STAAR SURGICAL CO

The following table shows the percentage of our total sales represented by certain items reflected in our Condensed Consolidated Statements of Income for the periods indicated.

Net Sales

The following table presents our net sales (dollars in thousands):

Net sales for the three months ended April 3, 2026 increased 119.6% 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%, with ICL unit increase of 227%. The increase in the APAC region was driven by increased sales in China, Japan and Korea. The Europe, Middle East and Africa region sales decreased 3%, with ICL units down 11%, due to decreased sales in our distributor markets, partially offset by increased sales in our direct markets. The Americas region sales increased 26%, with ICL unit growth up 28%, primarily due to sales growth in the U.S. Changes in foreign currency favorably impacted net sales by $1.2 million.

Gross Profit

The following table presents our gross profit and gross profit margin (dollars in thousands):

Gross profit for the three months ended April 3, 2026 increased 145.9%, from the same period of 2025. Gross profit margin increased to 73.6% of revenue for the three months ended April 3, 2026 compared to 65.8% of revenue for the three months ended March 28, 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.

General and Administrative Expense

The following table presents our general and administrative expenses (dollars in thousands):

General and administrative expenses for the three months ended April 3, 2026 decreased 30.4% from the same period of 2025 due to decreased outside services, bonus and stock-based compensation expenses and salary-related and payroll tax expenses.

Selling and Marketing Expense

The following table presents our selling and marketing expenses (dollars in thousands):

Selling and marketing expenses for the three months ended April 3, 2026 decreased 9.0% from the same period of 2025 due to decreased advertising and promotional activities and trade shows and sales meeting expenses, partially offset by bad debt expense and bonus and stock-based compensation expenses.

Research and Development Expense

The following table presents our research and development expenses (dollars in thousands):

Research and development expenses for the three months ended April 3, 2026 decreased 12.5% from the same period of 2025, due mainly to decreased salary-related and payroll tax expenses and bonus and stock-based compensation expenses.

Merger Transaction and Related Costs

At the special meeting of shareholders held on January 6, 2026, the Company’s shareholders voted against the merger with Alcon. Following the termination of the Merger Agreement, the Company entered into the Cooperation Agreement with Broadwood, which 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. The following table presents our professional services expenses we incurred in connection with the proposed merger with Alcon and the Cooperation Agreement (dollars in thousands):

Restructuring, Impairment and Related Charges

The following table presents our restructuring, impairment and related charges (dollars in thousands):

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, in 2026, as a result of the Cooperation Agreement with Broadwood, the Company incurred additional restructuring related charges related to leadership realignment as follows (in thousands):

(1)

The Company will no longer be using these assets.

(2)

The Company is actively pursuing subleasing opportunities.

Other Income, Net

The following table presents our other income, net (dollars in thousands):

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

Provision (Benefit) for Income Taxes

The following table presents our income tax provision (benefit) (dollars 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. 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 future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Liquidity and Capital Resources

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 April 3, 2026 and January 2, 2026 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 policy’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 of 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.

A summary of cash flows for the three months ended April 3, 2026 and March 28, 2025 was as follows (in thousands):

For the three months ended April 3, 2026, net cash used in operating activities consisted of $42.7 million in working-capital changes primarily related to increases in accounts receivable due to higher sales in the first quarter of 2026, partially offset by $15.8 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 million in net income. For the three months ended March 28, 2025, net cash used in operating activities consisted of $54.2 million in net loss; partially offset by $28.3 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.

For the three months ended April 3, 2026, net cash provided by investment activities was $2.1 million which consisted of $7.1 million of proceeds from the maturity and sale of investments AFS, partially offset by $4.5 million of purchases of investments AFS. For the three months ended March 28, 2025, net cash provided by investment activities was $35.4 million which consisted of $51.1 million of proceeds from the maturity of investments AFS, partially offset by $14.7 million in purchases of investments AFS.

For the three months ended April 3, 2026, net cash used in financing activities was $1.7 million which primarily consisted of $1.9 million to repurchase employee common stock for taxes withheld. For the three months ended March 28, 2025, net cash used in financing activities was $0.9 million which primarily consisted of $1.3 million to repurchase employee common stock for taxes withheld.

Commitments

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.”