IRIDEX CORP

On March 2, 2021, the Company entered into a series of strategic transactions with Topcon, headquartered in Tokyo Japan, pursuant to which (i) the Company purchased substantially all of the tangible and intangible assets of Topcon Medical Laser Systems, Inc. (“TMLS”) related to laser products previously manufactured and sold by TMLS, including the Pattern Scanning Laser (PASCAL) products, under the tradename “PASCAL” altogether, the “PASCAL Business”, (ii) Topcon acquired an equity interest in the Company, comprised of the issuance of 1,618,122 shares of the Company’s common stock at $6.18 per share (as determined based on the average of the Nasdaq Official Closing Price of the Company’s common stock for the five trading days immediately preceding March 2, 2021), and (iii) the Company granted Topcon the exclusive right to distribute certain of its products (including the PASCAL laser products) in certain international regions (the “Exclusive Distribution Rights”) and (iv) Topcon and the Company entered into the Manufacturing Services Agreement regarding transition of regulatory authorizations relating to, and manufacturing and supply of,

the PASCAL products for a specified post-closing transition period. The transaction is expected to result in net proceeds to the Company of approximately $19.5 million (of which $17.5 million was received on March 10, 2021 with the remaining $2.0 million expected to be received later only if, as of the exclusive distribution rights start date, the Company has (A) begun the process of transferring to Topcon the exclusive distribution right in Japan, which process shall be evidenced by a copy of a written notice or letter sent by the Company to the existing distributor in Japan under which it has exercised its right of termination or non-renewal in accordance with the terms of the applicable existing distributor agreement and (B) used its commercially reasonable efforts to obtain a written acknowledgement by such existing distributor to assign and transfer all supporting documents in such existing distributor’s possession that are necessary for Topcon to effectuate the transfer of exclusive distribution rights to Topcon in Japan.). The net proceeds have been allocated on a fair value basis as follows (in thousands):

On March 10, 2021, the Company completed the purchase of substantially all of the tangible and intangible assets of TMLS, which was an established leader in manufacturing and selling laser products under the tradename “PASCAL”. The acquisition has been recognized as an acquisition of a business and the purchase price (approximately $5.3 million) has been preliminarily allocated to tangible and identified intangible assets acquired based on their estimated fair values.  As additional information becomes available, the Company may further revise the preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from March 10, 2021).  Any such revisions or changes may be material.

Developed technology relates to PASCAL products, a pattern scanning laser used for retinal treatments, and was valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life is estimated to be 7 years, as determined based on the technology cycle related to the developed technology, and the estimated cash flows over the forecast period.

IPR&D pertains to an upcoming release of PASCAL products and has been valued using the multi-period excess earnings method under the income approach.

Pursuant to the First Amendment, the base monthly rent for the reduced premises of approximately 29,830 square feet, ranges from $84,121 to $93,070, for the period May 1, 2021 to August 31, 2024.  The Company is also responsible for the payment of certain operating expenses and taxes during the term. The Lease provides the landlord with a termination right, which can be exercised by the landlord by giving written notice to the Company at least thirty (30) months prior to the effective date of the termination.