STAA 10-K & 10-Q changes, risk factors and insider trading

We reported a decrease in revenue and a net loss in fiscal 2025 and 2024, and we may not be able to return to our growth and profitability trajectory.

For the fiscal year ended January 2, 2026, we reported $239.4 million of net sales, a decrease of 23.7% compared to $313.9 million in fiscal 2024, and we incurred a net loss of $80.4 million compared to a net loss of $20.2 million in fiscal 2024. For the fiscal year ended December 27, 2024, we reported $313.9 million of net sales, a decrease of 3%2.6% compared to $322.4 million in fiscal 2023, and we incurred a net loss of $20.2 million compared to net income of $21.3 million in fiscal 2023. Prior to fiscal 2024, we had reported over ten years of annual net sales growth, and we had delivered net income profitability since 2018. Our results in fiscal 2024 were negatively impacted by a significant decline in ICL sales in China in the fourth quarter ended December 27, 2024. We believe the sluggish economy and weak consumer consumption that contributed to fluctuating demand for ICL procedures in China in fiscal 2024 and 2025 will continue in fiscal 2025,2026, and we cannot predict when the macroeconomic conditions will improve in China or whether the demand for ICL procedures in China will return to historical levels in the foreseeable future. In the first half of fiscal 2025, we took a number of steps to change our leadership team, realign our leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. As we seek to align our cost structure with our sales forecasts, additional changes and further cuts may be required. While we intend to return to sales growth and profitability in the future, there can be no guarantee that we will achieve our growth and profitability plans. Further, our growth and profitability are challenged by the competitive nature of our industry and the other risks to our business detailed herein.

China accounted for approximately 51%32% of our fiscal 20242025 consolidated net sales. After a robust start to fiscal 2024, China experienced slowing growth in 2024, which some analysts believe may continuecontinued into 2025. The sluggish economy and weak consumer consumption in China negatively impacted the Company’s financial results for fiscal 2024.2024 and 2025. A significant or prolonged slowdown in the Chinese economy could materially impact our business and results of operations in the future. In addition, if social or political unrest were to disrupt business in China, or if other events in China significantly reduced or disrupted business activities in China, that may materially and adversely harm our business.

Further, changes in trade restrictions or new or increased tariffs or quotas, embargoes, sanctions, countersanctions, customs restrictions, or other interventions or geopolitical conflicts resulting from deteriorating relations between China and the U.S. would adversely impact our sales and operations in the region. As an example, on February 1, 2025, the U.S. government announced a 10% tariffstariff on product imports from certain countries, including China. In response, China announced that they would impose counter tariffs of 10% to 15% on select goods imported from the U.S., to which the U.S. responded with heightened reciprocal tariffs. The U.S. and China have reached a one-year agreement with an expiration of November 10, 2026, which includes the continued suspension of the heightened reciprocal tariffs on China and delayed enforcement of new U.S. export rules targeting affiliates of blacklisted firms. If maintained, the newly announced tariffs and the potential escalation of trade disputes could pose a significant risk to our business and would affect our sales in China. See the risk factor below captioned “Because our business is global, our sales and profits may fluctuate or decline in response to changes in foreign currency exchange rates and/or other international risks, including tariffs” for a further discussion of the risks from changes to the trade policies and tariffs between the U.S. and China.

For the year ended DecemberJanuary 27,2, 2024,2026, approximately 100% of our revenue was generated from sales of ICL lenses used in refractive procedures. Refractive surgery is an elective procedure generally not covered by health insurance. Patients must pay for the procedure, frequently through installment financing arrangements with third parties. They can defer the choice to have refractive surgery if they lack the disposable income to pay for it or do not feel their income is secure. Economic stagnation, lack of consumer confidence or a recession in any of our larger markets or on a global basis could slow ICL sales growth or, if severe, cause declines in sales, which could materially harm our business.

Economic, social, and political conditions, laws, practices, and local customs vary widely among the countries in which we sell our products. Our operations outside of the U.S. face a number of risks and potential costs, including, enjoying less stringent protection of intellectual property, and facing economic, political, and social uncertainty in some countries, especially in emerging markets. For example, sales in certain Asian and developing markets may result in lower margins and higher exposure to intellectual property infringement or counterfeits. Given the size of the Company’s business in China relative to its net sales in the rest of the world, macroeconomic conditions in China have a significant impact on the Company’s business, operations, and financial results. Our results in fiscal 2024 were negatively impacted by a significant decline in ICL sales in China in the fourth quarter ended December 27, 2024, where the sluggish economy and weak consumer consumption contributed to fluctuating demand for ICL procedures. As expected, our sales in China declined in 2025, due to elevated levels of inventory held at our China distributors at the end of December 27, 2024. If China experiences a significant or prolonged slowdown or disruption to its economy, or social or political unrest, we may experience a significant reduction in sales in the future.

Further, trade disputes or tensions between the United States and its significant trading partners may adversely affect our sales, including as a result of the imposition of tariffs or other barriers or restrictions on trade, or increase our costs. The institution of trade tariffs both globally and between the U.S. and China specifically could negatively impact the overall economic condition in our markets, including China, which could have a negative effect on our sales. As an example, on February 1, 2025, the U.S. government announced a 25% tariff on product imports from certain countries, including Mexico and Canada, and 10% tariffs on product imports from certain countries, including China. In response, China announced that they would impose counter tariffs of 10% to 15% on select goods imported from the U.S., to which the U.S. responded with heightened reciprocal tariffs. The U.S. and China have reached a one-year agreement with an expiration of November 10, 2026, which includes the continued suspension of the heightened reciprocal tariffs on China and delayed enforcement of new U.S. export rules targeting affiliates of blacklisted firms. If maintained, the newly announced tariffs and the potential escalation of trade disputes could pose a significant risk to our business and would affect our revenue and cost of goods sold. The extent, focus and duration of any such tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. Further, actions we take to adapt to new tariffs or trade restrictions may cause us to modify our operations or forgo business opportunities.

In addition, new laws orlaws, regulations and policies in China or elsewhere applicable to foreign medical device companies could negatively impact our business. The medical device landscape in China is rapidly evolving, and local preference policies and cost control measures, including programs like volume-based procurement, have the potential to disrupt our business. Also, we are exposed to credit and collectability risk on our trade receivables with customers in certain international markets. There can be no assurance we can effectively limit our credit risk and avoid losses and our ability to transfer foreign earnings to the U.S. may be subject to taxes or restricted or result in incurring substantial costs. Our continued success as a global company depends, in part, on our ability to develop and implement policies and strategies that are effective in anticipating and managing these and other risks in the countries where we do business. These and other risks may have a material adverse effect on our operations in any particular country and on our business, financial condition and results of operations as a whole.

Changes in tax laws can and do occur. For example, in 2017, the U.S. government enacted the Tax Cuts and Jobs Act, which is complex and continues to be further clarified with supplemental guidance. Changes to tax laws may require us to make significant judgment in determining the appropriate provision and related accruals for these taxes. Thus, as a result, such changes could result in substantially higher taxes and a significant adverse effect on our results of operations, financial conditions and liquidity. In addition, the Organization for Economic Co-operation and Development (OECD), has published proposals covering a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules, tax treaties and taxation of the digital economy. On October 8, 2021, the OECD/G20 inclusive framework on Base Erosion and Profit Shifting (the Inclusive Framework) published a statement updating and finalizing the key components of a two-pillar plan on global tax reform originally agreed on July 1, 2021, and a timetable for implementation by 2023. The timetable for implementation has since been extended to 2024 and, with respect to certain components of the plan, to 2025. Under pillar one, a portion of the residual profits of multinational businesses with global turnover above €20 billion and a profit margin above 10% will be allocated to market jurisdictions where such allocated profits would be taxed. Under pillar two, the Inclusive Framework has agreed on a global minimum corporate tax rate of 15% for companies with revenue above €750 million, calculated on a jurisdictional basis. On February 1, 2023, the U.S. Financial Accounting Standards Board indicated that they believe the minimum tax imposed under pillar two is an alternative minimum tax, and, accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. TheOn detailJanuary 5, 2026, the OECD issued administrative guidance outlining a framework under which U.S.-parented groups may be excluded from the application of the proposalsOECD’s isglobal subjectminimum totax changerules. andEach themember impact to usjurisdiction will need to beadopt determinedthis byguidance referenceinto local law, and the timing and manner of adoption may vary. We are continuing to monitor developments related to this guidance and will evaluate the finalimpact rules.on our financial statements as additional information becomes available.

WeOur currently manufacture all of ourprincipal ICL products at a singlemanufacturing facility is located in Monrovia, California. If our Monrovia manufacturing facility suffered a disruption, shutdown or catastrophic loss due to fire, flood, earthquake, terrorism or other natural or man-made disasters, including manufacturing challenges such as equipment or IT failure, it could have a material adverse effect on our operations. Our Monrovia manufacturing facility has been, and may in the future be, adversely impacted by weather and fire events, and it is located in a region where earthquakes could cause catastrophic loss. Developing additional manufacturing sites may require significant expense for personnel and equipment and a long period to obtain regulatory approvals. We are in the process of expanding our manufacturing capabilities for STAAR’s ICL products in our Nidau, Switzerland facility. This is a complex process that is subject to numerous risks and uncertainties, and there can be no guarantee that this facility will be prepared and approved by regulators for manufacturing.

InWhile we have received the required regulatory approvals and have started manufacturing ICLs at our majorNidau markets,facility, regulatoryramping approvalup production is subject to manufacturenumerous materialsrisks and sell our products is generally limited to the current manufacturing site, and changing the site requires applications to and approval from regulatory bodies prior to commercialization.uncertainties. To satisfy our own quality standards as well as regulations, we must follow strict protocols to confirm that products and materials made at athe Nidau facility, and any new sitefacility in the future, are equivalent to those made at theour currentlyMonrovia approved site.facility. Even minor changes in equipment, supplies or processes require validation. Unanticipated delays with a transferred process or difficulties in manufacturing a transferred material could interrupt our supply of products. Any sustained interruption in supply could cause us to lose market share and harm our business, financial condition and results of operations.

Our success depends on the skills, experience and performance of our senior management and other key employees. The loss or incapacity of existing members of our executive management team could negatively impact our operations, particularly if we experience difficulties in hiring qualified successors. Further,In 2025, we announced a number of leadership changes, including the appointment of a new Chief Executive Officer and new Chief Financial Officer. In 2026, in accordance with the Cooperation Agreement, our Chief Executive Officer agreed to step down, and the Board appointed interim Co-Chief Executive Officers. We are currently conducting a search for a permanent Chief Executive Officer. Such changes, and any changes in the future, can be disruptive to the business. In addition, it could be particularly detrimental if any key employee or employees went to work for a competitor. Also, our future success depends on our ability to identify, attract, train, motivate and retain other highly skilled personnel. Failure to do so may adversely affect our results. We do not maintain insurance policies to cover the cost of replacing the services of any of our key employees who may unexpectedly die or become disabled.

We sponsor two defined benefit pension plans through our wholly owned Swiss and Japanese subsidiaries, which we refer to as the “Swiss Plan” and the “Japan Plan”, respectively. Both plans are underfunded and may require significant cash payments. We determine our pension benefit obligations and funding status using many assumptions. If the investment performance does not meet our expectations, or if other actuarial assumptions are modified, or not realized, we may be required to contribute more than we currently expect and increase our future pension benefit obligations to be funded from our operations. Our pension plans taken together are underfunded by approximately $6.7$6.4 million ($0.4 million for the Japan Plan and $6.3$6.0 million for the Swiss Plan) as of DecemberJanuary 27,2, 2024.2026. If our cash flow from operations is insufficient to fund our worldwide pension obligations, as well as other cash requirements, we may have to seek additional capital.

Certain of our employees, contractors and vendors have access to and use personal information in the ordinary course of our business. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures and business controls, our information technology and infrastructure have in the past and may in the future be vulnerablesubject to attacks by hackers, breaches due to employee, contractor or vendor error, or malfeasance, systems error (whether as a result of an intentional breach, a natural disaster or human error) or other disruptions or subject to the inadvertent or intentional unauthorized release of information. Any such occurrence could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, and liability under laws that protect the privacy of personal information and regulatory penalties, disrupt our operations and the supply of products we provide to our clients, compromise our intellectual property or other confidential business information, or damage our reputation, any of which could adversely affect our profitability, revenue and competitive position. Many of our employees currently work remotely, which may make us more vulnerable to cyberattacks. While we have not experienced a material system failure, accident or security breach to date, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition. We continue to invest in our cybersecurity program to enhance current capabilities and also implement new capabilities in our effort to keep pace with the changing threat landscape. Also, certain of our information technology systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such events could materially harm our reputation and financial results. Moreover, while we maintain cyber insurance, it may be insufficient to address any potential loss incurred. We also rely on third parties to host or otherwise process some of this data (such as cloud-based computing). Elements of our information technology systems that we outsource to third parties may also be vulnerable to various types of attacks or disruptions. Any failure by a third party to prevent security breaches could have adverse consequences for us.

In addition, the expense associated with increased manufacturing, sales and marketing to meet increased demand may exceed our expectations. Further, we manufacture our ICLsprincipal ICL manufacturing facility is in the U.S., and inflationary pressures could result in increased costs in our supply chain, which may be difficult to pass along to our customers. AnyIn inabilityaddition, as we ramp up ICL manufacturing in Nidau, Switzerland, our costs are expected to successfullyincrease managegiven growththe expense of operating two sites and lower site utilization impacts cost absorption. We expect the on-going operation of two manufacturing sites will create pressure on gross margins and will lead to higher inventory levels in the near-term. As our ICLs have a shelf life of three years, if we are unable to align our manufacturing with forecasted demand, higher inventory levels could materiallyrequire write-downs for excess, slow moving, expiring and adverselyobsolete affect our business, financial condition, and results of operation.inventory.

OurIn futureaddition, growth depends, in part, on our ability to timely develop products to treat diseases and disorders of the eye that are more effective, safer, or incorporate emerging technologies better than our competitors’ products, and are accepted by physicians and patients. Salessales of our existing products may decline rapidly if one of our competitors introduces a superior product, or if we announce a new product of our own. If we focus on research and development or technologies that do not lead to better products, more effective or advanced products could surpass our current and planned products. In addition, such product development efforts could require a significant investment of resources. If we are able to develop new products, we must manufacture these products economically and market them successfully by demonstrating to enough eye-care professionals the overall benefits of using them. If we do not timely develop new products that meet market demand or if there is insufficient demand for our new products, our sales and results of operations could be harmed. For example, it is uncertain whether physicians in countries that recognize the CE Mark will adopt the EVO Viva lens for use in presbyopic eyes, which our Notified Body approved for marketing and sale in July 2020.

STAAR has limited product offerings, with nearly all of our net sales from EVO and EVO+ ICLs, which creates a heightened risk profile for the Company. In order to be successful, we will need to continue to launch new products or replace our existing products. Development of new implantable technology, from discovery through testing and registration to initial product launch, is expensive and time-consuming. Because of the complexities and uncertainties of ophthalmic research and development, products we are developing, including those currently in development, may not complete the development process or obtain the regulatory approvals required for us to successfully market the products. Our new products, including those currently under development, may fail to become commercially successful.

We are regulated by regional, national, state and local agencies in the U.S. as well as governmental authorities in those countries in which we manufacture or distribute products. These regulations may govern the research, development, manufacturing, and commercial activities relating to medical devices, including their design, pre-clinical and clinical testing, clearance or approval, production, labeling, sale, distribution, import, export, post-market surveillance, advertising, dissemination of information and promotion. Failure to receive necessary approvals in international jurisdictions on a timely basis, or at all, could harm our business and operating results. In addition, regulations and requirements for approvals vary by country, which can significantly increase the costs to sell our products in these international jurisdictions. Any failure to comply with applicable legal and regulatory obligations could result in fines and penalties, restrictions on certain business activities, and other remedial measures, which if significant, could disrupt of our operations, distract management, and harm our business.

If we cannot maintain compliance with a particular jurisdiction’s regulatory requirements, it could adversely impact our financial performance and have a material adverse effect on our ongoing business and operations. We plan to remain in compliance with regulatory requirements established by applicable global regulatory agencies, however, there can be no guarantyguarantee that we will do so. We expect to continue to devote resources and attention to our quality systems and compliance and other regulatory requirements as part of the ordinary course of business. We cannot ensure that our efforts will be successful and failure to achieve or maintain compliance may materially and adversely impact our business and operations.

Under the U.S. FDA regulations, we are required to provide the FDA with a Medical Device Report (MDR) for any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in international markets, such as the European Union and Asian markets, are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the relevant authority in the jurisdiction where the incident occurred. Any adverse event involving our products, including those requiring an MDR, could result in future voluntary corrective actions, such as product actions or customer notifications, or agency actions, such as inspection, mandatory recall, or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

The market price for our common stock has fluctuated widely. The closing price of our common stock ranged from $23.93$15.09 to $52.25$28.57 per share during the year ended DecemberJanuary 27,2, 2024.2026. Our stock price could continue to experience significant fluctuations in response to factors such as market perceptions, quarterly variations in operating results, operating results that vary from the expectations of securities analysts and investors, changes in financial estimates, changes in the business and market valuations of competitors, announcements by us or our competitors of a material nature, additions or departures of key personnel, future sales of our common stock and stock volume fluctuations. Also, general political and economic conditions such as a recession or interest rate fluctuations, public health crises, geopolitical tensions or conflicts, may adversely affect the stock market in general, and, in turn, the market price of our common stock.

STAAR employs a commercialization strategy that strives for sustainable, profitable growth. Our growth strategy includes making our complete ICL product line available in our existing geographic markets and expanding into attractive markets where we do not sell our products today. In addition, we are focused on driving awareness of the ICL procedure and the clinical benefits of our ICLs, and providing surgeon training, support and education, particularly in our newer markets. Historically, the Company also manufactured and sold intraocular lenses (or IOLs) for use in surgery to treat cataracts. As the Company has focused its business and strategy on its ICL product offerings, we have phased out our cataract IOL product line. For the fiscal year ended DecemberJanuary 27,2, 2024,2026, approximately 100% our net sales were generated from sales of ICLs.

Given the size of the Company’s business in China relative to its net sales in the rest of the world, macroeconomic conditions in China have a significant impact on the Company’s business, operations, and financial results. For the fiscal year ended December 27, 2024, weWe reported $313.9net millionsales of net$239.4 sales,million, a$313.9 decreasemillion, of 3% compared toand $322.4 million infor fiscal 2023,years 2025, 2024, and we2023, respectively. The significant decreases in net sales were primarily due to the dynamics within our business in China where the continued sluggish economy and weak consumer consumption contributed to fluctuating demand for ICL procedures. We incurred a net losslosses of $80.4 million and $20.2 million compared to net income of $21.3 million infor fiscal 2023.years 2025 and 2024, respectively. Prior to fiscal 2024, we had reported over ten years of annual net sales growth, and we had delivered net income profitability since 2018. Our results in fiscal 2024 were negatively impacted by a significant decline in ICL sales in China in the fourth quarter ended December 27, 2024, where the sluggish economy and weak consumer consumption contributed to fluctuating demand for ICL procedures.

OurDuring agreementsfiscal with2025, our distributors in China providepurchased forfewer minimumICLs, inventoryas requirementsthey were able to satisfy procedural demand largely from their existing inventory. Our distributors in China have historically purchased products from us in bulk shipments in advance of anticipated demand, which they use to satisfy orders from hospital customers based on forecastedscheduled demand.surgeries. During fiscal 2024, our distributors in China purchased lenses above suchcontracted minimums in anticipation of higher procedural volumes during what is typically a summer “high season” in China. Due to dynamic macroeconomic conditions and other factors, the number of ICL procedures performed during the high season and the second half of 2024 overall was lower than expected. Accordingly, our distributors in China held, as of December 27, 2024, elevated levels of ICL product inventory. We believe that volatility in surgical procedure volumes will continue until consumer confidence stabilizes and ultimately improves in China. As a result, we believe that theThe level of ICL inventory heldowned by our distributors in China ishas sufficientdecreased substantially since December 27, 2024, and has returned to meetcontractual currentlylevels. expectedAs procedure volumes for at least the first half of fiscal 2025. We therefore anticipateanticipated, we willreported report minimallower China ICL sales in thefiscal first2025 halfcompared ofto fiscal 2025. As China in-country inventory is reduced during the first half of fiscal 2025, we would expect our China revenue to normalize. However, our ability to successfully address these challenges will depend on a number of factors, including the risk of a prolonged slowdown or disruption in China and the institution of trade tariffs both globally and between the U.S. and China, as set forth in Item 1A. “Risk Factors.”2024.

During fiscal 2025,2026, we will continue to assess appropriate inventory levels, both inventory held by us and inventory held by our distributors. We generally keep sufficient inventory on hand to ship product immediately or shortly after receipt of an order. In addition, our distributors hold their own inventory in-country based on forecasted demand. During fiscal 2024, we increased our inventory levels to meet the significant level of anticipated demand for our ICL lenses, to support quick and efficient delivery and fulfillment for surgical procedures, and to mitigate risks associated with potential disruptions to our manufacturing and production process. During fiscal 2025,2026, we expect to adjust our production output based on forecasted demand and optimize the level of inventory held by us and held by our distributors.

WeFocused investment – we believe growth must be sustainable. In 2026, we havewill continue to prioritize investments that support long-term value creation, with a significantclear opportunityfocus toon fundamentallywhat transformdrives how myopiaresults and otherexpands refractiveprofits conditionsby areinvesting treated.wisely We want to be the first choice for doctors and for patients seeking visual freedom from wearing eyeglasses or contact lenses. Ain key focus in 2025 will be supporting our business in China as we work to navigate the macroeconomic challenges and position the Company for growth once the market recovers.markets. Across our markets, we recognize the need to further educate and train ophthalmic surgeons about our ICLs and our ICL procedure. In 2025, we intend to increase the number of strategic collaborations with leading refractive surgeons and practices in the U.S. to collaborate on marketing, training and education activities. We also plan to leverage our newthe EVO Experience Center at our headquarters in Lake Forest, CA,California, to conduct additional hands-on training and education in lens-based vision correction. In addition, we are continuing to invest in enhanced systems and tools to make ordering and fulfillment faster and easier. In 2025,2026, we will also continue to drive awareness of the ICL procedure to reach even more potential patients and effectively communicate the clinical benefits of our ICLs. While we work to launch our existing product portfolio in attractive global markets, we also intend to continue to invest in product innovation in 2025.

The following table presents our net sales, by product for the fiscal years presentedsales (dollars in thousands):

Total ICLNet sales for 20242025 decreased 2%23.7% from 2024. Net sales for 2025 included $27.5 million of sales related to the previously disclosed December China Shipment, of which payment was received during 2025. The composition of our net sales is primarily related to ICL sales. Net sales also include sales of delivery system sales and normal recurring sales adjustments such as sales return allowances, and for fiscal 2023, withIOL units down 6%.sales. The sales decrease was driven by thedecreased sales in China. The Asia Pacific (“APAC”) region, which decreased 6%32% with ICL units down 9%.35%. The decrease in the APAC region was driven by decreased sales in China, primarily related to the $27.5 million order in December 2024 for which we did not recognize revenue discussed above, partially offset by sales growth in India, other APAC Distributors, Japan and Korea. The Europe, Middle East and Africa (“EMEA”) region sales increased 10%3% with ICL unit growth up 17%,10%, due primarily to sales increases in our distributor markets partially offset by an increase in sales return allowances in our distributor markets. The Americas region sales increased 16%,14%, with ICL unit increase of 17%,10%, due primarily to sales growth in the U.S. Changes in foreign currency unfavorablyfavorably impacted ICLnet sales by $2.7$2.0 million, which impacted our Japan and Europe, Middle East and AfricaEMEA markets. ICL sales represented 99.6% of our total sales for fiscal year 2024.

Total ICLNet sales for 20232024 increaseddecreased 18%2.6% from 2022, with unit growth up 19%.2023. The sales increasedecrease was driven by the APAC region, which grewdecreased 21%6%, with unitICL growthunits ofdown 22%,9%. This decrease was driven by decreased sales in China, primarily duerelated to the $27.5 million December China Shipment, partially offset by sales growth in China, other APAC Distributors, India, Japan and Korea. The Europe, Middle East and AfricaEMEA region sales increased 7%9% with unitsICL similarunit togrowth priorof year,17%, due to sales growth in our distributor markets and direct markets. The Americas region sales increased 11%,13%, with ICL unit increase of 9%,17%, due primarily to sales growth in the U.S. Changes in foreign currency unfavorably impacted ICLnet sales by $1.8$2.8 million, which impacted our Japan and Europe, Middle East and AfricaEMEA markets. ICL sales represented 99.1% of our total sales for fiscal year 2023.

Gross profit for 2024 decreased 5.2% from 2023. Gross profit margin decreased to 76.3% of revenue for 2024 compared to 78.4% of revenue for 2023. The decrease in gross profit and gross profit margin was primarily due to the recognition of $3.9 million of cost of sales associated with our shipment of $27.5 million of ICLs to one of our distributors in China in the quarter ended December 27, 2024, for which we did not recognize revenue due to extended payment terms with the distributor. Gross profit and gross profit margin for fiscal 2024 were also negatively impacted by period costs associated with the expansion of the Company’s manufacturing capabilities in its Nidau, Switzerland facility, as well as the temporary idling of its U.S. manufacturing facility during the holiday season and for facility upgrades.

Selling and marketing expenses for 20232025 increaseddecreased 21.4%12.4% from 2022,2024, due to increaseddecreased advertising and promotional activities, salary-related payroll tax expenses, sales commissiontravel expenses and traveltrade expenses,shows and sales meetings and as a result of costs and charges in the prior year period associated with the opening of our new experience center, partially offset by increased bonus and stock-based compensation expenses.

Research and development expenses for 20242025 increaseddecreased 21.6%11.6% from 20232024 due to increased salary-related and payroll tax expenses, purchases of in-process research and development in the prior year period related to external AI tools for measurement and lens size selection and outside services related to professional and medical education, partially offset by decreased clinical expenses associated with our U.S. post-approval clinical trials.trials and outside services related to regulatory and medical affairs, partially offset by increased bonus and stock-based compensation expenses.

Research and development expenses for 20232024 increased 23.4%12.0% from 20222023 due to increased salary-related and payroll tax expensesexpenses, purchases of in-process research and development related to external AI tools for measurement and lens size selection and outside services related to medical affairs, partially offset by decreased clinical expenses associated with our U.S. post-approval clinical trials.

Research and development expenseexpenses consist primarily of compensation and related costs for personnel responsible for the research and development of new and existing products, quality assurance and post-market surveillance activities, the regulatory and clinical activities required to acquire and maintain product approvals globally and medical affairs expenses. TheseResearch and development expenses associated with the development of new and existing products were $9.6 million, $12.8 million and $8.9 million for fiscal 2025, 2024 and 2023, respectively. All research and development costs are expensed as incurred.

Other income, net generally relates to interest income earned on cash, cash equivalents and investments available for sale, interest expense on finance lease obligations, gains or losses on foreign currency transactions, and royalty income. The table below summarizes the year over year changes in other income, net (dollars in thousands):

Provision (Benefit) for Income Taxes

Our effective tax rates differ from the U.S. federal statutory rate of 21% for 2024,2025, 20232024 and 2022,2023 respectively, primarily due to the income taxes generated in foreign jurisdictions and realizability of deferred tax assets. AlsoTax impactingbenefits ourof effective$1.8 million generated in 2025 is mainly due to the loss recognized in the Company’s operation at Switzerland and a favorable uncertain tax ratesposition adjustment. The Company’s operation in Switzerland was aprofitable $4.5in 2024 and 2023 contributing to the majority of tax expense of $11.2 million recaptureand of$12.3 ourmillion, U.S.respectively. The Company has maintained a full valuation allowance inposition 2024,on $3.3its millionU.S. recaptureoperation as of ourfiscal U.S.year valuation allowance in 2023 and a $0.9 million release of our U.S. valuation allowance in 2022. Also during 2024, we recognized $1.5 million of unrecognized benefits, including interest, related to uncertain tax positions taken by us. There were no unrecognized benefits related to uncertain tax positions taken by us in 2023 or 2022.2025.

Our principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements included in this Annual Report. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. If our anticipated future cash flow from operating activities is insufficient to satisfy our future capital requirements in the long-term, we may need to seek additional capital. Our financial condition at January 2, 2026, December 27, 2024 and December 29, 2023 included the following (in thousands):

Cash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions. Our investment policypolicy’s primary objective is capital preservation while maximizing our return on investment. Investments available for sale may include U.S. government and corporate debt securities, commercial paper, certain certificates deposit and related security types, that are rated by two nationally recognized statistical rating organizations with minimum investment grade ratings of AAA to A-/A-1+ to A-2, or the equivalent. The maturity of individual investments may not extend 24 months from the date of purchase. There are also limits to the amount of credit exposure in any given security type. We do not have any off-balance sheet arrangements.

Our current liquidity and capital resources, as discussed above, will enable us to meet our known contractual obligations as of DecemberJanuary 27,2, 20242026 (in thousands):

The following table presents a summary of cash flows for the fiscal years presented (dollars in thousands):

SinceFor 2022 we decided to invest our2025, cash provided by investing activities resulted from $124.1 million in proceeds from the maturity of investments available for sale,sale used to supplement working capital, partially offset by $75.4 million in accordancepurchases withof ourinvestments investmentavailable policy.for sale and $5.8 million in purchases of property, plant and equipment. For 2024, cash used in investing activities resulted from $80.2 million in purchases of investments available for sale and $23.4 million in purchases of property, plant and equipment, partially offset from proceeds from the sale or maturity of investments available for sale of $44.4$43.1 million that was used to supplement working-capital. For 2023, cash provided by investment activities resulted from proceeds from the sale or maturity of investments available for sale of $144.8$143.5 million that was used to supplement working-capital, partially offset by $52.3 million in purchases of investments available for sale and $18.2 million in purchases of property, plant and equipment. For 2022, cash used in investment activities resulted from $155.7 million in purchases of investments available for sale and $18.1 million in purchases of property, plant and equipment, partially offset by $17.5 million of proceeds from the maturity of investments available for sale. Our investment in property, plant and equipment during 2024,2025, 20232024 and 2022,2023, was primarily due to investments in manufacturing facilities.

For 2025, cash used in financing activities of $4.6 million consisted of $6.5 million of repurchases of common stock pursuant to our share repurchase program and $1.5 million to repurchase employee common stock for taxes withheld, partially offset by proceeds from the exercise of stock options of $3.5 million. For 2024, cash provided by financing activities of $5.7 million consisted primarily from the exercise of stock options of $7.4 million, partially offset by $1.5 million to repurchase employee common stock for taxes withheld. For 2023, cash provided by financing activities of $7.4 million consisted primarily from the exercise of stock options of $9.7 million, partially offset by $2.1 million to repurchase employee common stock for taxes withheld. For 2022, cash provided by financing activities of $8.3 million consisted primarily of proceeds from the exercise of stock options.

Accounts receivable, net was $77.9$50.1 million and $94.7$77.9 million at DecemberJanuary 27,2, 20242026 and December 29,27, 2023,2024, respectively. Days’ Sales Outstanding (DSO) was 14585 and 113145 days for 20242025 and 2023,2024, respectively. As of DecemberJanuary 27,2, 20242026 and December 29,27, 2023,2024, the Company’s China distributors accounted for 58%33% and 70%,58%, respectively, of the Company’s consolidated trade receivables. Our DSO is at a normalized level for 2025. During fiscal 2024, the Company’s China distributors increased their purchases in anticipation of higher procedural volumes during what is typically a summer “high season” in China. Due to dynamic macroeconomic conditions and other factors, the number of ICL procedures performed during the high season and the second half of 2024 overall was lower than expected. Accordingly, our distributors in China held, as of December 27, 2024, elevated levels of ICL product inventory. Our distributor agreements typically provide for payment terms between 30 and 90 days. Our DSO was higher in 2024, in part, due to the higher levels of purchases by our China distributors during the year and the lower than anticipated procedural volumes. Our China distributors have made additional payments since December 27, 2024. Prior to adding a second China distributor in fiscal 2024, we had one distributor in China. The increase in DSO in 2023 was due to extended payment terms with our China distributor due to unfavorable foreign currency conditions at such time. We have solid relationships with our distributors in China, and we believe collectability for such accounts receivable balances are reasonably assured. We do not believe the increases in net accounts receivable reflect a trend, nor that it would have a material impact on cash flows as our available liquidity and capital resources had sufficient working capital despite the increases in net accounts receivable.

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created therein. In some cases readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “believe,” “will,” “should,” “could,” “forecast,” “potential,” “continue,” “ongoing” (or the negative of those words and similar words or expressions), although not all forward-looking statements contain these words. Forward-looking statements include, without limitation, statements regarding the intent, belief or current expectations of the Company and its management regarding any of the following: demand for our Implantable Collamer® Lenses; the benefits of our leadership realignment and related efforts; the timing of and our ability to manufacture and supply 100% of EVO and EVO+ ICLs for China from Switzerland; China macroeconomic conditions, procedure volumes, demand, and inventory levels; any projections of or guidance as to future earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, product mix, capital expense or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; potential outcomes and timing of the Company’s enterprise resource planning implementation; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of new or improved products; commercialization of new or improved products; future economic conditions or size of market opportunities globally; expected costs of operations; statements of belief, including as to achieving business plans for 2026 and beyond; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution investors and prospective investors that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors, which if they do not materialize or prove correct, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements and to note they speak only as of the date hereof. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, without limitation, our ability to grow and generate profit; our reliance on independent distributors in international markets; a slowdown or disruption to the Chinese economy; global economic conditions; disruptions in our supply chain; fluctuations in foreign currency exchange rates; international trade disputes (including involving tariffs) and substantial dependence on demand from Asia; changes in effective tax rate or tax laws; any loss of use of our principal manufacturing facility; competition; potential losses due to product liability claims; our exposure to environmental liability; data corruption, cyber-based attacks or network security breaches and/or noncompliance with data protection and privacy regulations; acquisitions of new technologies; climate changes; the willingness of surgeons and patients to adopt a new or improved product and procedure; extensive clinical trials and resources devoted to research and development; compliance with government regulations; legal proceedings, claims and regulatory actions; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before or after approval, or to take enforcement action; laws pertaining to healthcare fraud and abuse; changes in FDA or international regulations related to product approval; product recalls or failures; and other important factors;factors, andincluding those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on March 3, 2026.

STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. We are the leading manufacturer of phakic implantable lenses used worldwide in corrective or “refractive” surgery. We have been dedicated solely to ophthalmic surgery for over 40 years. Our goal is to position our refractive lenses throughout the world as primary and premium solutions for patients seeking visual freedom from wearing eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction. We generate worldwide revenue almost exclusively from sales of our Implantable Collamer® Lenses, or “ICLs.” Our ICLs are made from Collamer, which is a proprietary collagen copolymer material created and exclusively used by STAAR to make our lenses soft, flexible and biocompatible with the eye. Our ICLs are phakic lenses, meaning that they are implanted into the eye without removing the eye’s natural crystalline lens. This distinguishes an ICL procedure from other refractive procedures, as it does not involve the removal of corneal eye tissue. All of our ICLs are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Further, while ICLs are intended to be permanent, our ICLs are reversible lens implants, meaning they can be removed by a doctor if desired.

For the three months ended AprilJuly 3, 2026, net sales were $93.5 million, up 119.6%111.0% from $42.6$44.3 million for the three months ended MarchJune 28,27, 2025. The increase was primarily driven by strong sales performance in China, while distributor inventory was maintained at or below contractual levels. Net sales to our two distributors in China were $47.4$52.3 million for the three months ended AprilJuly 3, 2026, compared to net returnssales of $0.9$5.3 million in the prior-year period.

Gross margin increased year-over-year to 73.6%74.5% from 65.8%,74.0%, reflecting cost reduction initiatives implemented in the first quarter of 2025. This improvement was partially offset by higher per-unit manufacturing costs associated with low production volumes at the new Swiss facility during 2025. As production in Switzerland has scaledscales in 2026, unit costs have begun to improve. By the end of fiscal 2026, we expect unit costs to manufactureimprove. andHowever, gross margin will continue to be impacted by tariffs until we can supply 100% of EVO and EVO+ ICL lenses for China from SwitzerlandSwitzerland, withoutwhich exposureshould tohappen tariffs.by the end of 2026.

As a result of significantly increased sales,sales and higher gross profit, and reduced operating expenses, GAAP net income for the firstsecond quarter of 2026 was $5.2$8.1 million or $0.10$0.16 per diluted share, up from a net loss of $(54.216.8) million or $(1.100.34) per share for the prior year quarter. Although cashCash and investments available for sale decreasedincreased to $181.5 million at July 3, 2026 from $163.9 million at April 3, 2026 from $187.5 million due to front-loaded payments for seasonal bonuses2026, and other employee incentives, global sales meetings, severance, and costs associated with our Cooperation Agreement with Broadwood Partners, we expect to continue to generate cash during the remainder of the year.

Management believes that there have been no significant changes during the threesix months ended AprilJuly 3, 2026 to the items that we disclosed as our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026.

Net sales for the three months ended AprilJuly 3, 2026 increased 119.6%111.0% from the same period of 2025, primarily due to increased sales in China. The composition of our net sales is primarily related to ICL sales. Net sales also include sales of delivery system sales and normal recurring sales adjustments such as sales return allowances. The sales increase was driven by the Asia Pacific (“APAC”) region, which increased by 218%,189%, with ICL unit increase of 227%.216%. The increase in the APAC region was driven by increased sales in China,China and Japan and Korea.increases in other areas in the APAC region, partially offset by decreased sales in India. The Europe, Middle East and Africa (“EMEA”) region sales decreased 3%,1%, with ICL units down 11%,19%, mainly due to the current situation in the Middle East. Sales in the Middle East decreased 58% compared to the same period of last year. Excluding the impact of this decrease, EMEA region sales inincreased our12% distributorand markets, partially offset byunits increased sales in our direct markets.5%. The Americas region sales increased 26%,12%, with ICL unit growth up 28%,15%, primarily due to sales growth in the U.S. and Canada and Latin America. Changes in foreign currency favorablyunfavorably impacted net sales by $1.2$0.8 million.

Gross profit for the three and six months ended AprilJuly 3, 2026 increased 145.9%,112.6% and 127.9%, respectively, from the same periodperiods of 2025. Gross profit margin increased to 73.6%74.5% of revenue for the three months ended AprilJuly 3, 2026 compared to 65.8%74.0% of revenue for the three months ended MarchJune 28,27, 2025 and increased to 74.1% of revenue for the six months ended July 3, 2026 compared to 70.0% for the six months ended June 27, 2025, due to the elimination of period costs related to the ramp-up of manufacturing in Switzerland, a reduction in Advanced Manufacturing expenses as a result of our cost reductions implemented during the three months ended March 28, 2025, lower inventory provisions, and decreased freight and other cost of sales as a percentage of sales. This was partially offset by higher per unit manufacturing costs resulting from lower production volume in 2025.2025 and increased tariff expense on U.S.-manufactured product sold to China. Gross margin will continue to be impacted by tariffs until we can supply 100% of EVO and EVO+ ICL lenses for China from Switzerland, which should happen by the end of 2026.

General and administrative expenses for the three months ended AprilJuly 3, 2026 decreasedincreased 30.4%8.4% from the same period of 2025 due to decreasedincreased amortization of our cloud-based software and outside services,services associated with supporting our ERP system, partially offset by decreased salary-related and payroll tax expenses and bonus and stock-based compensation expenses and salary-related and payroll tax expenses.

Selling and marketing expenses for the three months ended AprilJuly 3, 2026 decreasedincreased 9.0%2.5% from the same period of 2025 due to decreasedseverance advertisingexpenses andtied promotionalto activitiesheadcount andreductions tradein showsGlobal and sales meeting expenses,Marketing, partially offset by baddecreased debt expensesalary-related and bonuspayroll and stock-based compensationtax expenses.

Research and development expenses for the three months ended AprilJuly 3, 2026 decreased 12.5%3.1% from the same period of 2025, due mainly to decreased salary-related and payroll tax expensesexpenses. Research and bonusdevelopment expenses for the six months ended July 3, 2026 decreased 8.0% from the same period of 2025, due mainly to decreased salary-related and stock-basedpayroll compensationtax expense and clinical expenses.

In the first half of 2025, the Companywe took a number of steps to change itsour leadership team, realign itsour leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. In addition, in 2026, as a result of the Cooperation Agreement with Broadwood, the Companywe incurred additional restructuring related charges related to leadership realignment as follows (in thousands):

The decrease in other income, net for the three and six months ended AprilJuly 3, 2026, was due mainly to higher foreign exchange losses forand thelower threeinterest months ended April 3, 2026.income.

The effective tax rates for the three months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025 were 36.7%26.9% and 0.5%,35.1%, respectively, and were 31.1% and 11.7% for the six months ended July 3, 2026 and June 27, 2025, respectively. Our effective tax rates differ from the U.S. federal statutory rate of 21%, primarily due to the income tax expense generated in foreign jurisdictions.

Our principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. If our anticipated future cash flow from operating activities is insufficient to satisfy our future capital requirements in the long-term, we may need to seek additional capital. Our financial condition at AprilJuly 3, 2026 and January 2, 2026 included the following (in thousands):

A summary of cash flows for the threesix months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025 was as follows (in thousands):

For the threesix months ended AprilJuly 3, 2026, net cash used in operating activities consisted of $42.7$45.4 million in working-capital changes primarily related to increaseschanges in accounts receivable due to higher sales in the first quarter of 2026,receivable, partially offset by $15.8$30.1 million in non-cash items primarily related to stock-based compensation, provision for sales returns and credit losses and depreciation of property, plant and equipment and $5.2$13.3 million in net income. For the threesix months ended MarchJune 28,27, 2025, net cash used in operating activities consisted of $54.2$71.0 million in net loss;loss, partially offset by $28.3$24.7 million in in non-cash items primarily related to impairment on fixed assets and operating leases and stock-based compensation and $13.3 million in working-capital changes primarily related to changes in accounts receivable, partially offset by changes in inventory, and $20.2 million in non-cash items primarily related to impairment on fixed assets and operating leases and stock-based compensation.inventory.

For the threesix months ended AprilJuly 3, 2026, net cash provided by investmentinvesting activities was $2.1$0.8 million which consistedincluded of $7.1$34.5 million of proceeds from the maturity and sale of investments AFS, partially offset by $4.5$32.7 million of purchases of investments AFS. For the threesix months ended MarchJune 28,27, 2025, net cash provided by investmentinvesting activities was $35.4$60.5 million which consistedincluded of $51.1$78.4 million of proceeds from the maturity and sale of investments AFS, partially offset by $14.7 million in purchases of investments AFS.