RxSight Inc

Previous wording

We are a commercial-stage medical technology company dedicated to providing high quality customized vision to patients following cataract surgery. Our proprietary RxSight® Light Adjustable Lens system (“RxSight system”) is the first and only commercially available premium cataract technology that enables doctors to customize and optimize visual acuity for patients after surgery. The RxSight system is comprised of our RxSight Light Adjustable Lens® (“LAL”®), RxSight Light Delivery Device (“LDD”™) and accessories. Our LAL is a premium intraocular lens (“IOL”) made of proprietary photosensitive material that changes shape in response to specific patterns of ultraviolet (“UV”) light generated by our LDD.

Current wording

We are a commercial-stage medical technology company dedicated to providing high quality customized vision to patients following cataract surgery. Our proprietary RxSight® Light Adjustable Lens system (“RxSight system”) is the first and only commercially available premium cataract technology that enables doctors to customize and optimize visual acuity for patients after surgery. The RxSight system is comprised of our RxSight Light Adjustable Lens™ (“LAL™” and “LAL+®”, collectively the “LAL”), RxSight Light Delivery Device (“LDD™”), and accessories. Our LAL's are premium intraocular lens (“IOL”) made of proprietary photosensitive material that changes shape in response to specific patterns of ultraviolet (“UV”) light generated by our LDD.

Previous wording

We compete primarily in the IOL market in the U.S. The LAL is a premium IOL which is partially reimbursable under Medicare, and in some cases by private payors. Premium IOLs are sold at a higher price point than conventional IOLs, as they provide refractive correction of vision unlike a conventional IOL that only replaces the natural lens with a clear lens (which is the standard for Medicare reimbursement). Our RxSight system is approved in Mexico and Canada for improving uncorrected visual acuity by adjusting the LAL power to correct residual postoperative refractive error. We may selectively pursue commercial expansion in these or other geographies that accept these approvals in the future, with a priority on markets where we see significant potential future opportunities. New approvals may also be sought in large foreign cataract markets with more complex regulatory processes such as Asia.

Current wording

We compete primarily in the IOL market in the U.S. The LAL is a premium IOL which is partially reimbursable under Medicare, and in some cases by private payors. Premium IOLs are sold at a higher price point than conventional IOLs, as they provide refractive correction of vision unlike a conventional IOL that only replaces the natural lens with a clear lens (which is the standard for Medicare reimbursement). Our RxSight system has regulatory approval in the U.S., Europe, Canada, Mexico and Korea. We may selectively pursue commercial expansion in these or other geographies that accept these approvals in the future, with a priority on markets where we see significant potential opportunities. New approvals may also be sought in large foreign cataract markets with more complex regulatory processes such as Asia and Europe.

Previous wording

Our commercial efforts began in 2019 and have been primarily focused in the United States, where we are building a “razor and razor blade” business model to drive new customer adoption and ongoing LAL volume growth. Our United States commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 4,000 U.S. cataract surgeons that perform 70%-80% of all premium IOL procedures. As of December 31, 2023, we had established an installed base of 666 LDDs in ophthalmology practices and, since our inception though December 31, 2023, surgeons have implanted over 96,000 LALs.

Current wording

Our commercial efforts began in late 2019 and have been primarily focused in the United States, where we are building a “razor and razor blade” business model to drive new customer adoption and ongoing LAL volume growth. Our United States commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 3,500 to 4,000 U.S. cataract surgeons that perform approximately 60% of all premium IOL procedures. As of December 31, 2024, we had established an installed base of 971 LDDs in ophthalmology practices and, since our inception though December 31, 2024, surgeons have implanted over 195,000 LALs.

Previous wording

We intend to continue to make investments in our sales and marketing organization, primarily sales representatives, clinical applications specialists and technical service personnel to support new customers and upgrades and LAL account managers to facilitate adoption of use of our LALs among existing accounts. We will expand our marketing efforts with additional print and digital, social media and other customer tools to expand their local advertising. We will also continue to make significant investments in research and development and clinical expenses to make enhancements in our current products. Additionally, as a public company, we have incurred and expect to continue to incur increased costs for employee-related expenses, director and officer insurance premiums, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), legal fees, investor relations fees and fees to members of our Board and expenses for compliance with public-company reporting requirements. Because of these and other factors, we expect to continue to incur net losses and negative cash flows from operations in the near future.

Current wording

We intend to continue to make investments in our sales and marketing organization, primarily sales representatives, clinical applications specialists and technical service personnel to support new customers and upgrades and LAL account managers to facilitate adoption of use of our LALs among existing accounts. We will expand our marketing efforts with additional print and digital, social media and other customer tools to expand their local advertising. We will also continue to make significant investments in research and development and clinical expenses to make enhancements in our current products. Additionally, as a public company, we have incurred and expect to continue to incur increased costs for employee-related expenses, director and officer insurance premiums, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), legal fees, investor relations fees, fees to members of our Board of directors and expenses for compliance with public-company reporting requirements. Because of these and other factors, we expect to continue to incur net losses and negative cash flows from operations in the near future.

Previous wording

We regularly review several operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. We believe the number of LDDs installed and, LALs implanted are indicators of our ability to drive adoption and generate revenue. We believe these are important metrics for our business. We may not yet be able to accurately assess seasonality and other trends, and we will continue to evaluate our business in the future using these and other financial metrics as we observe trends in our business.

Current wording

We regularly review several operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. We believe the number of LDDs installed and, LALs implanted are indicators of our ability to drive adoption and generate revenue. We believe these are important metrics for our business. We may not yet be able to accurately assess seasonality and other trends, and we will continue to evaluate our business in the future using these and other financial metrics as we observe trends in our business. Our quarterly and annual financial results may fluctuate as a result of a variety of factors many of which are outside our control. For example, it is not uncommon in our industry to experience seasonally weaker sales during the summer months and end-of-year holiday season. We may be affected by other seasonal trends in the future, including severe weather (which can impact the number of elective procedures performed), particularly as our business matures. Additionally, this seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue. To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics and make forecasting our future operating results and financial metrics more difficult.

Previous wording

We believe the number of LDDs sold in each quarter and our LDD installed base at the end of each period are important metrics as they represent an installed base into which we can sell our LALs. Our fourth quarter of 2023 was consistent with the typical seasonality patterns for cataract surgery volumes, which tend to be stronger in the fourth quarter.

Current wording

We believe the number of LDDs sold in each quarter and our LDD installed base at the end of each period are important metrics as they represent an installed base into which we can sell our LALs. We also believe the number of LALs sold (reported as implanted in a patient) in each quarter is an important metric indicative of adoption and utilization of our RxSight system.

Previous wording

During 2023, we had increased LDD sales of 71 and increased LAL sales of 29,589 when compared to 2022 from strong adoption of our RxSight technology by practices and doctors combined with an increased LDD installed base.

Current wording

During 2024, we had increased LDD sales of 39 and increased LAL sales of 43,182 when compared to 2023 from strong adoption of our RxSight technology by practices and doctors combined with an increased LDD installed base.

Previous wording

For the year ended December 31, 2023 and 2022, revenue from contracts with customers consisted of the following (in thousands):

Current wording

For the years ended December 31, 2024 and 2023, revenue from contracts with customers consisted of the following (in thousands):

Previous wording

For the year ended December 31, 2023 and 2022 we had no customers who individually accounted for more than 10% of revenue.

Current wording

For the year ended December 31, 2024 and 2023 we did not have any one customer who individually accounted for more than 10% of revenue.

Previous wording

Our LDD, as is typical of many medical device capital equipment products, has a low gross margin, as the material cost of the LDD is significant, representing greater than 50% of the total cost to manufacture. In addition, we do not mark up our LDD substantially, as LDDs, as sold, generate LAL procedures. Our LAL gross margin is higher, with low material cost but high fixed overhead costs. As our manufacturing volume of the LAL increases, we expect the gross margin may improve significantly.

Current wording

Our LDD, as is typical of many medical device capital equipment products, has a lower gross margin than the IOL, as the material cost of the LDD is significant, representing approximately 50% of the total cost to manufacture. In addition, the list price for and average selling price of our LDD are priced reasonably because LDDs, once sold, generate LAL procedures. Our LAL gross margin is higher, with low material cost but high fixed overhead costs. As our manufacturing volume of the LAL increases and the percentage of revenue from the LAL increases as a percentage of sales, we expect gross margin may continue to improve.

Previous wording

Selling, general and administrative (“SG&A”), expenses consist primarily of personnel-related expenses, including wages, incentive bonuses, stock-based compensation and benefits related to administrative, selling and marketing functions, education programs for doctors, commercial operations and analytics, finance, information technology and human resource functions. Other SG&A expenses include sales commissions, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, training for doctors, professional services fees such as legal, patent registration costs, accounting, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), tax fees, board of directors’ expenses, insurance costs, general corporate expenses and facilities-related expenses. We expect SG&A expenses to continue to increase in absolute dollars as we expand our sales and marketing organization and infrastructure to both drive and support the anticipated growth in revenue and due to additional legal, accounting audit and tax fees, insurance and other expenses associated with being a public company.

Current wording

Selling, general and administrative (“SG&A”), expenses consist primarily of personnel-related expenses, including wages, incentive bonuses, stock-based compensation and benefits related to administrative, selling and marketing functions, education programs for doctors, commercial operations and analytics, finance, information technology and human resource functions. Other SG&A expenses include sales commissions, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, training for doctors, professional services fees such as legal, patent registration costs, accounting, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), tax fees, board of directors’ expenses, insurance costs, general corporate expenses and facilities-related expenses.

Previous wording

Interest expense consist primarily of interest incurred on indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with indebtedness and interest on leases.

Current wording

Interest expense consist primarily of interest incurred on indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with our indebtedness and interest on leases.

Previous wording

Loss on extinguishment of term loan consist of the loss from extinguishment of term loan due to repayment of the Oxford debt.

Current wording

Loss on extinguishment of term loan consist of the loss from extinguishment of term loans due to repayment to Oxford Finance, LLC (“Oxford”). For more information regarding our prior term debt arrangement with Oxford, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) – Liquidity and Capital Resources – Refinancing and Payoff of Oxford Debt” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 28, 2024 (the “2023 Form 10-K”), which is incorporated herein by reference.

Previous wording

Sales increased by $40.1 million, or 81.8%, to $89.1 million for the year ended December 31, 2023 from $49.0 million for the year ended December 31, 2022. The increase was due to incremental sales of 29,589 LALs primarily due to an increased LDD installed base of 266 and incremental sales of 71 LDDs from strong adoption of our RxSight technology by practices and doctors.

Current wording

Sales increased by $50.8 million, or 57.1%, to $139.9 million for the year ended December 31, 2024 from $89.1 million for the year ended December 31, 2023. The increase was due to incremental sales of 43,182 LALs primarily due to continued penetration in existing customers, an increased LDD installed base of 305 and incremental sales of 39 LDDs from strong adoption of our RxSight technology by practices and doctors.

Previous wording

Cost of sales increased by $7.6 million, or 27.6%, to $35.3 million for the year ended December 31, 2023 from $27.7 million for the year ended December 31, 2022, primarily due to the increase in the number of LALs and LDDs sold during the period. Gross margin increased to 60.4% in the year ended December 31, 2023 from 43.5% in 2022 primarily due to improved operating leverage, favorable product mix from a greater percentage of revenue from LAL sales and increased margins on our LDD due to lower material costs from the introduction of our compact LDD during the third quarter of 2023.

Current wording

Cost of sales increased by $5.7 million, or 16.1%, to $41.0 million for the year ended December 31, 2024 from $35.3 million for the year ended December 31, 2023, primarily due to the increase in the number of LALs and LDDs sold during the period. Gross margin increased to 70.7% in the year ended December 31, 2024 from 60.4% in 2023 primarily due to improved operating leverage, favorable product mix from a greater percentage of revenue from LAL sales and increased margins on our LDD due to lower material costs from the introduction of our compact LDD during the third quarter of 2023.

Previous wording

Selling, general and administrative expenses increased by $16.1 million, or 27.5%, to $74.8 million for the year ended December 31, 2023, from $58.7 million for the year ended December 31, 2022. This increase was primarily attributable to an increase in selling and marketing personnel costs of $12.5 million due mainly to additional headcount of 29, increased sales commissions, incentive bonuses and employee benefits of $7.5 million, $2.0 million of increased stock-based compensation expense, $0.9 million in additional post market study costs, and new customer acquisition costs, in each case when compared to the year ended December 31, 2022. General and administrative expenses increased by $3.7 million primarily due to an additional $2.5 million from increased personnel costs and increased stock-based compensation as well as $1.7 million of increased legal, audit and audit related costs related to operating as a public company.

Current wording

Selling, general and administrative expenses increased by $26.6 million, or 35.6%, to $101.4 million for the year ended December 31, 2024, from $74.8 million for the year ended December 31, 2023. This increase was primarily attributable to an increase in selling and marketing personnel costs of $19.4 million due mainly to additional headcount of 44, increased sales commissions, incentive bonuses and employee benefits of $9.4 million, $3.2 million of increased stock-based compensation expense, $3.7 million in additional marketing study costs, and new customer acquisition costs, in each case when compared to the year ended December 31, 2023. General and administrative expenses increased by $7.2 million due to increased personnel expenses of $2.6 million, and increased stock-based compensation of $2.8 million and as well as $1.6 million of increased sales tax, outside services, software licenses and bank fees due to an increase in our general administration infrastructure to support an increased installed base and revenues.

Previous wording

Research and development expenses increased by $3.1 million to $29.1 million for the year ended December 31, 2023 from $26.0 million for the year ended December 31, 2022, an increase of 11.4%. This increase was primarily attributable to $2.9 million in increased personnel costs which includes stock-based compensation and $0.4 million in increased clinical study costs.

Current wording

Research and development expenses increased by $5.3 million to $34.4 million for the year ended December 31, 2024 from $29.1 million for the year ended December 31, 2023, an increase of 18.3%. This increase was primarily attributable to $2.9 million in increased facility costs due to increased research and development infrastructure, $2.2 million in increased personnel costs which includes stock-based compensation and $0.4 million in increased clinical study costs.

Previous wording

Other income (expense), net decreased by $4.9 million to income of $1.5 million for the year ended December 31, 2023 from expense of $3.4 million for the year ended December 31, 2022. This change was primarily due to increased interest income of $5.1 million from higher interest rates earned on higher short-term investment balances and decreased interest expense of $1.6 million on the Oxford term loan, which were offset by an increase of $1.8 million loss from extinguishment of term loan due to the repayment of the Oxford debt.

Current wording

Other income (expense), net increased by $8.0 million to income of $9.5 million for the year ended December 31, 2024 from income of $1.5 million for the year ended December 31, 2023. This change was primarily due to increased interest income of $2.9 million primarily from higher short-term investment balances and decreased interest expense of $3.3 million on the Oxford term loan and a decrease of $1.8 million loss from extinguishment of term loan due to the repayment of the Oxford debt.

Previous wording

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses in the future.

Current wording

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will continue to incur losses in the near future.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $9.7 million, short-term investments of $117.5 million, and accumulated deficit of $594.6 million. For the years ended December 31, 2023 and 2022, our net losses from operations were $50.1 and $63.3 million, respectively. We generated sales of $89.1 million and had a net loss of $48.6 million for the year ended December 31, 2023, compared to sales of $49.0 million and net loss of $66.8 million for the year ended December 31, 2022.

Current wording

As of December 31, 2024, we had cash and cash equivalents of $16.7 million, short-term investments of $220.5 million, and accumulated deficit of $622.1 million. For the years ended December 31, 2024 and 2023, our net losses from operations were $36.9 and $50.1 million, respectively. We generated sales of $139.9 million and had a net loss of $27.5 million for the year ended December 31, 2024, compared to sales of $89.1 million and net loss of $48.6 million for the year ended December 31, 2023.

Previous wording

On August 8, 2022, we filed a $200.0 million shelf registration statement which became effective on August 12, 2022. The shelf registration is effective for three years and permits us to sell, from time to time, up to $200.0 million in aggregate value of our common stock, preferred stock, debt securities, warrants, and/or units. The shelf registration statement was intended to provide us with flexibility to access additional capital when market conditions are appropriate. At the time of filing the shelf registration statement, we also filed a prospectus supplement to sell up to an aggregate value of $50.0 million dollars of our common stock through an ATM offering, through BofA Securities, Inc. as sales agent (the “ATM Facility”).

Current wording

On May 8, 2024, we filed an automatic shelf registration statement on Form S-3 (“shelf registration statement”). The shelf registration statement is effective for three years and permits us to sell, from time to time, common stock, preferred stock, debt securities, warrants, and/or units. The shelf registration statement is intended to provide us with the flexibility to access additional capital. At the time of filing the shelf registration statement, we also filed a prospectus supplement to sell up to an aggregate value of $115.0 million dollars of common stock through a public offering (“Public Offering”).

Previous wording

As of the date of this report, a total of 2,617,964 shares of our common stock, for total gross proceeds of $50.0 million (net proceeds of $47.5 million), representing the full authorized amount under the ATM Facility, have been issued and sold. On February 7, 2023, we entered into an underwriting agreement with BofA Securities, Inc., pursuant to which we agreed to issue and sell 4,000,000 shares of our common stock in a public offering, pursuant to the shelf registration statement. The shares of common stock were sold at a price to the public of $12.50 per share. Under the terms of the underwriting agreement, we also granted the underwriters an option exercisable for 30 days from the date of the underwriting agreement to purchase up to an additional 600,000 shares of common stock on the same terms and conditions. The public offering closed on February 10, 2023. The underwriters' option was exercised in full on February 10, 2023 and closed on February 14, 2023. We received net proceeds of approximately $53.6 million from the public offering, after deducting underwriters' discounts and commissions of $3.5 million and offering expenses of $0.5 million.

Current wording

On May 8, 2024, we entered into an underwriting agreement with BofA Securities, Inc., in which we agreed to issue and sell 1,785,714 shares of our common stock in a Public Offering, pursuant to the shelf registration statement. The shares of common stock were sold at a price to the public of $56.00 per share. Under the terms of the underwriting agreement, we also granted the underwriters an option exercisable for 30 days from the date of the underwriting agreement to purchase up to an additional 267,857 shares of common stock on the same terms and conditions. The underwriters' option was exercised in full on May 10, 2024 and the Public Offering (inclusive of the underwriters' option shares) closed on May 13, 2024. We received net proceeds of approximately $107.5 million from the Public Offering, after deducting underwriters' discounts and commissions of $6.9 million and other offering expenses of $0.6 million.

Previous wording

our ability to borrow or raise additional funds through future debt or equity offerings to finance our operations;

Current wording

our ability to raise additional funds or borrow to finance our operations;

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $9.7 million, short-term investments of $117.5 million, and an accumulated deficit of $594.6 million. We believe that our current cash, cash equivalents and short-term investments through the date of filing of this report will be sufficient to fund our operations for at least the next 12 months. Although, based on our current planned operations, we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations, as the same may be disclosed in the Company’s future Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q filed with the SEC, we may be required to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities or by entering into partnerships or a combination of one or more of these funding sources in order to meet our liquidity requirements. If we raise additional funds by issuing equity securities, our stockholders may experience dilution.

Current wording

As of December 31, 2024, we had cash and cash equivalents of $16.7 million, short-term investments of $220.5 million, and an accumulated deficit of $622.1 million. We believe that our current cash, cash equivalents and short-term investments through the date of filing of this report will be sufficient to fund our operations for at least the next 12 months. Although, based on our current planned operations, we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations, as the same may be disclosed in the Company’s future Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q filed with the SEC, we may be required to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities or by entering into partnerships or a combination of one or more of these funding sources in order to meet our liquidity requirements. We may also opportunistically raise capital under advantageous circumstances from time to time, such as the Public Offering, in order to support the expansion of our sales and operations in the U.S. and internationally and to pursue other business opportunities. If we determine that we need to raise additional funds, which may not be available to us when needed or on terms that we deem to be favorable. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected, including potentially requiring us to delay, limit, reduce or terminate certain of our product discovery and development activities or future commercialization efforts. If we raise additional funds by issuing equity securities, our stockholders may experience dilution.

Previous wording

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below:

Current wording

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below (in thousands):

Previous wording

Net cash used in operating activities for the year ended December 31, 2022 was $58.8 million, consisting primarily of a net loss of $66.8 million, a change in operating assets and liabilities of $7.4 million, partially offset by non-cash stock-based compensation of $11.4 million, and depreciation and amortization of $3.9 million.

Current wording

Net cash used in operating activities for the year ended December 31, 2024 was $17.0 million consisting primarily of a net loss of $27.5 million, a change in operating assets and liabilities of $9.2 million, partially offset by non-cash stock-based compensation of $24.6 million, and depreciation and amortization of $3.6 million.

Previous wording

Net cash provided by investing activities for the year ended December 31, 2022 was $40.0 million, consisting of net maturity of short-term investments of $42.3 million which was partially offset by purchases of property and equipment of $2.4 million.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $99.3 million, consisting of net purchases of short-term investments of $93.9 million and purchases of property and equipment of $5.4 million.

Previous wording

Net cash provided by financing activities for the year ended December 31, 2023 was $61.5 million, consisting primarily of proceeds from issuances of common stock from our public offering of $54.1 million, proceeds from issuance of common stock for at-the-market offerings of $42.4 million and proceeds from issuance of common stock of $9.5 million partially offset by a net paydown of the June 2023 LSA of $40.0 million.

Current wording

Net cash provided by financing activities for the year ended December 31, 2023 was $61.5 million, consisting primarily of proceeds from issuances of common stock from our public offering of $54.1 million, proceeds from issuance of common stock for at-the-market offerings of $42.4 million and proceeds from issuance of common stock of $9.5 million pursuant to equity compensation programs, partially offset by a net paydown of the June 2023 LSA Oxford term debt of $40.0 million.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, which may affect our future financial statement presentation, financial condition, results of operations and cash flows.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, which may affect our future financial statement presentation, financial condition, results of operations and cash flows.

Previous wording

While our significant accounting policies are described in more detail in the “Summary of Accounting Polices” in Note 2 in the Notes to Consolidated Financial Statements included in Part II - Item 8 in this report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Current wording

We believe that the accounting policies we use are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results. Our significant accounting policies are described in more detail in the “Summary of Accounting Polices” in Note 2 in the Notes to Consolidated Financial Statements included in Part II – Item 8 in this report. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that of all our significant accounting policies, the following accounting policies we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, the policies below are what we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Previous wording

Our revenue is generated from the sale of LALs used in cataract surgery along with a specifically designed machine for delivering light to the eye, the LDD, to adjust the lens post-surgery. Revenue is recognized from sales of products in the U.S. Canada and Europe to ambulatory surgery centers, hospitals, and physician private practices.

Current wording

Our revenue is generated from the sale of LALs used in cataract surgery along with a specifically designed machine for delivering light to the eye, the LDD, to adjust the lens post-surgery. Revenue is recognized from sales of products in the U.S. Canada, Europe and Asia to ambulatory surgery centers, hospitals, and physician private practices.

Previous wording

We recognize LDD revenue primarily at the point in time at installation and customer acceptance of the LDD is satisfied. LALs are held at customer sites on consignment. Revenue is recognized for LALs upon customer notification that the LALs have been implanted in a patient. The timing of revenue recognition for LDD transactions and LAL transactions requires management judgment. Revenue recognition is reasonably likely to have a material impact on our financial condition and results of operations.

Current wording

We recognize LDD revenue primarily at the point in time at installation and customer acceptance of the LDD is satisfied. LALs are generally held at customer sites on consignment. In limited instances distributors may purchase small quantities of our products primarily to support clinical studies outside the U.S. Revenue is recognized for LALs upon customer notification that the LALs have been implanted in a patient or when title transfers to the distributor in a limited number. The timing of revenue recognition for LDD transactions and LAL transactions requires management judgment. Revenue recognition is reasonably likely to have a material impact on our financial condition and results of operations.

Previous wording

We rely on third parties, including single and sole source suppliers, to manufacture certain components and subcomponents of our products. We do not have long-term supply agreements with, or guaranteed commitments from our suppliers, including single and sole source suppliers. We utilize purchase orders or blanket orders covering the medium term of 18–24 months for the majority of our supplier base. While we depend on our suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements, vendors will miss delivery dates, extend delivery dates or in some circumstances cancel purchase orders because these suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand. The expansion of global lead times has resulted in the lack of availability of raw materials, including semiconductors, computers, monitors electronic parts, metals, packaging, adhesives, chemicals, resins and subcontract painted components. Certain suppliers have passed on higher prices, surcharges and expedited shipping fees to defray the higher commodity prices they are paying due to short supply and pushed out delivery dates. Additionally, due to these supply chain constraints we will identify and qualify new vendors or substitute components which requires testing, validations and documentation adding to internal costs and diverting engineering resources from other projects. While we have taken measures to mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us. Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components or subcomponents used in our products would limit our ability to manufacture our current and new products and could have a material adverse effect on our business, financial condition and results of operations.

Current wording

We rely on third parties, including single and sole source suppliers, to manufacture certain components and subcomponents of our products and to provide raw materials, primarily chemicals for our LAL. We do not have long-term supply agreements with, or guaranteed commitments from our suppliers, including single and sole source suppliers. We utilize purchase orders or blanket orders covering the medium term of 18–24 months for the majority of our supplier base. While we depend on our suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements, vendors will miss delivery dates, extend delivery dates or in some circumstances cancel purchase orders because these suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand. The expansion of global lead times has resulted in the lack of availability of raw materials, including semiconductors, computers, monitors electronic parts, metals, packaging, adhesives, chemicals, resins and subcontract painted components. Certain suppliers have passed on higher prices, surcharges and expedited shipping fees to defray the higher commodity prices they are paying due to short supply and pushed out delivery dates. Additionally, we identify and qualify new suppliers to mitigate risk due to single and sole source suppliers and to alleviate supply chain constraints we will identify and qualify new vendors or substitute components which requires testing, validations and documentation adding to internal costs and diverting engineering resources from other projects. While we have taken measures to mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us. Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the components or subcomponents used in our products would limit our ability to manufacture our current and new products and could have a material adverse effect on our business, financial condition and results of operations.