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Organization and Description of Business and Accounting Policies (Policies)

12 Months Ended

Jan. 02, 2026

Organization And Description Of Business

Organization and Description of Business

STAAR Surgical Company, a Delaware corporation, was first incorporated in 1982, and together with its subsidiaries (the “Company”) designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. The Company generates worldwide revenue almost exclusively from sales of its Implantable Collamer Lenses (“ICLs”), which are used in corrective or “refractive” surgery. Historically, the Company also manufactured and sold intraocular lenses (“IOLs”), for use in surgery to treat cataracts. As the Company has focused its business and strategy on its ICL product offerings, it has phased out its cataract IOL product line.

The Company markets and sells ICLs for refractive surgery to treat myopia (nearsightedness) as its “EVO” family of lenses. The Company’s EVO family of lenses includes its EVO ICL, EVO+ ICL, and EVO Visian ICL. The Company’s newest offering, EVO Viva, has an extended depth of focus (EDoF) optic, which is designed to treat myopia with presbyopia (age-related loss of ability to focus). The Company also markets and sells an ICL lens to treat hyperopia (farsightedness), which is called Visian ICL. The Company makes its ICL product offerings available in multiple models, powers and lengths, including some with toric ICL (TICL) versions to correct for astigmatism (blurred vision). Not all of the Company’s products are currently available in all markets where it sells ICLs today.

As of January 2, 2026, the Company’s significant subsidiaries consisted of:

•

STAAR Surgical AG, a wholly owned subsidiary organized under the laws of Switzerland (“STAAR AG”)

•

STAAR Japan, Inc., a wholly owned subsidiary organized under the laws of Japan (“STAAR Japan”)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of STAAR Surgical Company and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated.

Fiscal Year and Interim Reporting Periods

The Company’s fiscal year ends on the Friday nearest December 31 and each of the Company’s quarterly reporting periods generally consists of 13 weeks. Fiscal year 2025 is based on a 53-week period and fiscal years 2024 and 2023 are based on a 52-week period.

Termination of Alcon Merger Agreement

As previously disclosed, on August 4, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Alcon Research, LLC, a Delaware limited liability company (“Alcon”), and Rascasse Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of Alcon (“Merger Sub”). The Merger Agreement provided, among other things, that subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Alcon. The Company and Alcon entered into two amendments to the Merger Agreement, on November 7, 2025 and December 9, 2025, and the Company held a special meeting of stockholders (the “Special Meeting”) to vote on the Merger on January 6, 2026. At the Special Meeting, the Company’s stockholders voted against the Merger, and the Merger Agreement was terminated in accordance with its terms effective January 6, 2026. None of the Company, Alcon or Merger Sub was required to pay any termination fee as a result of the termination of the Merger Agreement, and the parties are responsible for their respective costs and expenses related to the Merger Agreement and the transactions contemplated thereby. During fiscal 2025, the Company incurred $17,135,000 in professional fees and expenses related to the Merger, which are recorded as Merger transaction and related costs on the Consolidated Statement of Operations. Following the termination of the Merger Agreement, on January 14, 2026, the Company entered into a letter agreement (the “Cooperation Agreement”) with Broadwood Partners, L.P. and its affiliates (“Broadwood”), the Company’s largest stockholder. The Cooperation Agreement provided for certain governance and leadership changes, as well as reimbursement by the Company of expenses incurred by Broadwood and other stockholders in connection with their engagement with the Company, including the Special Meeting. See Note 19 – Subsequent Events to the Consolidated Financial Statements for information about the Merger Agreement and the Cooperation Agreement.

Reclassifications

The Company reclassified certain personnel costs including salary-related and payroll tax expenses, bonus and stock-based compensation related expenses and travel related expenses previously included in research and development to sales and marketing. These costs support internal and external training and education with respect to the Company’s existing products, and as such, the Company determined that classification of these costs in sales and marketing better reflects the nature of the costs and financial performance of the Company as it operates. The Company has made certain reclassification adjustments to conform prior period amounts to current presentation, which include reclassification adjustments between Research and development expenses and Sales and marketing expenses on its Consolidated Statements of Operations as follows (in thousands):


	2024							2023
	Prior Presentation		Reclassification			New Presentation		Prior Presentation		Reclassification			New Presentation
Sales and marketing	$	108,322	$	8,656		$	116,978	$	107,834	$	3,923		$	111,757
Research and development		53,973		(8,656	)		45,317		44,401		(3,923	)		40,478

The reclassification adjustments did not have a material impact on previously recorded amounts and had no impact on the Company’s Total selling, general and administrative expenses, Operating income (loss), Net income (loss) or Net earnings (loss) per share. The Consolidated Balance Sheets, Consolidated Statements of Operations, Comprehensive Income (Loss), Stockholders’ Equity and Cash Flows were not affected by changes in the presentation of these costs.

Additionally, non-cash lease expense is now presented on its own line in the Company’s Consolidated Statements of Cash Flows instead of combined with the changes in other current and non-current liabilities as follows (in thousands):


	2024								2023
	Prior Presentation		Reclassification			New Presentation			Prior Presentation		Reclassification			New Presentation
Non-cash operating lease expense	$	—	$	3,562		$	3,562		$	—	$	3,256		$	3,256
Other current and non-current liabilities		3,393		(3,562	)		(169	)		10,396		(3,256	)		7,140

Net cash provided by (used in) operating activities presented in the Consolidated Statements of Cash Flows was not affected by this change in presentation.

Segment Reporting

The Company operates in one reportable segment, ophthalmic surgical product segment, as all of the Company’s sales are generated from ophthalmic surgical products. The accounting policies for the ophthalmic surgical product segment are the same as those described in Note 1 – Organization and Description of Business and Accounting Policies of the Consolidated Financial Statements.

The Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer. The Company’s CODM manages and allocates resources to the operations of the Company on a consolidated basis. The CODM assesses performance comparing actual results to forecasts and decides how to allocate resources, i.e., headcount and compensation, based on net income or on operating results, if a net loss. Significant segment expenses are consistent with those presented on the Consolidated Statements of Operations.

The measure of segment assets is reported on the balance sheet as total consolidated assets and the expenditures for additions to long-lived assets, and depreciation and amortization expense is consistent with those presented on the Consolidated Statement of Cash Flows.

See Note 1 – Organization and Description of Business and Accounting Policies – Concentration of Credit Risk and Sales, Note 17 – Disaggregation of Revenues, Geographic Sales and Product Sales and Note 18 – Geographic Assets for specific information regarding the Company’s sales and long-lived assets.

Foreign Currency

The functional currency of STAAR Japan is the Japanese yen. The functional currency of STAAR AG is the U.S. dollar.

Assets and liabilities of STAAR Japan are translated at rates of exchange in effect at the close of the period. Sales and expenses are translated at the weighted average of exchange rates in effect during the period. Net foreign translation gain (loss) was as follows (in thousands):


	Years Ended
	2025		2024			2023
Foreign currency translation gain (loss)(1)	$	22	$	(1,775	)	$	(1,095	)
Gain (loss) on foreign currency transactions(2)		2,603		(3,675	)		(1,909	)

(1) Shown as a separate line item on the Consolidated Statements of Comprehensive Income (Loss).

(2) Shown as a separate line item on the Consolidated Statements of Operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions with original maturities of three months or less. Such balances generally exceed the federal insurance limits; however, the Company periodically assesses the financial condition of the institutions and believes that the risk of any loss is minimal. The book value of money market accounts approximates fair value and are classified as Level 1.

Use of Estimates

Revenue Recognition

The Company recognizes revenue when its contractual performance obligations with customers are satisfied and collectability is reasonably assured. The Company’s performance obligations are generally limited to single sales orders with product shipping to the customer within a month of receipt of the sales order. Substantially all of the Company’s revenues are recognized at a point-in-time when control of its products transfers to the customer, which is typically upon shipment (as discussed below). Payment for product sales is typically collected within a short period following transfer of control of product. The Company presents sales tax and similar taxes it collects from its customers on a net basis (excluded from revenues).

From time to time, the Company consigns or ships inventory to third parties outside the United States in advance of anticipated demand. While the Company does not recognize revenue on shipment of consigned inventory, the Company believes it can help address challenges and delays associated with importation and logistics. Further, the Company believes that increasing the amount of product in-country can mitigate potential impacts from geopolitical risk and tariff changes.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Revenue Recognition (Continued)

Historically, the Company marketed and sold cataract IOLs and related injectors and injector parts. The Company phased out sales of such products in fiscal 2023, and it did not sell any such products in fiscal 2024 or 2025. Sales of such products involved sales by the Company of injector parts to an unrelated customer and supplier (collectively referred to as “supplier”) whereby these injector part sales were either made as a final sale to the supplier or, were sold to be combined with an acrylic cataract IOL by the supplier into finished goods inventory (a preloaded acrylic cataract IOL). These finished goods were then sold back to the Company at an agreed upon, contractual price. The Company made a profit margin on either type of sale with the supplier and each type of sale was made under separate purchase and sales orders between the two parties resulting in cash settlement for the orders sold or repurchased. For parts that were sold as a final sale, the Company recognized a sale, and those sales were classified as other product sales in total net sales. For the injector parts that were sold to be combined with an acrylic cataract IOL into finished goods, the Company recorded the transaction at its carrying value deferring any profit margin as contra-inventory, until the finished goods inventory was sold to an end-customer (not the supplier) at which point the Company recognized revenues.

For all sales, the Company is considered the principal in the transaction as the Company is the party providing specified goods it has control over prior to when control is transferred to the customer. Cost of sales includes cost of production, freight and distribution, and inventory provisions, net of any purchase discounts. Shipping and handling activities that occur after the customer obtains control of the goods are recognized as fulfillment costs.

The Company disaggregates its revenue into the following categories: non-consignment sales and consignment sales.

•

Non-consignment Sales – The Company recognizes revenue from non-consignment product sales at a point-in-time when control has been transferred, which is typically at shipping point, except for certain customers and for STAAR Japan, which is typically recognized when the customer receives the product. The Company does not have significant deferred revenues as of January 2, 2026, December 27, 2024 and December 29, 2023, as delivery to the customer is generally made within the same or the next day of shipment. In December 2024, the Company shipped a $27.5 million order of ICLs to one of its distributors in China. The distributor requested extended payment terms, and the Company agreed. As these payment terms were significantly longer than the terms included in the Company’s distributor agreement, management determined that collectability was not probable, and the Company did not recognize the revenue associated with the shipment in the quarter ended December 27, 2024. However, as the shipment was received by the distributor, and control of the product passed to the distributor, the cost of the inventory was charged to cost of sales in the quarter ended December 27, 2024. Revenue for this order was recognized in 2025 when payments were received from the distributor, at which point the collectability concern is alleviated.

•

Consignment Sales – The Company’s products are marketed to ophthalmic surgeons, hospitals, ambulatory surgery centers or vision centers, and distributors. ICLs may be offered to surgeons and hospitals on a consignment basis, and historically, cataract IOLs were also offered on a consignment basis. The Company maintains title and risk of loss on consigned inventory and recognizes revenue for consignment inventory at a point-in-time when the Company is notified that the lenses have been implanted, thus completing the performance obligation.

See Note 17 – Disaggregation of Revenues, Geographic Sales and Product Sales to the Consolidated Financial Statements for additional information.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Revenue Recognition (Continued)

The Company also enters into certain strategic cooperation agreements with customers in which, as consideration for certain commitments made by the customer, including minimum purchase commitments, the Company agrees, among other things, to share the expense for marketing, educational training and general support of the Company’s products. The provisions in these arrangements allow for these payments to be made directly to the customer or payments can be made directly to a third party for distinct marketing, educational training and general support services provided to or on behalf of the customer by the third party. For payments the Company makes to another party or reimburses the customer for distinct marketing and support services, the Company recognizes these payments as sales and marketing expense as incurred. These strategic cooperation agreements are generally for periods of 12 months or more with quarterly minimum purchase commitments. The Company recognizes sales and marketing expenses in the period in which it expects the customer will achieve its minimum purchase commitment, generally quarterly, and any unpaid amounts are recorded in other current liabilities on the Consolidated Balance Sheets, see Note 8 – Other Current Liabilities to the Consolidated Financial Statements. Reimbursements made directly to the customer for general marketing incentives are treated as a reduction in revenues. The Company’s performance obligations generally occur in the same quarter as the shipment of product. Sales and marketing expenses for distinct services were as follows (in thousands):


	Years Ended
	2025		2024		2023
Marketing and support services related to strategic cooperation agreements	$	3,428	$	3,342	$	1,891

Since the payments for distinct or non-distinct services occur within the quarter corresponding with the purchases made by the customer and the shipments made by the Company to that customer, there is no remaining performance obligation by the Company to the customer. Accordingly, there are no deferred revenues associated with these types of arrangements as of January 2, 2026, December 27, 2024 and December 29, 2023.

Revenue Recognition

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Revenue Recognition (Continued)

The Company disaggregates its revenue into the following categories: non-consignment sales and consignment sales.

•

See Note 17 – Disaggregation of Revenues, Geographic Sales and Product Sales to the Consolidated Financial Statements for additional information.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Revenue Recognition (Continued)


	Years Ended
	2025		2024		2023
Marketing and support services related to strategic cooperation agreements	$	3,428	$	3,342	$	1,891

Allowance for Credit Losses

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment history and credit worthiness, as determined by the Company’s review of its customers’ current credit information. The Company continuously monitors collections and payments from customers and maintains a provision for estimated credit losses and uncollectible accounts based upon an expected loss model which considers its historical experience, any specific customer collection issues that have been identified and other relevant observable data, including current economic conditions. Amounts determined to be uncollectible are written off against the allowance for credit losses.

Allowance for Credit Losses

Concentration of Credit Risk and Sales

Financial instruments that potentially subject the Company to credit risk principally consist of trade receivables. This risk is limited due to the large number of customers comprising the Company’s customer base, and their geographic dispersion. As of January 2, 2026 and December 27, 2024, the Company’s China distributors accounted for 33% and 58%, respectively, of the Company’s consolidated trade receivables. Ongoing credit evaluations of customers’ financial condition are performed and, generally, no collateral is required. The Company maintains reserves for potential credit losses and such losses, taken together, have not exceeded management’s expectations.

The Company’s China distributors accounted for 32%, 51% and 58% of the Company’s consolidated net sales for the years ended 2025, 2024 and 2023, respectively.

Sales Return Reserve

The Company generally may permit returns of product if the product, upon issuance of a Return Goods Authorization, is returned within the time allowed by its return policies and records an allowance for estimated returns at the time revenue is recognized. The Company’s allowance for estimated returns is based on an expected loss model which considers historical and current/anticipated trends and experience, the impact of new product launches, the entry of a competitor, availability of timely and pertinent information and the various terms and arrangements offered, including sales with extended credit terms. For estimated returns, sales are reported net of estimated returns and cost of sales are reported net of estimated returns that can be resold. On the Consolidated Balance Sheets, the balances associated for estimated sales returns were as follows (in thousands):


	2025		2024
Estimated returns - inventory(1)	$	1,860	$	853
Allowance for sales returns		10,199		6,579

(1)

Recognized in inventories, net on the Consolidated Balance Sheets

Investments Available for Sale

Investments available for sale (“AFS”) are investments in debt securities for which the Company does not have the positive intent and ability to hold to maturity. The Company’s investment policy primary objective is capital preservation while maximizing its return on investment. Investments 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. Investments AFS with maturities of twelve months or less, are classified as short-term, otherwise, they are classified as long-term. Accrued interest receivable is recognized in current investments AFS on the Consolidated Balance Sheets.

Investments AFS are measured at fair value and its unrealized gains and losses reported net of the allowance for credit losses and applicable income taxes, are recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The cost of investments AFS is adjusted for amortization of premiums and accretion of discounts to maturity. Interest earned, including amortization of premiums and accretion of discounts recognized, is included in interest income (expense) on the Consolidated Statements of Operations. The cost of investments for purposes of computing realized and unrealized gains and losses is based on the specific identification method.

The Company recognizes impairment of a debt security for which there has been a decline in fair value below amortized cost if management intends to sell the security, or it is more-likely-than-not that the Company will be required to sell the security before recovery of its amortized cost basis. Impairment related to credit losses is recognized in other income (expense) on the Consolidated Statements of Operations. Any portion of impairment not related to credit losses is recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The measurement of the credit loss component is equal to the difference between the debt security’s amortized cost basis and the present value of its expected future cash flows discounted at the security’s effective yield.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

•

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

•

Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions market participants would make and significant to the fair value.

The carrying values reflected on the Consolidated Balance Sheets for cash and cash equivalents, trade accounts receivable, net, prepayments, deposits and other current assets, accounts payable and other current liabilities approximate their fair values because of the short maturity of these instruments.

Inventories, Net

Inventories, net are valued at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Inventories include the costs of raw material, labor, and manufacturing overhead, work in process and finished goods. Inventories also include as a contra item, deferred margins for certain injector parts described under the revenue recognition policy. The Company provides estimated inventory allowances for excess, expiring, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value to properly reflect inventory at the lower of cost or market.

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation on property, plant, and equipment is computed using the straight-line method over the estimated useful lives of the assets as noted below. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related expected lease term. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred.

Also included in property, plant and equipment is construction in process. Construction in process includes the cost of design plans and build out of facilities and the cost of equipment, as well as the direct costs incurred in the testing and validation of machinery and equipment and facilities before they are ready for productive use. Upon placement in service, costs are reclassified into the appropriate asset category and depreciation commences.

The estimated useful lives of assets are as follows:


Machinery and equipment		5-10 years
Computer equipment and software		2-5 years
Furniture and equipment		3-7 years
Leasehold improvements		The shorter of the useful life of the asset or the expected term of the associated lease

Goodwill

Goodwill, which has an indefinite life, is not amortized but instead is tested for impairment on an annual basis or between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level. Reporting units can be one level below the operating segment level and can be combined when reporting units within the same operating segment have similar economic characteristics. The Company has determined that its reporting units have similar economic characteristics, and therefore, can be combined into one reporting unit for the purposes of goodwill impairment testing. The Company performed its annual impairment test and determined that its goodwill was not impaired. As of January 2, 2026 and December 27, 2024, the carrying value of goodwill was $1,786,000.

Long-Lived Assets

The Company reviews property, plant, and equipment and intangible assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of these assets by comparing the carrying value of such assets to the estimated undiscounted future cash flows the assets are expected to generate. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value. A review of long-lived assets was conducted as of December 27, 2024 and no impairment was identified (see also Note 1 – Organization and Description of Business and Accounting Policies – Restructuring, Impairment and Related Charges.)

Amortization is computed on the straight-line basis, which is the Company’s best estimate of the economic benefits realized over the estimated useful lives of the assets which range from 3 to 20 years for patents, certain acquired rights and licenses, 10 years for customer relationships, and 3 to 10 years for developed technology.

During 2023, the Company recognized impairment of $154,000 for the remaining unamortized Japan patent and licenses related to cataract IOLs. Amortization expense for intangible assets were as follows (in thousands):


	Years Ended
	2025		2024		2023
Amortization expense	$	—	$	—	$	13

Cloud-Based Software

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 Cloud-based software on the 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, which is approximately 5 to 10 years. 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.

Lease Accounting

The Company recognizes right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than twelve months on the Consolidated Balance Sheets. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Operations.

A contract contains a lease if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. An asset is either explicitly identified or implicitly identified and must be physically distinct. In addition, the Company must have both the right to obtain substantially all of the economic benefits from use of the identified asset and has the right to direct the use of the identified asset.

Certain leases may have non-lease components such as common area maintenance expense for building leases and maintenance expenses for automobile leases. In general, the Company separates common area maintenance expense component from the value of the ROU asset and lease liability when evaluating rental properties, whereas the Company includes the maintenance and service components in the value of the ROU asset and lease liability while evaluating automobile leases.

When determining whether a lease is a finance lease or operating lease, the Company uses (i) greater than or equal to 75% to determine whether the lease term is a major part of the remaining economic life of the underlying asset and (ii) greater than or equal to 90% to determine whether the present value of the sum of lease payments is substantially all of the fair value of the underlying asset.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Lease Accounting (Continued)

The Company uses either the rate implicit in the lease or its incremental borrowing rate as the discount rate in lease accounting. The Company also elected not to capitalize leases that have terms of twelve months or less.

The Company reviews ROU assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of these assets by comparing the carrying value of such assets to the estimated undiscounted future cash flows the assets are expected to generate. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value.

Vendor Concentration

There were two vendors that accounted for over 30% of the Company’s consolidated accounts payable as of January 2, 2026. There was one vendor that accounted for over 10% of the Company’s consolidated accounts payable as of December 27, 2024

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged to expense as incurred.

Advertising Costs

Advertising costs, which are included in selling and marketing expenses, are expensed as incurred, and were as follows (in thousands):


	Years Ended
	2025		2024		2023
Advertising costs	$	19,631	$	34,084	$	46,680

Merger Transaction and Related Costs

In connection with the proposed merger with Alcon, the Company incurred professional service expenses of $17,135,000 during fiscal year 2025, which are included in Merger transaction and related costs on the Consolidated Statements of Operations. In accordance with the Cooperation Agreement with Broadwood Partners L.P., the Company expects to incur approximately $7,000,000 in additional expenses in the quarter ended April 3, 2026. See Note 19 – Subsequent Events to the Consolidated Financial Statements for further information.

Restructuring, Impairment and Related Charges

In the first half of 2025, the Company took a number of steps to change its leadership team, realign its leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. As part of this leadership realignment and related efforts, during the fiscal year 2025, the Company recognized costs related to severance and reduction in workforce of $12,354,000; consulting expenses of $874,000; impairment expenses on leasehold improvements and machinery and equipment of $7,759,000, as the Company will no longer be using these assets; and impairment on real property right-of-use assets of $4,894,000, as the Company is actively pursuing subleasing opportunities. In addition, the Company also recognized impairment of $2,751,000 during fiscal year 2025 for internally developed software that it will no longer be using as it will transition to a cloud-based software solution. An aggregate of $28,632,000 for such costs, expenses and charges is included in Restructuring, impairment and related charges on the Consolidated Statements of Operations for fiscal year 2025. The restructuring effort was substantially completed as of June 27, 2025. For more detail, see Notes 6 – Property, Plant and Equipment, Net, 8 – Other Current Liabilities and 9 – Operating Leases to the Consolidated Financial Statements.

Income Taxes

The Company adopted the annual disclosure requirements of the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740)” in fiscal 2025. 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. The Company’s income tax disclosure requirements have been enhanced on a prospective basis in these Consolidated Financial Statements as a result of the ASU 2023-09 adoption.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA introduces changes in U.S. tax law, with certain provisions applicable to the Company beginning in 2025. These changes include the immediate expensing of domestic research and experimental expenditures, accelerated tax deductions for qualified property, and modifications to certain international tax frameworks. The Company has incorporated OBBBA into the income tax provision during fiscal year 2025 resulting in an immaterial impact to the effective tax rate. The Company continues to evaluate the impact the new legislation will have on its Consolidated Financial Statements.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities, net operating loss and credit carryforwards, and uncertainty in income taxes, on a jurisdiction-by-jurisdiction basis. For each tax entity and tax jurisdiction, the Company presents deferred tax liabilities and assets, as well as any related valuation allowance, as a single non-current amount. The Company does not offset deferred tax liabilities and assets attributable to different tax entities or to different tax jurisdictions.

In evaluating the Company’s ability to recover the deferred tax assets within a jurisdiction from which they arise, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results and incorporates assumptions including overall current and projected business and industry conditions, projected sales growth, margins, costs and income by jurisdiction, the amount of future federal, state, and foreign pretax operating income, the reversal of temporary differences and the successful implementation of feasible and prudent tax-planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company also considers three years of cumulative operating results. It is the Company’s policy to not rely on future taxable profit as source of income to evaluate deferred tax asset realizability, if the Company is under three years of cumulative losses. Valuation allowances, or reductions to deferred tax assets, are recognized if, based on the weight of all the available evidence, it is more likely than not that some portion or all the deferred tax asset may not be realized. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period of enactment.

The Company has made a policy election to apply the incremental cash tax savings approach when analyzing the impact Global Intangible Low Tax Income (“GILTI”) could have on its U.S. valuation allowance. As a result of future expected GILTI inclusions, and because of the 2017 Tax Cuts and Jobs Act’s ordering rules, U.S. companies may now expect to utilize tax attribute carryforwards (e.g., net operating losses and deferred tax assets) for which a valuation allowance has historically been recorded (this is referred to as the “tax law ordering approach”). However, due to the mechanics of the GILTI rules, companies that have a GILTI inclusion may realize a reduced (or no) cash tax savings from utilizing such tax attribute carryforwards (this view is referred to as the “incremental cash tax savings approach”).

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Income Taxes (Continued)

The Company and its foreign subsidiaries operate in multiple tax jurisdictions, and have entered into certain intercompany service arrangements that are priced under transfer pricing policies intended to reflect arm’s-length terms under applicable tax laws and regulations. Transfer pricing requires management judgment and is supported by economic analyses, including benchmarking to comparable companies and/or transactions. The Company monitors the nature of its intercompany service arrangements for changes in its operations as well as economic conditions, and periodically refreshes its transfer pricing analyses, including updates to the comparable set and related results, as appropriate. Although these intercompany transactions reflect arm’s-length terms and the proper transfer pricing documentation is in place, transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact the Company’s effective tax rate and taxes due.

The Company recognizes the income tax benefit from an uncertain tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. The amount of tax benefit recorded, if any, is limited to the extent it is not greater than 50 percent likely to be realized upon settlement with the taxing authority (that has full knowledge of all relevant information). Accrued interest, if any, related to uncertain tax positions is included as a component of income tax expense, and penalties, if incurred, are recognized as a component of operating income or loss.

Basic and Diluted Net Income (Loss) Per Share

The Company has only one class of common stock and no participating securities which would require the two-class method of calculating basic earnings per share. Basic per share information is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted per share information is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period, adjusted for the effects of potentially dilutive securities using the treasury stock method. When the Company incurs a net loss, the number of diluted shares is equal to the number of basic shares. Potentially dilutive securities include the Company’s outstanding stock-based awards. As of January 2, 2026, the Company had outstanding grants of stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”). Stock options that are anti-dilutive, where their exercise price exceeds the average market price of the common stock, are not included in the treasury stock method calculation for diluted net income (loss) per share.

Employee Defined Benefit Plans

The Company maintains a passive pension plan (the “Swiss Plan”) covering employees of STAAR AG. The Swiss Plan conforms to the features of a defined benefit plan. The Company also maintains a noncontributory defined benefit pension plan which covers substantially all the employees of STAAR Japan.

The Company recognizes the funded status, or difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the Consolidated Balance Sheets, with a corresponding adjustment to accumulated other comprehensive income (loss). If the projected benefit obligation exceeds the fair value of plan assets, then that difference or unfunded status represents the pension liability. The Company records a net periodic pension cost in the Consolidated Statements of Operations. The liabilities and annual income or expense of both plans are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of asset return (asset returns and fair-value of plan assets are applicable for the Swiss Plan only). The fair values of plan assets are determined based on prevailing market prices.

Stock-Based Compensation

The Company maintains an Amended and Restated Omnibus Equity Incentive Plan, as amended (the “Equity Plan”). The Equity Plan provides the Company with the ability to grant various types of stock-based awards to executive officers, employees, consultants and members of its Board of Directors (the “Board”). The Equity Plan allows for awards of stock options, stock appreciation rights, restricted stock, RSUs, and other stock- and cash-based awards, including awards that are subject to service-based and performance-based vesting conditions. As of January 2, 2026, the Company had outstanding grants of stock options, RSUs and PSUs.

Note 1 — Organization and Description of Business and Accounting Policies (Continued)

Stock-Based Compensation (Continued)

Stock-based compensation expense for all stock-based awards granted is based on the grant-date fair value of the award. The Company recognizes this compensation expense on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three to four years for executive officers, employees and consultants, and one year for Board members.

For performance-based awards, vesting is contingent upon the Company meeting certain internally established performance conditions and is subject to the grantee’s continued service with the Company. The Company recognizes compensation expense for performance-based awards when the Company concludes that it is probable that the performance condition will be achieved, net of an estimate of pre-vesting forfeitures, over the requisite service period based on the grant-date fair value of the award. The Company reassesses the probability of vesting at each reporting period and adjusts compensation cost based on its probability assessment.

While the majority of the Company’s outstanding stock-based awards are stock options, RSUs and PSUs, the Company also, at times, grants awards in the form of restricted stock. Restricted stock awards provide for the issuance of common stock upon grant, subject to restrictions that lapse over the requisite service period of the award. For restricted stock awards granted to the Board, the restrictions lapse over a one-year service period and for executive officers and employees, it is typically a three-year service period. In each case the awards are subject to forfeiture (or acceleration, depending upon the circumstances) until the service period is completed. Restricted stock compensation expense is recognized on a straight-line basis over the requisite service period of one to three years, based on the grant-date fair value of the award.

Restricted stock awards are included in the Company’s shares of common stock issued and outstanding on the grant date. Shares subject to RSU and PSU awards are not issuable until the requisite service and applicable performance conditions are satisfied, so they are not included in the Company’s shares of common stock issued and outstanding until the vesting of such awards.

Share Repurchases

Repurchased shares are held in treasury stock. Treasury stock purchases are accounted for under the cost method whereby the cost of the acquired stock is recorded as treasury stock.

Comprehensive Income (Loss)

The Company presents comprehensive income (loss) on the Consolidated Balance Sheets and the Consolidated Statements of Comprehensive Income (Loss). Total comprehensive income (loss) includes, in addition to the net income (loss), changes in equity that are excluded from the Consolidated Statements of Operations and are recorded directly into a separate section of stockholders’ equity on the Consolidated Balance Sheets. The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) attributable to the Company for the years ended January 2, 2026, December 27, 2024 and December 29, 2023 (in thousands):


	Foreign Currency Translation			Investments Available for Sale			Defined Benefit Pension Plan – Japan			Defined Benefit Pension Plan – Switzerland			Accumulated Other Com-prehensive Income (Loss)
Balance, at December 30, 2022	$	(1,547	)	$	(336	)	$	184		$	1,855		$	156
Other comprehensive income (loss)		(1,095	)		363			(182	)		(4,121	)		(5,035	)
Tax effect		345			(64	)		54			431			766
Balance, at December 29, 2023		(2,297	)		(37	)		56			(1,835	)		(4,113	)
Other comprehensive income (loss)		(1,775	)		31			16			(1,923	)		(3,651	)
Tax effect		542			(5	)		(5	)		201			733
Balance, at December 27, 2024		(3,530	)		(11	)		67			(3,557	)		(7,031	)
Other comprehensive income (loss)		22			13			(20	)		558			573
Tax effect		(6	)		(1	)		6			(52	)		(53	)
Balance, at January 2, 2026	$	(3,514	)	$	1		$	53		$	(3,051	)	$	(6,511	)

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).” ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 requires footnote disclosure about specific expenses to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization and (5) depreciation, depletion and amortization recognized as part of oil- and gas-production activities or other types of depletion expenses. The tabular disclosure would also include certain other expenses, when applicable. ASU 2024-03 does not change or remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company will adopt ASU 2024-03 at the beginning of fiscal year 2026. The Company is currently evaluating the annual disclosure requirements and its effect on the Consolidated Financial Statements.