(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)

(Registrant’s ~~telephone number, including area code))~~Telephone Number, Including Area Code)

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

Indicate by check mark whether the ~~Registrant~~registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to submit ~~and post~~ such files). Yes þ☑ No o

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

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

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

The registrant has ~~41,164,231~~44,542,965 shares of common stock, par value $0.01 per share, issued and outstanding as of ~~October 30, 2017.~~July 26, 2019.

PART 1I – FINANCIAL INFORMATION

~~ITEM 1. FINANCIAL STATEMENTS~~

ITEM 1.
FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	September 29, 2017			December 30, 2016			June 28, 2019			December 28, 2018
ASSETS

Current assets:
Cash and cash equivalents	$	16,133		$	13,999		$	103,251		$	103,877
Accounts receivable trade, net of allowance for doubtful accounts of $2,255 and $2,056, respectively		16,237			16,344
Accounts receivable trade, net of allowance of doubtful accounts of $162 and $550, respectively								32,962			25,946
Inventories, net		13,274			14,825			16,328			16,704
Insurance receivable (Note 12)		7,000			—
Prepayments, deposits and other current assets		4,936			4,349			6,367			5,045
Total current assets		57,580			49,517			158,908			151,572
Property, plant and equipment, net		10,999			11,790			13,382			11,451
Finance lease right-of-use assets, net								2,338			—
Operating lease right-of-use assets, net								7,219			—
Intangible assets, net		326			473			261			243
Goodwill		1,786			1,786			1,786			1,786
Deferred income taxes		1,043			1,105			1,355			1,278
Other assets		969			772			713			1,009
Total assets	$	72,703		$	65,443		$	185,962		$	167,339

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Line of credit	$	4,442		$	4,283		$	2,854		$	3,780
Accounts payable		5,734			8,311			8,097			6,524
Obligations under capital leases		1,269			1,198
Litigation settlement obligation (Note 12)		7,000			—
Obligations under finance leases								960			1,098
Obligations under operating leases								2,766			—
Allowance for sales returns								3,263			2,895
Other current liabilities		7,253			7,275			10,771			13,431
Total current liabilities		25,698			21,067			28,711			27,728
Obligations under capital leases		834			1,339
Obligations under finance leases								580			459
Obligations under operating leases								4,580			—
Deferred income taxes		984			881			1,406			1,022
Asset retirement obligations		203			195			212			206
Deferred rent		184			59			—			188
Pension liability		4,138			3,997			6,138			5,310
Total liabilities		32,041			27,538			41,627			34,913

Commitments and contingencies (Note 12)

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized; 41,156 and 40,732 shares issued and outstanding at September 29, 2017 and December 30, 2016, respectively		412			407
Common stock, $0.01 par value; 60,000 shares authorized: 44,534 and 44,195 shares issued and outstanding at June 28, 2019 and December 28, 2018, respectively								445			442
Additional paid-in capital		202,148			197,657			296,063			289,584
Accumulated other comprehensive loss		(788	)		(1,050	)		(1,602	)		(1,320	)
Accumulated deficit		(161,110	)		(159,109	)		(150,571	)		(156,280	)
Total stockholders’ equity		40,662			37,905			144,335			132,426
Total liabilities and stockholders’ equity	$	72,703		$	65,443		$	185,962		$	167,339

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Net sales $ 23,473 $ 20,052 $ 65,759 $ 60,295
Cost of sales 6,624 5,180 18,859 17,804

Gross profit 16,849 14,872 46,900 42,491

General and administrative 4,946 4,985 15,065 18,378
Marketing and selling 6,431 7,149 20,282 22,006
Research and development 4,429 4,453 13,924 16,018
Total operating expenses 15,806 16,587 49,271 56,402

Operating income (loss) 1,043 (1,715 ) (2,371 ) (13,911 )

Other income (expense):
Interest expense, net (27 ) (29 ) (88 ) (85 )
Gain (loss) on foreign currency transactions 444 (29 ) 738 13
Royalty income 141 134 400 507
Other income (expense), net (19 ) (68 ) 17 (150 )
Other income, net 539 8 1,067 285

Income (loss) before provision (benefit) for income taxes 1,582 (1,707 ) (1,304 ) (13,626 )
Provision (benefit) for income taxes 409 71 697 (1,664 )
Net income (loss) $ 1,173 $ (1,778 ) $ (2,001 ) $ (11,962 )

Net income (loss) per share – basic $ 0.03 $ (0.04 ) $ (0.05 ) $ (0.30 )
Net income (loss) per share – diluted $ 0.03 $ (0.04 ) $ (0.05 ) $ (0.30 )

Weighted average shares outstanding – basic 41,110 40,486 40,939 40,227
Weighted average shares outstanding – diluted 42,104 40,486 40,939 40,227

	Three Months Ended					Six Months Ended
	June 28, 2019		June 29, 2018			June 28, 2019			June 29, 2018
Net sales	$	39,664	$	33,905		$	72,247		$	60,998
Cost of sales		9,765		8,678			18,168			16,340
Gross profit		29,899		25,227			54,079			44,658
Selling, general and administrative expenses:
General and administrative		7,508		6,196			14,345			11,967
Marketing and selling		11,682		10,659			21,825			18,113
Research and development		6,098		5,346			11,733			10,753
Total selling, general and administrative expenses		25,288		22,201			47,903			40,833
Operating income		4,611		3,026			6,176			3,825
Other income (expense), net:
Interest income (expense), net		259		(24	)		530			(36	)
Gain (loss) on foreign currency transactions		11		(520	)		(237	)		(597	)
Royalty income		163		149			334			306
Other income, net		1		4			98			21
Total other income (expense), net		434		(391	)		725			(306	)
Income before income taxes		5,045		2,635			6,901			3,519
Provision for income taxes		1,131		805			1,620			1,106
Net income	$	3,914	$	1,830		$	5,281		$	2,413
Net income per share:
Basic	$	0.09	$	0.04		$	0.12		$	0.06
Diluted	$	0.08	$	0.04		$	0.11		$	0.06
Weighted average shares outstanding:
Basic		44,479		41,723			44,357			41,568
Diluted		46,733		43,999			46,842			43,654

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME ~~(LOSS)~~

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net income (loss)	$	1,173		$	(1,778	)	$	(2,001	)	$	(11,962	)
Net income													$	3,914		$	1,830		$	5,281		$	2,413
Other comprehensive income (loss):
Defined benefit pension plans:
Defined benefit plans:
Net change in plan assets		(15	)		(11	)		(43	)		(34	)		(614	)		(21	)		(640	)		(30	)
Reclassification into earnings		20			27			60			80
Reclassification into other income, net														28			26			54			51
Foreign currency translation gain (loss)		(51	)		232			360			2,000			382			(521	)		339			207
Tax effect		13			(67	)		(110	)		(611	)		(55	)		156			(35	)		(67	)
Other comprehensive income (loss), net of tax		(33	)		181			267			1,435			(259	)		(360	)		(282	)		161
Comprehensive income (loss)	$	1,140		$	(1,597	)	$	(1,734	)	$	(10,527	)
Comprehensive income													$	3,655		$	1,470		$	4,999		$	2,574

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at March 29, 2019		44,447	$	444	$	292,722	$	(1,343	)	$	(154,485	)	$	137,338
Net income		—		—		—		—			3,914			3,914
Other comprehensive loss		—		—		—		(259	)		—			(259	)
Common stock issued upon exercise of options		52		1		486		—			—			487
Stock-based compensation		—		—		2,855		—			—			2,855
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		24		—		—		—			—			—
Balance, at June 28, 2019		44,534	$	445	$	296,063	$	(1,602	)	$	(150,571	)	$	144,335
Balance, at March 30, 2018		41,592	$	416	$	206,795	$	(629	)	$	(160,665	)	$	45,917
Net income		—		—		—		—			1,830			1,830
Other comprehensive loss		—		—		—		(360	)		—			(360	)
Common stock issued upon exercise of options		249		2		1,950		—			—			1,952
Stock-based compensation		—		—		1,743	.				—			1,743
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		25		1		—		—			—			1
Balance, at June 29, 2018		41,877	$	419	$	210,488	$	(989	)	$	(158,835	)	$	51,083

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(In thousands)

(Unaudited)

	Six Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital			Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at December 28, 2018		44,195	$	442	$	289,584		$	(1,320	)	$	(156,280	)	$	132,426
Net income		—		—		—			—			5,281			5,281
Adoption of ASC 842		—		—		—			—			113			113
Adoption of ASU 2018-07		—		—		(315	)		—			315			—
Other comprehensive loss		—		—		—			(282	)		—			(282	)
Common stock issued upon exercise of options		126		1		1,109			—			—			1,110
Stock-based compensation		—		—		5,685			—			—			5,685
Unvested restricted stock		11		—		—			—			—			—
Vested restricted stock		202		2		—			—			—			2
Balance, at June 28, 2019		44,534	$	445	$	296,063		$	(1,602	)	$	(150,571	)	$	144,335
Balance, at December 29, 2017		41,383	$	414	$	204,920		$	(1,150	)	$	(161,248	)	$	42,936
Net income		—		—		—			—			2,413			2,413
Other comprehensive income		—		—		—			161			—			161
Common stock issued upon exercise of options		306		3		2,402			—			—			2,405
Stock-based compensation		—		—		3,166			—			—			3,166
Unvested restricted stock		11		—		—			—			—			—
Vested restricted stock		177		2		—			—			—			2
Balance, at June 29, 2018		41,877	$	419	$	210,488		$	(989	)	$	(158,835	)	$	51,083

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended
September 29, 2017 September 30, 2016
Cash flows from operating activities:
Net loss $ (2,001 ) $ (11,962 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation of property, plant and equipment 2,344 1,933
Amortization of long-lived intangibles 166 171
Deferred income taxes 164 (1,806 )
Change in net pension liability 95 390
Loss on disposal of property and equipment 22 65
Stock-based compensation expense 2,185 8,143
Provision for sales returns and bad debts 186 99
Inventory provision 1,267 1,379
Changes in working capital:
Accounts receivable trade 41 1,707
Inventories 725 222
Prepayments, deposits and other current assets (764 ) (1,118 )
Accounts payable (2,751 ) 594
Other current liabilities 62 1,104
Net cash provided by operating activities 1,741 921

Cash flows from investing activities:
Acquisition of property and equipment (969 ) (2,709 )
Net cash used in investing activities (969 ) (2,709 )

Cash flows from financing activities:
Repayment of capital lease obligations (984 ) (302 )
Proceeds from sale leaseback transactions — 1,154
Repurchase of employee common stock for taxes withheld (234 ) (611 )
Proceeds from vested restricted stock and exercise of stock options 2,276 1,652
Net cash provided by financing activities 1,058 1,893

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 305 777

Increase in cash, cash equivalents, and restricted cash 2,135 882
Cash, cash equivalents, and restricted cash, at beginning of the period 14,118 13,521
Cash, cash equivalents, and restricted cash, at end of the period $ 16,253 $ 14,403

Supplemental Disclosure of Non-Cash Operating Activities
Insurance Receivable $ 7,000 $ —
Settlement Liability $ 7,000 $ —

	Six Months Ended
	June 28, 2019			June 29, 2018
Cash flows from operating activities:
Net income	$	5,281		$	2,413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant, and equipment		1,983			1,168
Amortization of intangibles		17			17
Deferred income taxes		393			358
Change in net pension liability		203			159
Loss on disposal of property and equipment		—			6
Stock-based compensation expense		5,220			2,899
Provision for sales returns and bad debts		(32	)		644
Inventory provision		787			753
Changes in working capital:
Accounts receivable		(6,533	)		(6,390	)
Inventories		106			(1,536	)
Prepayments, deposits, and other current assets		(1,154	)		(889	)
Accounts payable		563			956
Other current liabilities		(2,626	)		1,748
Net cash provided by operating activities		4,208			2,306
Cash flows from investing activities:
Acquisition of property and equipment		(4,601	)		(1,269	)
Acquisition of patents and licenses		(30	)		—
Net cash used in investing activities		(4,631	)		(1,269	)
Cash flows from financing activities:
Repayment of finance lease obligations		(681	)		(881	)
Repayment on line of credit		(999	)		—
Proceeds from the exercise of stock options		1,110			2,405
Proceeds from vested restricted stock		2			2
Net cash provided by (used in) financing activities		(568	)		1,526
Effect of exchange rate changes on cash, cash equivalents and restricted cash		243			163
Increase (decrease) in cash, cash equivalents and restricted cash		(748	)		2,726
Cash, cash equivalents and restricted cash, at beginning of year		103,999			18,641
Cash, cash equivalents and restricted cash, at end of year	$	103,251		$	21,367

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

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

Note 1 — Basis of Presentation and Significant Accounting Policies

The ~~condensed consolidated financial statements~~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 ~~comprehensive financial statements~~Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The ~~consolidated balance sheet~~Consolidated Balance Sheet as of December ~~30, 2016~~28, 2018 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, 2016.~~

28, 2018.

The ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for the three and ~~nine~~six months ended ~~September~~June 28, 2019 and June 29, ~~2017 and September 30, 2016,~~2018, 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~~six months ended ~~September~~June 28, 2019 and June 29, ~~2017 and September 30, 2016,~~2018, 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.

~~Recently Adopted Accounting Pronouncements~~

During the quarter ended March 31, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires a company to measure inventory at the lower of costCash, Cash Equivalents and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation”. We adopted this standard as of December 31, 2016 (beginning of FY 2017). The adoption of ASU 2015-11 did not have a material effect on the consolidated financial statements.

During the quarter ended March 31, 2017, the Company adopted ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which simplified several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. We adopted this standard as of December 31, 2016 (beginning of FY 2017). The adoption of ASU 2016-09 did not have a material effect on the consolidated financial statements and prior periods were not restated.

During the quarter ended March 31, 2017, the Company adopted ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”, on a retrospective basis, which changes how deferred taxes are classified on the Company’s balance sheets. Accordingly, the Company adjusted the December 30, 2016 balance sheet for current and noncurrent deferred tax assets to conform to the presentation for the current quarter due to the adoption of ASU 2015-17. The ASU eliminates the requirement to present deferred tax liabilities and assets as current and noncurrent on the balance sheet. Instead, companies are required to classify all deferred tax assets and liabilities as noncurrent. We adopted this standard as of December 31, 2016 (beginning of FY 2017). The adoption of ASU 2015-17 did not have a material effect on the consolidated financial statements.

~~During the quarter ended March 31, 2017, the Company adopted ASU 2016-18, “Statement of~~Restricted Cash Flows (Topic 230): Restricted Cash”, that requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash and that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We early adopted this standard as of December 31, 2016 (beginning of FY 2017). The adoption of ASU 2016-18 did not have a material effect on the consolidated financial statements, however, prior period restricted cash was added to beginning and ending cash and cash equivalents in the statement of cash flows to conform to the current presentation.

~~STAAR SURGICAL COMPANY~~

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows~~Cash Flows (in 000’s):

September 29, December 30, September 30, January 1,
2017 2016 2016 2016
Cash and cash equivalents $ 16,133 $ 13,999 $ 14,284 $ 13,402
Restricted cash included in other long-term assets 120 119 119 119
Total cash, cash equivalents, and restricted cash
as shown in the statements of cash flows $ 16,253 $ 14,118 $ 14,403 $ 13,521

	December 28, 2018		June 29, 2018
Cash and cash equivalents	$	103,877	$	21,246
Restricted cash⁽¹⁾		122		121
Total cash, cash equivalents and restricted cash	$	103,999	$	21,367

⁽¹⁾	Included in other assets on the Condensed Consolidated Balance Sheets.

The Company ~~has~~had restricted cash ~~of approximately $120,000~~ set aside as collateral for a standby letter of credit required by the California Department of Public Health for unforeseen future regulatory costs related to the decommissioning of certain manufacturing equipment.

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~In May 2017,~~ During the ~~FASB issued ASU 2017-09 “Scope of Modification Accounting,” which amends~~three months ended June 28, 2019, the ~~scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be~~Company was no longer required to ~~apply modification accounting under ASC 718. For all entities, the ASU is effective~~set aside collateral for ~~annual reporting periods, including interim periods within those annual reporting periods, beginning after~~this standby letter of credit.

Lease Accounting

On December ~~15, 2017, and thereafter. Early adoption is permitted, including adoption in any interim period. We will adopt this standard as of December 30, 2017~~29, 2018 (beginning of ~~FY 2018) and do not expect~~fiscal year 2019), the ~~adoption of the standard will have a material impact on our consolidated financial statements.~~

In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires that an employer report the service cost component in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of operating profit. The standard is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Prior periods are required to be recast. We will adopt this standard as of December 30, 2017 (beginning of FY 2018) and are currently evaluating the impact ASU 2017-07 may have on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The ASU is effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. The ASU should be applied on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption. We will adopt this standard as of December 30, 2017 (beginning of FY 2018) and are currently evaluating the impact ASU 2016-16 may have on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350)”, which simplifies the test for goodwill impairment. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company ~~does not expect ASU 2017-04 to have a material effect on the consolidated financial statements.~~

~~In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”~~adopted Financial Accounting Standards Board (“~~ASU 2016-15”~~FASB”), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (beginning of FY 2018) and early adoption is permitted. The Company is currently evaluating the impact ASU 2016-15 may have on its consolidated financial statements.

~~In February 2016, the FASB issued ASU~~ Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”, and its subsequent amendments affecting the Company: (i) ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and (ii) ASU 2018-11, “Leases (Topic 842): Targeted improvements,” using the modified retrospective method. Upon adoption of ASU 2016-02, the Company recognized a cumulative adjustment of $113,000 which ~~requires lessees to recognize~~decreased the accumulated deficit and recognized right-of-use (“ROU”) assets and lease liabilities for operating leases, whereby the Company’s accounting finance leases remained substantially unchanged.

The Company recognizes ROU assets and lease liabilities for leases with ~~lease~~ terms greater than twelve months in the ~~statement of financial position.~~Condensed Consolidated Balance Sheets. Leases ~~will be~~are classified as either finance or operating, with classification affecting the pattern of expense recognition in the ~~income statement. ASU 2016-02 also requires improved disclosures to help users~~Condensed Consolidated Statement of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period. Early adoption is permitted. The Company is gathering data to evaluate the impact the adoption of ASU 2016-02 may have on its consolidated financial statements and expects to complete the evaluation by the third quarter of 2018.Income.

STAAR SURGICAL COMPANY

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

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

Lease Accounting (Continued)

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 under ASU 2016-02, whereas, the Company includes the maintenance and service components in the value of the ROU asset and lease liability while evaluating automobile leases under ASU 2016-02.

When determining whether a lease is a finance lease or an operating lease, ASU 2016-02 does not specifically define criteria to determine “major part of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.” For lease classification determination, the Company continues to use (i) greater to 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 to 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.

The Company uses either the rate implicit in the lease or its incremental borrowing rate as the discount rate in lease accounting.

When adopting ASU 2016-02, the Company did not reassess any expired or existing contracts, reassess the lease classification for any expired or existing leases and reassess initial direct costs for exiting leases. 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.

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” provides an option to reclassify stranded tax effects within Accumulated Other Comprehensive Income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded. The adoption of ASU 2018‑02 did not have material impact on the Condensed Consolidated Financial Statements.

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” aligns the accounting for share-based payments to nonemployees similar to employees. Upon the adoption of ASU 2018-07, the Company recognized a cumulative adjustment of $315,000 which decreased the accumulated deficit.

In ~~May 2014,~~August 2018, the FASB issued ASU ~~2014-09, “Revenue from Contracts with Customers~~2018-13, “Fair Value Measurement (Topic ~~606)~~820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,”, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitledmodifies certain disclosures requirements for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The revised revenue standardreporting fair value measurements. This is effective for ~~public entities for annual periods beginning~~fiscal years ending after December 15, ~~2017,~~2019. Early adoption is permitted. The Company will adopt this standard as of January 4, 2020 (beginning of fiscal year 2020) and ~~interim periods therein, using either~~is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

STAAR SURGICAL COMPANY

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

Note 1 — Basis of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).Presentation and Significant Accounting Policies (Continued)

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted (Continued)

In August ~~2015,~~2018, the FASB issued ASU ~~2014-09 was amended by ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of~~2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20); Disclosure Framework – Changes in the ~~Effective Date”,~~Disclosure Requirement for Defined Benefit Plans,” which ~~defers the~~modifies disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans. This is effective ~~date of ASU 2014-09 by one year~~ for ~~all entities and permits early~~fiscal years ending after December 15, 2020. Early adoption on a limited basis. ASU 2014-09 was subsequently amended by four additional pronouncements: (i) ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” (ii) ASU No. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”; (iii) ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”; and (iv) ASU No. 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606”.

is permitted. The Company ~~is nearing completion~~will adopt this standard as of ~~its assessment~~January 2, 2021 (beginning of fiscal year 2021) and is ~~performing a final review of~~currently evaluating the disclosure requirements and its evaluation of the new standard, including a detailed review of its revenue streams and contracts. The majority of the Company’s revenue relates to the sale of implantable lenses (ICLs and IOLs) for which revenue is recognized at a point in time (i.e., typically at shipping point, except for certain customers and for our STAAR Japan subsidiary, which is typically recognized when the customer receives the product). The Company does not believe the adoption of the new standard will materially impact these transactions. The Company has also determined that it will make accounting policy elections to 1) treat shipping and handling activities that occur after the customer obtains control of the goods as fulfillment costs, and 2) exclude sales and other similar taxes from the measurement of the transaction price. Basedeffect on the work performed to date, the Company does not expect adoption of the new standard to have a material impact on its consolidated financial statements. The Company is still evaluating the effect the standard will have on its financial statement disclosures. The Company expects to apply the modified retrospective method to adopt the standard on December 30, 2017.

Condensed Consolidated Financial Statements.

Note 2 — Inventories

Inventories, net are stated at the lower of cost and net realizable value, determined on a first-in, first-out basis and consisted of the following (in thousands):

September 29, December 30,
2017 2016
Raw materials and purchased parts $ 2,330 $ 2,264
Work-in-process 2,363 1,924
Finished goods 11,059 14,268
15,752 18,456
Less: inventory reserves 2,478 3,631
$ 13,274 $ 14,825

~~STAAR SURGICAL COMPANY~~

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

	June 28, 2019		December 28, 2018
Raw materials and purchased parts	$	3,195	$	2,678
Work in process		2,907		2,195
Finished goods		11,621		13,214
Total inventories, gross		17,723		18,087
Less inventory reserves		1,395		1,383
Total inventories, net	$	16,328	$	16,704

Note 3 — Prepayments, Deposits, and Other Current Assets

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

	September 29,		December 30,
	2017		2016		June 28, 2019		December 28, 2018
Prepayments and deposits	$	1,944	$	1,003	$	2,953	$	1,707
Prepaid insurance		607		935		928		1,271
Income tax receivable		532		686
Consumption tax receivable		325		573		284		912
Value added tax (VAT) receivable		809		668		1,078		565
Pension benefit prepayment		90		—
Other current assets⁽¹⁾		629		484
	$	4,936	$	4,349
Income tax receivable						295		285
BVG Prepayment						372		16
Other⁽¹⁾						457		289
Total prepayments, deposits and other current assets					$	6,367	$	5,045

⁽¹⁾~~No individual item in “Other current assets” above exceeds 5% of the total prepayments, deposits, and other current assets.~~

⁽¹⁾	No individual item in “other current assets” exceeds 5% of the total prepayments, deposits and other current assets.

Note 4 — Property, Plant and Equipment

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

	September 29,		December 30,
	2017		2016		June 28, 2019		December 28, 2018
Machinery and equipment	$	17,680	$	19,807	$	21,266	$	19,000
Furniture and fixtures		9,410		8,025		9,880		9,860
Leasehold improvements		9,597		9,179		10,095		10,045
		36,687		37,011
Less: accumulated depreciation		25,688		25,221
	$	10,999	$	11,790
Total property, plant and equipment, gross						41,241		38,905
Less accumulated depreciation						27,859		27,454
Total property, plant and equipment, net					$	13,382	$	11,451

STAAR SURGICAL COMPANY

During the third quarter of 2017, the Company disposed of approximately $1.6 million of assets which were no longer in service and fully depreciated except for an asset disposal loss of approximately $21,000 which was included in the statement of operations.

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

Note 5 ~~— Intangible~~–Intangible Assets

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

September 29, 2017 December 30, 2016

Gross
Carrying
Amount

Accumulated
Amortization
Net
Gross
Carrying
Amount

Accumulated
Amortization
Net
Long-lived intangible assets:
Patents and licenses $ 9,245 $ (8,965 ) $ 280 $ 9,224 $ (8,930 ) $ 294
Customer relationships 1,393 (1,359 ) 34 1,343 (1,209 ) 134
Developed technology 886 (874 ) 12 854 (809 ) 45
Total $ 11,524 $ (11,198 ) $ 326 $ 11,421 $ (10,948 ) $ 473

June 28, 2019

December 28, 2018

Long-lived amortized intangible assets

Gross

Carrying

Amount

Accumulated

Amortization

Net

Gross

Carrying

Amount

Accumulated

Amortization

Net

Patents and licenses

9,302

(9,041

)

261

9,257

(9,014

)

243

Note 6 —– Other Current Liabilities

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

	September 29, 2017		December 30, 2016		June 28, 2019		December 28, 2018
Accrued salaries and wages	$	3,080	$	2,334	$	3,907	$	3,172
Accrued insurance						283		1,061
Accrued consumption tax						488		995
Accrued bonuses		1,680		1,414		1,784		5,113
Accrued consumption tax		304		424
Accrued insurance		197		501
Accrued income taxes		371		1,095
Income taxes payable						1,914		1,105
Other⁽¹⁾		1,621		1,507		2,395		1,985
	$	7,253	$	7,275
Total other current liabilities					$	10,771	$	13,431

⁽¹⁾	No individual item in “Other” ~~above~~ exceeds 5% of the other current liabilities.

Note 7 – Lines of Credit

Since 1998, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.06% as of June 28, 2019) plus a 0.50% spread, and may be renewed quarterly (the current line expires on August 21, 2019). The credit facility is not collateralized. The Company had 307,500,000 Yen and 417,500,000 Yen outstanding on the line of credit as of June 28, 2019 and December 28, 2018, respectively (approximately $2,854,000 and $3,780,000 based on the foreign exchange rates on June 28, 2019 and December 28, 2018, respectively), which approximates fair value due to the short-term maturity and market interest rates of the ~~total other current liabilities~~line of credit. In case of default, the interest rate will be increased to 14% per annum. There was 192,500,000 Yen and 82,500,000 Yen available for borrowing as of June 28, 2019 and December 28, 2018, respectively (approximately $1,786,000 and $747,000 based on the foreign exchange rate on June 28, 2019 and December 28, 2018, respectively). At maturity on August 21, 2019, the Company expects to renew this line of credit for an additional three months, with similar terms.

In September 2013, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a framework agreement for loans (“framework agreement”) with Credit Suisse (the “Bank”). The framework agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) (approximately $1,000,000 at the rate of exchange on June 28, 2019 and December 28, 2018), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The framework agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The framework agreement may be terminated by either party at any time in accordance with its general terms and conditions. The framework agreement is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the framework agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of June 28, 2019 and December 28, 2018.

The Company is in compliance with covenants of its credit facilities and lines of credit as of June 28, 2019.

During the six months ended June 28, 2019, the Company converted the lease line of credit schedule 011 with Farnam Street Financial, Inc. into a finance lease liability of approximately $500,000.

STAAR SURGICAL COMPANY

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

Note 8 – Leases

Finance Leases

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

	June 28, 2019
Machinery and equipment	$	2,158
Furniture and fixtures		1,042
Leasehold improvements		27
Finance lease right-of-use assets, gross		3,227
Less accumulated depreciation		889
Finance lease right-of-use assets, net	$	2,338

Total finance lease liability	$	1,540
Weighted-average remaining lease term (in years)		1.4
Weighted-average discount rate		6.47	%

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

	Three Months Ended		Six Months Ended
	June 28, 2019		June 28, 2019
Amortization of finance lease right-of-use asset	$	145	$	306
Interest on finance lease liabilities		22		41
Cash paid for amounts included in the measurement of finance lease liabilities:
Operating cash flows		22		41
Financing cash flows		316		681
Right-of-use assets obtained in exchange for new finance lease liabilities		37		679

Operating Leases

The Company entered into operating leases primarily related to real property (office, manufacturing and warehouse facilities), automobiles and copiers. These operating leases are two to five years in length with options to extend. The Company did not include any lease extensions in the initial valuation unless the Company was reasonably certain to extend the lease. Depending on the lease, there are those with fixed payment amounts for the entire length of the contract or payments which increase periodically as noted in the contract or increased at an inflation rate indicator. For operating leases that increase using an inflation rate indicator, the Company used the inflation rate at the time the lease was entered into for the length of the lease term. Supplemental balance sheet information related to operating leases consisted of the following (dollars in thousands):

STAAR SURGICAL COMPANY

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

Note 7 8 – Leases (Continued)

Operating Leases (Continued)

	June 28, 2019
Machinery and equipment	$	757
Furniture and fixtures		462
Real property		10,552
Operating lease right-of-use assets, gross		11,771
Less accumulated depreciation		4,552
Operating lease right-of-use assets, net	$	7,219

Total operating lease liability	$	7,346
Weighted-average remaining lease term (in years)		2.6
Weighted-average discount rate		1.84	%

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

	Three Months Ended		Six Months Ended
	June 28, 2019		June 28, 2019
Operating lease cost	$	683	$	1,294
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows		691		1,292
Right-of-use assets obtained in exchange for new operating lease liabilities		1,193		2,657

Future Minimum Lease Commitments

Estimated future minimum lease payments under operating and finance leases having initial or remaining non-cancelable lease terms more than one year as of June 28, 2019 and December 28, 2018 are as follows (in thousands):

As of June 28, 2019 12 Months Ended	Operating Leases		Finance Leases
June 2020	$	2,916	$	1,009
June 2021		2,201		506
June 2022		1,115		78
June 2023		942		8
June 2024		440		6
Thereafter		2		—
Total minimum lease payments, including interest	$	7,616	$	1,607
Less amounts representing interest		270		67
Total minimum lease payments	$	7,346	$	1,540

As of December 28, 2018 12 Months Ended	Operating Leases		Finance Leases
December 2019	$	2,606	$	1,153
December 2020		2,202		332
December 2021		980		143
December 2022		507		4
December 2023		202		—
Thereafter		12		—
Total minimum lease payments, including interest		6,509		1,632
Less amounts representing interest		—		75
Total minimum lease payments	$	6,509	$	1,557

STAAR SURGICAL COMPANY

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

Note 9 —Income Taxes

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

Three Months Ended

Six Months Ended

June 28,

2019

June 29,

2018

June 28,

2019

June 29,

2018

Provision for income taxes

1,131

805

1,620

1,106

The income tax provision is primarily due to pre-tax income generated in certain foreign jurisdictions. The Company’s quarterly provision for income taxes is determined by estimating an annual effective tax rate. This estimate may fluctuate throughout the year as new information becomes available affecting its underlying assumptions. There are no unrecognized tax benefits related to uncertain tax positions taken by the Company.

All earnings from the Company’s subsidiaries are not considered to be permanently reinvested. Accordingly, the Company provides withholding and U.S. taxes on all unremitted foreign earnings.

The 2017 Tax Act subjects a U.S. shareholder to tax on Global Intangible Low Tax Income (“GILTI”) earned by certain foreign subsidiaries. In general, GILTI is the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets. The provision further allows a deduction of 50 percent of GILTI, however this deduction is limited to the Company’s pre-GILTI U.S. income. The Company has elected to account for GILTI as a current period expense when incurred.

For the six months ended June 28, 2019, the Company included GILTI of $7,699,000 in U.S. gross income, which was fully offset with net operating loss carryforwards. The Company was not able to utilize the deduction of 50 percent of GILTI, as this deduction is limited to the Company’s pre-GILTI U.S. tax income.

As of June 28, 2019, the Company established a full valuation allowance in the U.S. for all periods presented due to the significant uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets, with the exception of the refundable alternative minimum tax credit of $273,000. Management will continue to monitor and evaluate all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, impact of GILTI in the U.S., 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, the amount of future federal, state, and foreign pretax operating income, the reversal of temporary differences and the 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, the Company considers three years of cumulative operating results. 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. As the Company experiences continued growth and profits the need for a valuation allowance will be evaluated each reporting period by Management to determine whether it is more likely than not that the Company’s deferred tax assets will be realizable in a later period. Any such changes in the assessment of a full or partial valuation allowance could have a material impact on earnings.

STAAR SURGICAL COMPANY

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

Note 10 – Defined Benefit Pension Plans

The Company has defined benefit plans covering employees of its Switzerland and Japan operations.

The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

	Three Months Ended						Six Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Service cost⁽¹⁾	$	248		$	139		$	480		$	277
Interest cost⁽²⁾		20			15			40			29
Expected return on plan assets⁽²⁾		(34	)		(28	)		(67	)		(54	)
Net amortization of transitional obligation^(2),(3)		—			2			—			5
Prior service credit^(2),(3)		(5	)		(5	)		(11	)		(11	)
Actuarial loss recognized in current period^(2),(3)		33			29			65			57
Net periodic pension cost	$	262		$	152		$	507		$	303

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Service cost $ 126 $ 155 $ 380 $ 466
Interest cost 15 19 43 54
Expected return on plan assets (25 ) (24 ) (71 ) (69 )
Net amortization of transitional obligation (a) 3 3 9 10
Actuarial loss recognized in current period (a) 17 24 51 70
Total $ 136 $ 177 $ 412 $ 531

⁽¹⁾	Recognized in selling general and administrative expenses on the Condensed Consolidated Statements of Income.

⁽²⁾	Recognized in other income (expense), net on the Condensed Consolidated Statements of Income.

⁽³⁾	Amounts reclassified from accumulated other comprehensive income (loss).

~~(a) Amounts reclassified from accumulated other comprehensive loss.~~

During the nine months ended September 29, 2017 and September 30, 2016, the Company made cash contributions of approximately $518,000 and $419,000, respectively, to its Swiss pension plan and the Company is not required to make additional cash contributions during the remainder of 2017. The Company currently is not required to and does not make contributions to its Japan pension plan. The Company’s contributions to its Swiss pension plan are as follows (in thousands):

Three Months Ended

Six Months Ended

June 28,

2019

June 29,

2018

June 28,

2019

June 29,

2018

Employer contribution

137

263

145

Note 11 — Stockholders’ Equity

Stock-Based Compensation

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

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Employee stock options	$	2,162	$	897	$	3,592	$	1,516
Restricted stock		77		59		159		110
Restricted stock units		311		494		1,415		1,092
Nonemployee stock options		29		148		54		181
Total stock-based compensation expense	$	2,579	$	1,598	$	5,220	$	2,899

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

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Cost of sales	$	22	$	4	$	36	$	7
General and administrative		1,018		655		1,796		1,174
Marketing and selling		690		366		1,861		826
Research and development		849		573		1,527		892
Total stock-based compensation expense, net		2,579		1,598		5,220		2,899
Amounts capitalized as part of inventory		276		145		465		267
Total stock-based compensation expense, gross	$	2,855	$	1,743	$	5,685	$	3,166

STAAR SURGICAL COMPANY

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

Note 811 — Stockholders’ Equity (Continued)

Incentive Plan

The Amended and Restated Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, and restricted stock units (“RSUs”). Options under the Plan are granted at fair market value on the date of grant, become exercisable generally over a three-year period, or as determined by the Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for accelerated vesting if there is a change in control and pre-established financial metrics are met (as defined in the Plan). Grants of restricted stock outstanding under the Plan generally vest over periods of one to three years. Grants of RSUs outstanding under the Plan generally vest based on service, performance, or a combination of both. As of June 28, 2019, there were 1,639,474 shares available for grant under the Plan

Assumptions

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model applying the weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that options granted are expected to be outstanding. The Company has calculated an 8% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

	Three Months Ended						Six Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		53	%		53	%		53	%		53	%
Risk-free interest rate		2.05	%		2.81	%		2.41	%		2.70	%
Expected term (in years)		5.67			5.72			5.67			5.72

Stock Options

A summary of stock option activity under the Plan for the six months ended June 28, 2019 is presented below:

	Stock Options (in 000’s)			Minimum Exercise Price		Maximum Exercise Price
Outstanding at December 28, 2018		3,920
Granted		801
Exercised		(126	)
Forfeited or expired		(16	)
Outstanding at June 28, 2019		4,579		$	3.50	$	43.84
Exercisable at June 28, 2019		3,026

STAAR SURGICAL COMPANY

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

Note 11 — Stockholders’ Equity (Continued)

Restricted Stock and Restricted Stock Units

A summary of restricted stock and RSU activity under the Plan for the six months ended June 28, 2019 is presented below:

	Restricted Stock (in 000’s)			Restricted Stock Units (in 000’s)
Unvested at December 28, 2018		11			322
Granted		11			19
Vested		(11	)		(202	)
Forfeited or expired		—			(5	)
Unvested at June 28, 2019		11			134

Note 12 - Commitments and Contingencies

Litigation and Claims

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. These legal proceedings and other matters may relate to, among other things, contractual rights and obligations, employment matters, or claims of product liability. STAAR maintains insurance coverage for various matters, including product liability and certain securities claims. While the Company does not believe that any of the claims known is likely to have a material adverse effect on the Company’s financial condition or results of operations, new claims or unexpected results of existing claims could lead to significant financial harm.

Employment Agreements

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective March 1, 2015. She and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all its assets, or termination “without cause or for good reason” as defined in the employment agreements.

STAAR SURGICAL COMPANY

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

Note 13 — Basic and Diluted Net Income ~~(Loss)~~ Per Share

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

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Numerator:
Net income (loss) $ 1,173 $ (1,778 ) $ (2,001 ) $ (11,962 )
Denominator:
Weighted average common shares outstanding 41,131 40,501 40,960 40,242
Less: Unvested restricted stock 21 15 21 15
Denominator for basic and diluted calculation 41,110 40,486 40,939 40,227
Effect of dilutive shares:
Options 837 — — —
Restricted stock and units 157 — — —
Denominator for diluted calculation 42,104 40,486 40,939 40,227
Net income (loss) per share – basic $ 0.03 $ (0.04 ) $ (0.05 ) $ (0.30 )
Net income (loss) per share – diluted $ 0.03 $ (0.04 ) $ (0.05 ) $ (0.30 )

	Three Months Ended						Six Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Numerator:
Net income	$	3,914		$	1,830		$	5,281		$	2,413
Denominator:
Weighted average common shares:
Common shares outstanding		44,489			41,734			44,368			41,579
Less: Unvested restricted stock		(10	)		(11	)		(11	)		(11	)
Denominator for basic calculation		44,479			41,723			44,357			41,568
Weighted average effects of potentially diluted common stock:
Stock options		2,149			2,037			2,292			1,800
Unvested restricted stock		97			17			185			17
Restricted stock units		8			222			8			269
Denominator for diluted calculation		46,733			43,999			46,842			43,654
Net income per share:
Basic	$	0.09		$	0.04		$	0.12		$	0.06
Diluted	$	0.08		$	0.04		$	0.11		$	0.06

The following table sets forth (in thousands) the weighted average number of options to purchase shares of common stock, restricted stock, and restricted stock ~~and~~ units with either exercise prices or unrecognized compensation cost per share greater than the average market price per share of the Company’s common stock, which were not included in the calculation of diluted per share amounts because the effects would be ~~anti-dilutive~~anti-dilutive.

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Stock options		1,991		554		1,256		539
Restricted stock and restricted stock units		1		2		—		1
Total		1,992		556		1,256		540

Note 14 — Disaggregation of Sales, Geographic Sales and Product Sales

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

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Options 1,545 2,134 2,497 2,937
Restricted stock and units — 60 159 48
Total 1,545 2,194 2,656 2,985

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Non-consignment sales	$	35,556	$	29,661	$	63,822	$	51,842
Consignment sales		4,108		4,244		8,425		9,156
Total net sales	$	39,664	$	33,905	$	72,247	$	60,998

STAAR SURGICAL COMPANY

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

Note 9 14 — Disaggregation of Sales, Geographic Sales and Product ~~Data~~Sales (Continued)

The Company markets and sells its products in over 6075 countries and conducts its manufacturing in the United States. Other than China ~~Japan,~~ and ~~the United States,~~Japan, the Company does not conduct business in any country in which its sales exceed 10% of worldwide consolidated net sales. Sales are ~~generally~~ attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

Three Months Ended Nine Months Ended
September 29, September 30, September 29, September 30,
2017 2016 2017 2016
China $ 7,164 $ 4,254 $ 17,489 $ 11,749
Japan 4,633 4,029 12,849 12,258
United States 1,896 2,419 5,946 7,355
Other 9,780 9,350 29,475 28,933
Total $ 23,473 $ 20,052 $ 65,759 $ 60,295

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
China	$	19,394	$	13,965	$	31,165	$	21,875
Japan		6,275		6,692		11,794		11,775
Other⁽¹⁾		13,995		13,248		29,288		27,348
Total net sales	$	39,664	$	33,905	$	72,247	$	60,998

⁽¹⁾	No other location individually exceeds 10% of the total sales.

In addition, domestic and foreign sales are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Domestic	$	2,114	$	1,895	$	4,066	$	3,651
Foreign		37,550		32,010		68,181		57,347
Total net sales	$	39,664	$	33,905	$	72,247	$	60,998

~~100%~~100% of the Company’s sales are generated from the ophthalmic surgical product segment and the chief operating decision maker makes operating decisions and allocates resources based upon the consolidated operating results, and therefore the Company operates as one operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer lenses (“ICLs”) used in refractive surgery and intraocular lenses (“IOLs”) used in cataract surgery. The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,		Three Months Ended				Six Months Ended
	2017		2016		2017		2016		June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
ICLs	$	18,110	$	14,801	$	49,698	$	43,389	$	34,432	$	27,292	$	62,218	$	48,450
Other product sales
IOLs		3,892		4,649		12,875		14,783		3,874		4,186		7,891		8,244
Other surgical products		1,471		602		3,186		2,123		1,358		2,427		2,138		4,304
Total	$	23,473	$	20,052	$	65,759	$	60,295
Total other product sales										5,232		6,613		10,029		12,548
Total net sales									$	39,664	$	33,905	$	72,247	$	60,998

One customer, our distributor in China, accounted for ~~31%~~49% and ~~27%~~43% of net sales for the three and ~~nine~~six months ended ~~September 29, 2017,~~June 28, 2019, respectively, and the same customer accounted for ~~21%~~41% and ~~19%~~36% of net sales for the three and ~~nine~~six months ended ~~September 30, 2016,~~June 29, 2018, respectively. As of ~~September 29, 2017~~June 28, 2019 and December ~~30, 2016,~~28, 2018, respectively, one customer, our distributor in China, accounted for ~~26%~~48% and ~~22%~~37% of consolidated trade receivables.

~~Note 10 — Stock-Based Compensation~~

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

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Employee stock options $ 443 $ 208 $ 1,204 $ 5,257
Restricted stock 50 32 136 259
Restricted stock units 314 146 845 2,569
Nonemployee stock options — — — 58
Total $ 807 $ 386 $ 2,185 $ 8,143

~~The Company recorded stock-based compensation costs in the following categories on the accompanying condensed consolidated statements of operations (in thousands):~~

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Cost of sales $ 2 $ — $ 6 $ 560
General and administrative 377 248 1,035 3,936
Marketing and selling 214 72 558 1,544
Research and development 214 66 586 2,103
Total stock compensation expense 807 386 2,185 8,143
Amounts capitalized as part of inventory 107 39 269 227
Total $ 914 $ 425 $ 2,454 $ 8,370

ITEM 2.

~~STAAR SURGICAL COMPANY~~

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

~~Stock Option Plan~~

Our Amended and Restated Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, restricted stock units (“RSUs”), and performance contingent stock units. Options under the plan are granted at fair market value on the date of grant, become exercisable over a three-year period, or as determined by our Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for accelerated vesting under certain circumstances in the event of a change in control (as defined in the Plan). Pursuant to the Plan, options for 3,826,956 shares were outstanding at September 29, 2017 with exercise prices ranging between $0.95 and $17.62 per share. Restricted stock grants under the Plan generally vest over a period between one to four years. There were 20,833 shares of restricted stock and 438,039 RSUs outstanding at September 29, 2017. As of September 29, 2017, there were 1,273,420 shares authorized and available for grants under the Plan.

~~Assumptions~~

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model applying the weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that options granted are expected to be outstanding. The Company has calculated an 11.3% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Expected dividend yield 0 % 0 % 0 % 0 %
Expected volatility 57 % 57 % 57 % 57 %
Risk-free interest rate 1.83 % 1.19 % 1.95 % 1.34 %
Expected term (in years) 5.67 5.57 5.67 5.57

~~A summary of option activity under the Plan for the nine-month period ended September 29, 2017 is presented below:~~

	~~Options~~ ~~Shares~~ ~~(000’s)~~
~~Outstanding at December 30, 2016~~		~~3,502~~
~~Granted~~		~~829~~
~~Exercised~~		~~(334~~	)
~~Forfeited or expired~~		~~(170~~	)
~~Outstanding at September 29, 2017~~		~~3,827~~
~~Exercisable at September 29, 2017~~		~~2,752~~

~~A summary of restricted stock and RSU activity under the Plan for the nine-month period ended September 29, 2017 is presented below:~~

Restricted
Shares
(000’s)

RSUs
(000’s)

Outstanding at December 30, 2016 23 274
Granted 21 291
Vested (23 ) (93 )
Forfeited — (34 )
Outstanding at September 29, 2017 21 438

~~STAAR SURGICAL COMPANY~~

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

~~Note 11 — Income Taxes~~

As discussed in Note 1 of the notes to the condensed consolidated financial statements, the Company adopted an accounting standards update regarding the recognition of excess tax benefits through the income statement upon settlement of share-based compensation awards. As the Company has a full valuation allowance, any realized benefits would be offset by the valuation allowance with no impact to the tax provision. Accordingly, there is no benefit reflected in the current tax provision and no restatement of the prior period.

The Company’s quarterly provision for income taxes is determined by estimating an annual effective tax rate. This estimate may fluctuate throughout the year as new information becomes available affecting its underlying assumptions.

The Company recorded an income tax provision of $0.4 million and $0.7 million for the three and nine months ended September 29, 2017 primarily due to pre-tax income generated in certain foreign jurisdictions. There are no unrecognized tax benefits related to uncertain tax positions taken by the Company.

The income tax benefit of $1.7 million for the nine months ended September 30, 2016 was primarily due to net operating losses from our foreign operations, primarily due to the acceleration of stock compensation and tax benefits related to the dissolution of one of our foreign subsidiaries.

All earnings from the Company’s subsidiaries are not considered to be permanently reinvested. Accordingly, the Company provides withholding and U.S. taxes on all unremitted foreign earnings. The Company reduced its deferred tax liability in 2016 related to withholding taxes from unremitted foreign earnings by the accumulated deficit of one of its foreign subsidiaries dissolved as of April 1, 2016.

~~Note 12 — Commitments and Contingencies~~

~~Lines of Credit~~

Since 1988, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement, as amended on or about November 21, 2016, with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.12% as of September 29, 2017) plus a 0.50% spread, and may be renewed annually (the current line expires on November 21, 2017). The credit facility is not collateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of September 29, 2017 and December 30, 2016 (approximately $4.4 million and $4.3 million based on the foreign exchange rates on September 29, 2017 and December 30, 2016, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of September 29, 2017, there were no available borrowings under the line.

In August 2010, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the Bank). The credit agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) ($1.0 million at the rate of exchange on September 29, 2017), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The credit agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The credit agreement may be terminated by either party at any time in accordance with its general terms and conditions. The credit facility is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions as defined in the credit agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of September 29, 2017 and December 30, 2016.

~~Covenant Compliance~~

~~The Company is in compliance with the covenants of its credit facilities as of the date of this filing.~~

~~STAAR SURGICAL COMPANY~~

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

~~Lease Line of Credit (Capital Leases)~~

On January 30, 2017, the Company entered into lease schedule 010 with Farnam Street Financial, Inc (“Farnam”). The line of credit provides for borrowings of up to $2.0 million at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. Interim rent is paid until the full amount of the line is used at which time the lease commences. As of September 29, 2017, approximately $737,456 of the line was available for borrowing.

On January 31, 2017, the Company entered into lease schedule 009R with Farnam. Under 009R, equipment with a cost of $1,957,000 was financed over a period of 24 months at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. As of September 29, 2017, approximately $1,310,609 was outstanding.

On June 12, 2014, the Company entered into lease schedule 008R with Farnam. Under the agreement, hardware and non-hardware with a cost of $964,612 was financed over a period of 36 months at a lease rate factor of 2.81% per $1 for hardware equipment and 3.12% per $1 for non-hardware equipment. At the end of the lease the Company could opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. The lease schedule was paid off in May 2017 and the Company is renting the equipment on a month to month basis temporarily until it decides to either return the equipment or exercise the fair market value purchase option.

~~Litigation and Claims~~

From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. These claims and legal proceedings may relate to contractual rights and obligations, employment matters, and claims of product liability. The most significant of these actions, proceedings and investigations are described below. STAAR maintains insurance coverage for product liability and certain securities claims. Legal proceedings can extend for several years, and most of the matters concerning the Company are at early stages of the legal and administrative process. As a result, these matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceedings are material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company’s consolidated results of operations, financial position, or cash flows.

~~Stockholder Securities Litigation: Todd Action~~

~~On July 8, 2014,~~ ~~a putative securities class action lawsuit was filed by Edward Todd against STAAR and three officers in the U.S. District Court for the Central District of California.~~ The plaintiff claims that STAAR made misleading statements to and omitted material information from our investors between February 27, 2013 and September 29, 2014 about alleged regulatory violations at STAAR’s Monrovia manufacturing facility. On October 20, 2014, plaintiff amended its complaint, dismissed two Company officers, added one other officer, reduced the alleged Class Period to November 1, 2013 through September 29, 2014, and demanded compensatory damages and attorneys’ fees. On January 5, 2017, the court granted plaintiff’s Motion for Class Certification. On June 20, 2017, plaintiff sought preliminary approval of a proposed class action settlement in the amount of $7,000,000. The settlement documents filed by the plaintiff included a “Stipulation and Agreement of Settlement” that provided, among other things, that the $7,000,000 settlement amount “shall be wired on behalf of all Defendants and Released Persons out of insurance proceeds from STAAR’s Insurance Policies into the Settlement Escrow Account.” The Company determined it was probable the insurance carriers would satisfy their obligation. On July 10, 2017, the court granted the plaintiff’s application for preliminary approval of the class action settlement. On or about July 28, 2017, the Company’s insurance carriers directly funded the entire settlement amount to the court-authorized escrow account. On October 23, 2017, the court granted plaintiff’s application for final approval of the class action settlement in the amount of $7,000,000. A third-party claims administrator will administer and oversee distribution of the settlement funds to qualified class members, pursuant to the process approved by the court. The Company recorded the liability associated with the settlement and the corresponding insurance receivable of $7,000,000 as of September 29, 2017. These entries did not have any impact on the statement of operations or cash flows for the nine months ended September 29, 2017. As of October 23, 2017, the Company, upon the Court’s final approval, relieved both the payable and the receivable off of its consolidated balance sheet.

~~Stockholder Derivative Litigation: Forestal Action~~

On June 21, 2016, Kevin Forestal filed a stockholder derivative complaint against our then-current Board of Directors, which included Caren Mason, Mark B. Logan, Stephen C. Farrell, Richard A. Meier, John C. Moore, J. Steven Roush, Louis E. Silverman, and William P. Wall, and STAAR as well as Barry G. Caldwell and John S. Santos in the U.S. District Court for the Central District of California. The plaintiff alleges breaches of fiduciary duties by, among other things, allowing STAAR to disseminate misleading statements to investors regarding the condition of the Company’s Quality System, failing to properly oversee the Company, and unjust enrichment. The complaint seeks damages, restitution and governance reforms, attorneys’ fees, and costs. On January 31, 2017, the court granted the Company’s Motion to Dismiss. On February 6, 2017, plaintiff filed a Notice of Appeal, and on July 17, 2017 plaintiff filed his appellate brief. On September 14, 2017, the Company filed its appellate answering brief. Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company has not recorded any loss or accrual in the accompanying condensed consolidated financial statements at September 29, 2017 and December 30, 2016 for this matter as the likelihood and amount of loss, if any, has not been determined and is not currently estimable.

~~STAAR SURGICAL COMPANY~~

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

~~Employment Agreements~~

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

~~Note 13 — Reclassifications~~

The Company reclassified inventory reserves from Changes in Working Capital - Inventory in the Statement of Cash Flows to the non-cash section of the Statement for both the nine months ended September 29, 2017 and September 30, 2016. The Company also reclassified $65,000 from Cash Proceeds from Sale of Property and Equipment to Loss on Disposal of Property and Equipment for the nine months ended September 30, 2016.

~~ITEM 2.~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “should,” “forecast” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements about any of the following: any projections of or guidance as to earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, capital expense or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of a new or improved products (including the ~~Toric ICL~~EVO family of lenses in the U.S. and the EDOF ICL for presbyopia internationally); commercialization of new or improved products; ~~the nature, timing and likelihood of resolving issues cited in the FDA’s 2014 Warning Letter or 2015 FDA-483;~~ future economic conditions or size of market opportunities; expected costs of ~~quality system and completion of FDA remediation efforts;~~operations; statements of belief, including as to achieving ~~2017~~2019 business plans; 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, such statements are inherently subject to risks and we can give no assurance that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described in in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on ~~March 2, 2017.~~February 21, 2019. We undertake no obligation to update these forward-looking statements after the date of this report to reflect future events or circumstances or to reflect actual outcomes.

The following discussion should be read in conjunction with the ~~unaudited~~audited consolidated financial statements of STAAR, including the related notes, provided in this report.

Overview

STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and companion delivery systems used to deliver the lenses into the eye. We ~~believe we~~ are the world’s leading manufacturer of intraocular lenses for patients seeking refractive vision correction, and we also make lenses for use in surgery to treat cataracts. All the lenses we make are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Refractive surgery is performed to treat the type of visual disorders that have traditionally been corrected using eyeglasses or contact lenses. We refer to our lenses used in refractive surgery as “implantable Collamer® lenses” or ~~“ICLs,~~“ICLs.” ~~which includes the EVO Visian ICL™ product line.~~ The field of refractive surgery includes both lens-based procedures, using products like our ICL family of products, and laser-based procedures like LASIK. Successful refractive surgery can correct common vision disorders such as myopia, hyperopia, and astigmatism. Cataract surgery is a common outpatient procedure where the eye’s natural lens that has become cloudy with age is removed and replaced with an artificial lens called an intraocular lens (IOL) to restore the patient’s vision. STAAR employs a commercialization strategy that strives for sustainable profitable growth. Our goal is to position our refractive lenses throughout the world as primary and premium solutions for patients seeking visual freedom from wearing ~~glasses~~eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction. We position our IOL lenses used in ~~cataract~~ surgery ~~in standard~~that treats cataracts based on quality and ~~premium value segments.~~value.

~~STAAR has significant operations globally. Activities outside~~Recent Developments

We achieved record second quarter results for total revenue, ICL sales, and ICL units. We believe the ~~United States (“U.S.”) accounted~~results through the first two quarters of 2019 put us on track to achieve or exceed the growth targets of 20% annual top line revenue growth and 30% ICL unit growth we disclosed earlier this year for ~~92% of our total sales in the third quarter of 2017, primarily due~~fiscal 2019. Subsequent to the pacing of product approvals and commercialization that tend to occur first outside the U.S. STAAR sells its products in more than 60 countries, with direct distribution in Japan, North America, Spain, Germany, Singapore, the U.K., and independent distribution in the remainderend of the ~~world. STAAR maintains operational and administrative facilities~~quarter we submitted data to our European Notified Body regarding our multi-site clinical trial for our EDOF ICL for presbyopia, which met the clinical trial primary endpoint. Our EDOF ICL for presbyopia is currently also under review by our European Notified Body for use as a supplemental or piggyback lens in ~~the U.S., Switzerland and Japan.~~

~~Recent Developments and Strategic Priorities~~patients who have IOLs implanted for ~~2017~~

In the third quarter of 2017, quarterly net sales increased 17% from prior year quarter to $23.5 million. Worldwide ICL sales increased 22% and units increased 18% from prior year quarter. In the quarter, ICL sales grew 256% in Canada, 32% in Japan and 69% in China. In regional markets, comparedcataracts. We also delivered to the prior year quarter, ICL sales increased 10% in North America, 6% in Europe, Middle East and Africa, and 35% in Asia Pacific, in spite of planned challenges in Korea. Global Toric ICL shipments continue to accountFDA a revised submission encompassing a clinical trial for a growing percentage of the ICL product mix. For the third quarter of 2017, injector part sales were significantly higher than prior year third quarter. We continue to recover from challenges with one of the materials used in our silicone IOL preloaded injectors. During the third quarter of 2017, we continued to enter into new strategic business agreements with customers, and renew or extend existing agreements.

With the discontinuation of our U.S. silicone IOL business and sales impacted by the materials challenge in our silicone IOL preloaded injectors, we expect that IOL sales will decrease in the fourth quarter of 2017 compared to the fourth quarter of 2016. We expect sales of injector parts to continue to increase compared to prior year in the fourth quarter of 2017. In September, our Notified Body in the European Union, DEKRA, approved an expanded age rangeleast burdensome pathway towards approval for our EVO ~~Visian ICL for myopia from adults aged 21 to 45 years old to adults aged 21 to 60 years old. Our first-in-man clinical trial for the next generation ICL with EDOF continued~~family of lenses in the ~~third quarter and the results continue to be positive.~~

~~For 2017, our strategic priorities remain as follows:~~

1. Complete Remediation Plan and Quality Systems Overhaul: We expect to complete our internal remediation and quality system rebuild commitments while also maintaining our global quality certifications;

~~2. Continue to Build the~~~~Visual Freedom~~ Market for Implantable Lenses: We will continue our activities to position the ICL as a primary and premium refractive procedure with clinical validation, new digital and social media marketing, product branding launched in 2016, and enhanced surgeon training and practice development programs;

3. Build Go-to-Market Strategy to Expand Market Share Globally: We are planning for double digit ICL growth through a refreshed sales strategy and by entering into additional strategic business relationships with growth-oriented refractive surgical providers operating eye hospitals and clinics;

4. Deliver Global Clinical Validation & Clinical Utility Excellence: The expanded Global Clinical and Medical Affairs teams will continue to assist in supporting submissions to and responding to queries from regulatory agencies and will monitor clinical data, conduct and monitor clinical studies and patient registries established in 2016 and enhance our medical communications protocol; and

5. Innovate, Develop and Release to Market Premium Collamer Lenses and Delivery Systems: We plan to complete research and development efforts relating to EVO (spherical) with EDOF lens design and meet internal commitments regarding other research and development priorities.

~~We continue to expect double-digit ICL unit growth in 2017 driven primarily by increasing market acceptance of the EVO Visian ICL in established markets with the exception of the~~ U.S. and Korea. We continue to anticipate gross profit as a percentage of sales for full year 2017 to be higher than 2016. We continue to expect operating expenses for 2017 will be below operating expenses in 2016. Finally, we will continue to evaluate opportunities to acquire new product lines, technologies, and companies.

Critical Accounting Policies

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 of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. ~~Management~~On December 29, 2018 (beginning of fiscal year 2019), the Company adopted Accounting Standards Update 2016-02, “Leases (Topic 842)” and its subsequent amendments, the impact of this new accounting standard are discussed in Notes 1 and 8 of the Condensed Consolidated Financial Statements. Other than the adoption of Topic 842, management believes that there have been no significant changes during the ~~nine~~six months ended ~~September 29, 2017~~June 28, 2019 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December ~~30, 2016.~~

28, 2018.

Results of Operations

The following table shows the percentage of our total sales represented by ~~the specific~~certain items ~~listed~~ reflected in our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Income for the periods ~~indicated, and the percentage by which these items increased or decreased over the prior period.~~indicated.

	Percentage of Net Sales for Three Months						Percentage of Net Sales for Nine Months						Percentage of Net Sales for Three Months						Percentage of Net Sales for Six Months
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		28.2			25.8			28.7			29.5			24.6	%		25.6	%		25.1	%		26.8	%
Gross profit		71.8			74.2			71.3			70.5			75.4	%		74.4	%		74.9	%		73.2	%

General and administrative		21.1			24.9			22.9			30.5			18.9	%		18.3	%		19.9	%		19.6	%
Marketing and selling		27.4			35.7			30.8			36.5			29.5	%		31.4	%		30.2	%		29.7	%
Research and development		18.9			22.2			21.2			26.6			15.4	%		15.8	%		16.3	%		17.6	%
		67.4			82.8			74.9			93.6
Operating income (loss)		4.4			(8.6	)		(3.6	)		(23.1	)
Other income (expense), net		2.3			0.2			1.6			0.5
Income (loss) before provision for income taxes		6.7			(8.4	)		(2.0	)		(22.6	)
Provision (benefit) for income taxes		1.7			0.4			1.1			(2.8	)
Net income (loss)		5.0	%		(8.8	)%		(3.1	)%		(19.8	)%
Total selling, general and administrative														63.8	%		65.5	%		66.4	%		66.9	%
Operating income														11.6	%		8.9	%		8.5	%		6.3	%
Total other income (expense), net														1.1	%		(1.1	)%		1.0	%		(0.5	)%
Income before income taxes														12.7	%		7.8	%		9.5	%		5.8	%
Provision for income taxes														2.9	%		2.4	%		2.2	%		1.8	%
Net income														9.8	%		5.4	%		7.3	%		4.0	%

Net Sales

Three Months Ended Percentage Change Nine Months Ended Percentage Change

September 29,
2017

September 30,
2016

2017
vs. 2016
September 29, 2017 September 30, 2016
2017
vs. 2016

Net sales $ 23,473 $ 20,052 17.1 % $ 65,759 $ 60,295 9.1 %

ICL 18,110 14,801 22.4 49,698 43,389 14.5
IOL 3,892 4,649 (16.3 ) 12,875 14,783 (12.9 )
Other 1,471 602 144.4 3,186 2,123 50.1

	Three Months Ended				Percentage Change			Six Months Ended				Percentage Change
	June 28, 2019		June 29, 2018		2019 vs. 2018			June 28, 2019		June 29, 2018		2019 vs. 2018
ICLs	$	34,432	$	27,292		26.2	%	$	62,218	$	48,450		28.4	%
Other product sales
IOLs		3,874		4,186		(7.5	)%		7,891		8,244		(4.3	)%
Other surgical products		1,358		2,427		(44.1	)%		2,138		4,304		(50.3	)%
Total other product sales		5,232		6,613		(20.9	)%		10,029		12,548		(20.1	)%
Net sales	$	39,664	$	33,905		17.0	%	$	72,247	$	60,998		18.4	%

Net sales for the three months ended ~~September 29, 2017~~June 28, 2019 were ~~$23.5~~$39.7 million, an increase of 17% ~~compared with $20.1~~from $33.9 million reported during the same period of ~~2016. Total~~2018. The increase in net sales was due to increases in ICL sales of $7.1 million, partially offset by a decrease in other product sales of $1.4 million. Currency, primarily the euro, negatively impacted net sales by approximately $0.6 million for the three months ended June 28, 2019.

Net sales for the ~~nine~~six months ended ~~September 29, 2017~~June 28, 2019 were ~~$65.8~~$72.2 million, an increase of ~~9.1% compared with $60.3~~18% from $61.0 million reported during the same period of ~~2016.~~2018. The ~~effect of exchange rate changes had an unfavorable impact on~~increase in net sales was due to increases in ICL sales of ~~$0.3~~$13.8 million, ~~and $0.4~~partially offset

by a decrease in other product sales of $2.5 million. Currency, primarily the euro, negatively impacted net sales by approximately $1.3 million ~~respectively, during~~for the ~~three and nine~~six months ended ~~September 29, 2017.~~

June 28, 2019.

Total ICL sales for the three months ended ~~September 29, 2017~~June 28, 2019 were ~~$18.1~~$34.4 million, ana 26% increase ~~of 22% compared with $14.8~~from $27.3 million reported ~~during~~for the same period of ~~2016. North America ICL~~2018, with unit growth up 34%. The sales ~~were $1.6 million during the third quarter, an~~ increase ~~of 10% in both sales and units compared to the prior year period. The increase in North America ICL sales~~ was driven by ~~a 256% increase~~the APAC region, which grew 37% with unit growth of 45%, primarily due to sales growth in ~~Canada~~China up 40%, Korea up 36%, Japan up 30% and India up 23%. The Europe, Middle East, Africa and Latin America region decreased 1% with unit growth up 4%, due primarily to decreased sales in Distributor Operations and the Middle East, largely offset by increased sales in Spain, Germany and the U.K. The North America region grew 18%, with unit growth of 4%, primarily due to increased sales in the U.S., as a result of ~~the successful commercialization~~sales of ~~the EVO~~ Toric ICL ~~which was introduced late~~ in ~~the third quarter of 2016. APAC~~2019 (none in 2018), partially offset by decreased sales in Canada. ICL sales ~~were $11.0 million during~~represented 86.8% and 80.5% of our total sales for the ~~third quarter of 2017, an increase of 35% compared to the prior year period, which was comprised of a 34% increase in units~~three months ended June 28, 2019 and a 1% increase in average selling prices, driven by strong double-digit growth in China, Japan, and APAC distributor markets. EMEA ICL sales were $5.4 million during the third quarter, an increase of 6% compared to the prior year period, which was comprised of an 8% decrease in units and a 15% increase in average selling prices.

June 29, 2018, respectively.

Total ICL sales for the ~~nine~~six months ended ~~September 29, 2017~~June 28, 2019 were ~~$49.7~~$62.2 million, a ~~15%~~28% increase ~~compared with $43.4~~from $48.5 million reported ~~during~~for the same period of ~~2016. Total~~2018, with unit growth up 36%. The sales increase was driven by the APAC region, which grew 43% with unit growth of 49%, primarily due to sales growth in China up 43%, Japan up 55%, Korea up 45% and India up 25%. The Europe, Middle East, Africa and Latin America region decreased 1% with unit growth up 5%, due primarily to decreased sales in the Middle East, Latin America and Distributor Operations, partially offset by increased sales in Germany and the U.K. The North America region grew 16%, with unit growth of 2%, primarily due to sales growth of 25% in the U.S., as a result of sales of Toric ICL ~~units increased 16% and average selling prices~~in 2019 (none in 2018), partially offset by decreased ~~1%. EMEA~~sales in Canada. ICL sales represented 86.1% and 79.4% of our total sales for the six months ended June 28, 2019 and June 29, 2018, respectively.

Other product sales, including IOLs were ~~$16.3~~$5.2 million for the ~~nine~~three months ended ~~September 29, 2017,~~June 28, 2019, a ~~5% increase compared to $15.5~~decrease of 21% from $6.6 million reported ~~in the same period in 2016 which was comprised of a 2% increase in units and a 3% increase in average selling prices. APAC ICL sales were $28.2 million~~ for ~~the nine months ended September 29, 2017, a 21% increase compared to $23.2 million reported during~~ the same period of ~~2016.~~2018. Other product sales, including IOLs were $10.0 million for the six months ended June 28, 2019, a decrease of 20% from $12.5 million reported for the same period of 2018. The ~~increase was comprised of 25% increase in units and a 3%~~decrease for both periods is due to the decrease in ~~average selling prices.~~preloaded injector part sales to a third-party manufacturer for product they sell to their customers. The ~~increase was driven by a 49% increase~~Company expects the rate of decline of injector part sales to decrease in ~~China sales, partially offset by lower sales in India and Korea. North America ICL sales were $5.1 million during~~ the ~~nine months ended September 29, 2017, an 11% increase in sales and units~~second half of 2019 compared to the ~~same period in 2016.~~

~~Total IOL~~first half of 2019. Other product sales represented 13.2% and 19.5% of our total sales for the three months ended ~~September~~June 28, 2019 and June 29, ~~2017 were $3.9 million, a decrease~~2018, respectively and represented 13.9% and 20.6% of ~~16% compared with $4.6 million reported during the same period of 2016. Total IOL~~our total sales for the ~~nine~~six months ended ~~September~~June 28, 2019 and June 29, 2017 were $12.9 million, a 13% decrease compared with $14.8 million reported during the same period in 2016. The decline for both the three and nine-month periods was due to the discontinuance of the silicone IOL product line in the U.S. during 2016 and due to production issues with one of the materials used in our silicone IOL preloaded injectors which has resulted in lower than planned IOL sales in Japan.2018, respectively.

Gross Profit

Other product sales for the three months ended September 29, 2017, were $1.5 million, an increase of 144% compared with the $0.6 million reported during the same period of 2016. Total other product sales for the nine months ended September 29, 2017 were $3.2 million, a 50% increase compared with $2.1 million reported during the same period in 2016. The increase in other product sales is due to an increase in injector part sales as expected.

~~Gross Profit~~

Three Months Ended Percentage
Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

Gross Profit $ 16,849 $ 14,872 13.3 % $ 46,900 $ 42,491 10.4 %
Gross Profit Margin 71.8 % 74.2 % 71.3 % 70.5 %

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 28, 2019			June 29, 2018			2019 vs. 2018			June 28, 2019			June 29, 2018			2019 vs. 2018
Gross profit	$	29,899		$	25,227			18.5	%	$	54,079		$	44,658			21.1	%
Gross margin		75.4	%		74.4	%					74.9	%		73.2	%

Gross profit for the three months ended ~~September 29, 2017~~June 28, 2019 was ~~$16.8~~$29.9 million, ~~or 71.8%~~a 18.5% increase compared to the $25.2 million reported for the same period of 2018. Gross profit margin increased to 75.4% of revenue for the three months ended June 28, 2019 compared ~~with $14.9 million, or 74.2%~~to 74.4% of revenue ~~in the prior year period. The decrease in gross margin~~ for the ~~quarter is due to unfavorable product mix~~three months ended June 29, 2018, due to increased sales of ~~low margin~~ICLs and decreased sales of injector parts ~~increased inventory provisions due to timing, and an increase~~resulting in ~~ICL unit costs,~~favorable product mix, partially offset by ~~an increased sales mix~~the effect of ~~Toric ICLs.~~

lower average selling prices.

Gross profit for the ~~nine~~six months ended ~~September 29, 2017~~June 28, 2019 was ~~$46.9~~$54.1 million, ~~or 71.3%~~a 21.1% increase compared to the $44.7 million reported for the same period of 2018. Gross profit margin increased to 74.9% of revenue for the six months ended June 28, 2019 compared ~~with $42.5 million, or 70.5%~~to 73.2% of revenue ~~in the prior year period. The increase in gross margin~~ for the ~~first nine~~six months of 2017 is due to an increased sales mix of Toric ICLs, the cost of sales related to the $0.6 million non-cash charge related to the immediate vesting of all unvested equity awards as a result of the triggering of the “Change of Control” provision of the Company’s equity incentive plan recorded in the first nine months of 2016 which was not repeated in 2017, and lower inventory provisions, partially offset by unfavorable product mixended June 29, 2018, due to increased sales of ~~low margin~~ICLs and decreased sales of injector parts ~~and~~resulting in favorable product mix, partially offset by the effect of lower average selling prices.

General and Administrative Expense

Three Months Ended Percentage Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

General and Administrative $ 4,946 $ 4,985 (0.8 )% $ 15,065 $ 18,378 (18.0 )%
Percentage of Net Sales 21.1 % 24.9 % 22.9 % 30.5 %

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 28, 2019			June 29, 2018			2019 vs. 2018			June 28, 2019			June 29, 2018			2019 vs. 2018
General and administrative expense	$	7,508		$	6,196			21.2	%	$	14,345		$	11,967			19.9	%
Percentage of sales		18.9	%		18.3	%					19.9	%		19.6	%

General and administrative expenses for the ~~nine~~three months ended ~~September 29, 2017~~June 28, 2019 were ~~$15.1~~$7.5 million, ~~a decrease~~an increase of ~~18%~~21.2% when compared with ~~$18.4~~$6.2 million reported for ~~the~~ same period ~~last year. The decrease was primarily due to lower stock based compensation expenses due to the $2.9 million non-cash charge related to the immediate vesting~~ of all unvested equity awards as a result of the triggering of the “Change of Control” provision of the Company’s equity incentive plan recorded during the first nine months of 2016 which were not repeated in the first nine months of 2017.2018. General and administrative expenses for the ~~first nine~~six months ended June 28, 2019 were $14.3 million, an increase of ~~2017 were also lower~~19.9% when compared with $12.0 million reported for same period of 2018. The increase in general and administrative expenses for both periods was due to ~~decreased~~an increase in headcount and salary-related expenses including stock-based compensation, ~~expenses.~~and increased facility costs and professional fees.

Marketing and Selling Expense

Three Months Ended Percentage Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

Marketing and Selling $ 6,431 $ 7,149 (10.0 )% $ 20,282 $ 22,006 (7.8 )%
Percentage of Net Sales 27.4 % 35.7 % 30.8 % 36.5 %

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 28, 2019			June 29, 2018			2019 vs. 2018			June 28, 2019			June 29, 2018			2019 vs. 2018
Marketing and selling expense	$	11,682		$	10,659			9.6	%	$	21,825		$	18,113			20.5	%
Percentage of sales		29.5	%		31.4	%					30.2	%		29.7	%

Marketing and selling expenses for the three months ended ~~September 29, 2017~~June 28, 2019 were ~~$6.4~~$11.7 million, ~~a decrease~~an increase of ~~10%~~9.6% when compared with ~~$7.1~~$10.7 million reported for ~~the~~ same period ~~last year. The decrease was due to the timing~~ of the ESCRS which was held in the third quarter of 2016 and will be held in the fourth quarter of 2017, partially offset by increased sales rep expenses in China. The Company expects fourth quarter 2017 expenses will be higher for this reason.

2018. Marketing and selling expenses for the ~~nine~~six months ended ~~September 29, 2017~~June 28, 2019 were ~~$20.3~~$21.8 million, ~~a decrease~~an increase of 8%20.5% when compared with ~~$22.0~~$18.1 million reported for ~~the~~ same period ~~last year.~~of 2018. The ~~decrease is primarily~~increase in marketing and selling expenses for both periods was due to lower stock based compensation expenses due to the $1.5 million non-cash charge related to the immediate vesting of all unvested equity awards as a result of the triggering of the “Change of Control” provision of the Company’s equity incentive plan recorded during the first nine months of 2016 which was not repeatedan increase in ~~the first nine months of 2017 and due to lower overall~~ headcount and ~~promotional costs~~salary-related expenses including stock-based compensation, increased travel expenses, and investments in ~~Japan.~~digital, consumer, and strategic marketing and commercial infrastructure.

Research and Development Expense

Three Months Ended Percentage Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

Research and Development $ 4,429 $ 4,453 (0.5 )% $ 13,924 $ 16,018 (13.1 )%
Percentage of Net Sales 18.9 % 22.2 % 21.2 % 26.6 %

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 28, 2019			June 29, 2018			2019 vs. 2018			June 28, 2019			June 29, 2018			2019 vs. 2018
Research and development expense	$	6,098		$	5,346			14.1	%	$	11,733		$	10,753			9.1	%
Percentage of sales		15.4	%		15.8	%					16.3	%		17.6	%

Research and development expenses for the ~~nine~~three months ended ~~September 29, 2017~~June 28, 2019 were ~~$13.9~~$6.1 million, ~~a 13.1% decrease~~an increase of 14.1% compared to ~~$16.0~~$5.3 million for the for same ~~prior year period. The decrease is primarily due to lower stock based compensation expenses due to the $1.9 million non-cash charge related to the immediate vesting~~period of all unvested equity awards as a result of the triggering of the “Change of Control” provision of the Company’s equity incentive plan recorded during the first nine months of 2016 which was not repeated in the first nine months of 2017.

2018. Research and development ~~expense consists primarily of compensation and related costs for personnel responsible~~expenses for the ~~research~~six months ended June 28, 2019 were $11.7 million, an increase of 9.1% compared to $10.8 million for the for same period of 2018. The increase for both periods was mainly due to an increase in headcount and ~~development of new and existing products and the regulatory and clinical activities required to acquire and maintain product approvals globally. These costs are expensed as incurred.~~salary-related expenses including stock-based compensation.

Other Income (Expense), Net

~~Other Income, Net~~

Three Months Ended Percentage Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

Other income, net $ 539 $ 8 — * $ 1,067 $ 285 — *

	Three Months Ended						Percentage Change		Six Months Ended						Percentage Change
	June 28, 2019			June 29, 2018			2019 vs. 2018		June 28, 2019			June 29, 2018			2019 vs. 2018
Other income (expense), net	$	434		$	(391	)		—*	$	725		$	(306	)		—*
Percentage of sales		1.1	%		-1.1	%				1.0	%		-0.5	%

Denotes change is greater than +100%.

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

~~The change in other~~Other income, net for the three ~~and nine~~ months ended ~~September 29, 2017 is primarily~~June 28, 2019 was $0.4 million, an increase from other expense, net of $0.4 million reported for the same period of 2018. Other income, net for the six months ended June 28, 2019 was $0.7 million, an increase from other expense, net of $0.3 million reported for the same period of 2018. The increase in other income, net was due to the increase in interest income earned on cash and cash equivalents and lower foreign ~~currency transaction gains.~~exchange losses (primarily the euro).

Income Taxes

~~Income Taxes~~

Three Months Ended Percentage Change Nine Months Ended Percentage Change
September 29,
2017 September 30,
2016
2017
vs. 2016
September 29,
2017 September 30,
2016
2017
vs. 2016

Provision (benefit) for income taxes $ 409 $ 71 — * $ 697 $ (1,664 ) — *

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

Three Months Ended

Percentage

Change

Six Months Ended

Percentage

Change

June 28,

2019

June 29,

2018

2019 vs. 2018

June 28,

2019

June 29,

2018

2019 vs. 2018

Income tax provision

1,131

805

40.5

1,620

1,106

46.5

The provision for income taxes is determined using an estimated annual effective tax rate. We recorded an income ~~tax provision~~taxes of ~~$0.4~~$1.1 million and ~~$0.7~~$1.6 million ~~respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 28, 2019, respectively and $0.8 million and $1.1 million for the three and six months ended June 29, ~~2017.~~2018, respectively. The income tax provision ~~for the three and nine months ended September 29, 2017 is~~was due primarily to pre-tax income generated in certain ~~higher rate~~ foreign jurisdictions. The income tax benefit for the nine months ended September 30, 2016 was primarily due to net operating losses from our foreign operations, primarily due to the acceleration of stock compensation, and tax benefits related to the dissolution of one of our foreign subsidiaries. We have no unrecognized tax benefits pertaining to any uncertain tax positions as of any period presented.

For the three and six months ended June 28, 2019, we included Global Intangible Low Tax Income (“GILTI”) of $5.6 million and $7.7 million, respectively, in U.S. gross income, which was fully offset with net operating loss carryforwards. We were not able to utilize the deduction of 50 percent of GILTI, as this deduction is limited to the Company’s pre-GILTI U.S. tax income.

Due to our history of losses in the U.S., we have maintained a full valuation allowance to offset the value of our U.S. net deferred tax assets on our balance sheet as of June 28, 2019, with the exception of the remaining refundable alternative minimum tax credit of $0.3 million. However, global profit is now includable in U.S. income under GILTI and as a result we have reported income in the U.S. in fiscal year 2018. As our global profitability improves, including our ability to meet or exceed forecasts, we will continue to reassess at each reporting period the need for a full or partial valuation allowance on our U.S. net deferred tax assets. We determine the need for a valuation allowance based upon all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, impact of GILTI in the U.S., tax planning strategies, and results of recent operations. If it is more likely than not that the deferred tax asset is realizable, we would record an income tax benefit for all or a portion of the valuation allowance in the period in which such determination is made. Any such changes in the assessment of a full or partial valuation allowance could have a material impact on earnings. The valuation allowance was approximately $37.7 million as of June 28, 2019.

Liquidity and Capital Resources

We have historically financed our operations primarily through operating cash flows, the issuance of common stock and proceeds from stock option exercises, borrowings under lines of credit and by relying on equipment and other commercial financing. During 2017, and for the foreseeable future, we will be highly dependent on our operating cash flows to supplement our current liquidity and funding of our operations. We may in the future supplement our working capital.

With continued expanding ICL sales and gross margins, the Company has been able to invest in its operations while maintaining its cash balances. Since 2014, we have maintained an average cash balance of approximately $13.5 million through the second quarter of 2017, increasing to $16.3 million at the end of the third quarter of 2017 and went from using approximately $8.0 million in cash for operating activities in 2014 to generating $1.8 million from operating activities during the first nine months of 2017. As we shift from remediation to commercialization, we expect to invest more in sales and marketing while maintaining quality. We believe these investments will accelerate high margin sales which should result in a significantly improved cash position and profitability.

We believe our current cash balances coupled with cash ~~flow~~flows from operating activities ~~will~~is expected to be ~~sufficient~~adequate to ~~meet~~cover our ~~working capital requirements for~~operational and business needs through at least the ~~foreseeable future.~~next 12 months. Our ~~need for working capital,~~financial condition at June 28, 2019 and December 28, 2018 included the ~~terms on which financing may be available, will depend in part on our degree of success in maintaining positive cash flow through the strategies described above under the caption “~~~~Recent Developments and Strategic Priorities for 2017~~.”following (in millions):

~~Overview of Changes in Cash and Cash Equivalents and Other Working Capital Accounts.~~

	June 28, 2019		December 28, 2018		2019 vs. 2018
Cash and cash equivalents	$	103.3	$	103.9	$	(0.6	)
Current assets	$	158.9	$	151.6	$	7.3
Current liabilities		28.7		27.7		1.0
Working capital	$	130.2	$	123.9	$	6.3

AsWe invest the net proceeds in short-term interest-bearing obligations, investment-grade instruments, certificates of ~~September 29, 2017 and December 30, 2016, respectively, STAAR had $16.3~~deposit or direct or guaranteed obligations of the U.S. government. Additionally, at June 28, 2019, we have a line of credit with a Japanese lender, in the amount of $4.6 million, ~~and $14.1~~with $1.8 million of ~~cash, cash equivalents~~availability and ~~restricted cash.~~

a line of credit with a Swiss lender, in the amount of $1.0 million, which is fully available for borrowing.

Net cash provided by operating activities was ~~$1.8~~$4.2 million and ~~$0.9~~$2.3 million for the ~~nine~~six months ended ~~September~~June 28, 2019 and June 29, ~~2017 and September 30, 2016,~~2018, respectively. ~~The net~~Net cash provided by operating activities for the ~~nine~~six months ended ~~September 29, 2017, resulted from a net loss~~June 28, 2019, consisted of ~~$2.0 million, offset by $6.4~~$8.6 million in non-cash items and ~~decreased~~$5.3 million in net income, offset by ~~a $2.7~~$9.6 million in working-capital changes. The increase in net cash provided by operating activities during the six months ended June 28, 2019 was due an increase in net income of $2.9 million and an increase of $2.6 million in non-cash items offset by a decrease in net working ~~capital.~~

capital of $3.5 million.

Net cash used in investing activities was ~~$1.0~~$4.6 million and $1.3 million for the ~~nine~~six months ended ~~September~~June 28, 2019 and June 29, ~~2017, compared to $2.7 million in net cash used in investing activities for the nine months ended September 30, 2016. Net cash used in investing activities for both periods was due~~2018, respectively, and relate primarily to the acquisition of property, plant, and equipment. The increase in

investment in property, plant and equipment during 2019, relative to 2018, is primarily due to continued increased investments in manufacturing and quality system improvement projects.

Net cash used in financing activities was $0.6 million for the six months ended June 28, 2019 and net cash provided by financing activities was ~~$1.1 million and $1.9~~$1.5 million for the ~~nine~~six months ended ~~September~~June 29, ~~2017 and September 30, 2016, respectively.~~2018. Net cash ~~provided by~~used in financing activities ~~during~~consisted of $1.0 million repayment on the ~~first nine months~~Japan line of ~~2017 resulted primarily~~credit and $0.7 million repayment of finance lease obligations, offset by $1.1 million of proceeds from the ~~proceeds from vested restricted stock and exercises~~exercise of stock ~~options and proceeds from sale-leaseback transactions, partially offset by purchase of employee common stock for taxes withheld and the repayment of capital lease obligations.~~options.

Credit Facilities and Commitments

Lines of Credit and ~~Lease Line of Credit (Capital Leases)~~

Leases

See ~~Note 12~~Notes 7 and 8 of the accompanying Condensed Consolidated Financial Statements.

Covenant Compliance

The Company is in compliance with the covenants of its credit facilities as of ~~September 29, 2017.~~June 28, 2019.

Employment Agreements

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective March 1, 2015. She and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all of its assets, or termination “without cause or for good reason” as defined in the employment agreements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as that term is defined in the rules of the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the ~~nine~~six months ended ~~September 29, 2017,~~June 28, 2019, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended December ~~30, 2016.~~

28, 2018.

ITEM 4.

~~ITEM 4 .~~

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September 29, 2017~~June 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. ~~Certain~~These legal proceedings ~~in which~~and other matters may relate to, among other things, contractual rights and obligations, employment matters, or claims of product liability. STAAR maintains insurance coverage for various matters, including product liability and certain securities claims. While we ~~are currently involved are discussed under “Litigation and Claims” in Note 12, “Commitments and Contingencies,”~~do not believe that any of the claims known is likely to have a material adverse effect on our ~~Condensed Consolidated Financial Statements provided in this report, and such discussions are hereby incorporated by reference.~~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 December ~~30, 2016.~~28, 2018. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.

OTHER INFORMATION

~~Effective August 10, 2017, we~~STAAR Surgical Company’s Swiss subsidiary STAAR Surgical AG (the “Company”) entered into a ~~standard~~lease agreement (the “Lease”) with Einfache Gesellschaft Calderari & Schwab (“Lessor”), to lease the real property located at Hauptstrasse 104, 2560 Nidau, Switzerland including a commercial ~~lease extending~~building of approximately 1,400 square meters (the “Premises”). The Lease is dated June 13, 2019, went into effect on June 1, 2019 and has an initial term through May 31, 2024. The foregoing summary is qualified in its entirety by reference to ~~October 31, 2020~~ the ~~term of our lease regarding a portion of our corporate headquarters located in Monrovia, California.~~

Lease, which is filed as Exhibit 10.37 to this Quarterly Report on Form 10-Q and incorporated herein by this reference.

ITEM 6.

EXHIBITS

3.1

~~ITEM 6.~~

~~EXHIBITS~~

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

3.2	Amended and Restated Bylaws.~~(4)~~(2)

~~4.4~~
4.1	Form of Certificate for Common Stock, par value $0.01 per share.(3)

~~†4.5~~ †4.2	Amended and Restated Omnibus Equity Incentive ~~Plan, effective February 25, 2016.(2)~~Plan.(4)

~~10.45~~ 10.37	~~Letter of the Company~~Lease Agreement dated ~~September 27, 2017 to Deborah Andrews, Vice President of Finance, Chief Financial Officer, regarding compensation.(5)~~June 13, 2019 between Einfache Gesellschaft Calderari & Schwab. and STAAR Surgical AG.*

~~10.46~~ 31.1	Lease dated August 10, 2017 by and between the Company and 2000 Gold L.P.*

~~31.1~~	Certifications Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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

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

101	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended ~~September 29, 2017,~~June 28, 2019, formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL), are filed herewith and include: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of ~~Operations,~~Income, (iii) the Condensed Consolidated Statements of Comprehensive ~~Loss,~~Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and ~~(v)~~(vi) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text.*

(1)	Incorporated by reference to Appendix 2 of the Company’s ~~Current Report~~Proxy Statement on Form ~~8-K~~DEF 14A as filed with the Commission on ~~June 11, 2014.~~April 13, 2018

☐	~~For the quarterly period ended: September 29, 2017~~
	Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the transition period from to~~

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


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

o Large accelerated filer	þ ☑		Accelerated filer	o☐
Non-accelerated filer	~~(Do not check if a smaller reporting company)~~☐	o	Smaller reporting company	☐

			PAGE NUMBER
			~~NUMBER~~
PART I – FINANCIAL INFORMATION			1

ITEM 1	~~Item 1.~~FINANCIAL STATEMENTS	~~Financial Statements.~~	1

ITEM 2.	~~Item 2.~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	15 19

ITEM 3.	~~Item 3.~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~Quantitative and Qualitative Disclosures About Market Risk.~~	20 25

ITEM 4.	~~Item 4.~~CONTROLS AND PROCEDURES	~~Controls and Procedures.~~	21 25

PART II – OTHER INFORMATION			25

ITEM 1.	~~Item 1.~~LEGAL PROCEEDINGS	~~Legal Proceedings.~~	21 25

ITEM 1A.	~~Item 1A.~~RISK FACTORS	~~Risk Factors.~~	21 25

ITEM 4.	~~Item 4.~~MINE SAFETY DISCLOSURES	~~Mine Safety Disclosures.~~	21 26

ITEM 5.	~~Item 5.~~OTHER INFORMATION	~~Other Information.~~	21 26

ITEM 6.	~~Item 6.~~EXHIBITS	~~Exhibits.~~	22 26

	September 29, 2017							December 30, 2016
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Long-lived intangible assets:
Patents and licenses	$	9,245	$	(8,965	)	$	280	$	9,224	$	(8,930	)	$	294
Customer relationships		1,393		(1,359	)		34		1,343		(1,209	)		134
Developed technology		886		(874	)		12		854		(809	)		45
Total	$	11,524	$	(11,198	)	$	326	$	11,421	$	(10,948	)	$	473

	Restricted Shares (000’s)			RSUs (000’s)
Outstanding at December 30, 2016		23			274
Granted		21			291
Vested		(23	)		(93	)
Forfeited		—			(34	)
Outstanding at September 29, 2017		21			438

	Three Months Ended				Percentage Change			Nine Months Ended				Percentage Change
	September 29, 2017		September 30, 2016		2017 vs. 2016			September 29, 2017		September 30, 2016		2017 vs. 2016
Net sales	$	23,473	$	20,052		17.1	%	$	65,759	$	60,295		9.1	%

ICL		18,110		14,801		22.4			49,698		43,389		14.5
IOL		3,892		4,649		(16.3	)		12,875		14,783		(12.9	)
Other		1,471		602		144.4			3,186		2,123		50.1

~~(3)~~ *	~~Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A/A as filed with the Commission on April 18, 2003.~~
~~(4)~~	~~Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for period ended June 30, 2017, as filed with the Commission on August 2, 2017.~~
~~(5)~~	~~Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 28, 2017.~~

*	Filed herewith.

			STAAR SURGICAL COMPANY

~~Date: November 8, 2017~~ Dated:		July 31, 2019	By: ~~/s/~~		/s/ DEBORAH J. ANDREWS
					Deborah J. Andrews

				Chief Financial Officer
					(on behalf of the Registrant and as ~~it’s~~
	its principal financial officer)