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<SEC-DOCUMENT>0000950134-08-003163.txt : 20080415
<SEC-HEADER>0000950134-08-003163.hdr.sgml : 20080415
<ACCEPTANCE-DATETIME>20080221165534
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950134-08-003163
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20080221

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			IRIDEX CORP
		CENTRAL INDEX KEY:			0001006045
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				770210467
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1230

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		1212 TERRA BELLA AVE
		CITY:			MOUNTAIN VIEW
		STATE:			CA
		ZIP:			94043
		BUSINESS PHONE:		6509404700

	MAIL ADDRESS:	
		STREET 1:		1212 TERRA BELLA AVENUE
		CITY:			MOUNTAIN VIEW
		STATE:			CA
		ZIP:			94043
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;IRIDEX LETTERHEAD&#093;
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">February&nbsp;21, 2008
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B><I>Via EDGAR and Overnight Courier </I></B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Jay Webb<BR>
Reviewing Accountant<BR>
Ms.&nbsp;Julie Sherman<BR>
Staff Accountant<BR>
Division of Corporation Finance<BR>
United States Securities and Exchange Commission<BR>
450 Fifth Street, N.W.<BR>
Mail Stop 6010<BR>
Washington, D.C. 20549

</DIV>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Re:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>IRIDEX Corporation<br>
Form&nbsp;10-Q for the period ended September&nbsp;29, 2007<br>
Filed November&nbsp;19, 2007<BR>
File No.&nbsp;000-27598</B></TD>
</TR>
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Webb and Ms.&nbsp;Sherman:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of IRIDEX Corporation (&#147;we,&#148; the &#147;Company,&#148; or &#147;IRIDEX&#148;), we submit this letter in
response to comments from the staff of the Securities and Exchange Commission (the &#147;Staff&#148;)
received by letter dated January&nbsp;11, 2008, relating to the Company&#146;s Form&nbsp;10-Q for the quarterly
period ended September&nbsp;29, 2007 (the &#147;Form&nbsp;10-Q&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this letter, we have recited the comments from the Staff in italicized type and have
followed each comment with the Company&#146;s response. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Form&nbsp;10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><I>Form&nbsp;10-Q for the period ending September&nbsp;29, 2007</I></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Refer to prior comment 5 from our letter dated October&nbsp;17, 2007. We note that you still
include $2.5&nbsp;million related to a legal settlement as a component of other income (expense)&nbsp;in
the nine month period ended September&nbsp;29, 2007. Your response to our prior comment did not
clearly support how your classification of this item as non-operating income complies with
GAAP. We do not believe the fact you wish to prominently disclose the item on your income
statement or that it is not non-recurring item supports your current classification. Please
provide us with references to the GAAP that support your presentation of this item as
non-operating in your income statement.</I></TD>
</TR>

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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">United States Securities and Exchange Commission<BR>
February&nbsp;21, 2008<BR>
Page 2

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In response to the Staff&#146;s comment, the Company notes:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In a recent SEC speech, the SEC commented that they had been consulted by many registrants on the
accounting for litigation settlements. In the speech, the SEC referenced EITF 02-16, &#147;Accounting
by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor&#148; as the
relevant guidance for litigation settlements received by customers from vendors. The SEC commented
that EITF 02-16, in most cases, requires payments received by a customer to be recorded as a
reduction of cost of goods sold. The exception was noted that if the settlement payment received
was clearly unrelated to the vendor/customer relationship, the SEC would be willing to consider
classification of the settlement as a gain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company concluded that the settlement payment was clearly unrelated to the vendor/customer
relationship based on the following facts:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Iridex is a medical device manufacturer that is in the business of selling laser systems
and delivery devices as products to the medical community.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Iridex is not in the business of granting licenses to its intellectual property to other
medical device manufacturers for the purpose of other medical device manufacturers
manufacturing competitive products.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Synergetics is a medical device manufacturer who manufactured a competitive product that
infringed on the Company&#146;s patents.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The settlement resulted in Iridex receiving payment from Synergetics for past patent
infringement. To effect the settlement Synergetics was granted licenses to the patents to
cover the period during which it had infringed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The total monetary settlement was for $6.5&nbsp;million with payment to occur over 5&nbsp;years.
The first payment of $2.5&nbsp;million was received and recorded in our second fiscal quarter
which was the three month period ended June&nbsp;30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2007 reported on Form 10-Q.
Five additional annual payments of $800,000 are anticipated to be received and recorded in
our second fiscal quarter for fiscal years ending 2008, 2009, 2010, 2011 and 2012.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company then considered Statement of Financial Accounting Concepts No.&nbsp;6, &#147;Elements of
Financial Statements,&#148; paragraph 86, 87, 88 and 89. Paragraph&nbsp;86 states &#147;Gains and losses may also
be described or classified as &#145;operating&#146; or &#145;non-operating&#146;, depending on their relation to an
entity&#146;s major ongoing or central operations. For example, losses on writing down inventory from
cost to market are usually considered to be operating losses, while major casualty losses are usually considered
non-operating losses.&#148;
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">United States Securities and Exchange Commission<BR>
February&nbsp;21, 2008<BR>
Page 3

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company concluded that the settlement payment is a gain that should be classified as
non-operating based on the following reasons:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is in the business of manufacturing medical devices .... not in the business
of granting licenses to its intellectual property to other medical
device companies.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This is evidenced by the fact that historically the Company has not recorded similar
types of settlements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As such the settlement should be considered incidental to the primary revenue generating
activities of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Paragraph&nbsp;89 indicates that a primary purpose of distinguishing gains... is to make displays of
information about an enterprise&#146;s sources of comprehensive income as useful as possible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The
Company believes that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The settlement is very unusual and material in nature and the Company does not
expect that it will record a similar settlement again.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">And therefore treating the settlement as a gain from operations would improperly distort the
current operating losses the Company experienced in the second and third quarters, and would
improperly distort the year-end operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe the settlement is properly disclosed to highlight the fact that the settlement is
unusual, infrequent and non-operating in nature and that our disclosure and classification of the
transaction provides the readers and users of our financial statements the most informative
information regarding the Company&#146;s sources of comprehensive income.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>We see from disclosures in Note 3 that on January&nbsp;16, 2007 you completed the acquisition of
the aesthetics business for approximately $26&nbsp;million in cash and $2&nbsp;million in stock. Please
tell us how your cash flow statement discloses the cash and non-cash portions of this
transaction and how your presentation of these items complies with SFAS Statement 95.</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our presentation of cash flow statements on Form 10-Q for the periods ending March
31<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> 2007 and June&nbsp;30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2007 the Company aggregated the components of the
business acquisition (of which the purchase of intangibles and the purchase of goodwill represented
greater than 90% of the total purchase price) and disclosed as a single line item in the Cash flows
from investing activities &#150; with the descriptor &#147;Acquisition of business&#148;. In addition in
accordance with SFAS Statement 95 the non cash component was disclosed by way of narrative in Note
3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our presentation of cash flow statement on Form 10-Q for the period ending September
29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2007 we disaggregated the components of the business and disclosed the two major
components of the acquisition
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">United States Securities and Exchange Commission<BR>
February&nbsp;21, 2008<BR>
Page 4

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">separately with the descriptors &#147;Purchase of intangible&#148; and
&#147;Goodwill&#148;. These items represent greater than 90% of the total purchase price. In addition in
accordance with SFAS Statement 95 the non cash component was disclosed by way of narrative in Note
3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">It is our intention to revert to the disclosure presentation adopted for the periods ending March
31<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> 2007 and June&nbsp;30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2007 for our next filing which will be for the period
ending December&nbsp;29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2007 and will be on Form 10-K.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with IRIDEX&#146;s responses to the Staff&#146;s comments, we acknowledge that we are
responsible for the adequacy and accuracy of the disclosure in our filings with the Securities and
Exchange Commission, Staff comments or changes to disclosure in response to Staff comments do not
foreclose the Securities and Exchange Commission from taking any action with respect to such
filings, and we may not assert Staff comments as a defense in any proceeding initiated by the
Securities and Exchange Commission or any person under the federal securities laws of the United
States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please acknowledge receipt of this letter by stamping the enclosed duplicate of this letter
and returning it to the undersigned in the envelope provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We would like to discuss these comments and responses at your earliest convenience. James H.
Mackaness the Company&#146;s recently appointed Chief Financial Officer can be reached at (650)&nbsp;962-8848
ext 3016. David&nbsp;J. Segre, Esq. and Jonathan W. Tanner, Esq. of Wilson Sonsini Goodrich&nbsp;&#038; Rosati,
Professional Corporation can be reached at (650)&nbsp;493-9300, and I may be reached at (650)&nbsp;962-8848
ext. 3001.
</DIV>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sincerely,</TD>
</TR>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/Theodore A. Boutacoff</TD>
</TR>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Theodore A. Boutacoff<br>
IRIDEX Corporation<BR>
President and Chief Executive Officer</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">cc:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">David J. Segre<br>
Jonathan W. Tanner<br>
James H. Mackaness</TD>
</TR>
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