STAAR SURGICAL CO

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation and Significant Accounting Policies

STAAR Surgical Company, a Delaware corporation, was first incorporated in 1982, and together with its subsidiaries designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. The accompanying Condensed Consolidated Financial Statements present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations, certain information and footnote disclosures normally included in the Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of January 2, 2026 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 2, 2026.

The Condensed Consolidated Financial Statements for the three months ended April 3, 2026 and March 28, 2025, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three months ended April 3, 2026 and March 28, 2025, are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Each of the Company’s fiscal reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks. Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Reclassifications

The Company reclassified certain personnel costs including salary-related and payroll tax expenses, bonus and stock-based compensation related expenses and travel related expenses previously included in research and development to selling and marketing. These costs support internal and external training and education of the Company’s existing products, and as such, the Company determined that classification of these costs in selling and marketing better reflects the nature of the costs and financial performance of the Company as it operates. The Company has made certain reclassification adjustments to conform prior period amounts to current presentation, which include reclassification adjustments between Research and development expenses and Selling and marketing expenses on its Condensed Consolidated Statements of Operations as follows (in thousands):

The reclassification adjustments did not have a material impact on previously recorded amounts and had no impact on the Company’s Total selling, general and administrative expenses, Operating income (loss), Net income (loss) or Net earnings (loss) per share. The Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Comprehensive Income (Loss), Stockholders’ Equity and Cash Flows were not affected by changes in the presentation of these costs.

Additionally, non-cash lease expense is now presented on its own line in the Company’s Condensed Consolidated Statements of Cash Flows instead of combined with the changes in other current and non-current liabilities as follows (in thousands):

Net cash used in operating activities presented in the Condensed Consolidated Statements of Cash Flows was not affected by this change in presentation.

Note 1 — Basis of Presentation and Significant Accounting Policies (Continued)

Restructuring, Impairment and Related Charges

In the first half of 2025, the Company took a number of steps to change its leadership team, realign its leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. In addition, as a result of the termination of the Agreement and Plan of Merger (the “Merger Agreement” with Alcon Research, LLC, a Delaware limited liability company (“Alcon”) in January 2026 and the entry into a letter agreement (the “Cooperation Agreement”) with Broadwood Partners, L.P. and its affiliates (“Broadwood”), the Company incurred additional restructuring related charges due to leadership realignment. Restructuring, impairment and related charges were as follows (in thousands):

(1)

See also Note 7 – Other Current Liabilities

(2)

The Company will no longer be using these assets, see Note 5 – Property, Plant and Equipment.

(3)

The Company is actively pursuing subleasing opportunities, see Note 8 – Operating Leases.

Merger Transactions and Related Costs

In connection with the proposed merger with Alcon and the Cooperation Agreement, the Company incurred professional service expenses of $6,743,000 for the three months ended April 3, 2026. The Cooperation Agreement provided for the reimbursement of certain reasonable out-of-pocket fees and expenses to Broadwood, Yunqi Capital and Defender Capital related to the merger with Alcon. See Note 16 – Related Party Transactions.

Vendor Concentration

There were three vendors and two vendors that accounted for over 60% and 30%, respectively, of the Company’s consolidated accounts payable as of April 3, 2026 and January 2, 2026, respectively.

Segment Reporting

The Company’s chief operating decision maker (“CODM”) has been identified as the Co-Chief Executive Officers. The Company’s CODM manages and allocates resources to the operations of the Company on a consolidated basis. The CODM assesses performance by comparing actual results to forecasts and decides how to allocate resources, i.e., headcount and compensation, based on net income or on operating results, if a net loss. Significant segment expenses are consistent with those presented on the Condensed Consolidated Statements of Operations.

The measure of segment assets is reported on the balance sheet as total consolidated assets and the expenditures for additions to long-lived assets, and depreciation and amortization expense is consistent with those presented on the Condensed Statement of Cash Flows.

See Note 14 – Disaggregation of Sales, Geographic Sales and Product Sales and Note 15 – Geographic Assets for specific information regarding the Company’s sales and long-lived assets.

Note 1 — Basis of Presentation and Significant Accounting Policies (Continued)

Recent Accounting Pronouncements Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).” ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 requires footnote disclosure about specific expenses to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion and amortization recognized as part of oil- and gas-production activities or other types of depletion expenses. The tabular disclosure also would include certain other expenses, when applicable. ASU 2024-03 does not change or remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company adopted the annual disclosure requirements of ASU 2024-03 at the beginning of fiscal year 2026 and will adopt the interim disclosure requirement beginning in fiscal year 2027. The Company is currently evaluating the annual disclosure requirements and its effect on its annual report for fiscal year 2026.

Note 2 — Investments Available for Sale

Investments available for sale (“AFS”) and the related fair value measurement consisted of the following (dollars in thousands):

The Company obtains the fair value from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers and other industry and economic events.

Note 2 — Investments Available for Sale (Continued)

The Company assessed each debt security in a gross unrealized loss position to determine whether the decline in fair value below amortized cost was a result of credit losses or other factors, whether the Company expects to recover the amortized cost of the debt security, the Company’s intent to sell and whether it is more-likely-than-not that the Company will not be required to sell the debt security before the recovery of the amortized cost basis. There has been no allowance for expected credit losses recorded for the three months ended April 3, 2026 and March 28, 2025.

The following table shows the fair value of investments AFS by contractual maturity (in thousands):

During the three months ended April 3, 2026, several of the Company’s investments AFS with an aggregate fair value of $1,650,000 was subject to early redemption. The Company recognized a gain of less than $1,000 for the three months ended April 3, 2026. During the three months ended March 28, 2025, one of the Company’s investments AFS with an aggregate fair value of $362,000 was subject to early redemption. The Company recognized a gain of less than $1,000 for the three months ended March 28, 2025.

Note 3 — Inventories

Inventories, net are stated at the lower of cost and net realizable value, determined on a first-in, first-out basis and consisted of the following (in thousands):

(1)

Finished goods inventory includes consigned inventory of $7,146,000 and $9,619,000 for April 3, 2026 and January 2, 2026, respectively. See also Note 14 – Disaggregation of Sales, Geographic Sales and Product Sales to the Condensed Consolidated Financial Statements for further details.

Note 4 — Prepayments, Deposits, and Other Current Assets

Prepayments, deposits, and other current assets consisted of the following (in thousands):

(1)

No individual category in “Other” exceeds 5% of the total prepayments, deposits and other current assets.

Note 5 — Property, Plant and Equipment

Property, plant and equipment, net consisted of the following (in thousands):

As discussed in Note 1 – Basis of Presentation and Significant Accounting Policies, during the three months ended March 28, 2025, the Company recognized fixed asset impairment expense of $7,059,000 primarily on leasehold improvements and machinery and equipment as the Company will no longer be using these assets. The Company also recognized impairment of $2,751,000 for internally developed software that the Company will no longer be using as it will transition to a cloud-based software solution. These amounts are recorded in Restructuring, impairment and related charges on the Condensed Consolidated Statements of Operations.

Construction in process primarily consists of the build out and validation of machinery and equipment.

The Company recorded depreciation expense in the following categories as follows (in thousands):

Note 6 — Cloud-Based Software

The Company capitalized cloud-based software implementation costs related to several systems, including enterprise resource planning and customer relationship management systems, which were placed into service at the beginning of the second quarter of 2026. Capitalized cloud-based software costs, net consisted of the following (in thousands):

Activity related to cloud-based software was as follows (in thousands):

Note 7 — Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

(1)

As discussed in Note 1, during the three months ended April 3, 2026, the Company recognized costs in connection with its leadership realignment and related efforts. Of these costs, a total of $1,614,000 was recognized for severance costs related to leadership realignment. This amount is recorded in Restructuring, impairment and related charges on the Condensed Consolidated Statements of Operations. A majority of these severance payments will be paid monthly through mid-2027.

(2)

No individual category in “Other” exceeds 5% of the other current liabilities.

Note 8 — Operating Leases

The Company entered into operating leases primarily related to real property (office, manufacturing and warehouse facilities), automobiles and copiers. These operating leases aretwo toten years in length with options to extend. The Company does not include any lease extensions in the initial valuation unless the Company was reasonably certain to extend the lease. Depending on the lease, there are those with fixed payment amounts for the entire length of the contract or payments which increase periodically as noted in the contract or increased at an inflation rate indicator. For operating leases that increase using an inflation rate indicator, the Company used the inflation rate at the time the lease was entered into for the length of the lease term. Supplemental balance sheet information related to operating leases consisted of the following (dollars in thousands):

As discussed in Note 1, during the three months ended March 28, 2025, the Company recognized impairment on real property right-of-use assets of $3,407,000. The impairment relates to the Company’s decision to exit several of its leased properties, for which the Company has obtained a subtenant for one of its properties and is actively pursuing subleasing the remaining properties. The impairment was determined based on market comparables of similar subleased properties. The impairment is recorded in Restructuring, impairment and related charges on the Condensed Consolidated Statements of Operations.

Note 8 — Operating Leases (Continued)

Supplemental cash flow information related to operating leases was as follows (in thousands):

Future Maturities of Lease Liabilities

Estimated future maturities of lease liabilities under operating leases having initial or remaining non-cancelable lease terms more than one year as of April 3, 2026 is as follows (in thousands):

Note 9 — Income Taxes

The Company recorded an income tax provision (benefit) as follows (in thousands):

The effective tax rates for the three months ended April 3, 2026 and March 28, 2025 were 36.7% and 0.5%, respectively. The Company’s effective tax rates differ from the U.S. federal statutory rate of 21% for thethree months ended April 3, 2026 and March 28, 2025, respectively, primarily due to the income tax expense generated in foreign jurisdictions.

Note 10 — Defined Benefit Pension Plans

The Company has defined benefit plans covering employees of its Switzerland and Japan operations. The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

(1)

Recognized in selling general and administrative expenses on the Condensed Consolidated Statements of Operations.

(2)

Recognized in other income, net on the Condensed Consolidated Statements of Operations.

(3)

Amounts reclassified from accumulated other comprehensive income (loss).

Note 10 — Defined Benefit Pension Plans (Continued)

The Company currently is not required to and does not make contributions to its Japan pension plan. The Company’s contributions to its Swiss pension plan are as follows (in thousands):

Note 11 — Stockholders’ Equity

Incentive Plan

The Company maintains an Amended and Restated Omnibus Equity Incentive Plan, as amended (the “Equity Plan”). The Equity Plan allows for awards of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance stock units (“PSUs”) and other stock- and cash-based awards, including awards that are subject to service-based and performance-based vesting conditions. As of April 3, 2026, the Company had outstanding grants of stock options, RSUs and PSUs.

Stock options granted under the Equity Plan are granted at fair market value on the date of grant, become exercisable generally over athree-year period, or as determined by the Board of Directors (the “Board”), and expire over periods not exceeding 10 years from the date of grant. Certain stock options and stock-based awards provide for accelerated vesting if there is a change in control and pre-established financial metrics are met (as defined in the Equity Plan). Grants of restricted stock outstanding under the Equity Plan generally vest over periods ofone tothree years. Grants of RSUs and PSUs outstanding under the Equity Plan generally vest based on service, performance, or a combination of both. On June 19, 2024, stockholders approved a proposal to increase the number of shares under the Equity Plan by 2,600,000 shares, for a total of 22,805,000 shares. As of April 3, 2026, there were 344,635 shares available for grant under the Equity Plan.

Stock-Based Compensation

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

The Company recorded stock-based compensation costs in the following categories (in thousands):

Note 11 — Stockholders’ Equity (Continued)

Stock-Based Compensation (Continued)

As of April 3, 2026, total unrecognized compensation cost related to non-vested stock-based compensation arrangements were as follows (in thousands):

The cost is expected to be recognized over a weighted-average period of approximately two years.

Assumptions

The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model applying the weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of stock options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that stock options granted are expected to be outstanding. The Company has calculated a 15% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

Stock Options

A summary of stock option activity under the Equity Plan forthree months ended April 3, 2026 is presented below:

Restricted Stock, Restricted Stock Units and Performance Stock Units

A summary of RSU and PSU activity under the Equity Plan for thethree months ended April 3, 2026 is presented below (shares in thousands):

Note 12 - Commitments and Contingencies

Executive Agreements

The Company has entered into agreements with certain of its executives that provide for severance payments and benefits upon termination of employment by the company without “cause” or by the executive for “good reason” as defined in the applicable agreements. Certain executives are also party to agreements that provide for enhanced payments and benefits in connection with a termination of employment upon a “change in control.”

Litigation and Claims

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. These legal proceedings and other matters may relate to, among other things, contractual rights and obligations, employment matters, or claims of product liability. The Company maintains insurance coverage for various matters, including product liability and certain securities claims. While the Company does not believe that any of the claims known is likely to have a material adverse effect on the Company’s financial condition or results of operations, new claims or unexpected results of existing claims could lead to significant financial harm.

Note 13 — Basic and Diluted Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share amounts):

Because the Company had a net loss for the three months ended March 28, 2025, the number of diluted shares is equal to the number of basic shares. The following table sets forth (in thousands) the weighted average number of options to purchase shares of common stock, restricted stock, RSUs and PSUs with either exercise prices or unrecognized compensation cost per share greater than the average market price per share of the Company’s common stock, which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive.

Note 14 — Disaggregation of Sales, Geographic Sales and Product Sales

100% of the Company’s sales are generated from the ophthalmic surgical product segment and the CODM makes operating decisions and allocates resources based upon the consolidated operating results, and therefore the Company operates asone operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer Lenses (“ICLs”) used in refractive surgery. The composition of the Company’s net sales is primarily related to ICL sales. Net sales include sales of delivery systems and normal recurring sales adjustments such as sales return allowances. In the following tables, sales are disaggregated by category and sales by geographic market data.

The Company maintains finished goods inventory at different sites in the United States, Switzerland and Japan, and from time to time, consigns or ships finished goods inventory to surgeons, hospitals, and distributors in advance of anticipated demand. The Company maintains title and risk of loss on consigned inventory and generally does not recognize revenue for consignment inventory until the Company is notified that the lenses have been implanted. The following table disaggregates the Company’s consignment sales (in thousands):

In April 2025, in order to mitigate potential financial exposure from tariffs imposed by China, the Company negotiated and implemented consignment agreements with itstwo distributors in China and delivered consigned inventory to its distributors in advance of the implementation of tariffs and delivered additional consignment inventory throughout fiscal 2025. As this consigned inventory in China is purchased by the Company’s distributors, revenue associated with such consigned inventory will be recorded as consignment sales. China consignment sales for thethree months ended April 3, 2026 were $12,634,000.

The Company’s product is marketed and sold in more than 85 countries and its product is manufacturing in the United States and Switzerland. Sales are attributed to countries based on locations of customers. During 2025, the presentation of immaterial amounts related to normal recurring sales adjustments previously presented in foreign other sales are presented in the countries these normal recurring sales adjustments are attributable to. The composition of the Company’s net sales to unaffiliated customers was as follows (in thousands):

(1)

The China region includes sales into China and Hong Kong.

(2)

No other location individually exceeds 10% of the total net sales.

The Company’s China distributors accounted for 51% of net sales for thethree months ended April 3, 2026, and the Company’s Korea distributor accounted for 18% of net sales for thethree months ended March 28, 2025. As of April 3, 2026, the Company’s China distributors accounted for 57% of consolidated trade receivables, and as of January 2, 2026, the Company’s China distributors accounted for 33% of consolidated trade receivables.

Note 15 — Geographic Assets

The Company’s long-lived assets are located in the following geographical locations in which the Company operates. Other than the U.S. and Switzerland. The composition of the Company’s long-lived assets was as follows (in thousands):

(1)

No other location individually exceeds 10% of each category of long-lived assets.

Note 16 — Related Party Transactions

On January 14, 2026, following the termination of the Merger Agreement, STAAR entered into the Cooperation Agreement with Broadwood, and agreed, among other things, to increase the size of the Board from six to seven directors, accept the resignations of Mr. Farrell and Dr. Yeu from the Board, and appoint each of Messrs. Bradsher, LeBuhn and Wang (each a “New Director”) to the Board. Additionally, the Company agreed that the Board would nominate each New Director as a candidate for election as a director at the 2026 annual meeting of shareholders and that the size of the Board, until the conclusion of the 2027 annual meeting of shareholders, will not exceed seven directors. The Company also agreed to reimburse Broadwood, Yunqi Capital and Defender Capital for certain reasonable and documented out-of-pocket fees and expenses they have incurred. Each of Broadwood and Yunqi Capital were holders of more than 5% of the Company’s outstanding stock at the time the Company entered into the Cooperation Agreement. The Cooperation Agreement was reviewed and approved by the Company’s Board, and it reviewed and approved the payment of the fees and expenses incurred by Broadwood and Yunqi Capital. The Company paid $5,036,000 to Broadwood and $962,000 to Yunqi Capital, in accordance with the Cooperation Agreement.