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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 was required to submit such files). Yes ☑ No ☐

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.

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 ☐ No ☑

The registrant has ~~47,395,678~~48,038,340 shares of common stock, par value $0.01 per share, issued and outstanding as of ~~July 30, 2021.~~August 5, 2022.

	July 2, 2021			January 1, 2021			July 1, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	173,083		$	152,453		$	202,490		$	199,706
Accounts receivable trade, net of allowance of doubtful accounts of $52 and $59, respectively		48,647			35,229
Accounts receivable trade, net of allowance for credit losses of $55 and $43, respectively								62,811			43,531
Inventories, net		15,590			18,111			18,089			17,274
Prepayments, deposits and other current assets		10,797			10,625			13,066			10,900
Total current assets		248,117			216,418			296,456			271,411
Property, plant and equipment, net		28,616			24,030			42,813			35,912
Finance lease right-of-use assets, net		59			596			420			506
Operating lease right-of-use assets, net		11,243			8,764			30,363			31,310
Intangible assets, net		239			270			184			218
Goodwill		1,786			1,786			1,786			1,786
Deferred income taxes		3,720			4,944			3,217			3,813
Other assets		658			608			786			822
Total assets	$	294,438		$	257,416		$	376,025		$	345,778
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	1,280		$	1,379
Accounts payable		7,579			7,874		$	12,716		$	8,699
Obligations under finance leases		85			360			166			127
Obligations under operating leases		2,765			2,485			3,708			3,283
Allowance for sales returns		5,429			4,532			5,550			4,816
Other current liabilities		24,663			24,606			24,374			31,877
Total current liabilities		41,801			41,236			46,514			48,802
Obligations under finance leases		25			38			295			382
Obligations under operating leases		8,654			6,537			26,880			28,269
Deferred income taxes		222			222			1,037			811
Asset retirement obligations		205			221			169			198
Pension liability		8,909			11,940			1,823			8,758
Total liabilities		59,816			60,194			76,718			87,220
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 47,391 and 46,448 shares issued and outstanding at July 2, 2021 and January 1, 2021, respectively		474			464
Common stock, $0.01 par value; 60,000 shares authorized: 48,024 and 47,716 shares issued and outstanding at July 1, 2022 and December 31, 2021, respectively								480			477
Additional paid-in capital		360,316			338,194			387,328			373,519
Accumulated other comprehensive loss		(3,836	)		(5,545	)		249			(4,048	)
Accumulated deficit		(122,332	)		(135,891	)		(88,750	)		(111,390	)
Total stockholders’ equity		234,622			197,222			299,307			258,558
Total liabilities and stockholders’ equity	$	294,438		$	257,416		$	376,025		$	345,778

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Net sales	$	62,367		$	35,194		$	113,119		$	70,381		$	81,101		$	62,367		$	144,301		$	113,119
Cost of sales		13,164			10,764			24,774			21,191			17,229			13,164			31,165			24,774
Gross profit		49,203			24,430			88,345			49,190			63,872			49,203			113,136			88,345
Selling, general and administrative expenses:
General and administrative		11,441			7,848			21,653			15,817			13,983			11,441			25,923			21,653
Selling and marketing		18,853			10,326			32,054			21,354			24,233			18,853			41,503			32,054
Research and development		8,260			7,311			16,519			14,209			8,636			8,260			16,577			16,519
Total selling, general and administrative expenses		38,554			25,485			70,226			51,380			46,852			38,554			84,003			70,226
Operating income (loss)		10,649			(1,055	)		18,119			(2,190	)
Other income (expense), net:
Operating income														17,020			10,649			29,133			18,119
Other expense, net:
Interest income (expense), net		(5	)		20			(12	)		236			43			(5	)		37			(12	)
Gain (loss) on foreign currency transactions		(131	)		388			(1,430	)		(80	)
Loss on foreign currency transactions														(1,860	)		(131	)		(2,775	)		(1,430	)
Royalty income		151			52			311			146			177			151			450			311
Other income (expense), net		51			(21	)		(34	)		(20	)		89			51			151			(34	)
Total other income (expense), net		66			439			(1,165	)		282			(1,551	)		66			(2,137	)		(1,165	)
Income (loss) before income taxes		10,715			(616	)		16,954			(1,908	)
Provision (benefit) for income taxes		2,148			556			3,395			(602	)
Net income (loss)	$	8,567		$	(1,172	)	$	13,559		$	(1,306	)
Net income (loss) per share:
Income before income taxes														15,469			10,715			26,996			16,954
Provision for income taxes														2,431			2,148			4,356			3,395
Net income													$	13,038		$	8,567		$	22,640		$	13,559
Net income per share:
Basic	$	0.18		$	(0.03	)	$	0.29		$	(0.03	)	$	0.27		$	0.18		$	0.47		$	0.29
Diluted	$	0.17		$	(0.03	)	$	0.27		$	(0.03	)	$	0.26		$	0.17		$	0.46		$	0.27
Weighted average shares outstanding:
Basic		47,099			45,354			46,858			45,152			47,889			47,099			47,822			46,858
Diluted		49,491			45,354			49,373			45,152			49,223			49,491			49,264			49,373

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Net income (loss)	$	8,567		$	(1,172	)	$	13,559		$	(1,306	)
Other comprehensive income (loss):
Net income													$	13,038		$	8,567		$	22,640		$	13,559
Other comprehensive income:
Defined benefit plans:
Net change in plan assets		(457	)		(28	)		2,627			(53	)		2,593			(457	)		6,661			2,627
Reclassification into other income (expense), net		120			72			240			142			33			120			85			240
Foreign currency translation gain (loss)		(111	)		113			(1,227	)		86
Foreign currency translation loss														(1,502	)		(111	)		(2,516	)		(1,227	)
Tax effect		69			(40	)		69			(36	)		188			69			67			69
Other comprehensive income (loss), net of tax		(379	)		117			1,709			139			1,312			(379	)		4,297			1,709
Comprehensive income (loss)	$	8,188		$	(1,055	)	$	15,268		$	(1,167	)
Comprehensive income													$	14,350		$	8,188		$	26,937		$	15,268

	Three Months Ended															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 April 1, 2022																	47,810	$	478	$	378,690	$	(1,063	)	$	(101,788	)	$	276,317
Net income																	—		—		—		—			13,038			13,038
Other comprehensive income																	—		—		—		1,312			—			1,312
Common stock issued upon exercise of options																	202		2		2,232		—			—			2,234
Stock-based compensation																	—		—		6,406		—			—			6,406
Unvested restricted stock																	7		—		—		—			—			—
Vested restricted and performance stock																	5		—		—		—			—			—
Balance, at July 1, 2022																	48,024	$	480	$	387,328	$	249		$	(88,750	)	$	299,307
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at April 2, 2021		46,857	$	469	$	348,063	$	(3,457	)	$	(130,899	)	$	214,176			46,857	$	469	$	348,063	$	(3,457	)	$	(130,899	)	$	214,176
Net income		—		—		—		—			8,567			8,567			—		—		—		—			8,567			8,567
Other comprehensive loss		—		—		—		(379	)		—			(379	)		—		—		—		(379	)		—			(379	)
Common stock issued upon exercise of options		530		5		7,871		—			—			7,876			530		5		7,871		—			—			7,876
Stock-based compensation		—		—		4,382		—			—			4,382			—		—		4,382		—			—			4,382
Unvested restricted stock		3		—		—		—			—			—			3		—		—		—			—			—
Vested restricted stock		1		—		—		—			—			—			1		—		—		—			—			—
Balance, at July 2, 2021		47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622			47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622

Balance, at April 3, 2020		45,105	$	451	$	309,480	$	(3,026	)	$	(141,938	)	$	164,967
Net loss		—		—		—		—			(1,172	)		(1,172	)
Other comprehensive income		—		—		—		117			—			117
Common stock issued upon exercise of options		681		7		7,546		—			—			7,553
Stock-based compensation		—		—		3,209		—			—			3,209
Vested restricted stock		2		—		—		—			—			—
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674

	Six Months Ended															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 31, 2021																	47,716	$	477	$	373,519	$	(4,048	)	$	(111,390	)	$	258,558
Net income																	—		—		—		—			22,640			22,640
Other comprehensive income																	—		—		—		4,297			—			4,297
Common stock issued upon exercise of options																	251		3		3,143		—			—			3,146
Stock-based compensation																	—		—		10,666		—			—			10,666
Unvested restricted stock																	7		—		—		—			—			—
Vested restricted and performance stock																	50		—		—		—			—			—
Balance, at July 1, 2022																	48,024	$	480	$	387,328	$	249		$	(88,750	)	$	299,307
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at January 1, 2021		46,448	$	464	$	338,194	$	(5,545	)	$	(135,891	)	$	197,222			46,448	$	464	$	338,194	$	(5,545	)	$	(135,891	)	$	197,222
Net income		—		—		—		—			13,559			13,559			—		—		—		—			13,559			13,559
Other comprehensive income		—		—		—		1,709			—			1,709			—		—		—		1,709			—			1,709
Common stock issued upon exercise of options		906		9		14,101		—			—			14,110			906		9		14,101		—			—			14,110
Stock-based compensation		—		—		8,021		—			—			8,021			—		—		8,021		—			—			8,021
Unvested restricted stock		3		—		—		—			—			—			3		—		—		—			—			—
Vested restricted stock		34		1		—		—			—			1			34		1		—		—			—			1
Balance, at July 2, 2021		47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622			47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622

Balance, at January 3, 2020		44,822	$	448	$	304,288	$	(3,048	)	$	(141,804	)	$	159,884
Net loss		—		—		—		—			(1,306	)		(1,306	)
Other comprehensive income		—		—		—		139			—			139
Common stock issued upon exercise of options		877		9		9,548		—			—			9,557
Stock-based compensation		—		—		6,399		—			—			6,399
Vested restricted stock		89		1		—		—			—			1
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674

	Six Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021
Cash flows from operating activities:
Net income (loss)	$	13,559		$	(1,306	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income							$	22,640		$	13,559
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant, and equipment		1,754			1,518			2,024			1,754
Amortization of intangibles		17			17			15			17
Deferred income taxes		845			(1,369	)		—			845
Change in net pension liability		(27	)		376			52			(27	)
Loss on disposal of property and equipment		2			3			—			2
Stock-based compensation expense		7,322			5,839			9,648			7,322
Provision for sales returns and bad debts		932			605			800			932
Inventory provision		697			816			1,428			697
Changes in working capital:
Accounts receivable		(13,797	)		(8,409	)		(20,137	)		(13,797	)
Inventories		2,238			(932	)		(1,825	)		2,238
Prepayments, deposits, and other current assets		(307	)		(2,172	)		(2,260	)		(307	)
Accounts payable		(268	)		297			3,243			(268	)
Other current liabilities		181			(3,471	)		(6,992	)		181
Net cash provided by (used in) operating activities		13,148		��	(8,188	)
Net cash provided by operating activities								8,636			13,148
Cash flows from investing activities:
Acquisition of property and equipment		(5,683	)		(4,210	)		(7,810	)		(5,683	)
Net cash used in investing activities		(5,683	)		(4,210	)		(7,810	)		(5,683	)
Cash flows from financing activities:
Repayment of finance lease obligations		(278	)		(346	)		(45	)		(278	)
Repayment on line of credit		—			(508	)
Proceeds from the exercise of stock options		14,110			9,557			3,146			14,110
Proceeds from vested restricted stock		1			1			—			1
Net cash provided by financing activities		13,833			8,704			3,101			13,833
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(668	)		41
Increase (decrease) in cash, cash equivalents and restricted cash		20,630			(3,653	)
Effect of exchange rate changes on cash and cash equivalents								(1,143	)		(668	)
Increase in cash and cash equivalents								2,784			20,630
Cash and cash equivalents, at beginning of the period		152,453			119,968			199,706			152,453
Cash and cash equivalents, at end of the period	$	173,083		$	116,315		$	202,490		$	173,083

The Condensed Consolidated Financial Statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in the Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of ~~January 1,~~December 31, 2021 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 ~~January 1,~~December 31, 2021.

The Condensed Consolidated Financial Statements for the three and six months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020,~~2 2021, 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 six months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020,~~2, 2021, 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.

There ~~was one vendor which~~were no vendors that accounted for over ~~11% and~~ 10% of the Company’s consolidated accounts payable as of July ~~2, 2021~~1, 2022 and ~~January 1, 2021, respectively.~~December 31, 2021. There were no vendors ~~who~~that accounted for over 10% of the Company’s consolidated purchases for the three and six months ended July 1, 2022 and July 2, 2021, ~~and July 3, 2020,~~ respectively.

During the COVID-19 pandemic, the Company believes it has used reasonable estimates and assumptions in determining valuation allowances for uncollectible trade receivables, sales returns reserves, obsolete and excess inventory reserves, deferred income taxes, and tax reserves, including valuation allowances for deferred tax assets, pension liabilities, evaluation of asset impairment, in determining the useful life of depreciable and definite-lived intangible assets, and in the variables and assumptions used to calculate and record stock-based compensation. Throughout the COVID-19 pandemic the Company offered extended payment terms to assist its surgeon customers and their clinics as they resumed business. Although the Company experienced some delays in payments on accounts receivable as a result of the COVID-19 pandemic in the first half of 2020, the Company experienced improvements since the third quarter of 2020 as elective refractive surgeries resumed. The Company is unaware of any material impairment of customer receivables. The Company’s sales representatives throughout the world remain engaged with customers conducting online training and other educational courses which have been very well attended. This activity has given the Company insight into COVID-19’s impact on customers and potential impairment of receivables.

~~Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted~~

On January 1, 2021 (beginning of fiscal year 2021), the Company adopted Accounting Standards Update (“ASU”) 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes the following exceptions: exception to the incremental approach for intraperiod tax allocation; exception to accounting for basis differences when there are ownership changes in foreign investments; and exception to interim period tax accounting for year to date losses that exceed anticipated losses. ASU 2019-12 also improves financial reporting for franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. The adoption of ASU 2019-12 did not have a material impact on the Condensed Consolidated Financial Statements.

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

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):

	July 2, 2021			January 1, 2021			July 1, 2022			December 31, 2021
Raw materials and purchased parts	$	3,075		$	3,679		$	5,119		$	3,971
Work in process		2,780			2,174			3,446			4,031
Finished goods		10,850			13,717			11,222			10,429
Total inventories, gross		16,705			19,570			19,787			18,431
Less inventory reserves		(1,115	)		(1,459	)		(1,698	)		(1,157	)
Total inventories, net	$	15,590		$	18,111		$	18,089		$	17,274

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

	July 2, 2021		January 1, 2021		July 1, 2022		December 31, 2021
Prepayments and deposits	$	4,429	$	3,423	$	4,397	$	4,047
Prepaid insurance		1,211		2,677		1,351		2,647
Prepaid marketing		2,000		368		2,244		543
Consumption tax receivable		334		1,409		519		830
Value added tax (VAT) receivable		1,078		2,056		2,208		2,197
BVG (Swiss Pension) prepayment		621		2		1,021		15
Swiss social insurance prepayment						945		—
Other⁽¹⁾		1,124		690		381		621
Total prepayments, deposits and other current assets	$	10,797	$	10,625	$	13,066	$	10,900

	July 2, 2021			January 1, 2021			July 1, 2022			December 31, 2021
Machinery and equipment	$	23,682		$	21,209		$	26,611		$	24,127
Computer equipment and software		8,619			7,423			8,977			8,807
Furniture and fixtures		4,734			4,676			4,478			3,658
Leasehold improvements		11,601			11,388			12,081			11,821
Construction in process		13,516			11,120			26,828			21,827
Total property, plant and equipment, gross		62,152			55,816			78,975			70,240
Less accumulated depreciation		(33,536	)		(31,786	)		(36,162	)		(34,328	)
Total property, plant and equipment, net	$	28,616		$	24,030		$	42,813		$	35,912

July 2, 2021

January 1, 2021

July 1, 2022

December 31, 2021

Long-lived amortized intangible assets

Gross

Carrying

Amount

Accumulated

Amortization

Net

Gross

Carrying

Amount

Accumulated

Amortization

Net

Gross

Carrying

Amount

Accumulated

Amortization

Net

Gross

Carrying

Amount

Accumulated

Amortization

Net

Patents and licenses

9,334

(9,095

)

239

9,382

(9,112

)

270

9,227

(9,043

)

184

9,315

(9,097

)

218

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

	July 2, 2021		January 1, 2021		July 1, 2022		December 31, 2021
Accrued salaries and wages	$	10,078	$	7,074	$	9,305	$	12,030
Accrued bonuses		3,100		3,000		2,754		8,091
Accrued insurance		752		2,633
Income taxes payable		3,323		4,657		4,074		2,248
Accrued consumption tax		707		1,743
Marketing obligations		1,788		1,484		2,481		2,243
Other⁽¹⁾		4,915		4,015		5,760		7,265
Total other current liabilities	$	24,663	$	24,606	$	24,374	$	31,877

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 July 2, 2021) plus a 0.50% spread, and may be renewed quarterly (the current line expires on August 21, 2021). The credit facility is not collateralized. The Company had 142,500,000 Yen outstanding on the line of credit as of July 2, 2021 and January 1, 2021 (approximately $1,280,000 and $1,379,000 based on the foreign exchange rates on July 2, 2021 and January 1, 2021, 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. There was 357,500,000 Yen available for borrowing as of July 2, 2021 and January 1, 2021 (approximately $3,210,000 and $3,459,000 based on the foreign exchange rate on July 2, 2021 and January 1, 2021, respectively). At maturity on August 21, 2021, 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 $1,100,000 at the rate of exchange on January 1, 2021), 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 0 borrowings outstanding as of January 1, 2021. Given its immaterial nature and the Company’s existing cash resources, during the second quarter of 2021, the Company cancelled the framework agreement.

~~The Company is in compliance with covenants of its credit facilities and lines of credit as of July 2, 2021.~~

The Company entered into finance leases primarily related to purchases of equipment used for manufacturing, computer-related equipment or ~~computer-related equipment.~~furniture and fixtures. 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):

	July 2, 2021			January 1, 2021			July 1, 2022			December 31, 2021
Machinery and equipment	$	36		$	570		$	30		$	35
Computer equipment and software		581			806			17			506
Furniture and fixtures								475			475
Finance lease right-of-use assets, gross		617			1,376			522			1,016
Less accumulated depreciation		(558	)		(780	)		(102	)		(510	)
Finance lease right-of-use assets, net	$	59		$	596		$	420		$	506

Total finance lease liability	$	110		$	398		$	461		$	509
Weighted-average remaining lease term (in years)		1.3			0.9			2.7			3.2
Weighted-average discount rate		2.08	%		3.46	%		4.09	%		4.02	%

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

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 ten years in length with options to extend. The Company ~~did~~does 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):

	July 2, 2021			January 1, 2021			July 1, 2022			December 31, 2021
Machinery and equipment	$	900		$	860		$	782		$	760
Computer equipment and software		472			462			446			472
Real property		15,974			12,956			34,108			34,426
Operating lease right-of-use assets, gross		17,346			14,278			35,336			35,658
Less accumulated depreciation		(6,103	)		(5,514	)		(4,973	)		(4,348	)
Operating lease right-of-use assets, net	$	11,243		$	8,764		$	30,363		$	31,310

Total operating lease liability	$	11,419		$	9,022		$	30,588		$	31,552
Weighted-average remaining lease term (in years)		5.7			5.2			7.4			7.8
Weighted-average discount rate		2.51	%		2.61	%		3.66	%		3.56	%

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Operating lease cost	$	857	$	746	$	1,640	$	1,486	$	1,166	$	857	$	2,304	$	1,640
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows		801		763		1,586		1,501		1,034		801		1,966		1,586
Right-of-use assets obtained in exchange for new operating lease liabilities		3,356		249		4,007		318		2,081		3,356		2,756		4,007

~~Estimated future minimum~~Maturities of lease ~~payments~~liabilities under operating and finance leases having initial or remaining non-cancelable lease terms more than one year as of July ~~2, 2021~~1, 2022 is as follows (in thousands):

As of July 2, 2021 12 Months Ended	Operating Leases			Finance Leases
June 2022	$	3,008		$	86
As of July 1, 2022 12 Months Ended							Operating Leases			Finance Leases
June 2023		2,919			14		$	5,340		$	181
June 2024		2,006			11			5,392			179
June 2025		1,112			—			4,624			128
June 2026		690			—			3,700			—
June 2027								3,655			—
Thereafter		2,263			—			12,613			—
Total minimum lease payments, including interest	$	11,998		$	111
Total future minimum lease payments							$	35,324		$	488
Less amounts representing interest		(579	)		(1	)		(4,736	)		(27	)
Total minimum lease payments	$	11,419		$	110
Present value of future minimum lease payments							$	30,588		$	461
Current lease obligations								(3,708	)		(166	)
Long-term lease obligations							$	26,880		$	295

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

The ~~Company recorded~~ ~~income taxes~~effective tax rates for the three months ended July 1, 2022 and July 2, 2021 was 15.7% and 20.0%, respectively, and was 16.1% and 20.0%, for the six months ended July 1, 2022 and July 2, 2021, respectively. The Company’s effective tax rates differ from the U.S. federal statutory rate of ~~$2,148,000 and $3,395,000~~21% for the three and six months ended July 1, 2022 and July 2, 2021, respectively, primarily due to ~~pre-tax~~the income taxes generated in ~~certain~~ foreign ~~jurisdictions and a recapture of its U.S. valuation allowance of $845,000 as a result of increased~~jurisdictions. The effective tax deductions in the projection of taxable income used in its valuation assessment. The Company, from time to time may adjust the projections of taxable income as a result of current conditions. The Company recorded income taxes of $556,000rate for the three ~~months ended July 3, 2020, due to pre-tax income generated in certain foreign jurisdictions. The Company recorded an income tax benefit of $602,000 for the~~and six months ended July ~~3, 2020~~1, 2022 was lower than the same period in 2021 primarily due to ~~a release of its U.S. valuation allowance~~ ~~of $1,369,000, as a result of~~jurisdictions in which the ~~Company revising its global forecasts in response to the impacts of COVID‑19, and due to changes in the usage and release of certain deferred tax assets, offset by 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 0 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.earned.

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 by the Company’s U.S. taxable income. The Company has elected to account for GILTI as a current period expense when incurred.

Final regulations issued on July 20, 2020 allow companies to exclude certain high-taxed income from their GILTI calculation (the GILTI high-tax exclusion). The GILTI high-tax exclusion applies if the effective foreign tax rate is 90% or more of the rate that would apply if the income were subject to the maximum US rate of tax specified in section 11 (currently 18.9%, based on a maximum rate of 21%). The final regulations also provide that the GILTI high-tax exclusion is an annual election made each year and is retroactive to years beginning after December 31, 2017. The Company has made the election to exclude certain high-taxed income from its GILTI calculation for the three and six months ended July 2, 2021 and July 3, 2020, respectively.

The ultimate realization of deferred tax assets is dependent upon future generation of income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the projected future income and tax planning strategies in making this assessment. Since January 1, 2021, the Company had three years of accumulated profits for federal and various state income tax purposes as a result of GILTI. However, the three-year income position is not solely determinative and, accordingly, management considers all other available positive and negative evidence in its analysis. This includes existing profits in foreign jurisdiction as well as projected future profits. The “incremental cash tax savings approach” is further described in Notes 1 and 10 of the Company’s fiscal 2020 Form 10-K. Under the incremental cash tax savings approach, the Company’s cumulative valuation allowance recorded was $37,315,000 and $7,879,000 for federal and state, respectively, at July 2, 2021, and $34,681,000 and $7,399,000 for federal and state, respectively, at January 1, 2021. Under the incremental cash tax savings approach, the valuation allowance recorded reflects the net operating losses and deferred tax assets which will not result in future cash tax savings and therefore provide no additional benefit. Total U.S. net deferred tax assets were $3,025,000 and $3,870,000 as of July 2, 2021 and January 1, 2021, respectively.

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						Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Service cost⁽¹⁾	$	329		$	320		$	677		$	639		$	309		$	329		$	635		$	677
Interest cost⁽²⁾		14			11			28			22			21			14			41			28
Expected return on plan assets⁽²⁾		(101	)		(46	)		(200	)		(89	)		(123	)		(101	)		(241	)		(200	)
Prior service credit⁽^2),(3)		(11	)		(8	)		(22	)		(17	)		(46	)		(11	)		(91	)		(22	)
Actuarial loss recognized in current period⁽^2),(3)		131			80			262			159			79			131			176			262
Net periodic pension cost	$	362		$	357		$	745		$	714		$	240		$	362		$	520		$	745

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):

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

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Employee stock options	$	2,784	$	2,505	$	5,256	$	4,737	$	2,457	$	2,784	$	4,784	$	5,256
Restricted stock		232		76		398		154		442		232		551		398
Restricted stock units		811		274		1,348		823		1,231		811		1,993		1,348
Performance stock units		108		—		201		—		1,310		108		1,692		201
Nonemployee stock options		57		63		119		125		314		57		628		119
Total stock-based compensation expense	$	3,992	$	2,918	$	7,322	$	5,839	$	5,754	$	3,992	$	9,648	$	7,322

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Cost of sales	$	54	$	30	$	89	$	52	$	106	$	54	$	176	$	89
General and administrative		1,815		1,209		3,254		2,294		2,806		1,815		4,587		3,254
Selling and marketing		953		812		1,786		1,867		1,324		953		2,213		1,786
Research and development		1,170		867		2,193		1,626		1,518		1,170		2,672		2,193
Total stock-based compensation expense, net		3,992		2,918		7,322		5,839		5,754		3,992		9,648		7,322
Amounts capitalized as part of inventory		390		291		699		560		652		390		1,018		699
Total stock-based compensation expense, gross	$	4,382	$	3,209	$	8,021	$	6,399	$	6,406	$	4,382	$	10,666	$	8,021

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, restricted stock units (“RSUs”) and performance stock units (“PSUs”). 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 and PSUs outstanding under the Plan generally vest based on service, performance, or a combination of both. As of July ~~2, 2021,~~1, 2022, there were ~~3,038,928~~2,156,185 shares available for grant under the Plan.

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 6%~~a 5% 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.

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Expected dividend yield		0	%		0	%		0	%		0	%		0	%		0	%		0	%		0	%
Expected volatility		53	%		53	%		53	%		53	%		54	%		53	%		54	%		53	%
Risk-free interest rate		0.83	%		0.31	%		0.84	%		0.53	%		3.27	%		0.83	%		1.83	%		0.84	%
Expected term (in years)		5.38			5.72			5.38			5.72			5.10			5.38			5.10			5.38

A summary of stock option activity under the Plan for six months ended July ~~2, 2021is~~1, 2022 is presented below:

	Stock Options (in 000’s)			Minimum Exercise Price		Maximum Exercise Price		Stock Options (in 000’s)			Minimum Exercise Price		Maximum Exercise Price
Outstanding at January 1, 2021		3,418
Outstanding at December 31, 2021									2,435
Granted		258							421
Exercised		(906	)						(251	)
Forfeited or expired		(23	)						(16	)
Outstanding at July 2, 2021		2,747		$	5.34	$	154.96
Exercisable at July 2, 2021		1,928
Outstanding at July 1, 2022									2,589		$	5.34	$	154.96
Exercisable at July 1, 2022									1,873

A summary of restricted stock, RSUs and PSUs activity under the Plan for the six months ended July ~~2, 2021~~1, 2022 is presented below (shares in thousands):

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.

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.

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

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Numerator:
Net income (loss)	$	8,567		$	(1,172	)	$	13,559		$	(1,306	)
Net income													$	13,038		$	8,567		$	22,640		$	13,559
Denominator:
Weighted average common shares:
Common shares outstanding		47,102			45,354			46,861			45,152			47,893			47,102			47,826			46,861
Less: Unvested restricted stock		(3	)		—			(3	)		—			(4	)		(3	)		(4	)		(3	)
Denominator for basic calculation		47,099			45,354			46,858			45,152			47,889			47,099			47,822			46,858
Weighted average effects of potentially diluted common stock:
Stock options		2,283			—			2,405			—			1,299			2,283			1,386			2,405
Unvested restricted stock		9			—			9			—			3			9			2			9
RSUs		88			—			90			—			24			88			45			90
PSUs		12			—			11			—			8			12			9			11
Denominator for diluted calculation		49,491			45,354			49,373			45,152			49,223			49,491			49,264			49,373
Net income (loss) per share:
Net income per share:
Basic	$	0.18		$	(0.03	)	$	0.29		$	(0.03	)	$	0.27		$	0.18		$	0.47		$	0.29
Diluted	$	0.17		$	(0.03	)	$	0.27		$	(0.03	)	$	0.26		$	0.17		$	0.46		$	0.27

~~Because the Company had a net loss for the three and six months ended July 3, 2020, the number of diluted shares is equal to the number of basic shares.~~ The following table sets forth (in thousands) the weighted average number of options to purchase shares of common stock, restricted stock, RSUs and PSUs 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.

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Stock options		14		3,082		173		3,502		1,153		14		862		173
Restricted stock, RSUs and PSUs		—		59		—		72		267		—		122		—
Total		14		3,141		173		3,574		1,420		14		984		173

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				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Non-consignment sales	$	57,368	$	23,446	$	102,785	$	53,846	$	76,444	$	57,368	$	134,013	$	102,785
Consignment sales		4,999		11,748		10,334		16,535		4,657		4,999		10,288		10,334
Total net sales	$	62,367	$	35,194	$	113,119	$	70,381	$	81,101	$	62,367	$	144,301	$	113,119

The Company markets and sells its products in over 75 countries and conducts its manufacturing in the United States. Other than China and Japan, the Company does not conduct business in any country in which its sales exceed 10% of worldwide consolidated net sales. Sales are attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers was as follows (in thousands):

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Domestic	$	2,704	$	882	$	5,044	$	2,621	$	3,872	$	2,704	$	6,502	$	5,044
Foreign:
China		32,930		18,603		52,573		30,318		46,150		32,930		74,389		52,573
Japan		9,283		7,463		18,886		15,765		10,302		9,283		21,935		18,886
Other⁽¹⁾		17,450		8,246		36,616		21,677
Other⁽¹⁾										20,777		17,450		41,475		36,616
Total foreign sales		59,663		34,312		108,075		67,760		77,229		59,663		137,799		108,075
Total net sales	$	62,367	$	35,194	$	113,119	$	70,381	$	81,101	$	62,367	$	144,301	$	113,119

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 1 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 was as follows (in thousands):

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
ICLs	$	59,235	$	30,728	$	105,736	$	60,068	$	77,922	$	59,235	$	136,597	$	105,736
Other product sales:
IOLs		3,074		2,561		6,799		6,555
Cataract IOLs										2,547		3,074		5,449		6,799
Other surgical products		58		1,905		584		3,758		632		58		2,255		584
Total other product sales		3,132		4,466		7,383		10,313		3,179		3,132		7,704		7,383
Total net sales	$	62,367	$	35,194	$	113,119	$	70,381	$	81,101	$	62,367	$	144,301	$	113,119

One customer, the Company’s distributor in China, accounted for ~~53%~~57% and ~~46%~~53% of net sales for the three ~~and six~~ months ended July 1, 2022 and July 2, 2021, respectively, and the same customer accounted for ~~53%~~52% and ~~43%~~46% for the ~~three and~~ six months ended July ~~3, 2020,~~1, 2022 and July 2, 2021, respectively. As of July ~~2, 2021~~1, 2022 and ~~January 1,~~December 31, 2021, respectively, one customer, the Company’s distributor in China, accounted for ~~55%~~60% and ~~46%~~47% of consolidated trade receivables.

In December 2019, COVID-19 surfaced and in March 2020, the World Health Organization declared a pandemic related to the rapid spread of COVID-19 around the world. The impact of the COVID-19 outbreak on the businesses and the economy in the U.S. and the rest of the world is, and is expected to continue to be, uncertain and may continue to be significant. Accordingly, the Company cannot predict the extent to which its financial condition and results of operation will be affected. On March 17, 2020, the Company suspended most of its production and non-essential business locations where employees can work from home. A very limited number of manufacturing personnel remained at work for critical late staged processes, until the end of March 2020. Manufacturing resumed on April 27, 2020.significant as COVID-19 variant strains emerge. The Company’s revenues have been adversely impacted, and the Company experienced a substantial slowdown in sales beginning March 20, 2020 in global geographies characterized as “hot spots” for the COVID-19 virus, including parts of Europe, North America, Asia, the Middle East and India. In certain of these markets, sales have paused as elective surgeries are discouraged to support COVID-19 related needs. The Company ~~expects decreases in sales in certain geographies to continue in 2021 as different geographies resume business activities on differing timelines.~~

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company did not apply for or require financing available under the CARES Act and does not expect to do so. The Company will continuecontinues to monitor the commercial and operational impact ~~that the CARES Act may have on its business, financial condition, results~~ of ~~operations, or liquidity.~~

~~The Consolidated Appropriations Act (“CAA”) among other things, opened up another round~~new variants of Paycheck Protection Program loans, expanding eligibility to small nonprofits, destination marking organizations, and housing cooperatives, provided additional funding for the Economic Injury Disaster Loans and grants, extends the Employee Retention Tax Credit, also extended and expanded Paid Sick and Family Leave Credits and the Employee Social Security tax deferral. The Company will continue to monitor the impact that the CAA may have on its business, financial condition, results of operations, or liquidity.COVID-19.

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, product mix, capital expense or any other financial items; the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to their impact on sales, operations or clinical trials globally), 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 EVO family of lenses in the U.S. and the~~ ~~EVO Viva family of lenses for presbyopia internationally~~);products; commercialization of new or improved products; future economic conditions or size of market opportunities; expected costs of operations; statements of belief, including as to achieving ~~2021~~2022 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 February ~~24, 2021.~~23, 2022. 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 audited consolidated financial statements of STAAR, including the related notes, provided in this report.

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 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.” 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)~~(“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 eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction. We position our cataract IOL lenses used in surgery that treats cataracts based on quality and value.

~~For~~During the second quarter, ~~of 2021 STAAR’s~~ net sales ~~increased 77% over~~grew 30% and ICL units grew 42% compared to the prior year driven by 79% global ICL unit growth as markets continued to more fully reopen following COVID-19 related shutdowns and we continued to gain momentum towards realization of a lens-based future for refractive vision correction. Notable markets for ICLquarter. Highlights included unit growth in ~~the second quarter of 2021 included~~ China ~~Japan, South Korea, APAC Distributor Markets, India, Spain, Germany, European Distributor Markets, the Middle East, and~~up 45%, the U.S. ~~In late April,~~up 36%, Japan up 41%, India up 181%, and Other Asia Pacific markets up 66%, all as compared to the ~~FDA received our clinical data for our~~prior year quarter. The U.S. commercial launch of the EVO Visian ICL family of myopia lenses (EVO) continued with the ~~goal~~announced partnership with Joe Jonas, who earlier in the month received EVO lenses to correct his distance vision. In the next several weeks, Joe Jonas and other paid EVO ambassador influencers will share their journey to Visual Freedom via a global advertising, marketing and social media campaigns funded by STAAR regarding the EVO Visian ICL lens. We reaffirm our previously provided outlook for fiscal 2022 net sales of ~~bringing~~approximately $295 million, which takes into account currency headwinds, and a continuation of the current level of COVID-19 related challenges in China and elsewhere, offset by stronger than expected global demand for our EVO lenses. We continue to monitor the ~~U.S. market later~~commercial and operational impact of new variants of COVID-19 in our markets, which remains uncertain at this ~~year. Our submission is currently under customary interactive FDA review.~~time and may adversely affect our financial results. We are ~~continuing~~also monitoring inflation globally, which may adversely affect our financial results in the ~~phased rollout of our EVO Viva lens, which is the presbyopia-correcting lens that received CE Mark approval in 2020.~~future if it persists.

While COVID-19 hotspots and government public health mandates may reoccur moving forward, we anticipate less business interruption and continued interest in our EVO ICL lens-based refractive solutions throughout 2021. Based on our first half 2021 financial results and with increasing visibility into key second half growth drivers for our business, we currently expect full year fiscal 2021 net sales to reach a range of $227 million to $230 million, up from our previously disclosed expectations for fiscal 2021 net sales of $215 million to $217 million.

This Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Income 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 believes that there have been no significant changes during the six months ended July ~~2, 2021~~1, 2022 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 ~~January 1,~~December 31, 2021.

The following table shows the percentage of our total sales represented by certain items reflected in our Condensed Consolidated Statements of ~~Operations~~Income for the periods indicated.

	Percentage of Net Sales for Three Months						Percentage of Net Sales for Six Months						Percentage of Net Sales for Three Months						Percentage of Net Sales for Three Months
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020			July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		21.1	%		30.6	%		21.9	%		30.1	%		21.2	%		21.1	%		21.6	%		21.9	%
Gross profit		78.9	%		69.4	%		78.1	%		69.9	%		78.8	%		78.9	%		78.4	%		78.1	%
General and administrative		18.4	%		22.3	%		19.1	%		22.5	%		17.2	%		18.4	%		18.0	%		19.1	%
Selling and marketing		30.2	%		29.3	%		28.4	%		30.3	%		29.9	%		30.2	%		28.8	%		28.4	%
Research and development		13.2	%		20.8	%		14.6	%		20.2	%		10.7	%		13.2	%		11.4	%		14.6	%
Total selling, general and administrative		61.8	%		72.4	%		62.1	%		73.0	%		57.8	%		61.8	%		58.2	%		62.1	%
Operating income (loss)		17.1	%		(3.0	)%		16.0	%		(3.1	)%
Operating income														21.0	%		17.1	%		20.2	%		16.0	%
Total other income (expense), net		0.1	%		1.2	%		(1.0	)%		0.4	%		(1.9	)%		0.1	%		(1.5	)%		(1.0	)%
Income (loss) before income taxes		17.2	%		(1.8	)%		15.0	%		(2.7	)%
Provision (benefit) for income taxes		3.5	%		1.5	%		3.0	%		(0.8	)%
Net income (loss)		13.7	%		(3.3	)%		12.0	%		(1.9	)%
Income before income taxes														19.1	%		17.2	%		18.7	%		15.0	%
Provision for income taxes														3.0	%		3.5	%		3.0	%		3.0	%
Net income														16.1	%		13.7	%		15.7	%		12.0	%

	Three Months Ended				Percentage Change			Six Months Ended				Percentage Change			Three Months Ended				Percentage Change			Six Months Ended				Percentage Change
	July 2, 2021		July 3, 2020		2021 vs. 2020			July 2, 2021		July 3, 2020		2021 vs. 2020			July 1, 2022		July 2, 2021		2022 vs. 2021			July 1, 2022		July 2, 2021		2022 vs. 2021
ICLs	$	59,235	$	30,728		92.8	%	$	105,736	$	60,068		76.0	%	$	77,922	$	59,235		31.5	%	$	136,597	$	105,736		29.2	%
Other product sales:
IOLs		3,074		2,561		20.0	%		6,799		6,555		3.7	%
Cataract IOLs																2,547		3,074		(17.1	)%		5,449		6,799		(19.9	)%
Other surgical products		58		1,905		(97.0	)%		584		3,758		(84.5	)%		632		58		—*			2,255		584		—*
Total other product sales		3,132		4,466		(29.9	)%		7,383		10,313		(28.4	)%		3,179		3,132		1.5	%		7,704		7,383		4.3	%
Net sales	$	62,367	$	35,194		77.2	%	$	113,119	$	70,381		60.7	%	$	81,101	$	62,367		30.0	%	$	144,301	$	113,119		27.6	%

Net sales for the three months ended July ~~2, 2021 were $62.4 million, an increase of 77%~~1, 2022 increased 30% from ~~$35.2 million reported during~~ the same period of ~~2020.~~2021. The increase in net sales was due to increased ICL sales of ~~$28.5 million, partially offset by a decrease in other product sales of $1.3~~$18.7 million. Changes in foreign currency ~~favorably~~unfavorably impacted net sales by ~~$0.8~~$3.1 million.

Net sales for the six months ended July ~~2, 2021 were $113.1 million, an increase of 61%~~1, 2022 increased 28% from ~~$70.4 million reported during the~~ same period of ~~2020.~~2021. The increase in net sales was due to increased ICL sales of ~~$45.7 million, partially offset by a decrease in other product sales of $2.9~~$30.9 million. Changes in foreign currency ~~favorably~~unfavorably impacted net sales by ~~$1.9~~$5.0 million.

Total ICL sales for the three months ended July ~~2, 2021 were $59.2 million, an increase of 93%~~1, 2022 increased 32% from ~~$30.7 million reported for~~ the same period of ~~2020,~~2021, with unit increase of ~~79%~~42%. The APAC region sales increased by ~~80%~~37%, with unit growth up ~~68%~~45%, due to sales growth in India up ~~161%~~192%, other APAC ~~Distributors~~regions up ~~116%~~65%, China up 39%, Japan up 16% and Korea up 16%. The Europe, Middle East, Africa and Latin America region sales increased 6% with unit increase of 30%, due to sales growth in in distributor markets up 24%, partially offset by sales decreases in our direct markets down 7%. The North America region sales increased 42%, with unit increase of 32%, primarily to sales growth in the U.S. up 47%. In late March 2022, the U.S. started to sell EVO ICLs. Changes in foreign currency unfavorably impacted ICL sales by $2.6 million for the three months ended July 1, 2022, which impacted our Europe, Middle East, Africa and Japan markets. ICL sales represented 96.1% and 95.0% of our total sales for the three months ended July 1, 2022 and July 2, 2021, respectively.

Total ICL sales for the six months ended July 1, 2022 increased 29% from the same period of 2021, with unit increase of 36%. The APAC region sales increased by 36%, with unit growth up 40%, due to sales growth in India up 92%, other APAC regions up 58%, China up ~~79%~~41%, Japan up 19% and Korea up ~~59%~~15%. The Europe, Middle East, Africa and Latin America region sales increased ~~129%~~2% with unit increase of ~~133%~~19%, due to sales due to sales growth in ~~United Kingdom~~distributor markets up ~~504%~~15%, ~~Middle East and North Africa up 356%, Latin America up 186%, Spain up 135%, Distributor Operations up 95% and Germany up 76%~~offset by sales decreases in our direct markets down 6%. The North America region sales increased ~~230%~~32%, with unit increase of ~~266%~~25%, ~~due increased~~primarily to sales growth in ~~Canada up 339% and~~ the U.S. up ~~216%~~35%. ~~Second quarter 2021 sales growth continues~~In late March 2022, the U.S. started to ~~follow the third quarter 2020 sales growth trends experienced after the initial COVID-19 pandemic closures occurred in many of our primary markets during the first half of 2020.~~sell EVO ICLs. Changes in foreign currency ~~favorably~~unfavorably impacted ICL sales by ~~$0.7~~$4.0 million for the ~~three~~six months ended July ~~2, 2021.~~1, 2022, which impacted our Europe, Middle East, Africa and Japan markets. ICL sales represented ~~95.0%~~94.7% and ~~87.3%~~93.5% of our total sales for the three months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020, respectively.~~

~~Total ICL sales for the six months ended July~~ 2, 2021, were $105.7 million, an increase of 76% from $60.1 million reported for the same period of 2020, with unit increase of 67%. The APAC region sales increased by 72%, with unit growth up 64%, due to sales growth in India up 89%, Japan up 84%, other APAC Distributors up 78%, China up 74%, and Korea up 41%. The Europe, Middle East, Africa and Latin America region sales increased 84% with unit increase of 78%, due to sales growth in the United Kingdom up 148%, Latin America up 109%, Middle East and North Africa up 98%, Spain up 88%, Distributor Operations up 82% and Germany up 67%. The North America region sales increased 110%, with unit increase of 124%, due increased sales in Canada up 141% and the U.S. up 105%. First half 2021 sales growth continues to follow the third quarter 2020 sales growth trends experienced after the initial COVID-19 pandemic closures occurred in many of our primary markets during the first half of 2020. Changes in foreign currency favorably impacted ICL sales by $1.7 million for the six months ended July 2, 2021. ICL sales represented 93.5% and 85.3% of our total sales for the six months ended July 2, 2021 and July 3, 2020, respectively.

Other product sales, including cataract IOLs ~~were $3.1 million~~ for the three and six months ended July ~~2, 2021, a decrease of 30%~~1, 2022, increased 1% and 4%, respectively from ~~$4.5 million reported for~~ the same period of ~~2020 and were $7.4 million for~~2021, due to increased preloaded injector part sales, offset by decreased sales of cataract IOLs. In the ~~six months ended July 2,~~first half of 2021, ~~a decrease of 28% from $10.3 million reported for the same period of 2020. The decrease for both periods was due to~~we experienced product yield issues requiring rework related to preloaded injector parts manufactured on our behalf by a third-party vendor then sold by us to a third-party manufacturer for product they sell to their ~~customers, as well as decreased IOL sales.~~customers. Changes in foreign currency ~~favorably~~unfavorably impacted other product sales by ~~$0.2~~$0.6 million and $1.1 million for the three and six months ~~ended~~ July ~~2, 2021.~~1, 2022, respectively. Other product sales represented ~~5.0%~~3.9% and ~~12.7%~~5.0% of our total sales for the three months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020,~~2, 2021, respectively and represented ~~6.5%~~5.3% and ~~14.7%~~6.5% of our total sales for the six months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020, respectively~~2, 2021., respectively.

	Three Months Ended						Percentage Change		Six Months Ended						Percentage Change			Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	July 2, 2021			July 3, 2020			2021 vs. 2020		July 2, 2021			July 3, 2020			2021 vs. 2020			July 1, 2022			July 2, 2021			2022 vs. 2021			July 1, 2022			July 2, 2021			2022 vs. 2021
Gross profit	$	49,203		$	24,430			—*	$	88,345		$	49,190			79.6	%	$	63,872		$	49,203			29.8	%	$	113,136		$	88,345			28.1	%
Gross margin		78.9	%		69.4	%				78.1	%		69.9	%					78.8	%		78.9	%					78.4	%		78.1	%

Gross profit for the three months ended July ~~2, 2021 was $49.2 million, a 101.4% increase compared to the $24.3 million reported for~~1, 2022 increased 29.8% from the same period of ~~2020.~~2021. Gross profit margin ~~increased~~decreased slightly to 78.8% of revenue for the three months ended July 1, 2022 compared to 78.9% of revenue for the three months ended July 2, 2021, ~~compared to 69.4% of revenue for the three months ended July 3, 2020,~~ due to ~~geographic sales mix, a decreased mix of injector part sales which carry a lower margin, and for the three months ended July 3, 2020 there were $1.0 million period costs recorded~~inventory reserves recognized as a result of ~~COVID-19~~discontinuance of our older generation Visian ICL in the U.S. and ~~the resulting~~increased period costs associated with manufacturing ~~pause from April 4 through April 27, 2020.~~ projects, offset by increased product and geographic sales mix.

Gross profit for the six months ended July ~~2, 2021 was $88.3 million, a 79.6% increase compared to the $49.2 million reported for~~1, 2022 increased 28.1% from the same period of ~~2020.~~2021. Gross profit margin increased to 78.4% of revenue for the six months ended July 1, 2022 compared to 78.1% of revenue for the six months ended

July 2, 2021, ~~compared to 69.9% of revenue for the six months ended July 3, 2020,~~ due mainly to product and geographic sales mix, ~~a decreased mix of injector part sales which carry a lower margin, and for the six months ended July 3, 2020 there were $1.2 million period costs recorded~~partially offset by inventory reserves recognized as a result of ~~COVID-19~~discontinuance of our older generation Visian ICL in the U.S. and ~~the resulting~~increased period costs associated with manufacturing ~~pause from March 17, 2020 through April 27, 2020.~~ projects.

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change			Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	July 2, 2021			July 3, 2020			2021 vs. 2020			July 2, 2021			July 3, 2020			2021 vs. 2020			July 1, 2022			July 2, 2021			2022 vs. 2021			July 1, 2022			July 2, 2021			2022 vs. 2021
General and administrative expense	$	11,441		$	7,848			45.8	%	$	21,653		$	15,817			36.9	%	$	13,983		$	11,441			22.2	%	$	25,923		$	21,653			19.7	%
Percentage of sales		18.4	%		22.3	%					19.1	%		22.5	%					17.2	%		18.4	%					18.0	%		19.1	%

General and administrative expenses for the three months ended July ~~2, 2021 were $11.4 million, a 45.8% increase compared to the $7.8 million reported for~~1, 2022 increased 22.2% from the same period of ~~2020~~2021 due to increased ~~compensation-related~~stock-based compensation expenses ~~corporate insurance~~ and ~~facilities~~facility costs. General and administrative expenses for the six months ended July ~~2, 2021 were $21.7 million, a 36.9% increase compared to the $15.8 million reported for~~1, 2022 increased 19.7% from the same period of ~~2020~~2021 due to increased ~~compensation-related expenses, corporate insurance and~~ facility costs, ~~partially offset by decreased tax consulting costs.~~stock-based compensation expenses and outside services.

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change			Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	July 2, 2021			July 3, 2020			2021 vs. 2020			July 2, 2021			July 3, 2020			2021 vs. 2020			July 1, 2022			July 2, 2021			2022 vs. 2021			July 1, 2022			July 2, 2021			2022 vs. 2021
Selling and marketing expense	$	18,853		$	10,326			82.6	%	$	32,054		$	21,354			50.1	%	$	24,233		$	18,853			28.5	%	$	41,503		$	32,054			29.5	%
Percentage of sales		30.2	%		29.3	%					28.4	%		30.3	%					29.9	%		30.2	%					28.8	%		28.4	%

Selling and marketing expenses for the three months ended July ~~2, 2021 were $18.9 million, a 82.6% increase compared to the $10.3 million reported for~~1, 2022 increased 28.5% from the same period of ~~2020 and for the six months ended July 2,~~ 2021 ~~were $32.1 million, a 50.1% increase compared to the $21.4 million reported for the same period of 2020. The increase in both periods was~~ due to increased ~~compensation-related expenses,~~ advertising and promotional activities and trade shows, partially offset by decreased salary-related and payroll tax expenses. Selling and marketing expenses ~~and~~ for the ~~three~~six months ended July 2,1, 2022 increased 29.5% from the same period of 2021 due to increased ~~travel~~advertising and ~~entertainment expenses.~~promotional activities and trade shows.

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change			Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	July 2, 2021			July 3, 2020			2021 vs. 2020			July 2, 2021			July 3, 2020			2021 vs. 2020			July 1, 2022			July 2, 2021			2022 vs. 2021			July 1, 2022			July 2, 2021			2022 vs. 2021
Research and development expense	$	8,260		$	7,311			13.0	%	$	16,519		$	14,209			16.3	%	$	8,636		$	8,260			4.6	%	$	16,577		$	16,519			0.4	%
Percentage of sales		13.2	%		20.8	%					14.6	%		20.2	%					10.7	%		13.2	%					11.4	%		14.6	%

Research and development expenses for the three and six months ended July ~~2, 2021 were $8.3 million, a 13.0% increase compared to the $7.3 million reported for~~1, 2022 increased 4.6% and 0.4%, respectively, from the same period of ~~2020~~2021 due mainly to increased ~~compensation-related~~in salary-related and payroll tax expenses ~~partially~~and stock-based compensation, offset by decreased clinical expenses associated with our ~~EVO~~ clinical trial in the U.S. Research and development expenses for the six months ended July 2, 2021 were $16.5 million, a 16.3% increase compared to the $14.2 million reported for the same period of 2020 due to increased compensation-related expenses.trials.

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change		Three Months Ended						Percentage Change		Six Months Ended						Percentage Change
	July 2, 2021			July 3, 2020			2021 vs. 2020			July 2, 2021			July 3, 2020			2021 vs. 2020		July 1, 2022			July 2, 2021			2022 vs. 2021		July 1, 2022			July 2, 2021			2022 vs. 2021
Other income (expense), net	$	66		$	439			(85.0	)%	$	(1,165	)	$	282			—*	$	(1,551	)	$	66			—*	$	(2,137	)	$	(1,165	)		(83.4	)%
Percentage of sales		0.1	%		1.2	%					(1.0	)%		0.4	%				(1.9	)%		0.1	%				(1.5	)%		(1.0	)%

~~Other income, net for the three months ended July 2, 2021 was $0.1 million, an 85% decrease from $0.4 million reported for the same period of~~ ~~2020, due to increased foreign exchange losses (primarily euro).~~ ~~Other expense, net for the six months ended July 2, 2021 was $1.2 million, compared to other income, net of $0.3 million reported for the same period of~~ ~~2020.~~ The change in other expense, net for the three and six months ended July 1, 2022 and July 2, 2021, respectively, was due ~~increased~~primarily to foreign exchange losses (primarily euro) ~~and decreased interest income.~~.

~~We recorded~~ ~~income taxes~~The effective tax rates for the three months ended July 1, 2022 and July 2, 2021 was 15.7% and 20.0%, respectively, and was 16.1% and 20.0%, for the six months ended July 1, 2022 and July 2, 2021, respectively. Our effective tax rates differ from the U.S. federal statutory rate of ~~$2.1 million and $3.4 million~~21% for the three and six months ended July 1, 2022 and July 2, 2021, respectively, primarily due to ~~pre-tax~~the income taxes generated in ~~certain~~ foreign ~~jurisdictions and a recapture of our U.S. valuation allowance of $0.8 million as a result of increased~~jurisdictions. The effective tax deductions in the projection of taxable income used in our valuation assessment. The Company, from time to time may adjust the projections of taxable income as a result of current conditions. We recorded income taxes of $0.6 millionrate for the three ~~months ended July 3, 2020 due to pre-tax income generated in certain foreign jurisdictions. We recorded an income tax benefit of $0.6 million for the~~and six months ended July ~~3, 2020~~1, 2022 was lower than the same period in 2021 primarily due to ~~a release~~jurisdictions in which the income is earned.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our ~~U.S. valuation allowance of $1.4 million, as a result of us revising~~pre-tax income. We carefully monitor these factors and adjust our global forecasts in response to the impacts of COVID-19, and due to changes in the usage and release of certain deferred tax assets, offset by pre-tax income generated in certain foreign jurisdictions.

ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset may not be realizable. The ultimate realization of deferred tax assets is dependent upon future generation of income during the periods in which temporary differences representing net future deductible amounts become deductible. We considered the projected futureeffective income tax planning strategies and all other available evidence both positive and negative, as well as results of recent operations in making this assessment. The “incremental cash tax savings approach” is further described in Notes 1 and 10 of the Company’s fiscal 2020 Form 10-K. Under the incremental cash tax savings approach, our cumulative valuation allowance recorded was $37.3 million and $7.9 million for federal and state, respectively, at July 2, 2021, and $34.7 million and $7.4 million for federal and state, respectively, at January 1, 2021. Under the incremental cash tax savings approach, the valuation allowance recorded reflects the net operating losses and deferred tax assets which will not result in future cash tax savings and therefore provide no additional benefit. Total U.S. net deferred tax assets were $3.0 million and $3.9 million as of July 2, 2021 and January 1, 2021, respectively.rate accordingly.

We believe that current cash, cash equivalents and future cash flow from operating activities will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements included in this quarterly report. Although we have experienced some delays in payments on accounts receivable as a result of the COVID-19 pandemic in the first half of 2020, this has improved since the third quarter of 2020 as our customers resume elective refractive surgery. We are unaware of any impairment of assets resulting from the COVID-19 pandemic. The Company did not apply for or require financing available under the Coronavirus Aid, Relief, and Economic Security “CARES” Act and does not expect to do so given the strength of our balance sheet. Our financial condition at July ~~2, 2021~~1, 2022 and ~~January 1,~~December 31, 2021 included the following (in millions):

	July 2, 2021		January 1, 2021		2021 vs. 2020		July 1, 2022		December 31, 2021		2022 vs. 2021
Cash and cash equivalents	$	173.1	$	152.5	$	20.6	$	202.5	$	199.7	$	2.8
Current assets	$	248.1	$	216.4	$	31.7	$	296.5	$	271.4	$	25.1
Current liabilities		41.8		41.2		0.6		46.5		48.8		(2.3	)
Working capital	$	206.3	$	175.2	$	31.1	$	250.0	$	222.6	$	27.4

We invest the net proceeds in short-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. ~~Additionally, at July 2, 2021, we~~We do not have ~~a line~~any off-balance sheet arrangements.

A summary of ~~credit with a Japanese lender, in the amount of $1.3 million, with $3.2 million of availability.~~

~~Net~~ cash ~~provided by operating activities was $13.1 million~~flows for the six months ended July 1, 2022 and July 2, 2021 ~~compared to~~was as follows (dollars in thousands):

For the six months ended July 1, 2022 net cash used by operating activities consisted of ~~$8.2~~$22.6 million in net income, $14.0 million in non-cash items, offset by $28.0 million in working-capital changes.

The increase in investments of property, plant and equipment for the six months ended July ~~3, 2020. Net cash provided by operating activities for~~1, 2022 relative to the ~~six months ended July 2, 2021, consisted~~same period of $13.6 million in net income, $11.5 in non-cash items, offset by $12.0 million in working-capital changes. The increase in net cash provided by operating activities during the six months ended July 2, 2021, was due to increased non-cash items of $3.7 million, net working capital of $2.7 million and net income of $13.6 million for the six months ended July 2, 2021 compared to a net loss of $1.3 million for the six months ended July 3, 2020.investments in manufacturing facilities.

Net cash used in investing activities was $5.7 million and $4.2 million for the six months ended July 2, 2021 and July 3, 2020, respectively, and relate primarily to the acquisition of property, plant, and equipment.

~~Net cash provided by financing activities was $13.8 million and $8.7 million for the six months ended July 2, 2021 and July 3, 2020, respectively.~~ Net cash provided by financing activities for the six months ended July 1, 2022 consisted of $3.1 million of proceeds from the exercise of stock options. For the six months ended July 2, 2021, net cash provided by financing activities consisted of $14.1 million of proceeds from the exercise of stock options, partially offset by ~~$0.3~~$0.2 million repayment of finance lease obligations.

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

~~The Company is in compliance with the covenants of its credit facilities as of July 2, 2021.~~

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.

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.

During the six months ended July ~~2, 2021,~~1, 2022, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 2021.

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.

There were no changes in our internal control over financial reporting during the quarter ended July ~~2, 2021~~1, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully information contained in this report and the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2021. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	95-3797439
(State or Other Jurisdiction of Incorporation or 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

		PAGE NUMBER

PART I – FINANCIAL INFORMATION		1

ITEM 1	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1816

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2321

ITEM 4.	CONTROLS AND PROCEDURES	2321

PART II – OTHER INFORMATION		2421

ITEM 1.	LEGAL PROCEEDINGS	2421

ITEM 1A.	RISK FACTORS	2422

ITEM 4.	MINE SAFETY DISCLOSURES	2422

ITEM 5.	OTHER INFORMATION	2422

ITEM 6.	EXHIBITS	2522

3.1	Amended and Restated Certificate of Incorporation.(1)

3.2	Amended and Restated Bylaws.(2)

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

†4.2	Amended and Restated Omnibus Equity Incentive Plan.(4)

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

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

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

101	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended July ~~2, 2021~~1, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL), are filed herewith and include: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of ~~Operations,~~Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text.*

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July ~~2, 2021,~~1, 2022, has been formatted in Inline XBRL with applicable taxonomy extension information contained in Exhibit 101.

		STAAR SURGICAL COMPANY

Dated:	August ~~4, 2021~~10, 2022	By:	/s/ PATRICK F. WILLIAMS
			Patrick F. Williams
			Chief Financial Officer
			(on behalf of the Registrant and as its principal financial officer)

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

	Restricted Stock			RSUs			PSUs
Unvested at January 1, 2021		11			122			15
Granted		3			48			—
Vested		(11	)		(34	)		—
Forfeited or expired		—			—			—
Unvested at July 2, 2021		3			136			15