          of  shares  of  common  stock  reserved  for  issuance thereunder from
          1,230,000  shares  to  1,500,000  shares.

                  Votes for:                       2,721,044

                  Votes against:                   1,591,431

                  Votes abstaining:                   20,275

     3.   To  approve  an  amendment to the 1995 Employee Stock Purchase Plan to
          increase  the  number  of shares of common stock reserved for issuance
          thereunder  from  370,000  shares  to  430,000  shares.

                  Votes for:                       3,487,364

                  Votes against:                     828,611

                  Votes abstaining:                   16,775

     4.   To ratify the appointment of PricewaterhouseCoopers LLP as independent
          accountants of the Company for the fiscal year ending January 3, 2004.

                  Votes for:                       6,374,988

                  Votes against:                       6,745

                  Votes abstaining:                    4,435

ITEM 5.  OTHER  INFORMATION
In  accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as
added  by  Section  202  of  the  Sarbanes-Oxley  Act of 2002, the Registrant is
responsible  for  disclosing  the  non-audit  services approved by the Company's
Audit  Committee  to  be  performed by PricewaterhouseCoopers LLP, the Company's
independent  auditor.  Non-audit  services  are  defined  in the law as services
other  than  those  provided  in  connection  with  an  audit or a review of the
financial  statements  of  the  Company.  The  additional  engagement  of
PricewaterhouseCoopers  LLP  for the matters listed below are each considered by
the  Company  to  be  audit-related  services  that  are  closely related to the
financial  audit  process.  During  the quarterly period covered by this filing,
the  Audit  Committee  approved  the  additional  engagements  of
PricewaterhouseCoopers  LLP  for  certain  tax  matter consultations and for the
review  of  the  Company's filings under the Securities Act of 1933, as amended.


                                       28

ITEM  6.          EXHIBITS  AND  REPORTS  ON  FORM  8-K
(a)  Exhibits

     10.1 Change  of  Control  Agreement,  effective as of May 19, 2003, entered
          into  by  and  between  the  Registrant  and  Larry  Tannenbaum, Chief
          Financial  Officer
     99.1 Certification  of  Chief Executive Officer and Chief Financial Officer
          pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002.


(b)  Reports  on  Form  8-K

     The Company filed a report on Form 8-K on May 13, 2003 relating to a press
release  regarding  the Company's financial results for the fiscal quarter ended
March 29,  2003.

     The Company filed a report on Form 8-K on July 22, 2003 relating to a press
release  regarding  the Company's financial results for the fiscal quarter ended
June  28,  2003.


                                       29

SIGNATURE

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

                                  IRIDEX  Corporation
                                  (Registrant)

     Date:  August  12,  2003         By: /s/   Larry  Tannenbaum
                                         -----------------------
                                      Larry Tannenbaum
                                           Chief Financial Officer, Senior Vice
                                           President of Finance and
                                           Administration  and  Secretary
                                           (Principal Financial and
                                           Accounting Officer)


CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO
- --------------------------------------------------------------------------------
         SECTION 13(A) OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
         --------------------------------------------------------------
                             AS ADOPTED PURSUANT TO
                             ----------------------
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                  ---------------------------------------------

I,  Theodore  A.  Boutacoff,  certify  that:

1.   I have reviewed this quarterly report on Form 10-Q of IRIDEX Corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and


                                       30

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

     Date:  August  12,  2003

                                   By:  /s/  Theodore  A.  Boutacoff
                                   Name:  Theodore  A.  Boutacoff
                                   Title: President and Chief Executive Officer
                                   (Principal  Executive  Officer)

I,  Larry  Tannenbaum,  certify  that:

1.   I have reviewed this quarterly report on Form 10-Q of IRIDEX Corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statements of a material fact or omit to state a material fact necessary to
     make the statement made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;


                                       31

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c.   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: August 12, 2003

                                    By:  /s/  Larry  Tannenbaum
                                    Name:  Larry  Tannenbaum
                                    Title: Chief Financial Officer, Senior Vice
                                    President of Finance and
                                    Administration  and  Secretary
                                    (Principal Financial and Accounting Officer)


                                       32