Company: STAA
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000950170-25-024813
Chunk: 72

Company: STAAR SURGICAL CO
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1B
Chunk 72
---
, we did not recognize the revenue, but we did recognize costs of sales associated with this order of $3.9 million, which had a negative impact on our gross profit and gross profit margin for the fourth quarter and fiscal year ended December 27, 2024. As the control of the inventory transferred to the distributor, accounting rules require us to record the costs of sales upon such transfer, even if revenue is not recognized until a future period. 

Under the extended payment terms, the distributor agreed to pay for the $27.5 million order by the end of the quarter ending September 26, 2025. Revenue for the order will not be recognized until payments are received from the distributor, at which point the collectability concern is alleviated. Because the cost of sales associated with this order was recognized in the quarter ended December 27, 2024, there will be no associated cost of sales for this order when the revenue is recognized, resulting in a 100% gross profit in the period payments are received. While we did not recognize revenue on this order upon shipment, we believe that having these ICLs in-country in China can help address challenges and delays associated with importation and logistics and can mitigate potential impacts from geopolitical risk and tariff changes. 

Our agreements with our distributors in China provide for minimum inventory requirements based on forecasted demand. During fiscal 2024, our distributors purchased lenses above such minimums in anticipation of higher procedural volumes during what is typically a summer “high season” in China.  Due to dynamic macroeconomic conditions and other factors, the number of ICL procedures performed during the high season and the second half of 2024 overall was lower than expected. Accordingly, our distributors in China held, as of December 27, 2024, elevated levels of ICL product inventory.  We believe that volatility in surgical procedure volumes will continue until consumer confidence stabilizes and ultimately improves in China. As a result, we believe that the level of ICL inventory held by our distributors in China is sufficient to meet currently expected procedure volumes for at least the first half of fiscal 2025. We therefore anticipate we will report minimal China ICL sales in the first half of fiscal 2025. As China in-country inventory is reduced during the first half of fiscal 2025, we would expect our China revenue to normalize. However, our ability to successfully address these challenges will depend on a number of factors, including the risk of a prolonged slowdown or disruption in China and the institution of trade tariffs