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):

Three Months Ended October 2, 2026 Compared to the Three Months Ended September 26, 2025

Net sales for the three months ended October 2, 2026 decreased 12.0% from the same period of 2025. The decrease was due to the recognition of $25.9 million in net sales related to the previously disclosed December China Shipment in the prior period, which did not recur in the current period. The December China Shipment was paid in full during the three months ended September 26, 2025. Excluding the December China Shipment from the prior period, net sales would have increased 21.1%. The composition of our net sales is primarily related to ICL sales. Net sales also include sales of delivery system and normal recurring sales adjustments such as sales return allowances.

The sales decrease was driven by the Asia Pacific (“APAC”) region, which decreased 20%. Lower sales in China drove the decrease, due to the December China Shipment. In Japan, our second largest market, sales decreased 8% due to the impact of currency fluctuation. Excluding the effects of this impact, sales were essentially flat while units grew 1%. Sales in Korea also decreased due to weakness in demand. These decreases were partially offset by increases in Taiwan, India and other areas in the APAC region. Excluding the impact of the December China Shipment, APAC sales would have increased 20%.

Sales in the Europe, Middle East and Africa (“EMEA”) region increased 31%. The increase came mainly from higher sales in the EMEA direct and distributor markets, despite the current geopolitical situation in the Middle East. Sales in the Middle East decreased 2% during this period. Excluding the Middle East, the EMEA region sales increased 51%.

The Americas region sales increased 14%, primarily due to sales growth in the U.S. and Latin America.

Changes in foreign currency unfavorably impacted net sales by $1.0 million.

Nine Months Ended October 2, 2026 Compared to the Nine Months Ended September 26, 2025

Net sales for the nine months ended October 2, 2026 increased 48.9% from the same period of 2025, primarily due to increased sales in China. Net sales for the nine months ended September 26, 2025 included the December China Shipment, of which a payment of $1.6 million was received during the three months ended June 27, 2025 and the remaining $25.9 million was paid in full during the three months ended September 26, 2025. Excluding the December China Shipment from the prior period, net sales would have increased 75.5%.

Sales in the APAC region increased by 66% compared to the same period of 2025. Higher China, Taiwan, Japan and Korea and other APAC markets drove the increase. Lower sales in India partially offset these increases. Excluding the impact of the December China Shipment, APAC sales would have increased 112%.

The EMEA region sales increased 8% compared to the same period of 2025. The increase came from higher sales in EMEA direct markets. The increase was partially offset by lower sales in the EMEA distributor markets, mostly in the Middle East due to the current geopolitical situation in the region. Sales in the Middle East decreased 30% during this period. Excluding the Middle East, EMEA region sales increased 20%.

The Americas region sales increased 17%, primarily due to sales growth in the U.S. and Canada and Latin America.

Changes in foreign currency unfavorably impacted net sales by $0.6 million.

Gross Profit

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

Gross profit for the three months ended October 2, 2026 decreased 24.1% from the same period of 2025. Gross profit margin decreased to 70.9% of revenue for the three months ended October 2, 2026 compared to 82.2% of revenue for the three months ended September 26, 2025. Gross profit for the nine months ended October 2, 2026 increased 42.6% from the same period of 2025. Gross profit margin decreased to 73.1% of revenue for the nine months ended October 2, 2026 compared to 76.3% for the nine months ended September 26, 2025.

Gross profit and gross profit margin were partially affected by when the December China Shipment’s net sales and cost of sales were recognized. Its cost of sales was recognized in December 2024, when the product shipped. Its net sales were recognized at a 100% gross margin when payment was received: $1.6 million was received during the three months ended June

27, 2025 and the remaining $25.9 million during the three months ended September 26, 2025. Excluding the December China Shipment, gross profit would have been $52.0 million for the three months ended September 26, 2025 and $111.2 million for the nine months ended September 26, 2025. Gross profit margin would have been 75.5% for the three months ended September 26, 2025 and 72.1% for the nine months ended September 26, 2025. Excluding the December China Shipment, gross profit margin would have decreased for the three months ended October 2, 2026 and increased for the nine months ended October 2, 2026 compared to the same periods of 2025.

For the nine months ended October 2, 2026 two factors helped gross profit and gross profit margin compared to the same period of 2025:

•

Period costs related to the ramp-up of manufacturing in Switzerland were eliminated.

•

Advanced Manufacturing expenses were lower as a result of our cost reductions implemented during the three months ended March 28, 2025.

For both the three and nine months ended October 2, 2026, several factors hurt gross profit and gross profit margin compared to the same periods of 2025:

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Per unit manufacturing costs were higher because of lower production volume in 2025.

•

Per unit manufacturing costs were higher for product made in Switzerland and sold to China.

•

Tariff expense was higher on product made in the U.S. and sold to China.

•

Inventory provisions increased.

We expect tariffs will continue to affect gross profit margin until we can supply 100% of EVO and EVO+ICL lenses for China from inventory produced in Switzerland. Although all new ICL’s for China were manufactured in Switzerland starting the third quarter of 2026, any U.S. product in inventory and sold to China will continue to be subject to tariffs.

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 October 2, 2026 decreased 9.0% from the same period of 2025 due to decreased bonus and stock-based compensation expenses, partially offset by increased amortization of our cloud-based software and outside services associated with supporting our ERP system.

General and administrative expenses for the nine months ended October 2, 2026 decreased 11.4% from the same period of 2025 due to decreased bonus and stock-based compensation expenses and salary-related and payroll tax expenses, partially offset by increased amortization of our cloud-based software.

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 October 2, 2026 increased 3.6% from the same period of 2025 due to increased amortization of our cloud-based software and outside services associated with supporting our ERP system and advertising and promotional activities, partially offset by decreased bonus and stock-based compensation expenses.

Selling and marketing expenses for the nine months ended October 2, 2026 decreased 1.2% from the same period of 2025 due to decreased advertising and promotional activities, salary-related and payroll tax expenses and trade shows and sales meeting expenses, partially offset by increased amortization of our cloud-based software and outside services associated with supporting our ERP system, severance expenses tied to headcount reductions in Global Marketing and bad debt expense.

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 October 2, 2026 increased 13.6% from the same period of 2025, due mainly to increased amortization of our cloud-based software and outside services associated with supporting our ERP system, salary-related and payroll tax expenses, and other clinical and medical affairs outside service expenses.

Research and development expenses for the nine months ended October 2, 2026 decreased 1.6% from the same period of 2025, due mainly to decreased salary-related and payroll tax expense, clinical expenses and bonus and stock-based compensation, partially offset by increased amortization of our cloud-based software and outside services associated with supporting our ERP system.

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, 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. In addition, in 2026, as a result of the Cooperation Agreement with Broadwood, we 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):

• Denotes change is greater than+100%.

The increase in other income, net for the three months ended October 2, 2026, was due mainly to lower foreign exchange losses and higher interest income. The decrease in other income, net for the nine months ended October 2, 2026, was due to higher foreign exchange losses and lower interest income.

Provision for Income Taxes

The following table presents our income tax provision (dollars in thousands):

• Denotes change is greater than+100%.

The effective tax rates for the three months ended October 2, 2026 and September 26, 2025 were 20.1% and 52.7%, respectively, and were 28.2% and (0.9)% for the nine months ended October 2, 2026 and September 26, 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 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 October 2, 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 beyond 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 nine months ended October 2, 2026 and September 26, 2025 was as follows (in thousands):

For the nine months ended October 2, 2026, net cash provided by operating activities consisted of $36.3 million in non-cash items primarily related to stock-based compensation, depreciation of property, plant and equipment and changes in inventory provision and $18.8 million in net income, partially offset by $29.8 million in working-capital changes primarily related to changes in accounts receivable and partially offset by changes in inventories. For the nine months ended September 26, 2025, net cash used in operating activities consisted of $62.1 million in net loss and $17.6 million in working-capital changes primarily related to changes in inventories, cloud-based software and accounts payable and other current and non-current liabilities and partially offset by changes in accounts receivable; this was partially offset by $49.4 million in in non-cash items primarily related to stock-based compensation and impairment on fixed assets and operating leases.

For the nine months ended October 2, 2026, net cash used in investing activities was $39.9 million which included $81.9 million of purchases of investments AFS, partially offset by $43.9 million of proceeds from the maturity and sale of investments AFS. For the nine months ended September 26, 2025, net cash provided by investing activities was $65.8 million which included $96.4 million of proceeds from the maturity and sale of investments AFS, partially offset by $26.5 million in purchases of investments AFS.

For the nine months ended October 2, 2026, net cash used in financing activities was $4.5 million which consisted of $5.9 million to repurchase employee common stock for taxes withheld, partially offset by $1.4 million of proceeds from the exercise of stock options. For the nine months ended September 26, 2025, net cash used in financing activities was $4.5 million which primarily consisted of $6.5 million of repurchases of common stock pursuant to our share repurchase program and $1.4 million to repurchase employee common stock for taxes withheld, partially offset by $3.4 million of proceeds from the exercise of stock options.

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.”