☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The registrant has ~~48,817,473~~49,131,110 shares of common stock, par value $0.01 per share, issued and outstanding as of ~~October 27, 2023.~~May 2, 2024.

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 ~~of the Company~~ present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned ~~subsidiaries.~~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 December ~~30, 2022~~29, 2023 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 December ~~30, 2022.~~29, 2023.

The Condensed Consolidated Financial Statements for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022,~~March 31, 2023, 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 ~~and nine~~ months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022,~~March 31, 2023, 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.

~~Revision of Financial Statements for Correction of Immaterial Misstatements~~

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 30, 2022, the Company determined that it had not correctly deducted compensation expense in calculating its income tax provision, deferred tax asset and valuation allowance under the Incremental Cash Tax Method. This resulted in an understatement of the net deferred tax asset, an overstatement in the valuation allowance, an overstatement of the provision for income taxes and understatement of net income. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the error and determined that the related impact was not material to results of operations or financial position for any prior annual or interim period, but that correcting the cumulative impact of the error would be material to our results of operations for the year ended December 29, 2023. Accordingly, the Company has corrected the consolidated balance sheet as of December 30, 2022 and the consolidated statements of income and comprehensive income for the years ended December 30, 2022 and December 31, 2021. The effects of the revision on the previously issued consolidated financial statements were as follows:

~~Condensed Consolidated Balance Sheet~~

~~(in thousands)~~

~~(Unaudited)~~

December 30, 2022

As Previously Reported

Adjustment

As revised

Deferred income taxes

$
4,824

$
3,920

$
8,744

Total assets

414,898

3,920

418,818

Accumulated deficit

(72,635
)

3,920

(68,715
)
Total stockholders’ equity

332,192

3,920

336,112

Total liabilities and stockholders’ equity

414,898

3,920

418,818

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

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

~~Revision of Financial Statements for Correction of Immaterial Misstatements (Continued)~~

~~Condensed Consolidated Statements of Stockholders’ Equity~~

~~(in thousands)~~

~~(Unaudited)~~

As Previously Reported

Adjustment

As revised

At December 31, 2021

Accumulated deficit

$
(111,390
)

$
3,010

$
(108,380
)
Total stockholders’ equity

258,558

3,010

261,568

At December 30, 2022

Accumulated deficit

(72,635
)

3,920

(68,715
)
Total stockholders’ equity

332,192

3,920

336,112

~~Condensed Consolidated Statements of Income and Comprehensive Income~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

December 30, 2022

December 31, 2021

As Previously Reported

Adjustment

As revised

As Previously Reported

Adjustment

As revised

Provision (benefit) for income taxes

$
6,797

$
(910
)

$
5,887

$
6,803

$
(3,010
)

$
3,793

Net income

38,755

910

39,665

24,501

3,010

27,511

Comprehensive income

42,959

910

43,869

25,998

3,010

29,008

Net income per share:

Basic

$
0.81

$
0.02

$
0.83

$
0.52

$
0.06

$
0.58

Diluted

$
0.78

$
0.02

$
0.80

$
0.50

$
0.06

$
0.56

~~Condensed Consolidated Statements of Cash Flows~~

~~(in thousands)~~

~~(Unaudited)~~

December 30, 2022

December 31, 2021

As Previously Reported

Adjustment

As revised

As Previously Reported

Adjustment

As revised

Cash flows from operating activities

Net income

$
38,755

$
910

$
39,665

$
24,501

$
3,010

$
27,511

Deferred income taxes

(1,344
)

(910
)

(2,254
)

1,495

(3,010
)

(1,515
)

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

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

Cloud-Based Software ~~Implementation Costs~~

The Company has entered into cloud-based software hosting arrangements for which it incurs implementation costs. Certain costs incurred during the application development stage are capitalized and included within Prepayments, deposits and other current assets or Other assets on the condensed consolidated balance sheet, depending on the short or long-term nature of such costs, in line with the Company's policy on the accounting for prepaid software hosting arrangements. Costs incurred during the preliminary project stage and post-implementation stage are expensed as incurred. Capitalized cloud-based software implementation costs are amortized, beginning on the date the related software or module is ready for its intended use, on a straight-line basis over the remaining term of the hosting arrangement. Amortization is recognized as a component of selling, general, and administrative expenses, in the same line item as the expense for the associated hosting arrangement.

As of ~~September~~March 29, 2024 and December 29, 2023, the Company recognized $~~1,318,000~~4,947,000 and $2,406,000, respectively, of net capitalized cloud-based software implementation costs recorded within Other assets on the ~~condensed consolidated balance sheets. There were~~ no ~~capitalized cloud-based software implementation costs recognized at December 30, 2022.~~Condensed Consolidated Balance Sheets. As of ~~September~~March 29, ~~2023,~~2024, these assets are not currently placed into service. No amortization of capitalized cloud-based software implementation costs were recognized during the three ~~and nine~~ months ended ~~September~~March 29, 2024 and March 31, 2023.

Vendor Concentration

There was one vendor that accounted for over 12% of the Company’s consolidated accounts payable as of March 29, 2024.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Segment Reporting (Topic 280).” ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments (a) disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), (b) disclose an amount for other segment items by reportable segment and description of its composition, (c) extend certain annual disclosures to interim periods, (d) clarify single reportable segment entities must apply Topic 280 in its entirety, (e) permit more than one measure of segment profit or loss to be reported under certain conditions and (f) require disclosure of the title and position of the CODM. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the annual disclosure requirements of ASU 2023-07 as of beginning of fiscal year 2024 and will adopt the interim disclosure requirements beginning fiscal year 2025. The Company is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740).” ASU 2023-09 improves the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. It also includes certain other amendments to improve the effectiveness of income tax disclosures regarding (a) income or loss from continuing operations disaggregated between domestic and foreign and (b) income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company will adopt ASU 2023-09 at the beginning of fiscal year 2025. The Company is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 2 — Investments Available for Sale

~~During the second half of 2022, the Company started to invest its cash in slightly higher yielding securities.~~ Investments available for sale (“AFS”) and the related fair value measurement consisted of the following (dollars in thousands):


	September 29, 2023													March 29, 2024
										Fair Value Measurements													Fair Value Measurements
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Level 1		Level 2		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Level 1		Level 2
Commercial paper	$	17,102	$	1	$	(5	)	$	17,098	$	—	$	17,098	$	4,522	$	3	$	(1	)	$	4,524	$	—	$	4,524
Certificates of deposit		4,080		1		(2	)		4,079		—		4,079		2,017		2		—			2,019		—		2,019
U.S. Treasury securities		24,828		—		(188	)		24,640		24,640		—		15,432		—		(78	)		15,354		15,354		—
U.S. agency securities		9,771		—		(21	)		9,750		—		9,750		1,732		—		(3	)		1,729		—		1,729
Corporate debt securities		18,812		2		(73	)		18,741		—		18,741		4,462		4		(4	)		4,462		—		4,462
Total investments AFS	$	74,593	$	4	$	(289	)	$	74,308	$	24,640	$	49,668	$	28,165	$	9	$	(86	)	$	28,088	$	15,354	$	12,734

	December 30, 2022													December 29, 2023
										Fair Value Measurements													Fair Value Measurements
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Level 1		Level 2		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Level 1		Level 2
Commercial paper	$	44,054	$	11	$	(62	)	$	44,003	$	—	$	44,003	$	7,720	$	9	$	—		$	7,729	$	—	$	7,729
Certificates of deposit		17,355		4		(75	)		17,284		—		17,284		3,716		4		—			3,720		—		3,720
U.S. Treasury securities		21,847		3		(15	)		21,835		21,835		—		23,036		3		(56	)		22,983		22,983		—
U.S. agency securities		10,688		16		(3	)		10,701		—		10,701		3,423		—		(4	)		3,419		—		3,419
Corporate debt securities		45,522		4		(288	)		45,238		—		45,238		11,538		12		(10	)		11,540		—		11,540
Total investments AFS	$	139,466	$	38	$	(443	)	$	139,061	$	21,835	$	117,226	$	49,433	$	28	$	(70	)	$	49,391	$	22,983	$	26,408

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.

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

~~Note 2 — Investments Available for Sale (Continued)~~

The Company assessed each debt security with gross unrealized losses for impairment. As part of that assessment, the Company concluded that it does not intend to sell and it is more-likely-than-not that the Company will not be required to sell, prior to the recovery of the amortized cost basis. The Company did not recognize impairment for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023.~~2024.

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


	As of September 29, 2023						As of March 29, 2024
	Within one year		After one year through five years		Total		Within one year		After one year through five years		Total
Commercial paper	$	17,098	$	—	$	17,098	$	4,524	$	—	$	4,524
Certificates of deposit		4,079		—		4,079		2,019		—		2,019
U.S. Treasury securities		14,855		9,785		24,640		9,816		5,538		15,354
U.S. agency securities		9,354		396		9,750		1,729		—		1,729
Corporate debt securities		15,295		3,446		18,741		3,037		1,425		4,462
Total investments AFS	$	60,681	$	13,627	$	74,308	$	21,125	$	6,963	$	28,088

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 2 — Investments Available for Sale (Continued)

During the ~~nine~~three months ended ~~September 29,~~March 31, 2023, one of the Company’s investments AFS was the subject of a downgraded credit rating. The Company sold its investments of $600,000 ~~in securities during~~following the ~~first quarter of 2023 due to a downgraded credit rating.~~downgrade. The Company recognized a realized gain upon sale of $2,000 during the ~~nine~~three months ended ~~September 29,~~March 31, 2023.

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):


	September 29, 2023			December 30, 2022			March 29, 2024			December 29, 2023
Raw materials and purchased parts	$	9,591		$	6,703		$	9,591		$	9,766
Work in process		6,451			5,499			6,097			5,722
Finished goods		18,944			13,633			25,642			23,150
Total inventories, gross		34,986			25,835			41,330			38,638
Less inventory reserves		(3,925	)		(1,674	)		(2,749	)		(3,508	)
Total inventories, net	$	31,061		$	24,161		$	38,581		$	35,130

Note 4 — Prepayments, Deposits, and Other Current Assets

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


	September 29, 2023		December 30, 2022		March 29, 2024		December 29, 2023
Prepayments and deposits	$	5,830	$	3,986	$	7,817	$	6,216
Prepaid insurance		455		2,620		1,968		2,314
Prepaid marketing costs		4,543		2,534		2,647		2,141
Consumption tax receivable		777		864		766		820
Value added tax (VAT) receivable		2,189		2,661		2,323		2,456
BVG (Swiss Pension) prepayment		801		111		1,416		23
Other(1)		932		700		444		739
Total prepayments, deposits and other current assets	$	15,527	$	13,476	$	17,381	$	14,709

(1)

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

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

Note 5 — Property, Plant and Equipment

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


	September 29, 2023			December 30, 2022			March 29, 2024			December 29, 2023
Machinery and equipment	$	29,461		$	28,026		$	32,547		$	30,874
Computer equipment and software		8,329			9,266			8,511			8,495
Furniture and fixtures		4,110			4,276			4,703			4,122
Leasehold improvements		10,047			14,965			11,736			10,780
Construction in process		40,174			32,269			45,149			40,364
Total property, plant and equipment, gross		92,121			88,802			102,646			94,635
Less accumulated depreciation		(29,235	)		(37,881	)		(30,309	)		(27,800	)
Total property, plant and equipment, net	$	62,886		$	50,921		$	72,337		$	66,835

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

~~Note 6 – Intangible Assets~~

~~Intangible assets, net consisted of the following (in thousands):~~

September 29, 2023

December 30, 2022

Long-lived amortized intangible assets

Gross
Carrying
Amount

Accumulated
Amortization

Net

Gross
Carrying
Amount

Accumulated
Amortization

Net

Patents and licenses

$
9,180

$
(9,180
)

$
—

$
9,240

$
(9,067
)

$
173

~~During the nine months ended September 29, 2023, the Company recognized full impairment of $154,000~~ ~~for its Japan patents and licenses related to cataract IOLs.~~

Note 76 – Other Current Liabilities

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


	September 29, 2023		December 30, 2022		March 29, 2024		December 29, 2023
Accrued salaries and wages	$	11,813	$	10,862	$	10,440	$	12,519
Accrued bonuses		2,517		6,925		2,325		3,456
Accrued insurance						1,460		2,315
Income taxes payable		8,540		3,845		9,708		10,848
Marketing obligations		1,571		1,374		2,097		1,874
Other(1)		11,824		7,735		9,231		9,926
Total other current liabilities	$	36,265	$	30,741	$	35,261	$	40,938

(1)

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

Note 87 – Leases

Finance Leases

The Company entered into finance leases primarily related to purchases of equipment used for manufacturing, computer-related equipment or furniture and fixtures. These finance leases are two to five years in length and have fixed payment amounts for the term of the contract and have options to purchase the assets at the end of the lease term. Supplemental balance sheet information related to finance leases consisted of the following (dollars in thousands):

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

~~Note 8 – Leases (Continued)~~

~~Finance Leases (Continued)~~


	September 29, 2023			December 30, 2022			March 29, 2024			December 29, 2023
Machinery and equipment	$	—		$	30
Computer equipment and software		6			18		$	6		$	6
Furniture and fixtures		475			475			475			475
Finance lease right-of-use assets, gross		481			523			481			481
Less accumulated depreciation		(261	)		(181	)		(335	)		(298	)
Finance lease right-of-use assets, net	$	220		$	342		$	146		$	183

Current finance lease obligations	$	164		$	169		$	166		$	165
Long-term finance lease obligations		84			210			—			42
Total finance lease liability	$	248		$	379		$	166		$	207
Weighted-average remaining lease term (in years)		1.5			2.2			1.0			1.3
Weighted-average discount rate		4.23	%		4.10	%		4.25	%		4.24	%

Supplemental cash flow information related to finance leases consisted of the following (dollars in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2023		September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
Amortization of finance lease right-of-use asset	$	37	$	39	$	114	$	121	$	37	$	39
Interest on finance lease liabilities		3		5		10		13		2		4
Cash paid for amounts included in the measurement of finance lease liabilities:
Operating cash flows		3		5		10		13		2		4
Financing cash flows		39		40		121		85		40		42

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 7 – Leases (Continued)

Operating Leases

The Company entered into operating leases primarily related to real property (office, manufacturing and warehouse facilities), automobiles and copiers. These operating leases are two to ten 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):


	September 29, 2023			December 30, 2022			March 29, 2024			December 29, 2023
Machinery and equipment	$	726		$	789		$	701		$	735
Computer equipment and software		446			446			445			446
Real property		41,313			34,465			42,291			40,869
Operating lease right-of-use assets, gross		42,485			35,700			43,437			42,050
Less accumulated depreciation		(7,493	)		(5,430	)		(8,837	)		(7,663	)
Operating lease right-of-use assets, net	$	34,992		$	30,270		$	34,600		$	34,387

Current operating lease obligations	$	4,003		$	3,524		$	4,403		$	4,202
Long-term operating lease obligations		31,643			27,136			31,126			31,425
Total operating lease liability	$	35,646		$	30,660		$	35,529		$	35,627
Weighted-average remaining lease term (in years)		7.5			7.5			7.2			7.3
Weighted-average discount rate		5.15	%		3.87	%		5.51	%		5.48	%

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

~~Note 8 – Leases (Continued)~~

~~Operating Leases (Continued)~~

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2023		September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
Operating lease cost	$	1,419	$	1,167	$	3,883	$	3,471	$	2,223	$	1,107
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows		1,259		1,103		3,584		3,069		1,384		1,173
Right-of-use assets obtained in exchange for new operating lease liabilities		4,580		126		8,000		1,166		1,495		1,909

Future Maturities of Lease Liabilities

Estimated future maturities of lease liabilities under operating and finance leases having initial or remaining non-cancelable lease terms more than one year as of ~~September~~March 29, ~~2023~~2024 is as follows (in thousands):

As of September 29, 2023
12 Months Ended

Operating Leases

Finance Leases

September 2024

$
5,957

$
171

September 2025

5,630

85

September 2026

4,987

—

September 2027

5,319

—

September 2028

5,381

—

Thereafter

18,105

—

Total future minimum lease payments

$
45,379

$
256

Less amounts representing interest

(9,733
)

(8
)
Total lease liability

$
35,646

$
248


As of March 29, 2024 12 Months Ended	Operating Leases			Finance Leases
March 2025	$	6,433		$	170
March 2026		5,379			—
March 2027		5,508			—
March 2028		5,633			—
March 2029		5,743			—
Thereafter		16,733			—
Total future minimum lease payments	$	45,429		$	170
Less amounts representing interest		(9,900	)		(4	)
Total lease liability	$	35,529		$	166

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 98 — Income Taxes

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

Three Months Ended

Nine Months Ended

September 29, 2023

September 30, 2022

September 29, 2023

September 30, 2022

Provision for income taxes

$
1,929

$
2,315

$
6,366

$
6,671


	Three Months Ended
	March 29, 2024		March 31, 2023
Provision for income taxes	$	1,128	$	2,009

The effective tax rates for the three months ended ~~September~~March 29, 2024 and March 31, 2023 ~~and September 30, 2022~~ were (~~28.6~~51.0)% and ~~18.4~~42.6%, ~~respectively, and were~~ ~~31.9% and~~ ~~16.9% for the nine months ended September 29, 2023 and September 30, 2022,~~ respectively. The Company’s effective tax rates differ from the U.S. federal statutory rate of 21% for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022,~~March 31, 2023, respectively, primarily due to the income tax expense generated in foreign jurisdictions.

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

Note 109 – 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):


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Service cost(1)	$	256		$	306		$	759		$	941		$	325		$	249
Interest cost(2)		91			22			268			63			84			87
Expected return on plan assets(2)		(92	)		(125	)		(270	)		(366	)		(132	)		(87	)
Prior service credit(2),(3)		(45	)		(44	)		(135	)		(135	)		(45	)		(45	)
Actuarial loss recognized in current period(2),(3)		(6	)		98			(19	)		274			28			(7	)
Net periodic pension cost	$	204		$	257		$	603		$	777		$	260		$	197

(1)

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

(2)

Recognized in other expense, net on the Condensed Consolidated Statements of Income.

(3)

Amounts reclassified from accumulated other comprehensive income (loss).

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):

Three Months Ended

Nine Months Ended

September 29, 2023

September 30, 2022

September 29, 2023

September 30, 2022

Employer contribution

$
269

$
230

$
731

$
666


	Three Months Ended
	March 29, 2024		March 31, 2023
Employer contribution	$	267	$	217

~~Note~~ 11 ~~— Stockholders’ Equity~~

~~Stock-Based Compensation~~

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

Three Months Ended

Nine Months Ended

September 29, 2023

September 30, 2022

September 29, 2023

September 30, 2022

Employee stock options

$
3,517

$
2,865

$
9,973

$
7,649

Restricted stock

201

67

347

618

Restricted stock units

2,214

1,249

5,963

3,242

Performance stock units

2,449

1,240

5,958

2,932

Nonemployee stock options

465

306

1,093

934

Total stock-based compensation expense

$
8,846

$
5,727

$
23,334

$
15,375

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

Three Months Ended

Nine Months Ended

September 29, 2023

September 30, 2022

September 29, 2023

September 30, 2022

Cost of sales

$
223

$
233

$
595

$
409

General and administrative

4,049

2,584

11,107

7,171

Selling and marketing

2,561

1,335

5,910

3,548

Research and development

2,013

1,575

5,722

4,247

Total stock-based compensation expense, net

8,846

5,727

23,334

15,375

Amounts capitalized as part of inventory

534

361

1,431

1,379

Total stock-based compensation expense, gross

$
9,380

$
6,088

$
24,765

$
16,754

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 1110 — Stockholders’ Equity ~~(Continued)~~

~~Stock-Based Compensation (Continued)~~

~~As of September 29, 2023, total unrecognized compensation cost related to non-vested stock-based compensation arrangements were as follows (in thousands):~~

September 29, 2023

Stock options

$
23,888

Restricted stock, RSUs and PSUs

24,690

Total unrecognized stock-based compensation cost

$
48,578

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

Incentive Plan

The Company maintains an Amended and Restated Omnibus Equity Incentive Plan ~~(“the~~(the “Equity Plan”) ~~provides~~. The Equity Plan allows for ~~various forms~~awards of ~~stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted only~~ stock options, stock appreciation rights, restricted stock, ~~unrestricted share grants,~~ restricted stock units (“RSUs”) and performance stock units (“PSUs”)~~. Options~~ and other stock- and cash-based awards, including awards that are subject to service-based and performance-based vesting conditions. As of March 29, 2024, the Company had outstanding grants of stock options, restricted stock awards, RSUs and PSUs.

Stock option granted under the Equity Plan are granted at fair market value on the date of grant, become exercisable generally over a three-year period, or as determined by the Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain ~~option~~stock options and ~~share~~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 of one to three years. Grants of RSUs and PSUs outstanding under the Equity Plan generally vest based on service, performance, or a combination of both. On June 15, 2023, stockholders approved a proposal to increase the number of shares under the plan by 2,170,000 shares, for a total of 20,205,000 shares. As of ~~September~~March 29, ~~2023,~~2024, there were ~~2,784,909~~962,029 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):


	Three Months Ended
	March 29, 2024		March 31, 2023
Employee stock options	$	3,173	$	2,977
Restricted stock		28		67
RSUs		2,312		1,601
PSUs		685		1,106
Nonemployee stock options		141		314
Total stock-based compensation expense	$	6,339	$	6,065

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


	Three Months Ended
	March 29, 2024		March 31, 2023
Cost of sales	$	298	$	149
General and administrative		3,075		3,363
Selling and marketing		1,210		857
Research and development		1,756		1,696
Total stock-based compensation expense, net		6,339		6,065
Amounts capitalized as part of inventory		337		369
Total stock-based compensation expense, gross	$	6,676	$	6,434

As of March 29, 2024, total unrecognized compensation cost related to non-vested stock-based compensation arrangements were as follows (in thousands):


	March 29, 2024
Stock options	$	28,392
Restricted stock, RSUs and PSUs		43,614
Total unrecognized stock-based compensation cost	$	72,006

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

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 10 — Stockholders’ Equity (Continued)

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 78% 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.


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Expected dividend yield		0	%		0	%		0	%		0	%		0	%		0	%
Expected volatility		60	%		54	%		60	%		54	%		59	%		60	%
Risk-free interest rate		4.18	%		2.91	%		3.91	%		1.88	%		4.16	%		3.96	%
Expected term (in years)		5.05			5.10			5.05			5.10			5.29			5.05

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

~~Note 11 — Stockholders’ Equity (Continued)~~

Stock Options

A summary of stock option activity under the Equity Plan for ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 is presented below:


	Stock Options (in 000’s)			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in 000’s)		Stock Options (in 000’s)			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in 000’s)
Outstanding at December 30, 2022		2,469		$	39.63
Outstanding at December 29, 2023											2,630		$	46.38
Granted		622			55.84						523			37.21
Exercised		(500	)		18.54						(187	)		28.50
Forfeited or expired		(38	)		72.49						(83	)		76.05
Outstanding at September 29, 2023		2,553		$	47.22		6.77	$	19,641
Exercisable at September 29, 2023		1,663		$	39.11		5.52	$	19,641
Outstanding at March 29, 2024											2,883		$	45.01		6.98	$	16,386
Exercisable at March 29, 2024											1,668		$	42.93		5.41	$	15,090

Restricted Stock, Restricted Stock Units and Performance Stock Units

A summary of restricted stock, ~~RSUs~~RSU and ~~PSUs~~PSU activity under the Equity Plan for the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 is presented below (shares in thousands):


	Restricted Stock			RSUs			PSUs			Restricted Stock			RSUs			PSUs
Unvested at December 30, 2022		4			192			118
Unvested at December 29, 2023											14			401			56
Granted		12			269			182			—			415			390
Vested		(4	)		(94	)		(36	)		—			(110	)		(24	)
Forfeited or expired		—			(6	)		(13	)		(4	)		(1	)		(4	)
Unvested at September 29, 2023		12			361			251
Unvested at March 29, 2024											10			705			418

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 1211 - Commitments and Contingencies

~~Severance Payable~~

~~As of September 29, 2023 and December 30, 2022 there was severance payable of $422,000~~ ~~and $410,000, respectively. recognized in other current liabilities on the Consolidated Balance Sheets, which included approximately $258,000~~ ~~and $300,000~~, respectively, in one-time employee benefits to be paid to certain employees in STAAR Japan who work primarily in IOL sales. During the three and nine months ended September 29, 2023, the Company recognized $~~80,000~~ ~~and $1,441,000, respectively, related to this. The Company is expected to incur through the end of 2023, one-time employee benefits of approximately $1,457,000~~ ~~related to this. These one-time employee benefits are recognized in general and administrative expense on the Consolidated Statements of Income.~~

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. ~~STAAR~~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.

~~Employment Agreements~~

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective January 1, 2023. He and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all its assets, or termination “without cause or for good reason” as defined in the employment agreements.

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

Note 1312 — Basic and Diluted Net Income (Loss) Per Share

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Numerator:
Net income	$	4,817		$	10,262		$	13,591		$	32,902
Net income (loss)													$	(3,339	)	$	2,710
Denominator:
Weighted average common shares:
Common shares outstanding		48,625			48,106			48,438			47,919			48,907			48,251
Less: Unvested restricted stock		(12	)		(4	)		(12	)		(4	)		—			(4	)
Denominator for basic calculation		48,613			48,102			48,426			47,915			48,907			48,247
Weighted average effects of potentially diluted common stock:
Stock options		679			1,336			933			1,378			—			1,116
Unvested restricted stock		—			2			3			2			—			3
RSUs		17			64			67			55			—			81
PSUs		61			45			65			21			—			53
Denominator for diluted calculation		49,370			49,549			49,494			49,371			48,907			49,500
Net income per share:
Net income (loss) per share:
Basic	$	0.10		$	0.21		$	0.28		$	0.69		$	(0.07	)	$	0.06
Diluted	$	0.10		$	0.21		$	0.27		$	0.67		$	(0.07	)	$	0.05

Because the Company had a net loss for the three months ended March 29, 2024, 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.


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2023		September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
Stock options		2,453		864		1,853		865		4,316		1,392
Restricted stock, RSUs and PSUs		341		2		26		20		495		15
Total		2,794		866		1,879		885		4,811		1,407

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Note 1413 — Disaggregation of Sales, Geographic Sales and Product Sales

In the following tables, sales are disaggregated by category, sales by geographic market and sales by product data. The following breaks down sales into the following categories (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2023		September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
Non-consignment sales	$	75,296	$	71,223	$	230,527	$	205,236	$	71,764	$	67,163
Consignment sales		5,012		4,823		15,615		15,111		5,592		6,365
Total net sales	$	80,308	$	76,046	$	246,142	$	220,347	$	77,356	$	73,528

The Company markets and sells its products in over 75 countries and conducts its manufacturing in the United States. Other than China and Japan, the Company does not conduct business in any country in which its sales exceed 10% of worldwide consolidated net sales. Sales are attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers was as follows (in thousands):

~~STAAR SURGICAL COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)~~

~~Note 14 — Disaggregation of Sales, Geographic Sales and Product Sales (Continued)~~


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2023		September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
Domestic	$	4,164	$	3,873	$	13,061	$	10,375	$	4,935	$	4,551
Foreign:
China		48,287		42,246		144,716		116,635		38,549		35,090
Japan		9,175		10,546		28,526		32,481		10,456		10,936
Other(1)		18,682		19,381		59,839		60,856		23,416		22,951
Total foreign sales		76,144		72,173		233,081		209,972		72,421		68,977
Total net sales	$	80,308	$	76,046	$	246,142	$	220,347	$	77,356	$	73,528

(1)

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

100% of the Company’s sales are generated from the ophthalmic surgical product segment and the chief operating decision maker makes operating decisions and allocates resources based upon the consolidated operating results, and therefore the Company operates as one operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer lenses (“ICLs”) used in refractive ~~surgery~~surgery. Historically the Company marketed and sold cataract intraocular lenses (“IOLs”) ~~used~~and related injectors and injector parts. The Company phased out sales of such products in ~~cataract surgery.~~fiscal 2023, and does not expect to sell any such products in fiscal 2024 or thereafter. The composition of the Company’s net sales by product line was as follows (in thousands):


	Three Months Ended					Nine Months Ended				Three Months Ended
	September 29, 2023			September 30, 2022		September 29, 2023		September 30, 2022		March 29, 2024		March 31, 2023
ICLs	$	81,069		$	71,953	$	244,806	$	208,550	$	77,151	$	70,625
Other product sales:
Cataract IOLs		(221	)		2,191		1,295		7,640		—		1,476
Other surgical products(1)		(540	)		1,902		41		4,157		205		1,427
Total other product sales		(761	)		4,093		1,336		11,797		205		2,903
Total net sales	$	80,308		$	76,046	$	246,142	$	220,347	$	77,356	$	73,528

(1) Other surgical products include delivery systems and normal recurring sales adjustments such as sales return allowances.

~~One customer, the~~The Company’s ~~distributor in~~ China distributors accounted for 6049% and 5648% of net sales for the three months ended ~~September~~March 29, 2024 and March 31, 2023, respectively. As of March 29, 2024 and December 29, 2023, ~~and September 30, 2022, respectively, and~~ the ~~same customer~~Company’s China distributors accounted for 5954% and 5370% ~~for the nine months ended September 29, 2023 and September 30, 2022, respectively. As of September 29, 2023 and December 30, 2022,~~, respectively, ~~one customer, the Company’s distributor in China, accounted for~~ 78~~% and~~ 59% of consolidated trade receivables.

~~Note~~ 15 ~~— COVID-19 Developments~~

In December 2019, COVID-19 surfaced and in March 2020, the World Health Organization declared a pandemic related to the rapid spread of COVID-19 around the world. The impact of the COVID-19 outbreak on the businesses and the economy in the U.S. and the rest of the world is, and is expected to continue to be, uncertain and may continue to be significant as COVID-19 variant strains emerge. The Company’s revenues have been adversely impacted, and the Company experienced a substantial slowdown in sales beginning March 20, 2020 in global geographies characterized as “hot spots” for the COVID-19 virus, including parts of Europe, North America, Asia, the Middle East and India. In certain of these markets, sales have paused as elective surgeries are discouraged to support COVID-19 related needs. While COVID-19 restrictions have since eased globally, a resurgence of the COVID-19 pandemic in global geographies, depending upon its duration and severity, could material adversely impact the global economy and the Company's industry, operations and financial condition and performance. The Company continues to monitor the commercial and operational impact of new variants of COVID-19 in its markets.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as ~~amended. Readers~~amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created therein. In some cases readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “believe,” “will,” “should,” ~~“forecast”~~“could,” “forecast,” “potential,” “continue,” “ongoing” (or the negative of those words and similar ~~expressions in connection with any discussion of future operating~~words or ~~financial performance.~~expressions), although not all forward-looking statements contain these words. In particular, these include statements ~~about~~regarding the intent, belief or current expectations of the Company and its management regarding any of the following: any projections of or guidance as to future earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, product mix, capital expense or any other financial items; the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to their impact on sales, operations or clinical trials globally),; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of a new or improved products; commercialization of new or improved products; future economic conditions or size of market opportunities; expected costs of operations; statements of belief, including as to achieving ~~2023~~ business ~~plans;~~plans for 2024 and beyond; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution investors and prospective investors that any such forward-looking statements are ~~inherently subject~~not guarantees of future performance and involve risks, uncertainties, assumptions and other factors, which if they do not materialize or prove correct, could cause actual results to ~~risks and we can give no assurance that our expectations will prove to be correct. Actual results could~~ differ materially from those ~~described~~expressed or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements and to note they speak only as of the date hereof. Factors that could cause actual results to differ materially from those set forth in ~~this report because of numerous factors, many of which are beyond our control. These factors~~the forward-looking statements include, without limitation, those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on February ~~23, 2023.~~27, 2024. We ~~undertake no~~disclaim any intention or obligation to update or review these financial projections or forward-looking statements ~~after the date of this report~~due to ~~reflect future~~new information or other events ~~or circumstances or to reflect actual outcomes.~~except as required by law.

The following discussion should be read in conjunction with the ~~audited consolidated financial statements of STAAR,~~Company’s unaudited Condensed Consolidated Financial Statements, including the related notes, provided in this report.

We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the ‘Investor Relations’ sections. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Overview

STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and ~~companion~~accessory delivery systems used to deliver the lenses into the eye. We are the ~~world’s~~ leading manufacturer of intraocular lenses for patients seeking refractive vision correction. All the lenses we make are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Refractive surgery is performed to treat the type of visual disorders that have traditionally been corrected using eyeglasses or contact lenses. We refer to ourphakic implantable lenses used worldwide in ~~refractive~~corrective or “refractive” surgery. We have been dedicated solely to ophthalmic surgery as “implantable Collamer® lenses” or “ICLs.” The field of refractive surgery includes both lens-based procedures, using products like our ICL family of products, and laser-based procedures like LASIK. Successful refractive surgery can correct common vision disorders such as myopia, hyperopia, and astigmatism. STAAR employs a commercialization strategy that strives for ~~sustainable profitable growth.~~over 40 years. Our goal is to position our refractive lenses throughout the world as primary and premium solutions for patients seeking visual freedom from wearing eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction.

~~Recent Developments~~ We generate worldwide revenue almost exclusively from sales of our implantable Collamer® lenses, or “ICLs.” Our ICLs are made from Collamer, which is a proprietary collagen copolymer material created and exclusively used by STAAR to make our lenses soft, flexible and biocompatible with the eye. Our ICLs are phakic lenses, meaning that they are implanted into the eye without removing the eye’s natural crystalline lens. This distinguishes an ICL procedure from other refractive procedures, as it does not involve the removal of corneal eye tissue. All of our ICLs are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Further, while ICLs are intended to be permanent, our ICLs are reversible lens implants, meaning they can be removed by a doctor if desired.

STAAR ~~achieved 13%~~employs a commercialization strategy that strives for sustainable profitable growth. Our growth strategy includes making our complete ICL product line available in our existing geographic markets and expanding into attractive markets where we do not sell our products today. In addition, we are focused on driving awareness of the ICL ~~sales in the third quarter of 2023, compared to the third quarter of 2022, with ICL sales growth in the Asia Pacific markets up 13%, EMEA markets up 14%,~~procedure and the ~~Americas up 5%. In China, ICL sales were up 14% compared to the second quarter~~clinical benefits of ~~2022. The uncertain economic environment globally~~our ICLs, and ~~world events may have an impact on~~providing surgeon training, support and education, particularly in our surgeon customers and patients. As a result, while we are reaffirming our previously provided outlook for fiscal 2023 ICL sales of $320 million to $325 million, revenue may come in at the lower end of the range should macroeconomic weakness and/or other disruptions materialize.newer markets.

On October 25, we began a voluntary recall of approximately 300 EVO/EVO+ lenses with a measurement deviating +/- 0.5 diopters from the as labeled power. We have identified and fixed the problem. We do not expect material operational costs related to this matter.

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of ~~Income~~Operations discusses and analyzes data in our unaudited Condensed Consolidated Financial Statements provided in this report, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

Management believes that there have been no significant changes during the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 to the items that we disclosed as our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December ~~30, 2022.~~29, 2023.

Results of Operations

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.


	Percentage of Net Sales for Three Months						Percentage of Net Sales for Nine Months						Percentage of Net Sales for Three Months
	September 29, 2023			September 30, 2022			September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		20.8	%		20.5	%		22.0	%		21.2	%		21.1	%		21.7	%
Gross profit		79.2	%		79.5	%		78.0	%		78.8	%		78.9	%		78.3	%
General and administrative		24.0	%		18.4	%		22.6	%		18.1	%		30.0	%		24.7	%
Selling and marketing		33.1	%		30.4	%		34.6	%		29.3	%		34.5	%		35.8	%
Research and development		14.3	%		12.7	%		13.6	%		12.0	%		17.3	%		14.0	%
Total selling, general and administrative		71.4	%		61.5	%		70.8	%		59.4	%		81.8	%		74.5	%
Operating income		7.8	%		18.0	%		7.2	%		19.4	%
Total other income (expense), net		0.6	%		(1.5	)%		0.9	%		(1.5	)%
Income before income taxes		8.4	%		16.5	%		8.1	%		17.9	%
Operating income (loss)														(2.9	)%		3.8	%
Total other income, net														0.1	%		2.6	%
Income (loss) before income taxes														(2.8	)%		6.4	%
Provision for income taxes		2.4	%		3.0	%		2.6	%		3.0	%		1.5	%		2.7	%
Net income		6.0	%		13.5	%		5.5	%		14.9	%
Net income (loss)														(4.3	)%		3.7	%

Net Sales

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

Three Months Ended

Percentage
Change

Nine Months Ended

Percentage
Change

September 29, 2023

September 30, 2022

2023 vs. 2022

September 29, 2023

September 30, 2022

2023 vs. 2022

ICLs

$
81,069

$
71,953

12.7
%

$
244,806

$
208,550

17.4
%
Other product sales:

Cataract IOLs

(221
)

2,191

—
*

1,295

7,640

(83.0
)%
Other surgical products

(540
)

1,902

—
*

41

4,157

(99.0
)%
Total other product sales

(761
)

4,093

—
*

1,336

11,797

(88.7
)%
Net sales

$
80,308

$
76,046

5.6
%

$
246,142

$
220,347

11.7
%

* Denotes change is greater than +~~100%.~~


	Three Months Ended				Percentage Change
	March 29, 2024		March 31, 2023		2024 vs. 2023
ICLs	$	77,151	$	70,625		9.2	%
Other product sales:
Cataract IOLs		—		1,476		(100.0	)%
Other surgical products		205		1,427		(85.6	)%
Total other product sales		205		2,903		(92.9	)%
Net sales	$	77,356	$	73,528		5.2	%

Net sales for the three months ended ~~September~~March 29, ~~2023~~2024 increased 6%5% from the same period of ~~2022.~~2023. The increase in net sales was primarily due to increased ICL sales of ~~$9.1~~$6.5 million, slightly offset by decreased other product sales of ~~$4.9 million. Changes in foreign currency favorably impacted net sales by $0.1 million.~~

Net sales for the nine months ended September 29, 2023 increased 12% from the same period of 2022. The increase in net sales was primarily due to increased ICL sales of $36.3 million, slightly offset by decreased other product sales of $10.5$2.7 million. Changes in foreign currency unfavorably impacted net sales by ~~$2.3~~$1.0 million.

Total ICL sales for the three months ended ~~September~~March 29, ~~2023~~2024 increased ~~13%~~9% from the same period of ~~2022,~~2023, with unit increase of ~~14%~~2%. The APAC region sales increased by ~~13%~~9%, with unit ~~growth up 15%~~decrease of 1%, due to sales growth in India up ~~40%, China up 14%~~10%, Japan up ~~12%~~11% and ~~other APAC regions~~China up 6%10%. The EMEA region sales increased ~~14%~~11% with unit growth up ~~13%~~22%, due to sales increases in our distributor markets up ~~20% and~~35%, partially offset by direct markets ~~up 9%~~down 5%. The Americas region sales increased 5%12%, with unit growth up 3%, primarily due to sales growth in Canada up 26% and the U.S. up 6%, partially offset by sales decrease in Latin America of 12%. Changes in foreign currency favorably impacted ICL sales by $0.1 million for the three months ended September 29, 2023. ICL sales represented 100.9% and 94.6% of our total sales for the three months ended September 29, 2023 and September 30, 2022, respectively.

Total ICL sales for the nine months ended September 29, 2023 increased 17% from the same period of 2022, with unit increase of 19%. The APAC region sales increased by 20%, with unit growth up 21%, due to sales growth in China up 24%, India up 20%, other APAC regions up 10%, Japan up 10% and Korea up 4%. The EMEA region sales increased 4%, with unit decrease of 2%, due to sales increases in our distributor markets up 5% and our direct markets up 3%. The Americas region sales increased 18%, with unit growth up 16%17

11%, primarily due to sales growth in the U.S. up ~~23%~~15% and Canada up 11%. ~~In late March 2022, the U.S. started to sell EVO ICLs.~~ Changes in foreign currency unfavorably impacted ICL sales by ~~$2.0~~$1.0 million for the ~~nine~~three months ended ~~September~~March 29, ~~2023, which impacted our Japan and Europe, Middle East and Africa markets.~~2024. ICL sales represented ~~99.5%~~99.7% and ~~94.6%~~96.1% of our total sales for the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022,~~March 31, 2023, respectively.

Other product sales, includes cataract ~~IOLs,~~intraocular lenses (“IOLs”), delivery systems and normal recurring sales adjustments such as sales return allowances. As a result of third-party materials and supply chain challenges that ~~affect~~affected our cataract IOLs and associated delivery devices, we ~~will no longer manufacture~~have phased out sales of our cataract IOLs ~~though~~as we ~~will continue~~focus on growing our ICL business. During 2023, we stopped manufacturing cataract IOLs, and we do not plan to ~~support these products through the end of 2023, as supplies permit.~~sell cataract IOLs in 2024. We do not expect this decision to have a significant impact to revenue growth in future years. Other product sales for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023,~~2024, decreased ~~119% and 89%, respectively,~~93% from the same period of ~~2022,~~2023, due primarily to a reduction in cataract IOL sales and decreased sales of cataract IOL injector ~~parts and increased sales return reserves. Changes in foreign currency unfavorably impacted other product sales by $0.3 million for the nine months ended September 29, 2023.~~parts. Other product sales represented ~~(0.9%)~~0.3% and ~~5.4%~~3.9% of our total sales for the three months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022, respectively, and represented 0.5% and 5.4% of our total sales for the nine months ended September 29,~~March 31, 2023, ~~and September 30, 2022,~~ respectively.

Gross Profit

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


	Three Months Ended						Percentage Change			Nine Months Ended						Percentage Change			Three Months Ended						Percentage Change
	September 29, 2023			September 30, 2022			2023 vs. 2022			September 29, 2023			September 30, 2022			2023 vs. 2022			March 29, 2024			March 31, 2023			2024 vs. 2023
Gross profit	$	63,638		$	60,462			5.3	%	$	191,926		$	173,598			10.6	%	$	61,035		$	57,562			6.0	%
Gross margin		79.2	%		79.5	%					78.0	%		78.8	%					78.9	%		78.3	%

Gross profit for the three months ended ~~September~~March 29, ~~2023~~2024 increased ~~5.3%~~6.0%, from the same period of ~~2022.~~2023. Gross profit margin ~~decreased~~increased to ~~79.2%~~78.9% of revenue for the three months ended ~~September~~March 29, ~~2023~~2024 compared to ~~79.5%~~78.3% of revenue for the three months ended ~~September 30, 2022,~~March 31, 2023, due ~~mainly~~primarily to ~~increased sales return reserves and period costs associated with manufacturing projects, partially offset by~~ product and ~~geographic sales mix.~~country mix of ICL sales.

Gross profit for the nine months ended September 29, 2023 increased 10.6%, from the same period of 2022. Gross profit margin decreased to 78.0% of revenue for the nine months ended September 29, 2023 compared to 78.8% of revenue for the nine months ended September 30, 2022, due mainly to reserves related to cataract IOLs.

General and Administrative Expense

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


	Three Months Ended						Percentage Change			Nine Months Ended						Percentage Change			Three Months Ended						Percentage Change
	September 29, 2023			September 30, 2022			2023 vs. 2022			September 29, 2023			September 30, 2022			2023 vs. 2022			March 29, 2024			March 31, 2023			2024 vs. 2023
General and administrative expense	$	19,266		$	14,011			37.5	%	$	55,461		$	39,934			38.9	%	$	23,228		$	18,098			28.3	%
Percentage of sales		24.0	%		18.4	%					22.6	%		18.1	%					30.0	%		24.7	%

General and administrative expenses for the three months ended ~~September~~March 29, ~~2023~~2024 increased ~~37.5%~~28.3% from the same period of ~~2022~~2023 due to increased ~~salary-related and payroll tax expenses,~~ outside services, facility costs and ~~bonus and stock-based compensation expenses.~~

~~General and administrative expenses for the nine months ended September 29, 2023 increased 38.9% from the same period of 2022 due to increased~~ salary-related and payroll tax ~~expenses~~, ~~outside services, bonus and stock-based compensation expenses, facility costs and Japan one-time employee benefits.~~expenses.

Selling and Marketing Expense

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


	Three Months Ended						Percentage Change			Nine Months Ended						Percentage Change			Three Months Ended						Percentage Change
	September 29, 2023			September 30, 2022			2023 vs. 2022			September 29, 2023			September 30, 2022			2023 vs. 2022			March 29, 2024			March 31, 2023			2024 vs. 2023
Selling and marketing expense	$	26,607		$	23,130			15.0	%	$	85,238		$	64,633			31.9	%	$	26,708		$	26,354			1.3	%
Percentage of sales		33.1	%		30.4	%					34.6	%		29.3	%					34.5	%		35.8	%

Selling and marketing expenses for the three months ended ~~September~~March 29, ~~2023~~2024 increased ~~15.0%~~1.3% from the same period of ~~2022~~2023 due to increased ~~advertising and promotional activities,~~ salary-related and payroll tax expenses, trade shows and sales meetings expenses and bonus and stock-based compensation expenses, ~~partially~~ offset by decreased ~~trade shows and sales meetings expenses.~~

~~Selling and marketing expenses for the nine months ended September 29, 2023 increased 31.9% from the same period of 2022 due to increased~~ advertising and promotional activities ~~especially in the U.S., salary-related~~ and ~~payroll tax expenses, bonus and stock-based compensation expenses and sales~~ commission expenses.

Research and Development Expense

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


	Three Months Ended						Percentage Change			Nine Months Ended						Percentage Change			Three Months Ended						Percentage Change
	September 29, 2023			September 30, 2022			2023 vs. 2022			September 29, 2023			September 30, 2022			2023 vs. 2022			March 29, 2024			March 31, 2023			2024 vs. 2023
Research and development expense	$	11,470		$	9,616			19.3	%	$	33,535		$	26,193			28.0	%	$	13,380		$	10,310			29.8	%
Percentage of sales		14.3	%		12.7	%					13.6	%		12.0	%					17.3	%		14.0	%

Research and development expenses for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023~~2024 increased ~~19.3% and 28.0%~~29.8% from the same period of ~~2022, respectively,~~2023, due mainly to increased salary-related and payroll tax expenses and ~~clinical expenses associated with our U.S. post-approval clinical trials, and for the nine months ended September 29, 2023, increased~~ bonus and stock-based compensation ~~expenses as compared to the nine months ended September 30, 2022.~~expenses.

Other Expense, Net

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

Three Months Ended

Percentage
Change

Nine Months Ended

Percentage
Change

September 29, 2023

September 30, 2022

2023 vs. 2022

September 29, 2023

September 30, 2022

2023 vs. 2022

Other income (expense), net

$
451

$
(1,128
)

—
*

$
2,265

$
(3,265
)

—
*
Percentage of sales

0.6
%

(1.5
)%

0.9
%

(1.5
)%

* Denotes change is greater than +~~100%.~~


	Three Months Ended						Percentage Change
	March 29, 2024			March 31, 2023			2024 vs. 2023
Other income, net	$	70		$	1,919			(96.4	)%
Percentage of sales		0.1	%		2.6	%

The ~~change~~decrease in other income, ~~(expense),~~ net for the three ~~and nine~~ months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022,~~March 31, 2023, respectively, was due mainly to ~~increased interest income mainly due to our investments held available for sale and lower~~higher foreign exchange losses.

Income Taxes

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


	Three Months Ended				Percentage Change
	March 29, 2024		March 31, 2023		2024 vs. 2023
Income tax provision	$	1,128	$	2,009		(43.9	)%

The effective tax rates for the three months ended ~~September~~March 29, 2024 and March 31, 2023 were (51.0)% and ~~September 30, 2022 were 28.6% and 18.4%~~42.6%, ~~respectively, and were 31.9% and 16.9% for the nine months ended September 29, 2023 and September 30, 2022,~~ 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

~~We believe that current~~Our principal sources of liquidity are cash, ~~and~~ cash equivalents, investments available for sale (“AFS”) and ~~future~~ cash flow from operating ~~activities~~activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial ~~statements included~~statements. We expect that cash flow from operating activities may fluctuate in ~~this quarterly report.~~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. Our financial condition at ~~September~~March 29, ~~2023~~2024 and December ~~30, 2022~~29, 2023 included the following (in thousands):

September 29, 2023

December 30,
2022

2023 vs. 2022

Cash and cash equivalents

$
127,432

$
86,480

$
40,952

Investments available for sale

74,308

139,061

(64,753
)
Total

$
201,740

$
225,541

$
(23,801
)

Current assets

$
347,068

$
311,723

$
35,345

Current liabilities

56,775

51,716

5,059

Working capital

$
290,293

$
260,007

$
30,286


	March 29, 2024		December 29, 2023		2024 vs. 2023
Cash and cash equivalents	$	224,024	$	183,038	$	40,986
Investments available for sale		28,088		49,391		(21,303	)
Total	$	252,112	$	232,429	$	19,683

Current assets	$	365,715	$	365,269	$	446
Current liabilities		62,674		65,036		(2,362	)
Working capital	$	303,041	$	300,233	$	2,808

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

A summary of cash flows for the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 and ~~September 30, 2022~~March 31, 2023 was as follows (in thousands):


	Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Cash flows from:
Operating activities	$	(17,375	)	$	32,745		$	21,680		$	(5,094	)
Investing activities		51,945			(109,659	)		16,187			9,933
Financing activities		7,048			8,095			4,056			(1,361	)
Effect of exchange rate changes		(666	)		(1,645	)		(937	)		10
Net increase (decrease) in cash and cash equivalents		40,952			(70,464	)
Net increase in cash and cash equivalents								40,986			3,488
Cash and cash equivalents, at beginning of year		86,480			199,706			183,038			86,480
Cash and cash equivalents, at end of year	$	127,432		$	129,242		$	224,024		$	89,968

For the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 net cash ~~used~~provided by operating activities consisted of ~~$61.3~~$16.8 million in working-capital changes and $8.2 million in non-cash items, partially offset by the net loss of $3.3 million. For the three months ended March 31, 2023 net cash used in operating activities consisted of $14.3 million in working-capital changes, partially offset by ~~$30.3~~$6.5 million in non-cash items and net income of ~~$13.6~~$2.7 million.

~~Starting in the second half of 2022, we decided to invest our cash in slightly higher yielding securities.~~ For the ~~nine~~three months ended ~~September~~March 29, ~~2023,~~2024, net cash provided by investment activities was ~~$52.0~~$16.2 million which consisted of ~~$119.4~~$21.4 million of proceeds from the sale or maturity of investments AFS, partially offset by ~~$52.3 million in purchases of investments AFS and $15.1~~$5.2 million in purchases of property, plant and equipment. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash ~~used in~~provided by investment activity was ~~$109.7~~$9.9 million which consisted of ~~$95.6~~$40.3 million of proceeds from the sale or maturity of investments AFS, partially offset by $27.4 million in purchases of investments AFS and ~~$14.1~~$2.9 million in purchases of property, plant and equipment.

Net cash provided by financing activities for the ~~nine~~three months ended ~~September~~March 29, ~~2023~~2024 was ~~$7.0~~$4.1 million which consisted of ~~$9.3~~$5.3 million of proceeds from the exercise of stock options, partially offset by ~~$2.1~~$1.2 million to repurchase of employee common stock for taxes withheld. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash ~~provided by~~used in financing activities was $1.4 million which consisted of ~~$8.2~~$1.8 million to repurchase of ~~proceeds from the exercise of~~employee common stock ~~options.~~for taxes withheld.

Commitments

Employment Agreements

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective January 1, 2023. He and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all of its assets, or termination “without cause or for good reason” as defined in the employment agreements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the ~~nine~~three months ended ~~September~~March 29, ~~2023,~~2024, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended December ~~30, 2022.~~29, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company. Based on that evaluation, our CEO and CFO concluded, as of the end of the period covered by this quarterly report on Form 10-Q, that our disclosure controls and procedures were effective. For purposes of this statement, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the CEO and the CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud or material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, our internal control system can provide only reasonable assurance of achieving its objectives and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and can provide only reasonable, not absolute, assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, or the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September~~March 29, ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully information contained in this report and the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended December ~~30, 2022.~~29, 2023. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

(c)

Trading Plans

During the quarter ended ~~September~~March 29, ~~2023,~~2024, no director or officer adopted or terminated:

(i)

Any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule ~~10b51-1(c)~~10b5-1(c); and

(ii)

Any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS


~~3.1~~Exhibit Number	~~Amended and Restated Certificate of Incorporation.(1)~~	Description

~~3.2~~	~~Amended and Restated Bylaws.(2)~~

3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Appendix 2 of the Company’s Proxy Statement on Form DEF 14A as filed with the Commission on April 26, 2018).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on February 1, 2023).

4.1		Form of Certificate for Common Stock, par value $0.01 per ~~share.(3)~~share (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8 A/A as filed with the Commission on April 18, 2003).

~~†4.2~~31.1	~~Amended and Restated Omnibus Equity Incentive Plan.(4)~~
*
~~31.1~~	Certifications Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	*	Certifications Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1	**	Certification Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101	*	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended ~~September~~March 29, ~~2023~~2024 formatted in Inline Extensible Business Reporting Language (iXBRL), are filed herewith and include: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text.*

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 29, ~~2023,~~2024, has been formatted in Inline XBRL with applicable taxonomy extension information contained in Exhibit 101.


*			Filed herewith.

**			Certification furnished herewith solely to accompany this annual report pursuant to 18 U.S.C. Section 1350. Certification is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.

~~(1)~~

~~Incorporated by reference to Appendix 2 of the Company’s Proxy Statement on Form DEF 14A as filed with the Commission on April 13, 2018.~~

~~(2)~~

~~Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on February 1, 2023.~~

~~(3)~~

~~Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8‑A/A as filed with the Commission on April 18, 2003.~~

~~(4)~~

~~Incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, for the period ended July 3, 2020, as filed with the Commission on August 5, 2020.~~

* Filed herewith.22

** Furnished herewith.

~~† Management contract or compensatory plan.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	95-3797439
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
25651 Atlantic Ocean Drive Lake Forest, California	92630
(Address of Principal Executive Offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	STAA	NASDAQ


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Net income	$	4,817		$	10,262		$	13,591		$	32,902
Net income (loss)													$	(3,339	)	$	2,710
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		(115	)		465			(1,839	)		7,126			232			(1,177	)
Reclassification into other income (expense), net		(51	)		54			(154	)		139			(17	)		(52	)
Investments available for sale:
Change in unrealized gain (loss)		149			(432	)		123			(432	)		(36	)		116
Reclassification into other income (expense), net		—			—			(2	)		—			3			(2	)
Foreign currency translation gain (loss)		(494	)		(958	)		(1,965	)		(3,474	)
Foreign currency translation loss														(1,100	)		(129	)
Tax effect		146			312			795			379			319			151
Other comprehensive income (loss), net of tax		(365	)		(559	)		(3,042	)		3,738
Comprehensive income	$	4,452		$	9,703		$	10,549		$	36,640
Other comprehensive loss, net of tax														(599	)		(1,093	)
Comprehensive income (loss)													$	(3,938	)	$	1,617


	Nine Months Ended						Three Months Ended
	September 29, 2023			September 30, 2022			March 29, 2024			March 31, 2023
Cash flows from operating activities:
Net income	$	13,591		$	32,902
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net income (loss)							$	(3,339	)	$	2,710
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property, plant, and equipment		3,743			3,101			1,237			1,113
Amortization/Impairment of intangibles		169			22
Amortization of intangibles								—			7
Accretion/Amortization of investments available for sale		(2,172	)		(307	)		(120	)		(983	)
Deferred income taxes		65			23			61			57
Change in net pension liability		(766	)		40			(93	)		(13	)
Loss on disposal of property and equipment		41			—
Stock-based compensation expense		23,334			15,375			6,339			6,065
Change in asset retirement obligation		(104	)		—
Provision for sales returns and bad debts		1,925			361			128			(377	)
Inventory provision		4,090			2,020			646			614
Changes in working capital:
Accounts receivable		(50,436	)		(13,108	)		29,837			(1,110	)
Inventories		(9,975	)		(4,123	)		(4,002	)		(3,920	)
Prepayments, deposits, and other current assets		(3,584	)		526
Prepayments, deposits, and other assets								(5,485	)		(4,249	)
Accounts payable		(3,266	)		(1,834	)		1,519			(3,168	)
Other current liabilities		5,970			(2,253	)		(5,048	)		(1,840	)
Net cash provided by (used in) operating activities		(17,375	)		32,745			21,680			(5,094	)
Cash flows from investing activities:
Acquisition of property and equipment		(15,100	)		(14,083	)		(5,202	)		(2,901	)
Purchase of investments available for sale		(52,314	)		(95,576	)		—			(27,445	)
Proceeds from sale or maturity of investments available for sale		119,359			—			21,389			40,279
Net cash provided by (used in) investing activities		51,945			(109,659	)
Net cash provided by investing activities								16,187			9,933
Cash flows from financing activities:
Repayment of finance lease obligations		(121	)		(85	)		(40	)		(42	)
Repurchase of employee common stock for taxes withheld		(2,096	)		—			(1,229	)		(1,849	)
Proceeds from the exercise of stock options		9,264			8,179			5,324			529
Proceeds from vested restricted stock		1			1
Net cash provided by financing activities		7,048			8,095
Proceeds from vested restricted and performance stock units								1			1
Net cash provided by (used in) financing activities								4,056			(1,361	)
Effect of exchange rate changes on cash and cash equivalents		(666	)		(1,645	)		(937	)		10
Increase (decrease) in cash and cash equivalents		40,952			(70,464	)
Increase in cash and cash equivalents								40,986			3,488
Cash and cash equivalents, at beginning of the period		86,480			199,706			183,038			86,480
Cash and cash equivalents, at end of the period	$	127,432		$	129,242		$	224,024		$	89,968


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


		PAGE NUMBER

PART I – FINANCIAL INFORMATION		1

ITEM 1	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1916

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2421

ITEM 4.	CONTROLS AND PROCEDURES	2421

PART II – OTHER INFORMATION		2521

ITEM 1.	LEGAL PROCEEDINGS	2521

ITEM 1A.	RISK FACTORS	2521

ITEM 4.	MINE SAFETY DISCLOSURES	2522

ITEM 5.	OTHER INFORMATION	2522

ITEM 6.	EXHIBITS	2622


	Three Months Ended																	Three Months Ended
	Common Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total			Common Stock Shares			Common Stock Par Value		Additional Paid-In Capital			Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at June 30, 2023		48,499		$	485	$	419,594		$	(2,521	)	$	(59,941	)	$	357,617
Balance, at December 29, 2023																			48,839		$	488	$	436,947		$	(4,113	)	$	(47,368	)	$	385,954
Net loss																			—			—		—			—			(3,339	)		(3,339	)
Other comprehensive loss																			—			—		—			(599	)		—			(599	)
Common stock issued upon exercise of options																			187			2		5,322			—			—			5,324
Stock-based compensation																			—			—		6,676			—			—			6,676
Repurchase of employee common stock for taxes withheld																			(36	)		—		(1,229	)		—			—			(1,229	)
Forfeited restricted stock																			(4	)		—		—			—			—			—
Vested restricted and performance stock units																			134			1		—			—			—			1
Balance, at March 29, 2024																			49,120		$	491	$	447,716		$	(4,712	)	$	(50,707	)	$	392,788

Balance, at December 30, 2022																			48,212		$	482	$	404,189		$	156		$	(68,715	)	$	336,112
Net income		—			—		—			—			4,817			4,817			—			—		—			—			2,710			2,710
Other comprehensive loss		—			—		—			(365	)		—			(365	)		—			—		—			(1,093	)		—			(1,093	)
Common stock issued upon exercise of options		305			3		7,255			—			—			7,258			40			—		529			—			—			529
Stock-based compensation		—			—		9,380			—			—			9,380			—			—		6,434			—			—			6,434
Repurchase of employee common stock for taxes withheld		(1	)		—		(112	)		—			—			(112	)		(31	)		—		(1,849	)		—			—			(1,849	)
Vested restricted and performance stock		14			—		—			—			—			—
Balance, at September 29, 2023		48,817		$	488	$	436,117		$	(2,886	)	$	(55,124	)	$	378,595

Balance, at July 1, 2022		48,024		$	480	$	387,328		$	249		$	(85,740	)	$	302,317
Net income		—			—		—			—			10,262			10,262
Other comprehensive loss		—			—		—			(559	)		—			(559	)
Common stock issued upon exercise of options		166			2		5,032			—			—			5,034
Stock-based compensation		—			—		6,088			—			—			6,088
Vested restricted and performance stock		12			—		—			—			—			—
Balance, at September 30, 2022		48,202		$	482	$	398,448		$	(310	)	$	(75,478	)	$	323,142
Vested restricted and performance stock units																			110			1		—			—			—			1
Balance at March 31, 2023																			48,331		$	483	$	409,303		$	(937	)	$	(66,005	)	$	342,844


	December 30, 2022
	As Previously Reported			Adjustment		As revised
Deferred income taxes	$	4,824		$	3,920	$	8,744
Total assets		414,898			3,920		418,818
Accumulated deficit		(72,635	)		3,920		(68,715	)
Total stockholders’ equity		332,192			3,920		336,112
Total liabilities and stockholders’ equity		414,898			3,920		418,818


	December 30, 2022							December 31, 2021
	As Previously Reported		Adjustment			As revised		As Previously Reported		Adjustment			As revised
Provision (benefit) for income taxes	$	6,797	$	(910	)	$	5,887	$	6,803	$	(3,010	)	$	3,793
Net income		38,755		910			39,665		24,501		3,010			27,511
Comprehensive income		42,959		910			43,869		25,998		3,010			29,008
Net income per share:
Basic	$	0.81	$	0.02		$	0.83	$	0.52	$	0.06		$	0.58
Diluted	$	0.78	$	0.02		$	0.80	$	0.50	$	0.06		$	0.56


	September 29, 2023							December 30, 2022
Long-lived amortized intangible assets	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Patents and licenses	$	9,180	$	(9,180	)	$	—	$	9,240	$	(9,067	)	$	173


	September 29, 2023
Stock options	$	23,888
Restricted stock, RSUs and PSUs		24,690
Total unrecognized stock-based compensation cost	$	48,578


	September 29, 2023		December 30, 2022		2023 vs. 2022
Cash and cash equivalents	$	127,432	$	86,480	$	40,952
Investments available for sale		74,308		139,061		(64,753	)
Total	$	201,740	$	225,541	$	(23,801	)

Current assets	$	347,068	$	311,723	$	35,345
Current liabilities		56,775		51,716		5,059
Working capital	$	290,293	$	260,007	$	30,286


		STAAR SURGICAL COMPANY

Dated:	~~November 6, 2023~~May 7, 2024	By:	/s/ PATRICK F. WILLIAMS
			Patrick F. Williams
			Chief Financial Officer
			(on behalf of the Registrant and as its principal financial officer)