Ladies and Gentlemen, thank you for standing by. Welcome to the IRIDEX Corporation Q2 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference to our host, Mr. William Moore. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining us as we discuss the results for second quarter of 2013. My name is Will Moore, and I'm the CEO of IRIDEX. Today, I'm joined by Jim Mackaness, our CFO and COO. Jim and I will both be delivering some prepared remarks related to the quarter and the business, then we'll open the floor for questions. Before we get started, Jill Bertotti from Allen & Caron will read the required Safe Harbor statement. Jill?

Good morning. This conference call will contain forward -- sorry, good afternoon. This conference call will contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended relating to global and domestic market conditions, demand for the company’s products and market acceptance of the company’s new products such as MicroPulse; enabled laser devices, development of new products; the company’s growth strategy including acquisitions, technology investments and strategic relationships, including the anticipated benefits of the company’s relationship with Peregrine Surgical Ltd., pricing of the company’s products, the success of the company’s operating expense control, the company’s margin goal, the company’s share repurchase program and the company’s financial outlook and performance in the remainder of fiscal 2013 and future periods. These statements are not guarantees of future performance and actual results may differ materially from those described in these forward-looking statements as a result of a number of factors. Please see a detailed description of these and other risks contained in the company's annual report on Form 10-K for the fiscal year ended December 29, 2012, filed with the Securities and Exchange Commission. Forward-looking statements contained in this conference call are made as of this date and will not be updated.

Thank you, Jill. As I started my remarks in previous quarters, by highlighting our goal at IRIDEX, is to become a more commercially focused company, controlling OpEx, growing revenue and being profitable. Today, we have growing tangible evidence that we are succeeding on this goal, and I'd like to explain why. Our products are focus on reducing the overall cost of health care systems, increasing the productivity of physician and improving therapeutic benefit to patients suffering from retinal diseases and glaucoma. Our message is resonating well with our customers. We have continued to see growing demand internationally for our products, where improving economies and developing nations have translated into increased investments in their health care systems. In April, we announced that we've received 2 significant orders totaling more than $500,000. The health systems in many of these countries, because of the cost and logistics, do not support the current drug treatment model for these diseases we see here in the U.S. which typically include a regular series of the drug injections in the eye. Growth in the U.S. and other mature markets is being stimulated by one of our major initiatives, which is building support for our unique proprietary technology called MicroPulse, which we believe is truly a disruptive therapy. MicroPulse was designed for treating serious ophthalmic conditions by allowing tissue to cool between laser pulses, thereby preventing tissue damage and increasing patient comfort, all while creating an extremely safe and effective procedure at a reduced cost compared to alternative drug therapies. With this as a backdrop, I'm pleased to announce that our revenue for the second quarter was $9.2 million, up 9% over last year. A closer look shows that to get there we made progress in both systems and recurring revenues. We successfully integrated the distribution channel we…

Thanks, Will. As you noted in the release and Will mentioned, we had another good quarter in Q2 as revenues reached $9.2 million, up 9% from $8.4 million in Q2 2012. Of that total revenue, system sales for Q2 2013 were $4.3 million, up from $4.0 million in Q2 2012. To characterize the revenue mix in the quarter, international system sales remain strong and were aided by several large tender wins in the period. And domestic system sales were also up modestly year-over-year even as we made changes in the commercial team and structure during the past 6 months. Recurring revenues jumped $0.4 million in the second quarter 2013 compared to Q2 2012, also a 9% increase, which translates into recurring revenues remaining at 52% of the aggregate revenues for growth periods, which is a very positive result. The increase in recurring revenues was a result of a combination of factors including the introduction of the independent channel selling Peregrine branded products in the U.S. and the continued benefits of the Alcon relationship. Gross margins were at 48.7% for the 2013 second quarter, which is an improvement over the last 2 quarters where we reported 47.0% in Q4 2012 and 47.3% in Q1 2013, and brought us back to the gross margin of last year's comparable period. As we said in the past and as we continue to innovate on the consumable side and grow that business, we anticipate margin improvement. And with the market strengthening and the value of MicroPulse being recognized, we expect to have more pricing leverage going forward. These elements, together with cost reduction programs concentrating on the IQ platform and TxCell platform, make us confident of being able to reach our stated target of 50% gross margin in the near term. Operating expenses continued to…

Thank you, Jim. I'd like to conclude by making some remarks about the market opportunities as I see them today. We believe in today's world of health care buying decisions are becoming more economic all around the world. If you DME today, you are looking at drug injections 6 to 7x a year for the rest of your life. As we have begun to see in countries in Europe and elsewhere, government health care systems are scrutinizing these costs, and either can't afford them or are not going to continue to tolerate them. To that point, we have for the past number of years been focused on the retinal specialist treating vision impairment caused by diabetes. The number of people that have been diagnosed with diabetes is growing at alarming rate around the world. Our product portfolio, both conventional continuous-wave lasers and MicroPulse lasers are priced for both emerging and developing markets. In today's economic climate, our product have tremendous value propositions when compared to the drug therapy model, all while having better durable outcome. We are very excited about the acceptance we are seeing in the marketplace for MicroPulse. Currently, about 1 out of every 10 visible wavelength laser system we sell is MicroPulse enabled. We are not quite at the tipping point yet for MicroPulse, but we are close and we are seeing growth in the take rate and lots of interest at conferences among ophthalmologists in general. Many of you may not have knowledge of our growing presence in glaucoma. Today, we provide 2 treatment options for glaucoma. Basically, glaucoma is an increased pressure caused by fluid buildup, which over time, causes vision impairment. The desired treatment is to reduce the pressure by reducing the fluid by either improving the outflow of the drain, or decrease the…

[Operator Instructions] And our first question comes from the line of Larry Haimovitch.

Will or Jim, did Peregrine, the strategic alliance that you announced not that long ago have any positive impact or is it a bit early for us to have seen any real benefit from that?

Larry, this is Jim. Yes, we basically brought them in April and they have been contributing. So they were one of the reasons for the uptick in the recurring revenue for this quarter.

And should we expect in the quarters to come that the impact will be even bigger? I would assume as they get more comfortable and integrated into the organization, their impact would be even more positive?

Yes. And we see it -- we actually see the relationship with Peregrine as having 3 elements, if you like. So to your point, yes, there's the independent selling the existing Peregrine products come in. We think there's a benefit there and we think that should start to contribute on an annual basis north of $1 million for that. The second benefit we see is being able to take the Peregrine branded products over the rest of our channels and to some extent, completing the product portfolio of an independents had by allowing them to have access to some of the IRIDEX product. So if we are successful with all of that, we actually think this will combine -- generate close to $2 million on an annual basis. And then the third element, which we've indicated a couple of times, is the advantage of having Peregrine within the sort of ecosystem is they are a very good design house and they are able to quickly turn some products for us. So we're looking for that to be able to help the consumable product pipeline on an ongoing basis. So we see 3 elements to the overall relationship.

Jim, if you look longer term, what should we model, let's say, 2, 3, 4 years out? With the company as it currently is constructed for gross margins, can you get to be a company, let's say, with the 55% or even 60% gross margin or is that just not possible with the fact that you sell so much capital equipment?

No. I think the way we have it is, 50% is the short-term goal, and we do think we can obviously get there. To your point, in that term of length of time, we set ourselves the target of getting to 55% or just over 55%. I don't know that we see 60%.

And those extra 5 -- well, 6 or 7 basis points of gross margins, Jim, I assume much of that could go to the operating income line?

Yes. We do think we're pretty well leveraged on the OpEx side.

Our next question comes from the line of Joe Munda. Joseph P. Munda - Sidoti & Company, LLC: I guess really following up on the prior question on gross margin. That 55% target, is that a target that you guys are aiming for by third quarter of '14? Are we going to see that...

No. No. Short term, we're trying to get the 50% number. And so short term, and Will indicated with some of the cost programs that we're putting in place to take the cost out of the IQ plant from the TxCell. We'll see all of those benefits coming into the beginning of next year and continue to come through into Q3 of next year. Because some of these programs take 6, 9 months, 12 months to fully pull off. So that all is what allows us to feel that in the near strokes, we can get to the 50% number. Larry's comment was sort of more in the 3, 4 years, which would be as our model continues to evolve and we continue to look for opportunities just to infill on the consumable side and we continue to see revenue leverage within the operation base that we have, we do think that there's an opportunity in a number of years, but sort of more in that range to get to the 55%. And as I sit here -- but I don't see our way to 60%. Joseph P. Munda - Sidoti & Company, LLC: Okay. I'm just wondering because 9% revenue growth, gross margin stayed flat here. I'm just trying to get a sense, was it more capital equipment that was sold in the quarter? Is that what's...

Well, yes, one way to look at it, because we've -- if you took the 48.7% of last year, we actually improved the margin by 1 percentage point as a result of efficiencies within the operational group. So that was all things being equal, we'd have gone from 48.7% to 49.7% But we gave up a percentage point due to the mix, which is your point a little bit more capital coming through, which is good. MicroPulse adoption, which is good. We do need to look at our pricing on those to see if we can't test the pricing to help us with the regain if you like that percentage point. Joseph P. Munda - Sidoti & Company, LLC: I don't mean to cut you off, but was the growth more on unit or was it price increases? You're making it seem like it was more unit growth.

It was unit growth to date, yes. And now we're going to be testing to see if we've got pricing strength in the market. So going forward, we'd like to see unit growth and price growth. Joseph P. Munda - Sidoti & Company, LLC: Yes. And I guess, Will, you talked about -- now on pricing, you talked about being able to go into the marketplace, being more confident, being able to sell maybe at a higher price. And I want to know basically what is driving the adoption? Is it the use in the institutions or is it more of the white papers or just getting and having the sales rep right in front of the doc? Really, what is occurring there?

I'll answer that question, Joe. I want to step back a little bit, when you talked about hardware mix. I understand a lot of the things that are going on is the messaging out of marketing is correct and the adoption is on newer products, TxCell and 532 greens. Those are relatively new products and there's always a time frame to go through development to get the margins correct. Now to the other part, price elasticity. We came out with a new product with MicroPulse and 1 year ago we added $2,000 or so per MicroPulse embedded laser. That's been increased to $4,000. We're still getting adoption and units are growing. And so Jim and I are thinking about -- what is the real elasticity of the market? And we'll test it in a variety of ways on the sale side. Now it doesn't mean that the salespeople are in front of the customers more often. I'm not going to say that, but what I will say is the marketing department is doing a phenomenal job as vis–à–vis, the example the webinar I mentioned earlier, and so this is creating a lot more pull into the market. So our sales people are spending more time in front of buyers instead of trying to scavenge the countryside for the buyers. So it's a more efficient use of time. Joseph P. Munda - Sidoti & Company, LLC: Okay. And I'm just wondering, I know you're saying you have a tough comp. In the third quarter you gave guidance, which we appreciate. But I'm just trying to understand, Peregrine is being added, now there's more adoption, the possibility of sequential quarter-over-quarter growth here, you're saying it kind of stop short. It will be a significant uptick from the quarter of -- third quarter of the prior year. I'm just trying to get a sense of why maybe, sequentially, it's not going to match up?

I think when you look at Jim's guidance numbers, it's pretty darn close to last quarter as it is. We derive a lot of our business internationally, 50% of our business is internationally. And there's holiday season, there's Ramadan, there's a variety of things going on that makes international a little bit weaker during the third quarter. So you get a little seasonality in there. Joseph P. Munda - Sidoti & Company, LLC: No, I understand. European vacations in August. Everybody's gone for a month, I totally understand that. But you guys need a guy on the beach to sell then. The other -- Will, how many teaching institutions have you guys reached out to or currently are utilizing your laser systems?

Well, when you say our laser system, you're talking about continuous wave or MicroPulse? Joseph P. Munda - Sidoti & Company, LLC: Well, let's say, MicroPulse because that's the hot topic.

Yes. Joe, I don't have that exact number in front of me but I'll be happy to get it to you. The teaching institutions that are using MicroPulse vary from the United States to other parts of the world. I mean we're now 150 plus MicroPulse units out there. I'm going to say to be comfortable, Joe, I'm looking at in the U.S. using MicroPulse on an everyday basis, teaching institutions -- I don't know if I could guess. I'm not going to guess. I'd rather go look at it and respond to you specifically. Joseph P. Munda - Sidoti & Company, LLC: Okay. And then my final question for you. You guys talked about downsizing in the operating efficiencies, can you give us a sense -- I know you talked a little bit about executives and -- what are you doing on the manufacturing side? Because you did touch about redesigning lasers and to me that seems like a pretty in-depth process and gross margin may seem to take a hit because of it. Historically speaking, just from other companies, that always tends to be the trend.

Joe, were going to answer this in 2 questions. I'm going to answer a part and then Jim's going to do the other part. When I talk about streamlining, when I arrived, there was 12 Vice Presidents here, we're down to 5. There' one, now Jim can touch on the other side. Would you start talking about the manufacturing and R&D side?

Yes. So on that manufacturing and R&D, I mean, it just is what Will had mentioned before. We've alluded to the fact that we have the IQ platform and we have the TxCell platform that we are building products off. And it's just very customary that as you mature the platform, there are opportunities to basically address cost engineering opportunity. So I don't see this as earth-shattering, if you like, it's just a question of saying, okay, now that we've had anywhere between 1 year to 2.5 years of whatever experience, let's go back and revisit the volume and the labor and find ways to take cost out. So it's a very standard procedure, which we think can generate significant benefit.

Our next question comes from the line of Jason Stankowski.

I was curious if you've looked into whether we're getting new sales outside of the retinal specialist space and sort of, basically, brand-new customers that we never had before because of the convenience and the safety of MicroPulse? Are you seeing any of those?

Yes. Jason, I think there's a couple of things going on. I'm going to bifurcate that into U.S. and international. On the international front, as the -- diabetes is a large problem and it's very large in countries such as Saudi Arabia and India and Vietnam, Brazil. And those, as we announced earlier, that we had a couple of large orders in that area. We had new customers in India. 12 new clinics came on in the last quarter. We had a number in Brazil as well. Those were combination sale, Jason, between MicroPulse lasers and continuous-wave lasers. So as those countries become a little more economically stable and growing, they start to spend more money and invest more money in health care. And vision is a pretty important thing. And with the population aging the way it is, older people get vision -- have vision problems and these lasers that we have really help out. And what happens for us internationally is the long-term success we've had with our continuous-wave lasers here that are valued as products that last a long time, makes for a very easy decision for these tenders, for these government buys. And they also are stepping up and buying 1 or 2 MicroPulses to take care of the earlier on treatment. So we're seeing that internationally. On the U.S. side, the migration we're seeing from the retinal specialists to what we'll call the comprehensive office, and the comprehensive office is more of a general type physician, they basically are beginning to decide that they don't want to send their patients, if they're not going to do injections, they don't want to send their patients over to a retinal specialists. They'd either do it themselves, and then in our particular case, because the safety factor of MicroPulse, they can. And so their fear of doing harm goes away. And so their desire to make more money increases. And they'll either do it themselves or they'll hire their own retinal graduate. And we've seen those types of customers as well.

Great, great. That's good news. I didn't quite understand your comments about thanking Eduardo for all of his help. When you said he's still going to be with us or he's not -- or he's going to stay with the company but you guys are going to take the respective roles, you and Tim?

Yes. So I'll try to clear it up a little bit, and I apologize if it's confusing. Eduardo is still here and he will be for the foreseeable future. He's working with me at the moment as we try to figure out how to integrate these programs that we've put in place. International, the U.S., independent, how do those come together, varying products, that we have to push from one side of the other. Meaning, we've got the Peregrine products with those independents, and now we've got Peregrine products with independents and with our rep. Our products with us going over to the independents, how does that fit? How many do we really need? Eduardo is about as close to an accountant as you can get when it comes the numbers and details like that. So I'm working with him to design those programs. On top of that, you've heard Jim talked about not only the Peregrine deal, but the increase with Alcon, and we'll continue to reach out the other people to partner. There's a matrix that we've got to put together with the distribution channel, and that's where we're going to use Eduardo more, on the strategic side working with me, to then implement into the sales side.

Okay. So just from a management standpoint, he's just able to be more strategic and helpful than be kind of a quota-carrying guy, gives him just a little bit more flexibility in his schedule, et cetera?

Yes. I think when you have somebody that's got 25 years of experience in the marketplace that knows doctors all over the world, he's a valuable resource. And that's what we want to utilize. We're bringing people into play that are maybe, I won't hungrier, but are maybe a little more aggressive to go out and look for new orders.

Right, and get the orders. That's great that you've been able to keep him on from a strategic standpoint. He is clearly, clearly an asset. Maybe you can give us -- my last question I guess is just a little bit about what you're seeing in terms of -- I think the Peregrine deal, even though you have to deal with some of the distribution kind of issues and channel conflict, it seems like a great financial as well as strategic deal. Are there a handful of things out there? Dozens or is it really hard to find and evaluate smart things, incremental smart things? How are you seeing that landscape?

Well, one, before I get to answer the question completely, in this particular situation with Peregrine, I want to complement Jim. He did a phenomenal job in negotiating that contract. And I'm sure we'll be able to find other transactions like that such as what we did with Alcon of the green tip, it's a similar type of transaction. In today's world, there's a lot of technology that has been developed over the last 5, 8, 10 years, that has no ability to go public. Has no real ability to -- it's a product line, not a company. And given our strong financial position and our market presence, I think we're a great avenue to deal with that. And there's a number of them. I don't see anything happening for us in a Peregrine-type transaction over the next number of months because, as we were saying, I'm spending more of my time on international and we've got some other items we're working on to increase revenue that we've already got here. So we will do those deals, but we're not going to be doing them once a quarter.

Right. When the smart ones come, you'll take advantage of them...

We'll be opportunistic, yes.

Our next question comes from the line of Stan Mann [ph].

I've got several questions. One, you've got an unusually high mix of International business compared to other medical device laser people. Is there a reason for that, are we weak domestically or -- can you give us a little color on that?

Well, Stan, I take it is a positive. And I'll respond in a little differently way, your comment about are we weak domestically? I think we're find domestically and I look at the growth rate in the marketplace today with ophthalmology lasers and this type of business, it's growing in a 3% to 5% range, and we're doubling that. So I think we're pretty strong both U.S. and internationally. And I think by having the large international exposure, that's come about from a lot of studies that we've had both Europe and the U.S. and the number of doctors that come and train here, and then go back to their countries. And we're just taking advantage of that situation. So, I don't think we're weak in the U.S. at all. I mean we've got 10 U.S. direct people and 10 independents at this point in time.

Okay. So normally, again, normally as other companies in the health care field. International carries a lower margin than domestic, is that the case here also?

It does a little bit for us in the mix, yes, Stan, because we go through distribution internationally. So you're correct. So that's part of that margin issue that we can face.

Okay. And you're expecting to keep our ratio domestic to international fairly constant in the way you are building our gross profit overall?

I think at this stage, yes.

Okay. My second question is, the disposable, again, normally disposables carry higher margins than hardware. Is that the case for us with our disposable business?

Yes. You're correct, Stan, yes.

Okay. And is Peregrine the product line equivalent to our normal gross profits, bottom line?

It's probably not as close to with our direct IRIDEX branded consumable disposable, but it is accretive to the overall company margin.

Okay. Because the distribution -- you don't have salesman with Peregrine, okay. My next question is what are we going to do with our cash? It keeps building, which is great, but we're at $13 million, which is $1.30 per share. And do you have any vision or near-term plan or something for our cash? Since it earns very little in this kind of a climate.

Well, Stan, I think that -- we're looking at the cash situation, because as an asset it's just sitting there as you described, and that's true. That is why we have the periscope up and we're looking for other transactions that we could do at any point in time. And I have, at this point, there's no other plan to use the cash other than 4 potential acquisitions going forward.

And the pipeline is not near term as you see it?

What do you define as near term, Stan?

Within the next year, the near term. One year is near term.

Yes. I would think that there would be some transaction within the next year.

Okay. My last comment is a congratulations because, us, going to Wedbush and Craig-Hallum in New York, that's a big deal. That really is getting us exposure. And I got to really congratulate you and Jim and whoever works on it for getting us significant visibility that I don't think we've ever had, except in the phony old days. So that's good and hopefully, we'll be webcast or something so that others, including our investors, can listen in.

Well, Stan, thank you very much, but I think that Jim and I will both take a little bit of credit. But the real credit goes to the team here that is producing products at reasonable prices, the marketing department is getting the right message, and the sales department delivering the numbers we need.

Our next question comes from the line of William Singleton [ph].

This are the questions I'm going to ask, I see it that I'm the fifth caller, everybody else has asked so many questions. But the one question that they didn't -- probably really wanted to ask you, but I'm come forward and ask, with all the stuff moving forward, with all this positive information in doing better and better each quarter, really is the stock going to be moving, things going to be undervalued? Is it time for the stock to show us the money?

Could you repeat -- I didn't hear the last -- can you repeat the question? I heard the preamble, but I didn't hear the question.

The question for you guys is, I mean, Jim, I guess, is doing great. Eduardo, the whole team of everybody there. The question here is, which all the other callers probably wanted to ask, when is the stock going to move? When is it -- with all the positive information, moving forward, I heard you say within a year’s time? Question being, Isn't it time for the stocks to show us, as shareholders, the money as far as moving?

Well, I hear your question and it relates to whether you think it's undervalued or not. As far as movement, I've been here 9 months. And at that point in time when I arrived, it was $3.19. Today, it's $6 something. That's substantial movement in my mind. So I'm not sure I understand the question.

Well, it means that -- I mean, with all of the things you guys got moving forward, it seems to me that it would move a little bit more than what it's been moving.

Okay. So I think there's a couple of levels of complexity to the question. And I think Stan alluded to it just before that, and that's the exposure that the company is finally getting with a couple of institutions like Craig-Hallum and Wedbush. The other issue we have is we continue, to this date, to have a limited flow which makes it hard for people to buy. And so it's harder for larger institutions to get into our stock. Below $5 was hard for people to buy the stock. We're now above -- so it's changing and it's growing. And I think as long as we deliver the results we're doing, I suspect the stock will continue to migrate up. That's about what I can tell you. I don't really have another answer.

Okay. Well, that seems to answer the question. I mean it seems like everybody else wanted to ask you that question, but they didn't ask you. I went around and asked you, hey when are the stocks going to move? The I mean the last guy said, "Hey, it's going to be about a year." I mean, I'm coming straight out and I want to know the direct answer from the people who are in control of this business.

All we can definitely do is operate efficiently and try to deliver the numbers and let the investors do the rest.

Our next question comes from the line Paul Sits [ph].

A couple of questions. I noticed that the reserves were somewhat light. What are you planning -- what are you guiding the tax rate at?

Yes. The tax rate should stay pretty light for the whole of this year. We are benefiting from a net operating loss. And at the moment, the combination in net operating loss, our actual tax is fairly minimal. So we're actually expecting the tax provision to similarly stay fairly light for the rest of this year.

And what's the tax loss carry forward that remains?

At the beginning of this year, we had about $13.9 million of net operating losses.

And the CapEx expectations here for the year?

Yes. I would say they're pretty much in line with what we've done for the first half. So we typically -- yes, we're in the maybe -- we can round about $100,000 in a quarter, $50,000 to $100,000 in a quarter. So I don't see anything at this stage out of that bounds going forward at this stage.

And then for a more quantitative commentary. Besides the internal cost controls, which I'm sure have some interim expense here and the redesign of the platform, again, which has some interim expense, there was also an opportunity to leverage your worldwide distribution and support channel and you made some announcements during the quarter and in fact, you talked a little bit about some of the things, products you were putting into the channel. In light of -- I look at that as 3 legs of the stool. Are there any positive profit contributions in the quarter from each of those or are the expenses still running ahead of what will -- our benefits in the long term?

I'm not sure quite -- could you take a run of that one more time just to make sure I got it.

Sure. We certainly -- I'm sure that the internal cost controls that were put in place there are some realization of expense control there. But there's also severance items, there's other things. Just a sense of how much it's impacting the quarter? And also the redesign of the platform, I'm not sure what stage that's in. Whether those expenses are behind the company or not. And also in the changes in the distribution channel, putting other products in to cover overhead, things like that. How much of that opportunity really is contributory now?

Okay. So let me see...

Just in a quantitative -- not in a quantitative way, but in a qualitative way. How far along are we?

Right. I think I got it. A good question. So I think as far as the realignment of the organization and therefore associated, for example, severance cost. That should all be behind us. We don't really see any of that going forward.

Okay. So we're enjoying the benefits, the fruits of that now?

Yes. Exactly. We should be at the sort of the steady state, if you like on that. I do think -- you raised a very good question on the redesign of the platform. We are, on one particular project, we're actually citing that as we speak. So as we get our arms around exactly the type of investment and the speed at which we want to do it, we'll have a better handle on that. That may be something that we could absorb within the existing expense structure, if you like. Or it may be something because -- I think we're all very, very keen to try and get the gross margin benefit sooner rather than later. So one of the things we're looking at is can we accelerate that by, in fact, maybe going outside as well. We may see that you want to sort of step our way through some incremental expenditure there. But we're working on that. As far as the distribution channel...

Could I ask just a little bit about that? Is this a design for manufacturability? Is this a design to reduce the requirements in the field for sending them up and using it, or what's the thrust here?

Yes. I would suggest that what we have at the moment is when we birth the -- in this case I'm talking about the IQ platform, when we birth the IQ, we wanted to make sure that it could satisfy multiple product variations out of the platform. Which is great and has allowed flexibility to get more from that platform. The issue is, is if you like, is therefore you carry a lot of commonality of cost across the end product, which ultimately may not actually benefit that particular product. So there's ways to go back to the platform and try to sort of allow for different variations to be pulled from it in a more cost-effective fashion. So that's what we're in at the moment, so we're looking at that. And then your third question was on the distribution channels. So that's benefiting now, that's on. And so it's contributing already and we do think there's more upside leverage opportunity, room to grow additional revenues through those channels. So that's contributing and we look to see improved contribution.

And your average cost per share in the quarter for the share buyback.

$4.37 I think it was.

And so there is still $3 million remaining in the authorization.

$2.9 million. We made a scratch.

And our final question comes from the line of Sam Bergman.

A couple of questions. In terms of R&D for the rest of the year. Will it run pretty flat to this quarter or is there an expected bump third and fourth quarter?

I'm kind of thinking it's going to be somewhere around the same for Q3 and then Q4 starts to come back to that question about whether we want to accelerate the -- or whether we have the option to accelerate the platform revisit on the IQ. So we're working on the data. We want to scale it, size it, see how long it's going to take, and then we'll have better understanding.

And in terms of the glaucoma -- or MicroPulse being used for glaucoma. Can you give me an idea if that particular product line is delivering some revenue right now? And how do you plan to handle the growth, the upcoming growth in that particular business, which I think is tremendous? Were they direct sales staff or existing sales staff that you have? Or are you going to go indirect?

Sam, so we've had the tap side, the turning of the tap, the G-Probe for quite a while. And it was repositioned not long ago with marketing, and we've been gaining leading positions across the world with that device. It is a very late stage part of the disease. When you do the photocoagulation using our G-Probe and our 810 laser. Now what we've been looking at is how do we move upstream into earlier and earlier treatments because the number of people and the number of procedures are larger and larger. The first thing was, I mentioned in my comments, how safe the 532 was. The IQ 532 MicroPulse because it's phobia friendly, it's not going to cause any damage. When doctors find a treatment modality that is extremely safe, they're going to try and look at new places and new areas to use it. That's led us into the area which we called MLT. There are other products that are out there today, which they are calling SLT, which deals with the trabecular mesh network and it's basically trying to find a way to make that network allow, that mesh network to allow for drains. ALT was the original one and it was just basically burning a hole in the mesh to try to get additional drain. The 532, if you think about it, it's more -- I mean, being in Boston, you'd understand this. At the end of the winter, your soil in your garden is pretty hard. You've got to take and throw it up to allow the water to go through. The 532 green MicroPulse laser basically acts like a massage on the mesh network, and it allows for an improvement in drains. There is some published data that's coming out. The other area we're talking about in glaucoma is even earlier yet. And that would be a product -- it's not scientific in nature, this is just straightforward engineering. It's not trivial, but it's straightforward, it's an idea that look at finding a way to create another drain in another part of the eye using our laser system with a captive disposable. Those projects are underway and we expect them out sometime next year.

Do you have any idea how large that market is? Or how large that market could be for IRIDEX?

I would rather ask my marketing guy specifically. I do know this, that there's over $4 billion spent in and around glaucoma. That's pretty large. And the growth, if you think about it, just think this way, if the growth rate in the age population is 65 or 85 over the next 10 to 15 years, it's going to be approaching 100%. That's a huge market and all of us -- I mean, Sam, I hate to say it, but all of us will reach that point with glaucoma at some point in time.

And last question, trade shows. So what's the next trade show that you're going to be at and presenting?

Next week in South America at the Pan-American Conference. It's thousands of doctors coming out from all over Latin America and we have a presenter from Mexico that has been using 577 MicroPulse and another one from Brazil that will be in the booth. It's not our booth, it's our distributor's booth, but they will be making presentations there. And then shortly after that, in September, we'll have a conference in Germany where Dr. Lutrell [ph] from the United States and 2 doctors from Europe, 1 from Italy and 1 from Germany, will be having a workshop at the Euro Retinal Conference. And that's not on our dime, that is by the society inviting these doctors to come and teach them how to use MicroPulse. That's in September.

And one last remaining question. How many doctors are using the glaucoma product off label?

I don't think anybody is using it off label, Sam. The situation is that the product is designed and to be able to be used the glaucoma that tap, if you will, on the 810 and the G-Probe, we've had approval for that for quite a while. MLT, we've had approval for that quite a while. The idea of using the 532 is approved to be used on the eyes. But nobody's using it off label at this point in time, that we're aware of.

And in terms of doctors using it as it's supposed to be used because it's been approved, what kind of increases have you seen on that?

I think it's too early really, Sam. I mean we're talking about miniscule numbers. What we're trying to suggest on our conference is that because of the safety and efficacy of MicroPulse, we're going to see it being used more and more in other areas, as Jim described in his particular case, on uveitis. These are new areas, new procedures because people are just discovering that the device is so safe. And we'll be discovering that on a regular basis. The interest for us on the glaucoma is the strategic initiative for us over a long period of time, over the next number of years. And we will be the only company -- when we're done, that we're aware of, that will have a device that deals with tap and the drain in varying stages of the glaucoma disease.

And I'm showing no further questions at this time. Please continue.

With that, I'd like to say thank you to everybody for your participation and interest in IRIDEX. And we look forward to delivering positive results the next quarter as well. Thank you.

Ladies and gentlemen, that does conclude our conference for today. You may now disconnect.