Note 15 — Geographic Assets
The Company’s long-lived assets are located in the following geographical locations in which the Company operates. Other than the U.S. and Switzerland. The composition of the Company’s long-lived assets was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2026 |
|
|
|
U.S. |
|
|
Switzerland |
|
|
Other(1) |
|
|
Total |
|
Property, plant and equipment, net |
|
$ |
52,408 |
|
|
$ |
17,154 |
|
|
$ |
368 |
|
|
$ |
69,930 |
|
Operating lease ROU assets, net |
|
|
20,209 |
|
|
|
4,770 |
|
|
|
2,526 |
|
|
|
27,505 |
|
Cloud-based software |
|
|
35,111 |
|
|
|
— |
|
|
|
— |
|
|
|
35,111 |
|
Total |
|
$ |
107,728 |
|
|
$ |
21,924 |
|
|
$ |
2,894 |
|
|
$ |
132,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2026 |
|
|
|
U.S. |
|
|
Switzerland |
|
|
Other(1) |
|
|
Total |
|
Property, plant and equipment, net |
|
$ |
55,621 |
|
|
$ |
17,311 |
|
|
$ |
391 |
|
|
$ |
73,323 |
|
Operating lease ROU assets, net |
|
|
21,454 |
|
|
|
5,346 |
|
|
|
2,809 |
|
|
|
29,609 |
|
Cloud-based software |
|
|
31,118 |
|
|
|
— |
|
|
|
— |
|
|
|
31,118 |
|
Total |
|
$ |
108,193 |
|
|
$ |
22,657 |
|
|
$ |
3,200 |
|
|
$ |
134,050 |
|
(1)No other location individually exceeds 10% of each category of long-lived assets.
Note 16 — Related Party Transactions
On January 14, 2026, following the termination of the Merger Agreement, STAAR entered into the Cooperation Agreement with Broadwood, and agreed, among other things, to increase the size of the Board from six to seven directors, accept the resignations of Mr. Farrell and Dr. Yeu from the Board, and appoint each of Messrs. Bradsher, LeBuhn and Wang (each a “New Director”) to the Board. Additionally, the Company agreed that the Board would nominate each New Director as a candidate for election as a director at the 2026 annual meeting of shareholders and that the size of the Board, until the conclusion of the 2027 annual meeting of shareholders, will not exceed seven directors. The Company also agreed to reimburse Broadwood, Yunqi Capital and Defender Capital for certain reasonable and documented out-of-pocket fees and expenses they have incurred. Each of Broadwood and Yunqi Capital were holders of more than 5% of the Company’s outstanding stock at the time the Company entered into the Cooperation Agreement. The Cooperation Agreement was reviewed and approved by the Company’s Board, and it reviewed and approved the payment of the fees and expenses incurred by Broadwood and Yunqi Capital. The Company paid $5,036,000 to Broadwood and $962,000 to Yunqi Capital, in accordance with the Cooperation Agreement.
Note 17 - Subsequent Event
Effective August 4, 2026, following an extensive global search, the Board appointed Warren Foust as President and Chief Executive Officer and a new member of the Board. Also effective August 4, 2026, Deborah Andrews, who served since February 2026 as Interim co-Chief Executive Officer alongside Mr. Foust, began serving as Executive Vice President. She also continues to serve as Chief Financial Officer.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
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 (“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,” “could,” “forecast,” “potential,” “continue,” “ongoing” (or the negative of those words and similar words or expressions), although not all forward-looking statements contain these words. Forward-looking statements include, without limitation, statements regarding the intent, belief or current expectations of the Company and its management regarding any of the following: demand for our Implantable Collamer® Lenses; the benefits of our leadership realignment and related efforts; the timing of and our ability to manufacture and supply 100% of EVO and EVO+ ICLs for China from Switzerland; China macroeconomic conditions, procedure volumes, demand, and inventory levels; 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 plans, strategies, and objectives of management for future operations or prospects for achieving such plans; potential outcomes and timing of the Company’s enterprise resource planning implementation; 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 new or improved products; commercialization of new or improved products; future economic conditions or size of market opportunities globally; expected costs of operations; statements of belief, including as to achieving business plans for 2026 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 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 differ materially from those 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 the forward-looking statements include, without limitation, our ability to grow and generate profit; our reliance on independent distributors in international markets; a slowdown or disruption to the Chinese economy; global economic conditions; disruptions in our supply chain; fluctuations in foreign currency exchange rates; international trade disputes (including involving tariffs) and substantial dependence on demand from Asia; changes in effective tax rate or tax laws; any loss of use of our principal manufacturing facility; competition; potential losses due to product liability claims; our exposure to environmental liability; data corruption, cyber-based attacks or network security breaches and/or noncompliance with data protection and privacy regulations; acquisitions of new technologies; climate changes; the willingness of surgeons and patients to adopt a new or improved product and procedure; extensive clinical trials and resources devoted to research and development; compliance with government regulations; legal proceedings, claims and regulatory actions; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before or after approval, or to take enforcement action; laws pertaining to healthcare fraud and abuse; changes in FDA or international regulations related to product approval; product recalls or failures; and other important factors, including those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on March 3, 2026.
We disclaim any intention or obligation to update or review these financial projections or forward-looking statements due to new information or other events except as required by law.
The following discussion should be read in conjunction with the 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 accessory delivery systems used to deliver the lenses into the eye. We are the leading manufacturer of phakic implantable lenses used worldwide in corrective or “refractive” surgery. We have been dedicated solely to ophthalmic surgery for 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.
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 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 procedure and the clinical benefits of our ICLs, and providing surgeon training, support and education, particularly in our newer markets.
Business Environment and Factors Affecting Comparability
For the three months ended July 3, 2026, net sales were $93.5 million, up 111.0% from $44.3 million for the three months ended June 27, 2025. The increase was primarily driven by strong sales performance in China, while distributor inventory was maintained at or below contractual levels. Net sales to our two distributors in China were $52.3 million for the three months ended July 3, 2026, compared to net sales of $5.3 million in the prior-year period.
Gross margin increased year-over-year to 74.5% from 74.0%, reflecting cost reduction initiatives implemented in the first quarter of 2025. This improvement was partially offset by higher per-unit manufacturing costs associated with low production volumes at the new Swiss facility during 2025. As production in Switzerland scales in 2026, we expect unit costs to improve. However, gross margin will continue to be impacted by tariffs until we can supply 100% of EVO and EVO+ ICL lenses for China from Switzerland, which should happen by the end of 2026.
Selling, general and administrative expenses were $59.6 million in the second quarter of 2026, compared to $62.8 million in the second quarter of 2025. Excluding restructuring, impairment, and related charges of $5.2 million recorded in the previous year that were not repeated this year, second quarter of 2025 selling, general and administrative expenses would have been $57.5 million. Second quarter of 2026 selling, general and administrative expenses included year-over-year increases driven primarily by higher depreciation expense and consulting costs associated with the Company’s enterprise resource planning (“ERP”) implementation, which launched during the second quarter of 2026, as well as increased severance expense tied to headcount reductions in Global Marketing. These items, along with various other miscellaneous increases, were partially offset by lower compensation-related expenses.
The ERP implementation represented a significant operational undertaking for the Company during the quarter. As sales volumes grew, unforeseen operational challenges emerged that required extensive daily manual intervention from teams across the organization. Through these concentrated efforts, the Company successfully met its sales targets for the quarter. While certain implementation-related issues persist, the Company has developed a comprehensive remediation plan and anticipates resolving these matters in the third quarter of 2026. The Company expects to continue to invest and add functionality to its systems.
As a result of significantly increased sales and higher gross profit, GAAP net income for the second quarter of 2026 was $8.1 million or $0.16 per diluted share, up from a net loss of $(16.8) million or $(0.34) per share for the prior year quarter. Cash and investments available for sale increased to $181.5 million at July 3, 2026 from $163.9 million at April 3, 2026, and we expect to continue to generate cash during the remainder of the year.
Critical Accounting Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of 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. Actual results may differ, significantly at times, from these estimates if actual conditions differ from our assumptions.
Management believes that there have been no significant changes during the six months ended July 3, 2026 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 January 2, 2026.
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 Ended |
|
|
Six Months Ended |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
25.5 |
% |
|
|
26.0 |
% |
|
|
25.9 |
% |
|
|
30.0 |
% |
Gross profit |
|
|
74.5 |
% |
|
|
74.0 |
% |
|
|
74.1 |
% |
|
|
70.0 |
% |
General and administrative |
|
|
24.3 |
% |
|
|
47.3 |
% |
|
|
21.3 |
% |
|
|
52.3 |
% |
Selling and marketing |
|
|
28.8 |
% |
|
|
59.3 |
% |
|
|
27.5 |
% |
|
|
61.2 |
% |
Research and development |
|
|
10.6 |
% |
|
|
23.2 |
% |
|
|
10.6 |
% |
|
|
24.9 |
% |
Merger transaction and related costs |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
3.6 |
% |
|
|
0.0 |
% |
Restructuring, impairment and related charges |
|
|
0.0 |
% |
|
|
11.8 |
% |
|
|
1.4 |
% |
|
|
32.1 |
% |
Total selling, general and administrative |
|
|
63.7 |
% |
|
|
141.6 |
% |
|
|
64.4 |
% |
|
|
170.5 |
% |
Operating income (loss) |
|
|
10.8 |
% |
|
|
(67.6 |
)% |
|
|
9.7 |
% |
|
|
(100.5 |
)% |
Total other income, net |
|
|
1.0 |
% |
|
|
9.1 |
% |
|
|
0.6 |
% |
|
|
8.0 |
% |
Income (loss) before income taxes |
|
|
11.8 |
% |
|
|
(58.5 |
)% |
|
|
10.3 |
% |
|
|
(92.5 |
)% |
Provision (benefit) for income taxes |
|
|
3.2 |
% |
|
|
(20.5 |
)% |
|
|
3.2 |
% |
|
|
(10.8 |
)% |
Net income (loss) |
|
|
8.6 |
% |
|
|
(38.0 |
)% |
|
|
7.1 |
% |
|
|
(81.7 |
)% |
Net Sales
The following table presents our net sales (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Net sales |
|
$ |
93,535 |
|
|
$ |
44,320 |
|
|
|
— |
* |
|
$ |
187,057 |
|
|
$ |
86,909 |
|
|
|
— |
* |
* Denotes change is greater than +100%.
Net sales for the three months ended July 3, 2026 increased 111.0% from the same period of 2025, primarily due to increased sales in China. The composition of our net sales is primarily related to ICL sales. Net sales also include sales of delivery system sales and normal recurring sales adjustments such as sales return allowances. The sales increase was driven by the Asia Pacific (“APAC”) region, which increased by 189%, with ICL unit increase of 216%. The increase in the APAC region was driven by increased sales in China and Japan and increases in other areas in the APAC region, partially offset by decreased sales in India. The Europe, Middle East and Africa (“EMEA”) region sales decreased 1%, with ICL units down 19%, mainly due to the current situation in the Middle East. Sales in the Middle East decreased 58% compared to the same period of last year. Excluding the impact of this decrease, EMEA region sales increased 12% and units increased 5%. The Americas region sales increased 12%, with ICL unit growth up 15%, primarily due to sales growth in the U.S. and Canada and Latin America. Changes in foreign currency unfavorably impacted net sales by $0.8 million.
Net sales for the six months ended July 3, 2026 increased 115.2% from the same period of 2025, primarily due to increased sales in China. The sales increase was driven by the APAC region, which increased by 203%, with ICL unit increase of 221%. The increase in the APAC region was driven by increased sales in China, Japan and Korea and increases in other areas in the APAC region, partially offset by decreased sales in India. The EMEA region sales decreased 2%, with ICL units down 15%, mainly due to the current situation in the Middle East. Sales in the Middle East decreased 52% compared to the same period of last year. Excluding the impact of this decrease, EMEA region sales increased 10% and units increased 8%. The Americas region sales increased 19%, with ICL unit growth up 21%, primarily due to sales growth in the U.S. and Canada and Latin America. Changes in foreign currency favorably impacted net sales by $0.4 million.
Gross Profit
The following table presents our gross profit and gross profit margin (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Gross profit |
|
$ |
69,727 |
|
|
$ |
32,799 |
|
|
|
— |
* |
|
$ |
138,586 |
|
|
$ |
60,804 |
|
|
|
— |
* |
Gross profit margin |
|
|
74.5 |
% |
|
|
74.0 |
% |
|
|
|
|
|
74.1 |
% |
|
|
70.0 |
% |
|
|
|
* Denotes change is greater than +100%.
Gross profit for the three and six months ended July 3, 2026 increased 112.6% and 127.9%, respectively, from the same periods of 2025. Gross profit margin increased to 74.5% of revenue for the three months ended July 3, 2026 compared to 74.0% of revenue for the three months ended June 27, 2025 and increased to 74.1% of revenue for the six months ended July 3, 2026 compared to 70.0% for the six months ended June 27, 2025, due to the elimination of period costs related to the ramp-up of manufacturing in Switzerland, a reduction in Advanced Manufacturing expenses as a result of our cost reductions implemented during the three months ended March 28, 2025, lower inventory provisions, and decreased freight and other cost of sales as a percentage of sales. This was partially offset by higher per unit manufacturing costs resulting from lower production volume in 2025 and increased tariff expense on U.S.-manufactured product sold to China. Gross margin will continue to be impacted by tariffs until we can supply 100% of EVO and EVO+ ICL lenses for China from Switzerland, which should happen by the end of 2026.
General and Administrative Expense
The following table presents our general and administrative expenses (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
General and administrative expense |
|
$ |
22,739 |
|
|
$ |
20,969 |
|
|
|
8.4 |
% |
|
$ |
39,761 |
|
|
$ |
45,427 |
|
|
|
(12.5 |
)% |
Percentage of sales |
|
|
24.3 |
% |
|
|
47.3 |
% |
|
|
|
|
|
21.3 |
% |
|
|
52.3 |
% |
|
|
|
General and administrative expenses for the three months ended July 3, 2026 increased 8.4% from the same period of 2025 due to increased amortization of our cloud-based software and outside services associated with supporting our ERP system, partially offset by decreased salary-related and payroll tax expenses and bonus and stock-based compensation expenses.
General and administrative expenses for the six months ended July 3, 2026 decreased 12.5% from the same period of 2025 due to decreased bonus and stock-based compensation expenses, salary-related and payroll tax expenses and outside services, partially offset by increased amortization of our cloud-based software.
Selling and Marketing Expense
The following table presents our selling and marketing expenses (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Selling and marketing expense |
|
$ |
26,944 |
|
|
$ |
26,283 |
|
|
|
2.5 |
% |
|
$ |
51,453 |
|
|
$ |
53,228 |
|
|
|
(3.3 |
)% |
Percentage of sales |
|
|
28.8 |
% |
|
|
59.3 |
% |
|
|
|
|
|
27.5 |
% |
|
|
61.2 |
% |
|
|
|
Selling and marketing expenses for the three months ended July 3, 2026 increased 2.5% from the same period of 2025 due to severance expenses tied to headcount reductions in Global Marketing, partially offset by decreased salary-related and payroll tax expenses.
Selling and marketing expenses for the six months ended July 3, 2026 decreased 3.3% from the same period of 2025 due to decreased advertising and promotional activities, salary-related and payroll tax expenses and trade shows and sales meeting expenses, partially offset by severance expenses tied to headcount reductions in Global Marketing, increased stock-based compensation expenses and bonus, and bad debt expense.
Research and Development Expense
The following table presents our research and development expenses (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Research and development expense |
|
$ |
9,943 |
|
|
$ |
10,263 |
|
|
|
(3.1 |
)% |
|
$ |
19,868 |
|
|
$ |
21,602 |
|
|
|
(8.0 |
)% |
Percentage of sales |
|
|
10.6 |
% |
|
|
23.2 |
% |
|
|
|
|
|
10.6 |
% |
|
|
24.9 |
% |
|
|
|
Research and development expenses for the three months ended July 3, 2026 decreased 3.1% from the same period of 2025, due mainly to decreased salary-related and payroll tax expenses. Research and development expenses for the six months ended July 3, 2026 decreased 8.0% from the same period of 2025, due mainly to decreased salary-related and payroll tax expense and clinical expenses.
Merger Transaction and Related Costs
At the special meeting of shareholders held on January 6, 2026, the Company’s shareholders voted against the merger with Alcon. Following the termination of the Merger Agreement, the Company entered into the Cooperation Agreement with Broadwood, which provided for the reimbursement of certain reasonable out-of-pocket fees and expenses to Broadwood, Yunqi Capital and Defender Capital related to the merger with Alcon. The following table presents our professional services expenses we incurred in connection with the proposed merger with Alcon and the Cooperation Agreement (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Merger transaction and related costs |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
* |
|
$ |
6,743 |
|
|
$ |
— |
|
|
|
— |
* |
Percentage of sales |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
3.6 |
% |
|
|
0.0 |
% |
|
|
|
* Denotes change is greater than +100%.
Restructuring, Impairment and Related Charges
The following table presents our restructuring, impairment and related charges (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Restructuring, impairment and related charges |
|
$ |
— |
|
|
$ |
5,248 |
|
|
|
(100.0 |
)% |
|
$ |
2,681 |
|
|
$ |
27,912 |
|
|
|
(90.4 |
)% |
Percentage of sales |
|
|
0.0 |
% |
|
|
11.8 |
% |
|
|
|
|
|
1.4 |
% |
|
|
32.1 |
% |
|
|
|
In the first half of 2025, we took a number of steps to change our leadership team, realign our leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. In addition, in 2026, as a result of the Cooperation Agreement with Broadwood, we incurred additional restructuring related charges related to leadership realignment as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
Severance and reduction in workforce |
|
$ |
— |
|
|
$ |
3,645 |
|
|
$ |
1,614 |
|
|
$ |
12,453 |
|
Consulting expenses |
|
|
— |
|
|
|
227 |
|
|
|
1,067 |
|
|
|
866 |
|
Impairment on leasehold improvements and machinery and equipment(1) |
|
|
— |
|
|
|
700 |
|
|
|
— |
|
|
|
7,759 |
|
Impairment on real property right-of-use assets(2) |
|
|
— |
|
|
|
676 |
|
|
|
— |
|
|
|
4,083 |
|
Impairment on internally developed software(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,751 |
|
|
|
$ |
— |
|
|
$ |
5,248 |
|
|
$ |
2,681 |
|
|
$ |
27,912 |
|
(1)The Company will no longer be using these assets.
(2)The Company is actively pursuing subleasing opportunities.
Other Income, Net
The following table presents our other income, net (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Other income, net |
|
$ |
923 |
|
|
$ |
4,049 |
|
|
|
(77.2 |
)% |
|
$ |
1,162 |
|
|
$ |
6,964 |
|
|
|
(83.3 |
)% |
Percentage of sales |
|
|
1.0 |
% |
|
|
9.1 |
% |
|
|
|
|
|
0.6 |
% |
|
|
8.0 |
% |
|
|
|
The decrease in other income, net for the three and six months ended July 3, 2026, was due mainly to higher foreign exchange losses and lower interest income.
Provision (Benefit) for Income Taxes
The following table presents our income tax provision (benefit) (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percentage
Change |
|
|
Six Months Ended |
|
|
Percentage
Change |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
|
2026 vs. 2025 |
|
Provision (benefit) for income taxes |
|
$ |
2,966 |
|
|
$ |
(9,103 |
) |
|
|
— |
* |
|
$ |
5,978 |
|
|
$ |
(9,378 |
) |
|
|
— |
* |
* Denotes change is greater than +100%.
The effective tax rates for the three months ended July 3, 2026 and June 27, 2025 were 26.9% and 35.1%, respectively, and were 31.1% and 11.7% for the six months ended July 3, 2026 and June 27, 2025, respectively. Our effective tax rates differ from the U.S. federal statutory rate of 21%, primarily due to the income tax expense generated in foreign jurisdictions.
Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. If our anticipated future cash flow from operating activities is insufficient to satisfy our future capital requirements in the long-term, we may need to seek additional capital. Our financial condition at July 3, 2026 and January 2, 2026 included the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2026 |
|
|
January 2, 2026 |
|
|
2026 vs. 2025 |
|
Cash and cash equivalents |
|
$ |
148,579 |
|
|
$ |
153,150 |
|
|
$ |
(4,571 |
) |
Investments available for sale |
|
|
32,910 |
|
|
|
34,386 |
|
|
|
(1,476 |
) |
Total |
|
$ |
181,489 |
|
|
$ |
187,536 |
|
|
$ |
(6,047 |
) |
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
342,353 |
|
|
$ |
311,545 |
|
|
$ |
30,808 |
|
Current liabilities |
|
|
73,394 |
|
|
|
68,504 |
|
|
|
4,890 |
|
Working capital |
|
$ |
268,959 |
|
|
$ |
243,041 |
|
|
$ |
25,918 |
|
Cash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions. Our investment policy’s primary objective is capital preservation while maximizing our return on investment. Investments available for sale may include U.S. government and corporate debt securities, commercial paper, certain certificates of deposit and related security types, that are rated by two nationally recognized statistical rating organizations with minimum investment grade ratings of AAA to A-/A-1+ to A-2, or the equivalent. The maturity of individual investments may
not extend 24 months from the date of purchase. There are also limits to the amount of credit exposure in any given security type. We do not have any off-balance sheet arrangements.
A summary of cash flows for the six months ended July 3, 2026 and June 27, 2025 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
July 3, 2026 |
|
|
June 27, 2025 |
|
Cash flows from: |
|
|
|
|
|
|
Operating activities |
|
$ |
(2,005 |
) |
|
$ |
(32,983 |
) |
Investing activities |
|
|
781 |
|
|
|
60,471 |
|
Financing activities |
|
|
(3,195 |
) |
|
|
(5,488 |
) |
Effect of exchange rate changes |
|
|
(152 |
) |
|
|
972 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(4,571 |
) |
|
|
22,972 |
|
Cash and cash equivalents, at beginning of year |
|
|
153,150 |
|
|
|
144,159 |
|
Cash and cash equivalents, at end of period |
|
$ |
148,579 |
|
|
$ |
167,131 |
|
For the six months ended July 3, 2026, net cash used in operating activities consisted of $45.4 million in working-capital changes primarily related to changes in accounts receivable, partially offset by $30.1 million in non-cash items primarily related to stock-based compensation, provision for sales returns and credit losses and depreciation of property, plant and equipment and $13.3 million in net income. For the six months ended June 27, 2025, net cash used in operating activities consisted of $71.0 million in net loss, partially offset by $24.7 million in in non-cash items primarily related to impairment on fixed assets and operating leases and stock-based compensation and $13.3 million in working-capital changes primarily related to changes in accounts receivable, partially offset by changes in inventory.
For the six months ended July 3, 2026, net cash provided by investing activities was $0.8 million which included $34.5 million of proceeds from the maturity and sale of investments AFS, partially offset by $32.7 million of purchases of investments AFS. For the six months ended June 27, 2025, net cash provided by investing activities was $60.5 million which included $78.4 million of proceeds from the maturity and sale of investments AFS, partially offset by $14.7 million in purchases of investments AFS.
For the six months ended July 3, 2026, net cash used in financing activities was $3.2 million which consisted of $4.6 million to repurchase employee common stock for taxes withheld, partially offset by $1.4 million of proceeds from the exercise of stock options. For the six months ended June 27, 2025, net cash used in financing activities was $5.5 million which primarily consisted of $4.5 million of repurchases of common stock and $1.4 million to repurchase employee common stock for taxes withheld.
Commitments
Executive Agreements
The Company has entered into agreements with certain of its executives that provide for severance payments and benefits upon termination of employment by the company without “cause” or by the executive for “good reason” as defined in the applicable agreements. Certain executives are also party to agreements that provide for enhanced payments and benefits in connection with a termination of employment upon a “change in control.”
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the six months ended July 3, 2026, 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 January 2, 2026.
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 July 3, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings, claims, regulatory actions and other matters arising in the normal course of business. These legal proceedings, claims, regulatory actions and other matters may relate to, among other things, contractual rights and obligations, vendor and distributor relationships, employment matters, and claims of product liability or medical device quality compliance. 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.
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 January 2, 2026. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.
During the quarter ended July 3, 2026, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) 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 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
|
|
|
|
Exhibit Number |
|
|
Description |
|
|
|
|
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 March 17, 2025). |
|
|
|
|
4.1 |
|
|
Form of Certificate for Common Stock, par value $0.01 per 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). |
|
|
|
|
10.1 |
|
|
Amendment No. 2 to the STAAR Surgical Company Amended and Restated Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the Commission on June 22, 2026). |
|
|
|
|
10.2 |
|
|
President and CEO Offer Letter, effective August 4, 2026, by and between the Company and Warren Foust (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on August 6, 2026). |
|
|
|
|
10.3 |
* |
|
Performance Stock Option Grant Notice and Stock Option Agreement by and between the Company and Warren Foust. |
|
|
|
|
10.4 |
* |
|
Performance Stock Option Grant Notice and Stock Option Agreement by and between the Company and Warren Foust. |
|
|
|
|
10.5 |
* |
|
Performance Stock Option Grant Notice and Stock Option Agreement by and between the Company and Deborah Andrews. |
|
|
|
|
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 July 3, 2026 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 July 3, 2026, has been formatted in Inline XBRL with applicable taxonomy extension information contained in Exhibit 101. |
|
|
|
|
|
|
|
|
* |
|
|
Filed herewith. |
|
|
|
|
** |
|
|
Certification furnished herewith solely to accompany this quarterly 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. |
SIGNATURES
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.
|
|
|
|
|
|
|
|
|
STAAR SURGICAL COMPANY |
|
|
|
|
|
|
Dated: |
|
August 12, 2026 |
By: |
|
/s/ DEBORAH ANDREWS |
|
|
|
|
|
Deborah Andrews |
|
|
|
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
(on behalf of the Registrant and as its principal financial officer) |