Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 29, 2023

Basis of Presentation and Significant Accounting Policies

Note 1 — Basis of Presentation and Significant Accounting Policies

The Condensed Consolidated Financial Statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in the Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 30, 2022 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 30, 2022.

The Condensed Consolidated Financial Statements for the three and nine months ended September 29, 2023 and September 30, 2022, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three and nine months ended September 29, 2023 and September 30, 2022, are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Each of the Company’s fiscal reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks. Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Revision of Financial Statements for Correction of Immaterial Misstatements

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

Condensed Consolidated Balance Sheet

(in thousands)

(Unaudited)


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

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

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

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)


	As Previously Reported			Adjustment		As revised
At December 31, 2021
Accumulated deficit	$	(111,390	)	$	3,010	$	(108,380	)
Total stockholders’ equity		258,558			3,010		261,568
At December 30, 2022
Accumulated deficit		(72,635	)		3,920		(68,715	)
Total stockholders’ equity		332,192			3,920		336,112

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

(Unaudited)


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

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	December 30, 2022									December 31, 2021
	As Previously Reported			Adjustment			As revised			As Previously Reported		Adjustment			As revised
Cash flows from operating activities
Net income	$	38,755		$	910		$	39,665		$	24,501	$	3,010		$	27,511
Deferred income taxes		(1,344	)		(910	)		(2,254	)		1,495		(3,010	)		(1,515	)

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

Cloud-Based Software Implementation Costs

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

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