<SUBMISSION>
<ACCESSION-NUMBER>0001015402-02-002658
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20020629
<FILING-DATE>20020813
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>IRIDEX CORP
<CIK>0001006045
<ASSIGNED-SIC>3845
<IRS-NUMBER>770210467
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0102
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-27598
<FILM-NUMBER>02730872
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1212 TERRA BELLA AVE
<CITY>MOUNTAIN VIEW
<STATE>CA
<ZIP>95043-1824
<PHONE>6509404700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1212 TERRA BELLA AVENUE
<CITY>MOUNTAIN VIEW
<STATE>CA
<ZIP>95043-1824
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>
                                  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 29, 2002

     [ ]  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 7, 2002 was 6,862,862.


<PAGE>
<TABLE>
<CAPTION>
                                    IRIDEX CORPORATION

                                     TABLE OF CONTENTS

                                                                                      Page
                                                                                      ----
<S>      <C>                                                                          <C>
PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

           Condensed Consolidated Balance Sheets as of June 29, 2002
           and December 29, 2001                                                         3

           Condensed Consolidated Statements of Operations for the three months
           and six months ended June 29, 2002 and June 30, 2001                          4

           Condensed Consolidated Statements of Cash Flows for the six months
           ended June 29, 2002 and June 30, 2001                                         5

           Condensed Consolidated Statements of Comprehensive Income (Loss) for the
           three and six months ended June 29, 2002 and June 30, 2001                    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                   25

PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS                                                            26

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS                                    26

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES                                              26

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                                             28

SIGNATURE                                                                               29
</TABLE>


                                        2
<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                               IRIDEX CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


                                                   JUNE 29,     DECEMBER 29,
                                                 ------------  --------------
                                                     2002           2001
                                                 ------------  --------------
                                                 (unaudited)
<S>                                              <C>           <C>

                            ASSETS
                            ------
Current assets:
  Cash and cash equivalents . . . . . . . . . .  $     6,351   $       4,613
  Available-for-sale securities . . . . . . . .        3,680           4,489
  Accounts receivable, net. . . . . . . . . . .        6,952           8,066
  Inventories . . . . . . . . . . . . . . . . .       11,838          12,562
  Prepaids and other current assets . . . . . .          542             599
                                                 ------------  --------------
    Total current assets. . . . . . . . . . . .       29,363          30,329
  Property and equipment, net . . . . . . . . .        1,287           1,535
  Deferred income taxes . . . . . . . . . . . .        1,932           1,924
                                                 ------------  --------------
    Total assets. . . . . . . . . . . . . . . .  $    32,582   $      33,788
                                                 ============  ==============

          LIABILITIES AND STOCKHOLDERS' EQUITY
          ------------------------------------
Current liabilities:
  Accounts payable. . . . . . . . . . . . . . .  $       729   $       1,176
  Accrued expenses. . . . . . . . . . . . . . .        2,559           2,779
                                                 ------------  --------------
    Total liabilities . . . . . . . . . . . . .        3,288           3,955
                                                 ------------  --------------
Stockholders' equity:
  Common stock. . . . . . . . . . . . . . . . .           70              69
  Additional paid-in capital. . . . . . . . . .       23,536          23,417
  Accumulated other comprehensive income (loss)           (2)              3
  Treasury stock. . . . . . . . . . . . . . . .         (430)           (430)
  Retained earnings . . . . . . . . . . . . . .        6,120           6,774
                                                 ------------  --------------
    Total stockholders' equity. . . . . . . . .       29,294          29,833
                                                 ------------  --------------
    Total liabilities and stockholders' equity.  $    32,582   $      33,788
                                                 ============  ==============
</TABLE>


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


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                                  IRIDEX CORPORATION
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                     (UNAUDITED)

                                                                               THREE MONTHS ENDED       SIX MONTHS ENDED
                                                                               JUNE 29,    JUNE 30,    JUNE 29,    JUNE 30,
                                                                                 2002        2001        2002        2001
                                                                              ----------  ----------  ----------  ----------
<S>                                                                           <C>         <C>         <C>         <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   7,433   $   7,088   $  14,396   $  12,823
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,312       3,391       8,190       6,763
                                                                              ----------  ----------  ----------  ----------
      Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      3,121       3,697       6,206       6,060
                                                                              ----------  ----------  ----------  ----------

Operating expenses:
  Research and development . . . . . . . . . . . . . . . . . . . . . . . . .      1,320       1,176       2,465       2,488
  Sales, general and administrative. . . . . . . . . . . . . . . . . . . . .      2,512       2,624       4,799       5,422
                                                                              ----------  ----------  ----------  ----------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . .      3,832       3,800       7,264       7,910
                                                                              ----------  ----------  ----------  ----------

Operating loss from continuing operations. . . . . . . . . . . . . . . . . .       (711)       (103)     (1,058)     (1,850)
  Other income, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         54         121          97         261
                                                                              ----------  ----------  ----------  ----------
Income (loss) from continuing operations before benefit from (provision for)
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (657)         18        (961)     (1,589)
  Benefit from (provision for) income taxes. . . . . . . . . . . . . . . . .        210          (7)        307         676
                                                                              ----------  ----------  ----------  ----------
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .       (447)         11        (654)       (913)

Loss from discontinued operations (net of applicable income tax benefit of
$-, $-, $- and $542, respectively) . . . . . . . . . . . . . . . . . . . . .          -           -           -        (893)
                                                                              ----------  ----------  ----------  ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    (447)  $      11   $    (654)  $  (1,806)
                                                                              ==========  ==========  ==========  ==========
Income (loss) from continuing operations per common share-basic. . . . . . .  $   (0.07)  $    0.00   $   (0.10)  $   (0.14)
Loss from discontinued operations per common share-basic . . . . . . . . . .          -           -           -       (0.13)
                                                                              ----------  ----------  ----------  ----------
Net income (loss) per common share-basic . . . . . . . . . . . . . . . . . .  $   (0.07)  $    0.00   $   (0.10)  $   (0.27)
                                                                              ==========  ==========  ==========  ==========

Income (loss) from continuing operations per common share-diluted. . . . . .  $   (0.07)  $    0.00   $   (0.10)  $   (0.14)
Loss from discontinued operations per common share-diluted . . . . . . . . .          -           -           -       (0.13)
                                                                              ----------  ----------  ----------  ----------
Net income (loss) per common share-diluted . . . . . . . . . . . . . . . . .  $   (0.07)  $    0.00   $   (0.10)  $   (0.27)
                                                                              ==========  ==========  ==========  ==========

Shares used in per common share basic calculations . . . . . . . . . . . . .      6,861       6,742       6,849       6,727
                                                                              ==========  ==========  ==========  ==========
Shares used in per share diluted calculations. . . . . . . . . . . . . . . .      6,861       6,874       6,849       6,727
                                                                              ==========  ==========  ==========  ==========
</TABLE>


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


                                        4
<PAGE>
<TABLE>
<CAPTION>
1
                                              IRIDEX CORPORATION
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (IN THOUSANDS)
                                                 (UNAUDITED)

                                                                                         SIX MONTHS ENDED
                                                                                        JUNE 29,    JUNE 30,
                                                                                          2002        2001
                                                                                       ----------  ----------
<S>                                                                                    <C>         <C>
Cash flows from operating activities:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    (654)  $  (1,806)
  Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
    Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          -         564
    Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .        437         421
    Provision for inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .         70         140
    Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (8)          -
    Changes in operating assets and liabilities:
      Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,114       1,141
      Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        654      (1,544)
      Prepaids and other current assets . . . . . . . . . . . . . . . . . . . . . . .         57         212
      Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (447)         94
      Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (220)       (991)
                                                                                       ----------  ----------
    Net cash provided by (used in) operating activities . . . . . . . . . . . . . . .      1,003      (1,769)
                                                                                       ----------  ----------

Cash flows from investing activities:
  Purchases of available-for-sale securities. . . . . . . . . . . . . . . . . . . . .     (2,555)     (1,367)
  Proceeds from maturity of available-for-sale securities . . . . . . . . . . . . . .      3,359       1,089
  Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . .       (189)       (328)
                                                                                       ----------  ----------
    Net cash provided by (used in) investing activities . . . . . . . . . . . . . . .        615        (606)
                                                                                       ----------  ----------

Cash flows from financing activities:
  Issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . .        120         133
                                                                                       ----------  ----------
    Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . .        120         133
                                                                                       ----------  ----------
      Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . .      1,738      (2,242)

Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . .      4,613       9,998
                                                                                       ----------  ----------

Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . . . . . .  $   6,351   $   7,756
                                                                                       ==========  ==========



SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Change in unrealized losses on available-for-sale securities                         $      (5)  $      (2)
</TABLE>


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


                                        5
<PAGE>
<TABLE>
<CAPTION>
                               IRIDEX  CORPORATION
         CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                  (IN THOUSANDS)
                                   (UNAUDITED)

                                      THREE MONTHS ENDED      SIX MONTHS ENDED

                                     JUNE 29,    JUNE 30,    JUNE 29,    JUNE 30,
                                       2002        2001        2002        2001
                                    ----------  ----------  ----------  ----------
<S>                                 <C>         <C>         <C>         <C>
Net income (loss) . . . . . . . .   $    (447)  $      11   $    (654)  $  (1,806)

Other comprehensive loss:

  Change in unrealized loss on
    available-for-sale securities          (3)         (5)         (5)         (2)
                                    ----------  ----------  ----------  ----------

Comprehensive income (loss) . . .   $    (450)  $       6   $    (659)  $  (1,808)
                                    ==========  ==========  ==========  ==========
</TABLE>


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


                                        6
<PAGE>
                               IRIDEX CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     The  accompanying  unaudited condensed consolidated financial statements of
IRIDEX  Corporation  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 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 29, 2002 (as amended
on Form 10K/A on April 10, 2002).  The results of operations for the three month
and  six month periods ended June 29, 2002 are not necessarily indicative of the
results  for  the  year  ending  December 28, 2002 or any future interim period.

2.   INVENTORIES (IN THOUSANDS):

                                                JUNE 29,     DECEMBER 29,
                                                  2002          2001
                                              ------------  -------------

                                               (unaudited)
Raw materials and work in progress. . . . .   $      7,310  $       8,078
Finished goods. . . . . . . . . . . . . . .          4,528          4,484
                                              ------------  -------------
Total inventories . . . . . . . . . . . . .   $     11,838  $      12,562
                                              ============  =============

3.   COMPUTATIONS OF NET INCOME (LOSS) PER COMMON SHARE

     Basic  and diluted net income (loss) per share are computed by dividing net
income  (loss) for the period by the weighted average number of shares of common
stock  outstanding  during  the  period.  The  calculation of diluted net income
(loss)  per  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.


                                        7
<PAGE>
     A  reconciliation of the numerator and denominator of net income per common
share  is  as  follows  (in  thousands,  except  per  share  amounts):

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED      SIX MONTHS ENDED
                                                                JUNE 29,   JUNE 30,    JUNE 29,    JUNE 30,
                                                                  2002       2001        2002        2001
                                                               ----------  ---------  ----------  ----------
                                                                    (unaudited)             (unaudited)
<S>                                                            <C>         <C>        <C>         <C>
Numerator
Income (loss) from continuing operations. . . . . . . . . . .  $    (447)  $      11  $    (654)  $    (913)
Income (loss) from discontinued operations. . . . . . . . . .          -           -          -        (893)
                                                               ----------  ---------  ----------  ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . .  $    (447)  $      11  $    (654)  $  (1,806)
                                                               ==========  =========  ==========  ==========
Denominator - Basic
  Weighted average common stock outstanding . . . . . . . . .      6,861       6,742      6,849       6,727
                                                               ==========  =========  ==========  ==========
Basic income (loss) per share from continuing operations. . .  $   (0.07)  $    0.00  $   (0.10)  $   (0.14)
Basic income (loss) per share from discontinued operations. .       0.00        0.00       0.00       (0.13)
                                                               ==========  =========  ==========  ==========
Basic income (loss) per share . . . . . . . . . . . . . . . .  $   (0.07)  $    0.00  $   (0.10)  $   (0.27)
                                                               ==========  =========  ==========  ==========

Denominator - Diluted
  Weighted average common stock outstanding . . . . . . . . .      6,861       6,742      6,849       6,727
Effect of dilutive securities
  Weighted average common stock options . . . . . . . . . . .          -         132          -           -
                                                               ----------  ---------  ----------  ----------
Total weighted average stock and options outstanding. . . . .      6,861       6,874      6,849       6,727
                                                               ==========  =========  ==========  ==========
Diluted income (loss) per share from continuing operations. .  $   (0.07)  $    0.00  $   (0.10)  $   (0.14)
Diluted income (loss) per share from discontinued operations.       0.00        0.00       0.00       (0.13)
                                                               ==========  =========  ==========  ==========
Diluted income (loss) per share . . . . . . . . . . . . . . .  $   (0.07)  $    0.00  $   (0.10)  $   (0.27)
                                                               ==========  =========  ==========  ==========
</TABLE>

     During  the  three  and six months ended June 29, 2002, options to purchase
1,614,037  shares  a  weighted  average  exercise  price of $5.29 per share were
outstanding,  but  were  not  included in the computations of diluted net income
(loss)  per  common  share  because  their  effect was antidilutive. For the six
months  ended  June  30,  2001  options to purchase 1,525,889 shares at a weight
average  price  of  $4.68  per  share  were  outstanding but not included in the
computations  of  diluted  net  income per common share because their effect was
antidilutive.  For  the  three  months  ended  June 30, 2001 options to purchase
849,821  shares  at  a weighted average exercise price of $7.39 were outstanding
but were not included in the computations of diluted net income per common share
because  the  exercise  price of the related options exceeded the average market
price  of  the  common  shares. These options could dilute earnings per share in
future  periods.

4.   DISCONTINUED  OPERATIONS

     In  April  2001,  management  decided  to  discontinue  the  Laser Research
segment.  There  were  no  revenues, costs or expenses for this segment for both
the  three  month  periods  ended June 29, 2002 and June 30, 2001, respectively.
The  total loss on discontinued operations of $893,000 (net of a $542,000 income
tax  benefit)  was recorded in the first quarter of 2001 and consisted primarily
of  inventory  and  sales  returns costs.  No assets or liabilities of the Laser
Research  segment  remain  and  no proceeds are expected from the disposition of
this  segment.


                                        8
<PAGE>
5.   BUSINESS  SEGMENTS  (UNAUDITED)

     We  operate  in  two  reportable segments: the ophthalmology medical device
segment and the aesthetics 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 29,
2002  and  June  30,  2001  is  as  follows  (in  thousands):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                Three Months Ended June 29, 2002        Three Months Ended June 30, 2001    Six Months Ended June 29, 2002
--------------------------------------------------------------------------------------------------------------------------
              Ophthalmology    Aesthetics    Total    Ophthalmology    Aesthetics    Total    Ophthalmology    Aesthetics
                 Medical        Medical                  Medical        Medical                  Medical        Medical
                 Devices        Devices                  Devices        Devices                  Devices        Devices
--------------------------------------------------------------------------------------------------------------------------
<S>           <C>             <C>           <C>       <C>             <C>           <C>       <C>             <C>
Sales         $        5,679  $      1,754  $ 7,433   $        5,444  $      1,644  $ 7,088   $       10,756  $      3,640
--------------------------------------------------------------------------------------------------------------------------
Direct Cost            1,797           727    2,524            1,732           565    2,297            3,469         1,601
of Goods
Sold
--------------------------------------------------------------------------------------------------------------------------
Direct                 3,882         1,027    4,909            3,712         1,079    4,791            7,287         2,039
Gross
Margin
--------------------------------------------------------------------------------------------------------------------------
Total                                        (5,566)                                 (4,773)
Unallocated
Costs
--------------------------------------------------------------------------------------------------------------------------
Pre-tax                                        (657)                                     18
income
(loss)
--------------------------------------------------------------------------------------------------------------------------



----------------------------------------------------------------
                             Six Months Ended June 30, 2001
----------------------------------------------------------------
                Total    Ophthalmology    Aesthetics     Total
                            Medical        Medical
                            Devices        Devices
----------------------------------------------------------------
<S>           <C>        <C>             <C>           <C>
Sales         $ 14,396   $       10,074  $      2,749  $ 12,823
----------------------------------------------------------------
Direct Cost      5,070            3,214         1,008     4,222
of Goods
Sold
----------------------------------------------------------------
Direct           9,326            6,860         1,741     8,601
Gross
Margin
----------------------------------------------------------------
Total          (10,287)                                 (10,190)
Unallocated
Costs
----------------------------------------------------------------
Pre-tax           (961)                                  (1,589)
income
(loss)
----------------------------------------------------------------
</TABLE>

     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.

6.   RECENT  ACCOUNTING  PRONOUNCEMENTS

     On  April  30, 2002, the Financial Accounting Standards Board (FASB) issued
FASB  Statement No. 145 (SFAS 145), Rescission of FASB Statements No. 4, 44, and
64,  Amendment  of  FASB  Statement  No. 13, and Technical Corrections.  FAS 145
rescinds  both  FASB  Statement  No. 4 (SFAS 4), Reporting Gains and Losses from
Extinguishment  of Debt, and the amendment to FAS 4, FASB Statement No. 64 (SFAS
64), Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.  Through
this rescission, FAS 145 eliminates the requirement (in both SFAS 4 and SFAS 64)
that  gains  and  losses  from  the extinguishment of debt be aggregated and, if
material,  classified  as  an  extraordinary item, net of the related income tax
effect.  However,  an  entity  is not prohibited from classifying such gains and
losses  as extraordinary items, so long as it meets the criteria in paragraph 20
of  Accounting  Principles  Board  Opinion  No.  30,  Reporting  the  Results of
Operations  Reporting  the  Effects  of Disposal of a Segment of a Business, and
Extraordinary,  Unusual  and  Infrequently  Occurring  Events  and Transactions.
Further,  SFAS  145  amends paragraph 14(a) of FASB Statement No. 13, Accounting
for  Leases,  to  eliminate  an  inconsistency  between  the  accounting  for
sale-leaseback  transactions  and certain lease modifications that have economic
effects that are similar to sale-leaseback transactions.  The amendment requires
that  a lease modification (1) results in recognition of the gain or loss in the


                                        9
<PAGE>
financial  statements,  (2)  is subject to FASB Statement No. 66, Accounting for
Sales  of  Real  Estate,  if the leased asset is real estate (including integral
equipment),  and (3) is subject (in its entirety) to the sale-leaseback rules of
FASB  Statement  No.  98,  Accounting  for  Leases:  Sale-Leaseback Transactions
Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease
Term, and Initial Direct Costs of Direct Financing Leases. Generally, FAS 145 is
effective  for  transactions occurring after May 15, 2002. We do not expect that
the  adoption  of  SFAS  145  will  have  a  material  effect  on  our financial
performance  or  results  of  operations.

     In  June  2002,  the  FASB  issued  SFAS  No.  146, "Accounting for Exit or
Disposal  Activities"  ("SFAS  146").  SFAS  146  addresses  significant  issues
regarding  the  recognition,  measurement,  and  reporting  of  costs  that  are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain  Employee  Termination  Benefits  and  Other  Costs  to Exit an Activity
(including  Certain  Costs  Incurred in a Restructuring)." The scope of SFAS 146
also  includes  costs  related  to  terminating a contract that is not a capital
lease  and  termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an ongoing
benefit  arrangement  or  an individual deferred-compensation contract. SFAS 146
will  be  effective  for  exit  or  disposal activities that are initiated after
December  31,  2002  and early application is encouraged. We will adopt SFAS 146
during  the  first fiscal quarter of 2003. The provisions of EITF No. 94-3 shall
continue to apply for an exit activity initiated under an exit plan that met the
criteria  of  EITF  No.  94-3  prior  to the adoption of SFAS 146. The effect on
adoption  of  SFAS 146 will change on a prospective basis the timing of when the
restructuring  charges  are recorded from a commitment date approach to when the
liability is incurred. The Company does not expect that the adoption will have a
material  effect  on  its  financial  performance  or  results  of  operations.


                                       10
<PAGE>
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  our  ability  to  continue  our  efforts  to  reduce the cost of
components  to  offset  anticipated decreases in our average selling prices; the
impact  of  the  current  difficult  economic  environment  on  levels of sales;
expectations  of  decreased  levels of employee-related costs as a result of the
recently  completed  reduction-in force; levels of future investment in research
and  development  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, 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  negatives  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
statements, which reflect management's analysis only as of the date of this Form
10-Q.  We undertake no obligation to update the results of any revision of these
forward-looking  statements  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  Form 10-K filed with the Securities and Exchange Commission on March
29,  2002  and  detailed  from time to time in the reports that we file with the
Securities  and  Exchange  Commission.

RESULTS  OF  OPERATIONS

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

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED     SIX MONTHS ENDED
                                                  JUNE 29,   JUNE 30,   JUNE 29,   JUNE 30,
                                                    2002       2001       2002       2001
                                                       (UNAUDITED)          (UNAUDITED)
                                                  ---------  ---------  ---------  ---------
<S>                                               <C>        <C>        <C>        <C>
Sales. . . . . . . . . . . . . . . . . . . . . .     100.0%     100.0%     100.0%     100.0%
Cost of sales. . . . . . . . . . . . . . . . . .      58.0       47.8       56.9       52.7
                                                  ---------  ---------  ---------  ---------
  Gross profit . . . . . . . . . . . . . . . . .      42.0       52.2       43.1       47.3
                                                  ---------  ---------  ---------  ---------
Operating expenses:
  Research and development . . . . . . . . . . .      17.8       16.6       17.1       19.4
  Sales, general and administrative. . . . . . .      33.7       37.0       33.3       42.3
                                                  ---------  ---------  ---------  ---------
    Total operating expenses . . . . . . . . . .      51.5       53.6       50.4       61.7
                                                  ---------  ---------  ---------  ---------

Operating loss from continuing operations. . . .      (9.5)      (1.4)      (7.3)     (14.4)
Other income, net. . . . . . . . . . . . . . . .       0.7        1.7        0.7        2.0
                                                  ---------  ---------  ---------  ---------
Income (loss) from continuing operations before
benefit from (provision for) income taxes. . . .      (8.8)       0.3       (6.6)     (12.4)
Benefit from (provision for) income taxes. . . .       2.8       (0.1)       2.1        5.3
                                                  ---------  ---------  ---------  ---------
Income (loss) from continuing operations . . . .      (6.0)       0.2       (4.5)      (7.1)
Income (loss) from discontinued operations (net
of applicable income tax benefit). . . . . . . .       0.0        0.0        0.0       (7.0)
                                                  ---------  ---------  ---------  ---------
Net income (loss). . . . . . . . . . . . . . . .      (6.0)%      0.2%      (4.5)%    (14.1)%
                                                  =========  =========  =========  =========
</TABLE>

     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 (in
thousands).


                                       11
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                Three Months Ended                        Six Months Ended
---------------------------------------------------------------------------------------------------------
                      June 29, 2002        June 30, 2001         June 29, 2002          June 30, 2001
                                   (UNAUDITED)                                (UNAUDITED)
---------------------------------------------------------------------------------------------------------
                   Amount   Percentage   Amount   Percentage   Amount   Percentage   Amount   Percentage
                             of total              of total              of total              of total
                               sales                 sales                 sales                 sales
---------------------------------------------------------------------------------------------------------
<S>                <C>      <C>          <C>      <C>          <C>      <C>          <C>      <C>
    Domestic       $ 4,744        63.8%  $ 4,038        57.0%  $ 8,743        60.7%  $ 7,160        55.8%
---------------------------------------------------------------------------------------------------------
    International    2,689        36.2%    3,050        43.0%    5,653        39.3%    5,663        44.2%
---------------------------------------------------------------------------------------------------------
Total              $ 7,433       100.0%  $ 7,088       100.0%  $14,396       100.0%  $12,823       100.0%
---------------------------------------------------------------------------------------------------------
Ophthalmology:
---------------------------------------------------------------------------------------------------------
    Domestic       $ 3,220        43.3%  $ 2,813        39.7%  $ 6,037        41.9%  $ 5,015        39.1%
---------------------------------------------------------------------------------------------------------
    International    2,459        33.1%    2,631        37.1%    4,719        32.8%    5,059        39.5%
---------------------------------------------------------------------------------------------------------
Total              $ 5,679        76.4%  $ 5,444        76.8%  $10,756        74.7%  $10,074        78.6%
---------------------------------------------------------------------------------------------------------
Aesthetics:
---------------------------------------------------------------------------------------------------------
    Domestic       $ 1,524        20.5%  $ 1,225        17.3%  $ 2,706        18.8%  $ 2,145        16.7%
---------------------------------------------------------------------------------------------------------
    International      230         3.1%      419         5.9%      934         6.5%      604         4.7%
---------------------------------------------------------------------------------------------------------
Total              $ 1,754        23.6%  $ 1,644        23.2%  $ 3,640        25.3%  $ 2,749        21.4%
---------------------------------------------------------------------------------------------------------
</TABLE>

     Combined  Ophthalmology  and  Dermatology  Sales

     Sales  for  the  three  months  ended  June 29, 2002 increased 4.9% to $7.4
million for the three months ended June 29, 2002 from $7.1 million for the three
months  ended  June  30,  2001.  Sales  for  the  six months ended June 29, 2002
increased  12.3%  to  $14.4  million from $12.8 million for the six months ended
June 30, 2001. For both the three and six month periods the overall increase was
driven primarily by increased unit sales of our ophthalmology products and sales
of  the  Apex  hair removal laser system for aesthetics, which was introduced in
July  2001,  offset  by  a  decrease  in  average  selling  prices.

     Domestic sales increased by 17.5% to $4.7 million from $4.0 million for the
comparable prior year three-month period. For the six months ended June 29, 2002
domestic  sales  increased 22.1% to $8.7 million from $7.2 million. For both the
three and six month periods, the increase was due mainly to increased unit sales
of our ophthalmology delivery devices and laser systems as well as unit sales of
the  Apex  hair  removal laser system for aesthetics offset by decreased average
selling  prices  for  domestic  products.

     International  sales  decreased  10.0% to $2.7 million for the three months
ended  June 29, 2002 from $3.0 million for the comparable prior year three-month
period,  primarily  as  a  result  of  decreased unit sales of our ophthalmology
visible  laser  systems  and  net decreases in average selling prices offset, in
part, by increased sales of ophthalmology delivery devices and sales of the Apex
hair  removal laser system. For the six months ended June 29, 2002 international
sales  remained  constant  at  5.7  million.

                                       12
<PAGE>
     Ophthalmology  Sales

     Ophthalmology  sales  increased  to $5.7 million for the three months ended
June  29,  2002  from $5.4 million for the three months ended June 30, 2001. For
the  six  months  ended  June  29,  2002  ophthalmology sales increased to $10.8
million  from  $10.1  million  for  the  comparable prior year six-month period.
Domestic  ophthalmology  sales  increased  to  $3.2 million for the three months
ended  June 29, 2002 from $2.8 million for the comparable prior year three-month
period.  For  the  six  months  ended June 29, 2002 domestic ophthalmology sales
increased  to  $6.0  million  from  $5.0  million  for the comparable prior year
six-month  period.  For  both  the  three  and  six  month  periods  domestic
ophthalmology  sales increased mainly as a result of increased sales of delivery
devices  and  laser systems. International ophthalmology sales decreased to $2.5
million  for  the  three  months  ended  June 29, 2002 from $2.6 million for the
comparable prior year three-month period. For the six months ended June 29, 2002
international  ophthalmology  sales  decreased to $4.7 million from $5.1 million
for  the  prior  six-month period. For both the three and six month periods, the
decrease  in  international  ophthalmology  sales  was due to decreased sales of
visible  laser  systems  offset,  in  part,  by  increases  in sales of delivery
devices.

     Aesthetics  Sales

     Aesthetics  sales increased to $1.8 million for the three months ended June
29,  2002 from $1.6 million for the three months ended June 30, 2001. The second
quarter  of  2001  included  approximately  $0.4 million of DioLite laser system
shipments  delayed from the first quarter of 2001 as a result of a key component
delay.  See  "-  Factors  that  Hay  Affected Future Results - We Depend on Sole
Source  Limited  Source  Suppliers."  For  the  six  months  ended June 29, 2002
aesthetics  sales increased to $3.6 million from $2.7 million for the comparable
prior  six-month period. Domestic aesthetics sales increased to $1.5 million for
the  three  months  ended June 29, 2002 from $1.2 million for as compared to the
comparable prior year three-month period. For the six months ended June 29, 2002
domestic  aesthetics sales increased to $2.7 million from $2.1 million. For both
the  three  and six month periods, the increase in domestic aesthetics sales was
driven  by  sales of the Apex hair removal laser system which commenced shipment
in  July  2001. International aesthetics sales decreased by $0.2 million to $0.2
million  for  the  three  months  ended  June 29, 2002 from $0.4 million for the
comparable  prior  three-month  period  due  to the impact of the DioLite system
shipments  delayed  from  the  first  quarter  of  2001  which  more than offset
international  sales of the Apex hair removal laser system in the second quarter
of  2002.  For the six months ended June 29, 2002 international aesthetics sales
increased  to  $0.9 million from $0.6 million mainly as a result of sales of the
Apex  hair  removal  laser  system. Our aesthetics products sales continue to be
affected  by  the  current  weak economic conditions, particularly in the United
States,  and  because hair removal procedures completed using our Apex 800 laser
system  are  typically  elective  procedures  that  are  differed by patients in
difficult  economics  times,  See "-Factors That Hay Affect Future Results - Our
Business  has been adversely Impacted by the Current Worldwide Economic Slowdown
and  Related  Uncertainties."

     Gross  Profit.  Our  gross  profit  decreased 15.6% to $3.1 million for the
three  months  ended June 29, 2002 compared to $3.7 million for the three months
ended  June  30,  2001.  Gross profit as a percentage of net sales for the three
months  ended  June 29, 2002 decreased to 42.0%, compared to 52.2% for the three
months ended June 30, 2001. For the six months ended June 29, 2002, gross profit
as a percentage of net sales decreased to 43.1% as compared to 47.3% for the six
months  ended June 30, 2001. For both the three and six month periods ended June
29,  2002,  the decrease in gross profit was primarily due to increased overhead
costs  related  mainly  to  reorganization  of  our  manufacturing  and  service
functions  and  inventory  related  charges,  lower  average selling prices, the
addition  of lower margin sales of the Apex hair removal laser system and to the
reduction  in  workforce.  For  the three and six months ended June 29, 2002 the
reorganization of our manufacturing and services functions and inventory related
charges  resulted  in  a  decrease in gross profit of approximately $0.3 million
while  lower average selling prices resulted in a decrease of approximately $0.3
million.  Although, increasing competition has continued to result in a downward
trend  in  average  selling  prices for some products, we intend to continue our
efforts  to reduce the cost of components and manufacturing and thereby mitigate
the  impact  of  price  reductions  on  our gross profit. See "-Factors That Hay
Affect  Future  Results  -  If  We Cannot Increase Our Sales Volumes, Reduce Our
Costs or Introduce Higher Margin Products to Offset Anticipated Reduction in the
Average  Unit  Selling  Price of our Products, Our Operating Results May Suffer.
Additionally, a portion of our manufacturing costs in the second quarter of 2002
related  to  reorganization  of  the  manufacturing function and to reduction in
force  and  are  not  expected  to  recur. Overall, however, 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 Fluctuate from Quarter to
Quarter  and  Year  to  Year

     Research  and  Development. Our research and development expenses increased
by  12.2%  to  $1.3  million  for the three months ended June 29, 2002 from $1.2
million  for  the  three  months  ended  June 30, 2001. Research and development
expenses  increased  as  a percentage of net sales to 17.8% for the three months
ended June 29, 2002 from 16.6% for the comparable prior year three-month period.
The  increase  in  research and development expense in absolute dollars and as a
percentage  of  sales  for  the  three  month period ended June 29, 2002 was due
primarily  to  the  launch of new development projects and restructuring charges
related  to  a  reduction  in  work  force  during  the  second quarter of 2002.
Restructuring  charges  accounted  for  approximately  $60,000  of  the  overall
increase in research and development expense while the launch of new development
projects  accounted for the remainder of the increase. For the six month periods
ended  June  29,  2002  and  June  30,  2001,  research and development expenses
remained  relatively  constant  at  approximately  $2.5 million. The increase in
costs  in  2002  due  to  new development projects and restructuring charges was
offset  by  costs  in 2001 associated with the completion of development work on
the  Apex  800 hair removal laser system. Research and development expenses as a
percentage  of  net  sales  decreased  during  the  period  to


                                       13
<PAGE>
17.1%  for the six months ended June 29, 2002 from 19.4% for the comparable 2001
period  mainly  as  a  result of increased sales in the second half of 2002. The
reduction  in  workforce  is  expected  to  reduce  research  and  development
employee-related  costs  by  going  forward.

     Sales,  General  and  Administrative. Our sales, general and administrative
expenses  decreased  by 4.3% to $2.5 million for the three months ended June 29,
2002 from $2.6 million for the three months ended June 30, 2001. As a percentage
of  net sales, sales, general and administrative expenses decreased to 33.7% for
the  three  months  ended June 29, 2002 from 37.0% for the comparable prior year
three-month  period.  For the six months ended June 29, 2002, sales, general and
administrative expenses decreased by 11.5% to $4.8 million from $5.4 million for
the  comparable  period in 2001. Sales, general and administrative expenses as a
percentage  of  net  sales  decreased to 33.3% for the six months ended June 29,
2002  from  42.3%  for  the  comparable period in 2001. The decrease in absolute
dollars  and  as  a  percentage  of  net  sales for both the three and six month
periods  ended  June  29,  2002  was  due primarily to a net decrease in various
support  related  expenses  offset  by  reduction  in force related costs in the
second  quarter of 2002. For both the three and six month periods ended June 29,
2002  the  reduction in force related costs were approximately $60,000 while the
decrease  in  various  support related expenses made up the remainder of the net
decrease  in  selling,  general  and  administrative  expenses.  As  part of the
restructuring during the second quarter of 2002, the ophthalmology and aeshetics
product  development  and  marketing  functions  were  combined,  allowing for a
reduction  in operating expenses for these functions. The reduction in workforce
is  expected  to reduce research and development employee-related costs by going
forward.

     Discontinued  Operations.  In April 2001, management decided to discontinue
the  Laser  Research segment. There were no revenues, costs or expenses for this
segment  for  either of the three month periods ended June 29, 2002 and June 30,
2001,  respectively.  The total loss on discontinued operations of $893,000 (net
of  a $542,000 income tax benefit) was recorded in the first quarter of 2001 and
consisted  primarily  of  inventory  and  sales  returns  costs.  No  assets  or
liabilities  of  the  Laser Research segment remain and no proceeds are expected
from  the  disposition  of  this  segment.

     Reduction  in Force. During the quarter ended June 29, 2002, we reduced our
workforce  by  approximately  12%.  For the three months ended June 29, 2002, we
recorded restructuring charges totaling approximately $150,000 that were related
primarily  to the severance costs associated with headcount reduction instituted
in  the  second  quarter.  The  reduction  in  workforce  is  expected to reduce
employee-related  costs  by  $1.2 million annually going forward. As of June 29,
2002, we had a total headcount of 110 full-time employees after the reduction in
force.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  June  29, 2002, our primary sources of liquidity included cash and cash
equivalents  and  available-for-sale securities in the aggregate amount of $10.0
million.  In  addition, we have available $4 million under our unsecured line of
credit  which  bears  interest  at  the bank's prime rate and expires in October
2002.  As  of  June  29,  2002, no borrowings were outstanding under this credit
facility.  We  expect  to renew the line of credit in October 2002 assuming that
the  terms  continue  to  be  acceptable.

     During  the  six  months  ended June 29, 2002, we generated $1.7 million in
cash  and  cash  equivalents.  During this period, operating activities provided
$1.0  million  of  cash.  Sources  of  cash from operating activities included a
decrease  in  net  accounts  receivable  of  $1.1  million,  a  decrease  in net
inventories  of  $0.7 million and depreciation of $0.4 million, partially offset
by  uses  of  cash  including a net loss of $0.7 million, a decrease in accounts
payable  of  $0.4  million  and  a decrease in accrued expenses of $0.2 million.
We  implemented  procedures  to  reduce  overall  inventory  levels and accounts
receivable  balances  and  will  continue these asset management efforts to help
increase  our  cash  position.

     Investing  activities  provided  $0.6  million in cash and cash equivalents
during  the  six  months ended June 29, 2002, primarily due to net proceeds from
maturity of available for sale securities of $0.8 million offset by $0.2 million
for  the  acquisition  of  property  and  equipment.


                                       14
<PAGE>
     Net  cash provided by financing activities during the six months ended June
29,  2002  was  $0.1  million  which  consisted of 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
for  the  next  12  months.  However,  if  the current economic downturn remains
protracted,  we may need to expand our cash reserves to fund our operations. Our
liquidity  could be negatively affected by a continued 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."

     In  December  1998,  we instituted a stock repurchase program whereby up to
150,000  shares  of  our  Common Stock may be repurchased in the open market. We
plan  to  utilize all of the reacquired shares for reissuance in connection with
employee  stock programs. No shares were repurchased during the six months ended
June  29,  2002.  To  date, we have purchased 103,000 shares of our Common Stock
under  this  program.

CRITICAL ACCOUNTING POLICIES

     The  preparation  of  our condensed financial statements in conformity with
United  States  Generally  Accepted  Accounting Principles (GAAP) requires us to
make  estimates  and  judgments  that  affect the reported amounts of assets and
liabilities,  net  sales  and expenses, and the related disclosures. We base our
estimates on historical experience, our knowledge of economic and market factors
and  various  other  assumptions  that  we  believe  to  be reasonable under the
circumstances.  Actual  results  may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies
are  affected  by  significant  estimates, assumptions and judgments used in the
preparation  of  our condensed consolidated  financial  statements.

Revenue Recognition.

     Revenue  from  product sales is recognized upon receipt of a purchase order
and  product  shipment provided no significant obligations remain and collection
of the receivables is deemed probable. Up-front fees received in connection with
product sales are deferred and recognized over the associated product shipments.

Sales Return Allowance and Allowance for Doubtful Accounts.

     In the process of preparing financial statements we must make estimates and
assumptions  that  affect  the  reported  amount  of  assets  and disclosures of
contingent  assets  and  liabilities at the date of the financial statements and
the  reported  amounts  of  revenues  and  expenses  during the reported period.
Specifically,  we must estimate future product returns related to current period
product  revenue.  We  analyze  historical  returns, current economic trends and
changes  in  customer  demand and acceptance of our products when evaluating the
adequacy  of  the  sales  returns  allowance  and  other allowances. Significant
management  judgments  and  estimates  must  be made and used in connection with
establishing  the  sales  returns and other allowances in any accounting period.
Material  differences may result in the amount and timing of our revenue for any
period  if  management made different judgments or utilized different estimates.
Similarly  our  management  must  make  estimates of the uncollectibility of our
accounts  receivable.  Management  specifically analyzes accounts receivable and
analyzes  historical  bad  debts,  customer  concentrations,  customer
credit-worthiness,  current  economic trends and changes in our customer payment
terms  when  evaluating the adequacy of the allowance for doubtful accounts. Our
accounts  receivable  balance  was  $7.0  million, net of allowance for doubtful
accounts  of  $0.2  million  as  of  June  29,  2002.


                                       15
<PAGE>
Inventories.

     Inventories  are  stated at the lower of cost or market. Cost is determined
on a standard cost basis which approximates actual cost on a first-in, first-out
(FIFO) method. Lower of cost or market is evaluated by considering obsolescence,
excessive  levels  of  inventory,  deterioration  and  other  factors.

Income Taxes.

     Income  taxes  are  accounted  for  under Statement of Financial Accounting
Standards  (SFAS)  No.  109,  "Accounting for Income Taxes." Under SFAS No. 109,
deferred  assets  and  liabilities  are  recognized  for the future consequences
attributable  to differences between the financial statement carrying amounts of
existing  assets  and  liabilities  and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be  recovered or settled. Valuation allowances are established when necessary to
reduce  deferred  tax  assets  to  the  amounts  expected  to  be  realized.

Warranty Reserves.

     We  provide  reserves  for  the estimated cost of product warranties at the
time  revenue  is  recognized. We estimate the costs of our warranty obligations
based on our historical experience of known product failure rates, use of labor,
materials and service delivery costs incurred in correcting product failures. In
addition,  from  time  to  time,  specific  warranty  accruals  may  be  made if
unforeseen  technical  problems  arise. Should our actual experience relative to
these factors differ from our estimates, we may be required to record additional
warranty  reserves.  Alternatively, if we provide more reserves than we need, we
may  reverse  a  portion  of  such  provision  in  future  periods.

RECENT  ACCOUNTING  PRONOUNCEMENTS

     On  April  30, 2002, the Financial Accounting Standards Board (FASB) issued
FASB  Statement No. 145 (SFAS 145), Rescission of FASB Statements No. 4, 44, and
64,  Amendment  of  FASB  Statement  No.  13, and Technical Corrections. FAS 145
rescinds  both  FASB  Statement  No. 4 (SFAS 4), Reporting Gains and Losses from
Extinguishment  of Debt, and the amendment to FAS 4, FASB Statement No. 64 (SFAS
64),  Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. Through
this rescission, FAS 145 eliminates the requirement (in both SFAS 4 and SFAS 64)
that  gains  and  losses  from  the extinguishment of debt be aggregated and, if
material,  classified  as  an  extraordinary item, net of the related income tax
effect.  However,  an  entity  is not prohibited from classifying such gains and
losses  as extraordinary items, so long as it meets the criteria in paragraph 20
of  Accounting  Principles  Board  Opinion  No.  30,  Reporting  the  Results of
Operations  Reporting  the  Effects  of Disposal of a Segment of a Business, and
Extraordinary,  Unusual  and  Infrequently  Occurring  Events  and Transactions.
Further,  SFAS  145  amends paragraph 14(a) of FASB Statement No. 13, Accounting
for  Leases,  to  eliminate  an  inconsistency  between  the  accounting  for
sale-leaseback  transactions  and certain lease modifications that have economic
effects  that are similar to sale-leaseback transactions. The amendment requires
that  a lease modification (1) results in recognition of the gain or loss in the
financial  statements,  (2)  is subject to FASB Statement No. 66, Accounting for
Sales  of  Real  Estate,  if the leased asset is real estate (including integral
equipment),  and (3) is subject (in its entirety) to the sale-leaseback rules of
FASB  Statement  No.  98,  Accounting  for  Leases:  Sale-Leaseback Transactions
Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease
Term, and Initial Direct Costs of Direct Financing Leases. Generally, FAS 145 is
effective  for  transactions occurring after May 15, 2002. We do not expect that
the  adoption  of  SFAS  145  will  have  a  material  effect  on  our financial
performance  or  results  of  operations.

     In  June  2002,  the  FASB  issued  SFAS  No.  146, "Accounting for Exit or
Disposal  Activities"  ("SFAS  146").  SFAS  146  addresses  significant  issues
regarding  the  recognition,  measurement,  and  reporting  of  costs  that  are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain  Employee  Termination  Benefits  and  Other  Costs  to Exit an Activity
(including  Certain  Costs  Incurred in a Restructuring)." The scope of SFAS 146
also  includes  costs  related  to  terminating a contract that is not a capital
lease  and  termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an ongoing
benefit  arrangement  or  an individual deferred-compensation contract. SFAS 146
will  be  effective  for  exit  or  disposal activities that are initiated after
December  31,  2002  and early application is encouraged. We will adopt SFAS 146
during  first  quarter of 2003. The provision of EITF No. 94-3 shall continue to
apply for an exit activity initiated under an exit plan that met the criteria of
EITF  No. 94-3 prior to the adoption of SFAS 146. The effect on adoption of SFAS
146  will  change  on  a  prospective basis the timing of when the restructuring
charges  are  recorded  from a commitment date approach to when the liability is
incurred.  The  Company  does  not expect that the adoption will have a material
effect  on  its  financial  performance  or  results  of  operations.


                                       16
<PAGE>
FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS

     We Rely on Continued Market Acceptance of Our Products. 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 aesthetics
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, procedures and price;

          -    Recommendations and opinions by ophthalmologists and
               dermatolgists;

          -    Performance of these laser systems and treatments which are a
               beneficial alternative to competing technologies and treatments;

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

          -    The 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  dermatological 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 International and Quantel.
All  of  these companies currently offer a competitive semiconductor-based laser
system  in  ophthalmology.  Our  principal competitors in aesthetics are Lumenis
Ltd.,  Laserscope,  Candela  Corporation and Altus Medical Inc. 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 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  Development  of  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.  Introduction  of  new products and new applications will require that


                                       17
<PAGE>
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  and  general  economic  conditions affecting
purchasing  patterns.  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, particularly in
the  U.S.,  have contributed to the current slowdown in our business in general.
This  has  resulted  in reduced demand for some of our products, particularly in
our  aesthetics  products,  such  as the Apex 800, excess manufacturing capacity
under  current  market  conditions and higher overhead costs, as a percentage of
revenue. In addition, these economic conditions are making it very difficult for
us,  our  customers  and  our  distributors to forecast and 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
or further deteriorate, this may have a material adverse impact on our financial
position,  results  of  operation  and  cash  flows.

     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 the final
product  at  our  facility in Mountain View, California.  Although our OcuLight,
DioLite 532 and Apex 800 systems have been introduced, we continue to face risks
associated  with  manufacturing  these products.  Various difficulties may occur
despite  testing.  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.
Some  of  our  suppliers  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
suppliers,  including unavailability of or delays in obtaining adequate supplies
of  components,  including  optics,  laser  diodes, and crystals and potentially
reduced  control  of  quality,  production  costs and timing of delivery. We may
experience  difficulty  identifying  alternative  sources  of supply for certain
components  used in our products. For example, we experienced delays in shipping
our green laser systems (such as the DioLite 532 for aesthetics and the OcuLight
GL  and  GLx for ophthalmology) during the first fiscal quarter of 2001 due to a
supply  shortage  of  a  key component. We qualified additional sources for this
component  during  the  first  fiscal  quarter  of 2001; however, the process of
qualifying suppliers is ongoing and may be lengthy, particularly as new products
are  introduced. In addition, the use of alternate components may require design
alterations  which  may  delay  installation and increase product costs. We have
some  long  term  or volume purchase agreements with our suppliers and currently
purchase  components  on  a  purchase  order  basis. These components may not be
available  in the quantities required, on reasonable terms, or at all. Financial
or  other  difficulties  faced by our suppliers or significant changes in demand
for  these  components or materials could limit their availability. Any failures
by  such third parties to adequately perform may impair our ability to offer our
existing  products,  delay  the  submission of products for regulatory approval,
impair our ability to deliver products on a timely basis or otherwise impair our
competitive  position.  Establishing  our  own capabilities to manufacture these
components  would  be  expensive  and  could  significantly  decrease our profit
margins.  Our  business,  results of operations and financial condition would be
adversely  affected  if  we  were 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 six months ended June 29, 2002 and
June  30,  2001,  our  international  sales  were $5.7 million for both periods,
representing  39%  and  44%,  respectively,  of  total sales. We anticipate that
international  sales  will


                                       18
<PAGE>
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.  For  example,  the  current high U.S. dollar
relative  value  to the European currency (the Euro) is making our products less
competitive in Europe when compared to European competitors and could negatively
impact future sales levels from the region.  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;

          -    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."

     We  Depend  on  Third  Party  Coverage  and  Reimbursement  Policies.  Our
ophthalmology  products  are  typically purchased by doctors, clinics, hospitals
and  other  users,  which  bill various third-party payers, such 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.  For example,
during  July  2000,  the Center for Medicare and Medicaid Services (CMS) advised
that  claims for reimbursement for certain AMD procedures which use our OcuLight
SLx  laser system would not be reimbursed by CMS.  As a result, since July 2000,
sales  of  the  OcuLight  SLx  laser system dropped significantly.  In September
2000, CMS changed its position and advised that claims for reimbursement for two
of  the  AMD  procedures  can  be submitted for reimbursement, with coverage and
payment  to  be  determined  by  the local medical carriers at their discretion.
Sales  of  the  OcuLight  SLx  continue,  albeit  at  a lower level, because the
OcuLight  SLx  can  also  be  used  for  other  ophthalmic  procedures  with CMS
reimbursement.  We  believe domestic sales of the OcuLight SLx laser system will
continue  at these lower levels until more local Medicare 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.  Two
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,  as  well  as  Cigna,  which  is the carrier for North
Carolina, Tennessee and Idaho, have made coverage decisions approving the use of
the  TTT  protocol  for  the treatment of wet AMD.  We believe that more medical
carriers  will reimburse for these procedures when they are further validated by
clinical  studies.  We  are  sponsoring  a  randomized  clinical trial which may
further  validate  Transpupillary  thermotherapy,  the  most  significant of the
subject  AMD  procedures.


                                       19
<PAGE>
     Changes  in  government legislation or regulation or in private third-party
payers'  policies toward reimbursement for procedures employing our products may
prohibit  adequate  reimbursement.  Denial of coverage and reimbursement for our
products  could  have  a  material  adverse  effect  on our business, results of
operations and financial condition. 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.

     Our  Operating  Results 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 both preceding and following the
          terrorist attacks on September 11, 2001;

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

     -    Changes in demand for our existing line of dermatological 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 dermatolgical 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


                                       20
<PAGE>
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.  As  a  result of the above factors, sales for any future quarter
are  not  predictable  with  any  significant  degree  of accuracy and operating
results  in  any period should not be considered indicative of the results to be
expected  for  any  future  period.

     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 May 1996, we executed an agreement with Miravant
Medical  Technologies, a maker of photodynamic drugs, to collaborate on a device
that  emits  a  laser beam to activate a photodynamic drug developed by Miravant
for the treatment of wet AMD. The Phase III clinical trial was fully enrolled in
December  1999. In January 2002, Miravant announced that the top line results of
the  trial  indicated  that SnET2, the photodynamic drug developed, did not meet
the  primary  efficacy endpoint in the study population. As a result, the future
place  for SnET2 in the treatment of wet AMD is unclear and we cannot assure you
that  SnET2  will  be  timely or successfully pursued through clinical trials by
Miravant.  In  the fourth quarter of 2001, we charged to expense $0.3 million of
inventory  related  to  the  laser  used  by  Miravant in the Phase III clinical
trials.  Additionally,  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. 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.a

     We  Rely  on  Patents  and  Proprietary  Rights. Our success and ability to
compete  is  dependent  in  part  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 thirteen United States patents and one
foreign  patent  on  the  technologies related to our products and processes. We
have  approximately  eight  pending patent applications in the United States and
six  foreign  pending  patent  applications  that  have  been  filed. Our patent
applications  may not issue as patents, any patents now or in the future may not
offer  any  degree  of  protection, or our patents or patent applications may be
challenged,  invalidated  or  circumvented  in  the  future.  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.


                                       21
<PAGE>
     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.  Because  patent applications are
maintained  in  secrecy  in  the  United States until patents are issued and are
maintained  in  secrecy  for a period of time outside the United States, we have
not  conducted  any  searches  to determine whether our technology infringes any
patents  or patent applications.  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.  This may adversely impact
our  operating  results.

     Any  claims,  with  or  without  merit,  could 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.  Although patent and intellectual property
disputes in the medical device area have often been settled through licensing or
similar arrangements, costs associated with such arrangements may be substantial
and  could include ongoing royalties.  An adverse determination in a judicial or
administrative  proceeding or failure to obtain necessary licenses 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.
Conversely,  litigation  may  be  necessary  to enforce patents issued to us, to
protect  trade  secrets  or  know-how  owned  by  us  or  to  determine  the
enforceability,  scope  and  validity of the proprietary rights of others.  Both
the  defense  and  prosecution  of  intellectual  property suits or interference
proceedings  are  costly  and  time  consuming.

     We  Are  Subject  To  Government  Regulation.  The  medical devices that we
market  and  manufacture  are  subject to extensive regulation by the FDA and by
foreign  and  state governments.  Under the FDA Act and the related regulations,
the  FDA  regulates  the  design,  development,  clinical  testing, manufacture,
labeling,  sale,  distribution  and  promotion of medical devices.  Before a new
device  can  be  introduced into the market, the manufacturer must obtain market
clearance  through  either  the  510(k)  premarket  notification  process or the
lengthier  premarket  approval  ("PMA")  application  process.  Obtaining  these
approvals  can  take  a  long time and delay the introduction of a product.  For
example,  the  introduction  of the OcuLight GL in the United States was delayed
about  three  months  from our expectations due to the longer than expected time
period  required  to  obtain  FDA  premarket  clearance.  Noncompliance  with
applicable  requirements,  including  Quality  System  Regulations ("QSRs"), can
result  in,  among  other things, fines, injunctions, civil penalties, recall or
seizure  of  products, total or partial suspension of production, failure of the
government  to  grant  premarket  clearance  or  premarket approval for devices,


                                       22
<PAGE>
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.  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.

     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  to  the  European  Medical  Device  Directive and all
applicable  standards.  While  currently  all  of  our  released 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.

     We  Face  Product Liability Risks 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. Such insurance is expensive and
in  the future may not be available on acceptable terms, 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  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. The average
selling  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. Further, should
average  selling  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  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
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.


                                       23
<PAGE>
     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 is Volatile. 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  operating  results;

          -    Changes  in  financial  estimates  by  securities  analysts;

          -    Announcements  by  us  or  our  competitors of new products or of
               significant  clinical  achievements;

          -    Changes  in  market  valuations  of  other similar companies; and

          -    Any  deviations  in our net sales or levels of profitability from
               levels  expected  by  securities  analysts.

     In  addition,  the stock market has recently experienced extreme volatility
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.


                                       24
<PAGE>
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  29,  2002.

     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.


                                       25
<PAGE>
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.


                                       26
<PAGE>
ITEM 4.   SUBMISSION  OF  MATTERS  TO  VOTE  OF  SECURITY  HOLDERS

     Our  Annual  Meeting  of Stockholders was held on June 5, 2002 in San Jose,
California.  Of  the  6,862,862  shares  outstanding  as  of  the  record date,
6,573,518  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    6,068,255     505,263

                  James L. Donovan      6,068,255     505,263

                  John M. Nehra         6,172,055     401,463

                  Donald L. Hammond     6,168,480     405,038

                  Joshua Makower, M.D.  6,175,030     398,488

                  Robert K. Anderson    6,175,055     398,463


     2.   To  approve an amendment to the 1998 Stock Plan to increase the number
          of  shares  of  common  stock  reserved  for  issuance thereunder from
          930,000  shares  to  1,230,000  shares.


                  Votes  for:                5,702,036

                  Votes  against:               12,490

                  Votes  abstaining:           858,992

     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  340,000  shares  to  370,000  shares.


                                       27
<PAGE>
                  Votes  for:                6,059,886

                  Votes  against:                9,100

                  Votes  abstaining:           504,532


     4.   To ratify the appointment of PricewaterhouseCoopers LLP as independent
          accountants of the  Registrant for the fiscal year ending December 28,
          2002.

                  Votes  for:                6,566,118

                  Votes  against:                4,900

                  Votes  abstaining:             2,500



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  Registrant's Audit Committee to be performed by PricewaterhouseCoopers
     LLP,  the  Registrant'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 Registrant. The
     additional  engagement of PricewaterhouseCoopers LLP for the matters listed
     below  are  each  considered by the Registrant 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  engagement of PricewaterhouseCoopers LLP for certain tax matter
     consultations  and  for  the  review  of the Registrant's filings under the
     Securities  Act  of  1933,  as  amended.

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

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

      None.


                                       28
<PAGE>
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 13, 2002     By: /s/  Robert Kamenski
                              -------------------------------

                              Robert  Kamenski
                              Chief  Financial  Officer
                              (Principal  Financial and
                              Principal Accounting Officer)


                                       29
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>doc2.txt
<TEXT>
                                                                    Exhibit 99.1
                                                                    ------------

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     I,  Theodore  A. Boutacoff, certify, pursuant to 18 U.S.C. Section 1350, as
adopted  pursuant  to  Section  906  of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of IRIDEX Corporation on Form 10-Q for the fiscal quarter ended
June  29, 2002 fully complies with the requirements of Section 13(a) or 15(d) of
the  Securities  Exchange  Act  of  1934  and that information contained in such
Quarterly  Report  on  Form  10-Q  fairly  presents in all material respects the
financial  condition  and  results  of  operations  of  IRIDEX  Corporation.



                                     By:    /s/  Theodore A. Boutacoff
                                            --------------------------
                                     Name:  Theodore A. Boutacoff
                                     Title: Chief Executive Officer



     I, Robert Kamenski, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant  to  Section  906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report  of IRIDEX Corporation on Form 10-Q for the fiscal quarter ended June 29,
2002  fully  complies  with  the  requirements  of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Quarterly
Report  on  Form  10-Q  fairly  presents  in all material respects the financial
condition  and  results  of  operations  of  IRIDEX  Corporation.



                                     By:    /s/  Robert Kamenski
                                            --------------------------
                                     Name:  Robert Kamenski
                                     Title: Chief Financial Officer


<PAGE>

</TEXT>
</DOCUMENT>
</SUBMISSION>
