10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:    June 28, 2019

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-11634

STAAR SURGICAL COMPANY

(Exact Name of Registrant as Specified in its Charter)

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)

(626) 303-7902

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

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

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.

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

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 44,542,965 shares of common stock, par value $0.01 per share, issued and outstanding as of July 26, 2019.

STAAR SURGICAL COMPANY

INDEX

		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	19
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
ITEM 4.	CONTROLS AND PROCEDURES	25
PART II – OTHER INFORMATION		25
ITEM 1.	LEGAL PROCEEDINGS	25
ITEM 1A.	RISK FACTORS	25
ITEM 4.	MINE SAFETY DISCLOSURES	26
ITEM 5.	OTHER INFORMATION	26
ITEM 6.	EXHIBITS	26

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	June 28, 2019			December 28, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	103,251		$	103,877
Accounts receivable trade, net of allowance of doubtful accounts of    $162 and $550, respectively		32,962			25,946
Inventories, net		16,328			16,704
Prepayments, deposits and other current assets		6,367			5,045
Total current assets		158,908			151,572
Property, plant and equipment, net		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		261			243
Goodwill		1,786			1,786
Deferred income taxes		1,355			1,278
Other assets		713			1,009
Total assets	$	185,962		$	167,339
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	2,854		$	3,780
Accounts payable		8,097			6,524
Obligations under finance leases		960			1,098
Obligations under operating leases		2,766			—
Allowance for sales returns		3,263			2,895
Other current liabilities		10,771			13,431
Total current liabilities		28,711			27,728
Obligations under finance leases		580			459
Obligations under operating leases		4,580			—
Deferred income taxes		1,406			1,022
Asset retirement obligations		212			206
Deferred rent		—			188
Pension liability		6,138			5,310
Total liabilities		41,627			34,913
Commitments and contingencies
Stockholders’ equity:
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		296,063			289,584
Accumulated other comprehensive loss		(1,602	)		(1,320	)
Accumulated deficit		(150,571	)		(156,280	)
Total stockholders’ equity		144,335			132,426
Total liabilities and stockholders’ equity	$	185,962		$	167,339

See accompanying notes to the condensed consolidated financial statements.

1

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	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.

2

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net income	$	3,914		$	1,830		$	5,281		$	2,413
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		(614	)		(21	)		(640	)		(30	)
Reclassification into other income, net		28			26			54			51
Foreign currency translation gain (loss)		382			(521	)		339			207
Tax effect		(55	)		156			(35	)		(67	)
Other comprehensive income (loss), net of tax		(259	)		(360	)		(282	)		161
Comprehensive income	$	3,655		$	1,470		$	4,999		$	2,574

See accompanying notes to the condensed consolidated financial statements.

3

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.

4

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.

5

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	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.

6

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 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 have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 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 28, 2018.

The Condensed Consolidated Financial Statements for the three and six months ended June 28, 2019 and June 29, 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 six months ended June 28, 2019 and June 29, 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.

Cash, Cash Equivalents and Restricted Cash

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

	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 had restricted cash 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.  During the three months ended June 28, 2019, the Company was no longer required to set aside collateral for this standby letter of credit.

Lease Accounting

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted Financial Accounting Standards Board (“FASB”) 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 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 terms greater than twelve months in the Condensed Consolidated Balance Sheets.  Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statement of Income.  

7

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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):  Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies certain disclosures requirements for reporting fair value measurements.  This is effective for fiscal years ending after December 15, 2019.  Early adoption is permitted.  The Company will adopt this standard as of January 4, 2020 (beginning of fiscal year 2020) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

8

STAAR SURGICAL COMPANY

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

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

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

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20); Disclosure Framework – Changes in the Disclosure Requirement for Defined Benefit Plans,” which modifies disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.  This is effective for fiscal years ending after December 15, 2020.  Early adoption is permitted.  The Company will adopt this standard as of January 2, 2021 (beginning of fiscal year 2021) and is currently evaluating the disclosure requirements and its effect on the 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):

	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):

	June 28, 2019		December 28, 2018
Prepayments and deposits	$	2,953	$	1,707
Prepaid insurance		928		1,271
Consumption tax receivable		284		912
Value added tax (VAT) receivable		1,078		565
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” 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):

	June 28, 2019		December 28, 2018
Machinery and equipment	$	21,266	$	19,000
Furniture and fixtures		9,880		9,860
Leasehold improvements		10,095		10,045
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

9

STAAR SURGICAL COMPANY

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

Note 5 –Intangible Assets

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

	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):

	June 28, 2019		December 28, 2018
Accrued salaries and wages	$	3,907	$	3,172
Accrued insurance		283		1,061
Accrued consumption tax		488		995
Accrued bonuses		1,784		5,113
Income taxes payable		1,914		1,105
Other(1)		2,395		1,985
Total other current liabilities	$	10,771	$	13,431

⁽¹⁾ No individual item in “Other” 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 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.

10

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):

11

STAAR SURGICAL COMPANY

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

Note 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

12

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. 

13

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

⁽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).

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	$	79	$	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

14

STAAR SURGICAL COMPANY

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

Note 11 — 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

15

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.

16

STAAR SURGICAL COMPANY

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

Note 13 — Basic and Diluted Net Income Per Share

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
	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 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.

	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				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

17

STAAR SURGICAL COMPANY

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

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

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 is set forth below (in thousands):

	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% 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				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
ICLs	$	34,432	$	27,292	$	62,218	$	48,450
Other product sales
IOLs		3,874		4,186		7,891		8,244
Other surgical products		1,358		2,427		2,138		4,304
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 49% and 43% of net sales for the three and six months ended June 28, 2019, respectively, and the same customer accounted for 41% and 36% of net sales for the three and six months ended June 29, 2018, respectively.  As of June 28, 2019 and December 28, 2018, respectively, one customer, our distributor in China, accounted for 48% and 37% of consolidated trade receivables.

18

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 EVO family of lenses in the U.S. and the EDOF ICL for presbyopia internationally); 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 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 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 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 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) 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 IOL lenses used in surgery that treats cataracts based on quality and value.

Recent Developments

We achieved record second quarter results for total revenue, ICL sales, and ICL units.  We believe the 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 fiscal 2019. Subsequent to the end of the 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 patients who have IOLs implanted for cataracts. We also delivered to the FDA a revised submission encompassing a clinical trial for a least burdensome pathway towards approval for our EVO family of lenses in the U.S.

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,

19

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. 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 six months ended 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 28, 2018.

Results of Operations

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

	Percentage of Net Sales for Three Months						Percentage of Net Sales for Six Months
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		24.6	%		25.6	%		25.1	%		26.8	%
Gross profit		75.4	%		74.4	%		74.9	%		73.2	%
General and administrative		18.9	%		18.3	%		19.9	%		19.6	%
Marketing and selling		29.5	%		31.4	%		30.2	%		29.7	%
Research and development		15.4	%		15.8	%		16.3	%		17.6	%
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			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 June 28, 2019 were $39.7 million, an increase of 17% from $33.9 million reported during the same period of 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 six months ended June 28, 2019 were $72.2 million, an increase of 18% from $61.0 million reported during the same period of 2018.  The increase in net sales was due to increases in ICL sales of $13.8 million, partially offset

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by a decrease in other product sales of $2.5 million.  Currency, primarily the euro, negatively impacted net sales by approximately $1.3 million for the six months ended June 28, 2019.

Total ICL sales for the three months ended June 28, 2019 were $34.4 million, a 26% increase from $27.3 million reported for the same period of 2018, with unit growth up 34%. The sales increase was driven by the APAC region, which grew 37% with unit growth of 45%, primarily due to sales growth in 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 sales of Toric ICL in 2019 (none in 2018), partially offset by decreased sales in Canada.  ICL sales represented 86.8% and 80.5% of our total sales for the three months ended June 28, 2019 and June 29, 2018, respectively.

Total ICL sales for the six months ended June 28, 2019 were $62.2 million, a 28% increase from $48.5 million reported for the same period of 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 in 2019 (none in 2018), partially offset by decreased 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 $5.2 million for the three months ended June 28, 2019, a decrease of 21% from $6.6 million reported for the same period of 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 decrease for both periods is due to the decrease in preloaded injector part sales to a third-party manufacturer for product they sell to their customers.  The Company expects the rate of decline of injector part sales to decrease in the second half of 2019 compared to the first half of 2019.  Other product sales represented 13.2% and 19.5% of our total sales for the three months ended June 28, 2019 and June 29, 2018, respectively and represented 13.9% and 20.6% of our total sales for the six months ended June 28, 2019 and June 29, 2018, respectively.

Gross Profit

	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 June 28, 2019 was $29.9 million, 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 to 74.4% of revenue for the three months ended June 29, 2018, due to increased sales of ICLs and decreased sales of injector parts resulting in favorable product mix, partially offset by the effect of lower average selling prices.

Gross profit for the six months ended June 28, 2019 was $54.1 million, 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 to 73.2% of revenue for the six months ended June 29, 2018, due to increased sales of ICLs and decreased sales of injector parts resulting in favorable product mix, partially offset by the effect of lower average selling prices.

General and Administrative Expense

	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	%

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General and administrative expenses for the three months ended June 28, 2019 were $7.5 million, an increase of 21.2% when compared with $6.2 million reported for same period of 2018. General and administrative expenses for the six months ended June 28, 2019 were $14.3 million, an increase of 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 an increase in headcount and salary-related expenses including stock-based compensation, and increased facility costs and professional fees.

Marketing and Selling Expense

	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 June 28, 2019 were $11.7 million, an increase of 9.6% when compared with $10.7 million reported for same period of 2018. Marketing and selling expenses for the six months ended June 28, 2019 were $21.8 million, an increase of 20.5% when compared with $18.1 million reported for same period of 2018.   The increase in marketing and selling expenses for both periods was due to an increase in headcount and salary-related expenses including stock-based compensation, increased travel expenses, and investments in digital, consumer, and strategic marketing and commercial infrastructure.

Research and Development Expense

	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 three months ended June 28, 2019 were $6.1 million, an increase of 14.1% compared to $5.3 million for the for same period of 2018. Research and development expenses for the 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 salary-related expenses including stock-based compensation.

Other Income (Expense), Net

	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%.

Other income, net for the three months ended 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 exchange losses (primarily the euro).  

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Income Taxes

	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 income taxes of $1.1 million and $1.6 million for the three and six months ended June 28, 2019, respectively and $0.8 million and $1.1 million for the three and six months ended June 29, 2018, respectively.  The income tax provision was due primarily to pre-tax income generated in certain foreign jurisdictions.  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 believe our current cash balances coupled with cash flows from operating activities is expected to be adequate to cover our operational and business needs through at least the next 12 months.  Our financial condition at June 28, 2019 and December 28, 2018 included the following (in millions):

	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

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 June 28, 2019, we have a line of credit with a Japanese lender, in the amount of $4.6 million, with $1.8 million of availability and 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 $4.2 million and $2.3 million for the six months ended June 28, 2019 and June 29, 2018, respectively.  Net cash provided by operating activities for the six months ended June 28, 2019, consisted of $8.6 million in non-cash items and $5.3 million in net income, offset by $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 of $3.5 million.

Net cash used in investing activities was $4.6 million and $1.3 million for the six months ended June 28, 2019 and June 29, 2018, respectively, and relate primarily to the acquisition of property, plant, and equipment.  The increase in

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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 $1.5 million for the six months ended June 29, 2018.  Net cash used in financing activities consisted of $1.0 million repayment on the Japan line of credit and $0.7 million repayment of finance lease obligations, offset by $1.1 million of proceeds from the exercise of stock options.

Credit Facilities and Commitments

Lines of Credit and Leases

See 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 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended 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 28, 2018.

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 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.  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 we do not believe that any of the claims known is likely to have a material adverse effect on our 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 28, 2018. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

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ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

STAAR Surgical Company’s Swiss subsidiary STAAR Surgical AG (the “Company”) entered into a 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 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 the 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	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)
10.37	Lease Agreement dated June 13, 2019 between Einfache Gesellschaft Calderari & Schwab. and STAAR Surgical AG.*
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 June 28, 2019, 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 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.*

(1) Incorporated by reference to Appendix 2 of the Company’s Proxy Statement on Form DEF 14A as filed with the Commission on April 13, 2018

(2) Incorporated by reference to Appendix 3 of the Company’s Proxy Statement on Form DEF 14A as filed with the Commission on April 13, 2018.

(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 Appendix 1 of the Company’s Proxy Statement on Form DEF 14A as filed with the Commission on April 13, 2018.

* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan.

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SIGNATURES

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.

		STAAR SURGICAL COMPANY
Dated:	July 31, 2019	By:	/s/ DEBORAH J. ANDREWS
			Deborah J. Andrews
			Chief Financial Officer
			(on behalf of the Registrant and as its principal financial officer)

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EX-10.37

REAL ESTATE & PROPERTY MANAGEMENT

SCHLOSSSTR. 8A - CH-2560 NIDAU/BIEL - info@calderari-immo.ch - TEL. 032 331 31 51 - FAX 032 331 31 53

Exhibit 10.37

Tenancy Agreement

between

Einfache Gesellschaft Calderari & Schwab, Schloss-Strasse 8a, 2560 Nidau

Enzo Calderari, Neuenburgstrasse 36, 2505 Biel

Walter Schwab, Kirschbauweg 8, 2572 Mörigen

and

STAAR Surgical Ltd., Hauptstrasse 104, 2560 Nidau

1. Rental property

The tenant will take possession of the following facilities in the building at Hauptstrasse 104 in 2560 Nidau for the purpose of renting them:

On the ground floor: - 9002: Small warehouse (29 m²)

-9003: Small warehouse (29 m²)

-9005: Small warehouse (29 m²)

-9006: Big warehouse (102 m²)

-9007: Big warehouse (117 m²)

On the ground floor: -1001: Warehouse/production site (210 m²)

-1002: Warehouse/production site (210 m²)

-1003: Office/production site (210 m²)

On the 2nd floor: -1201: Office space (460 m²)

Parking deck: - 7020 -7026: 7 car parks

Ground floor car park: -8012-8014 and 8023-8033: 14 car parks

2. Start of tenancy:

The tenancy shall commence on 1 June 2019

3. Term of tenancy

There is a fixed-term tenancy of five years. This Tenancy Agreement can therefore be terminated by either contracting party as of 30 April 2024 at the very earliest, subject to six months’ notice.

The agreement may be terminated as of the end of any month by any contracting party subject to a 12-month notice period, with the first possible termination date being 30 April 2024.

3.1. Option right

The tenant shall have the right to extend the tenancy agreement once by five years under the current conditions. If the tenant wants to make use of this genuine extension option, the landlord must receive a written declaration to this effect from the tenant by no later than 30 April 2023.

4. Rent

The net rent amounts to CHF 18,918 per month.

On the ground floor:

- 9002: Small warehouse (29 m²) at CHF80: CHF2,320 p.y.

- 9003: Small warehouse (29 m²) at CHF80: CHF2,320 p.y.

- 9005: Small warehouse (29 m²) at CHF80: CHF2,320 p.y.

- 9006: Big warehouse (102 m²) at CHF80: CHF8,160 p.y.

- 9007: Big warehouse (117 m²) at CHF80: CHF9,360 p.y.

On the ground floor:

- 1001: Warehouse/production site (210 m²) at CHF170: CHF35,700 p.y.

- 1002: Warehouse/production site (210 m²) at CHF170: CHF35,700 p.y.

- 1003: Office/production site (210 m²) at CHF170: CHF35,700 p.y.

On the 2nd floor: -1201: Office space (460 m²) at CHF158: CHF73,600 p.y.

Parking deck: - 7020 -7026: 7 car parks at CHF100: CHF8,400 p.y.

Ground floor car park: -8012-8014 and 8023-8033: 14 car parks at CHF80: CHF 13,440

4.1. The annual rent of CHF 227,020 shall remain unchanged for the first three years. With effect from 1 May 2022, irrespective of the fixed-term tenancy of this Agreement and at the request of either contracting party, the rent can be adjusted as of 1 January every year

The following applies as a basis for this: 2015 CPI: as amended in February 2019: 101.70 index points

4.2. Ancillary costs

The instalments for heating and ancillary costs (heating, electricity use in common areas, the burner, water charges, waste water and waste disposal fees) for which the landlord issues an annual statement as of 30 April amount to CHF 1,400 per month. Said statement is issued based on the number of square metres rented.

5. Use of the rental property

5.1. The rental properties are rented out as storage, office and production facilities. The tenant undertakes to submit to the landlord any changes to the intended use for approval.

5.2.Maintenance

The tenant shall keep the property in a good, clean condition in accordance with Art. 259 of the Swiss Code of Obligations. Annual repairs which do not exceed the amount of CHF 500 per year shall be borne by the tenant.

If any damage to the rental property is visible, the tenant undertakes to keep the extent thereof to a minimum, be it through immediate measures at its own expense or by immediately notifying the landlord.

Repair work, minor finishing work, or required changes to the rental property and the entire building shall be put up with by the tenant without any entitlement on the part of the latter to make claims for damages.

5.3.Subletting

The tenant shall be entitled to sublet rooms. The landlord must be informed of any subletting.

5.4.Access to the rental property

The landlord shall have the right to enter the rental properties at any time for the purpose of protecting its interests, insofar as it provides advance notification.

6. Insurance

The tenant undertakes to obtain appropriate insurance cover at its own expense against theft, fire, explosion and water damage, as well as all risks associated with company operations, in particular tenant liability insurance, for its machines, equipment, furnishings, goods and all items which are located in the rented facilities.

The tenant shall bear the consequences of any non-compliance with this obligation, with complete exoneration of the landlord.

7. Company signage and lettering

7.1.Affixing and executing

The tenant may only affix company signage and lettering with the landlord’s consent in the designated location specified by the latter and subject to state and communal font regulations. Intended location: above salesroom.

7.2.Costs

The costs associated with new lettering or changes thereto shall be borne by the tenant. The tenant shall also be liable for the costs associated with restoring the property to its original condition in case of removal following a change of tenant.

8.Changes to the rental property 8.1. Approval

Any changes to the rental property shall only be permitted with the landlord’s express written consent.

9. Returning the rental property

9.1. Cleaning

The rental property shall be returned in a clean and tidy condition once the tenancy has ended.

9.2. Damages

The tenant shall be liable for all damages which cannot be attributed to normal wear and tear. The tenant shall arrange for such damages to be rectified by the time this Tenancy Agreement ends.

10. Special agreements

The tenant expressly takes note of the fact that in accordance with Art. 283 of the Debt Enforcement Bankruptcy Act / Art. 257 to 259 and 268 of the Swiss Code of Obligations, the landlords insist on asserting their legally guaranteed right of retention. Deadline for a retention request: 30 days after the written warning.

The tenant shall be given the right to make a note of this tenancy agreement in the land register at its own expense and for the full term of this agreement – and for the full term of the extension if this option is exercised.

This agreement is entirely subject to Swiss substantive law, with the exclusion of the conflict of laws (International Private Law Act).

The exclusive place of jurisdiction is Nidau. All disputes arising from or in conjunction with this agreement (including issues relating to its validity, binding effect, interpretation, performance or non-performance) shall be decided by the competent courts at the place of jurisdiction.

The tenants: The landlord:

Staar Surgical Ltd. Einfache Gesellschaft Calderari und Schwab

/s/ Philippe Subrin/s/ Enzo Calderari

/s/ Regina de Wilde/s/ Walter Schwab

Nidau, (date)

13/06/2019

Nidau, (date)18/06/2019

EX-31.1

Exhibit 31.1

Certifications

I, Caren Mason, certify that:

1.I have reviewed this quarterly report on Form 10-Q of STAAR Surgical Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	July 31, 2019	/s/ CAREN MASON
		Caren Mason
		President, Chief Executive Officer, and Director
		(principal executive officer)

EX-31.2

Exhibit 31.2

Certifications

I, Deborah J. Andrews, certify that:

1.I have reviewed this quarterly report on Form 10-Q of STAAR Surgical Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	July 31, 2019	/s/ DEBORAH J. ANDREWS
		Deborah J. Andrews
		Chief Financial Officer
		(principal financial officer)

EX-32.1

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the period ended June 28, 2019 (the “Report”) by STAAR Surgical Company (“Registrant”), each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant as of and for the periods presented in the Report.

Dated:	July 31, 2019	/s/ CAREN MASON
		Caren Mason
		President, Chief Executive Officer,
		and Director (principal executive officer)

Dated:	July 31, 2019	/s/ DEBORAH J. ANDREWS
		Deborah J. Andrews
		Chief Financial Officer
		(principal financial officer)

A signed original of this written statement required by 18U.S.C. Section 1350has been provided to STAAR Surgical Company and will be furnished to the Securities and Exchange Commission or its staff upon request.

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Document And Entity Information - shares	6 Months Ended
	Jun. 28, 2019	Jul. 26, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 28, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	STAAR SURGICAL CO
Entity Central Index Key	0000718937
Current Fiscal Year End Date	--01-03
Entity Filer Category	Large Accelerated Filer
Trading Symbol	STAA
Entity Common Stock, Shares Outstanding		44,542,965
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	0-11634
Entity Tax Identification Number	953797439
Entity Address, Address Line One	25651 Atlantic Ocean Drive
Entity Address, City or Town	Lake Forest
Entity Address, State or Province	California
Entity Address, Postal Zip Code	92630
City Area Code	626
Local Phone Number	303-7902

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Current assets:
Cash and cash equivalents	$ 103,251	$ 103,877
Accounts receivable trade, net of allowance of doubtful accounts of $162 and $550, respectively	32,962	25,946
Inventories, net	16,328	16,704
Prepayments, deposits and other current assets	6,367	5,045
Total current assets	158,908	151,572
Property, plant and equipment, net	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	261	243
Goodwill	1,786	1,786
Deferred income taxes	1,355	1,278
Other assets	713	1,009
Total assets	185,962	167,339
Current liabilities:
Line of credit	2,854	3,780
Accounts payable	8,097	6,524
Obligations under finance leases	960	1,098
Obligations under operating leases	2,766
Allowance for sales returns	3,263	2,895
Other current liabilities	10,771	13,431
Total current liabilities	28,711	27,728
Obligations under finance leases	580	459
Obligations under operating leases	4,580
Deferred income taxes	1,406	1,022
Asset retirement obligations	212	206
Deferred rent		188
Pension liability	6,138	5,310
Total liabilities	41,627	34,913
Commitments and contingencies
Stockholders’ equity:
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	296,063	289,584
Accumulated other comprehensive loss	(1,602)	(1,320)
Accumulated deficit	(150,571)	(156,280)
Total stockholders’ equity	144,335	132,426
Total liabilities and stockholders’ equity	$ 185,962	$ 167,339

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable, current	$ 162	$ 550
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	44,534,000	44,195,000
Common stock, shares outstanding	44,534,000	44,195,000

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Income Statement [Abstract]
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

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 3,914	$ 1,830	$ 5,281	$ 2,413
Defined benefit plans:
Net change in plan assets	(614)	(21)	(640)	(30)
Reclassification into other income, net	28	26	54	51
Foreign currency translation gain (loss)	382	(521)	339	207
Tax effect	(55)	156	(35)	(67)
Other comprehensive income (loss), net of tax	(259)	(360)	(282)	161
Comprehensive income	$ 3,655	$ 1,470	$ 4,999	$ 2,574

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Balance at Dec. 29, 2017	$ 42,936	$ 414	$ 204,920	$ (1,150)	$ (161,248)
Balance (in shares) at Dec. 29, 2017		41,383
Net income	2,413				2,413
Other comprehensive income (loss)	161			161
Common stock issued upon exercise of options	2,405	$ 3	2,402
Common stock issued upon exercise of options (in shares)		306
Stock-based compensation	$ 3,166		3,166
Unvested restricted stock (in shares)	(11)	11
Vested restricted stock	$ 2	$ 2
Vested restricted stock (in shares)		177
Balance at Jun. 29, 2018	51,083	$ 419	210,488	(989)	(158,835)
Balance (in shares) at Jun. 29, 2018		41,877
Balance at Mar. 30, 2018	45,917	$ 416	206,795	(629)	(160,665)
Balance (in shares) at Mar. 30, 2018		41,592
Net income	1,830				1,830
Other comprehensive income (loss)	(360)			(360)
Common stock issued upon exercise of options	1,952	$ 2	1,950
Common stock issued upon exercise of options (in shares)		249
Stock-based compensation	$ 1,743		1,743
Unvested restricted stock (in shares)	(11)	11
Vested restricted stock	$ 1	$ 1
Vested restricted stock (in shares)		25
Balance at Jun. 29, 2018	51,083	$ 419	210,488	(989)	(158,835)
Balance (in shares) at Jun. 29, 2018		41,877
Balance at Dec. 28, 2018	132,426	$ 442	289,584	(1,320)	(156,280)
Balance (in shares) at Dec. 28, 2018		44,195
Net income	5,281				5,281
Adoption of ASC/ ASU | Accounting Standards Update 2016-02	113				113
Adoption of ASC/ ASU | Accounting Standards Update 2018-07			(315)		315
Other comprehensive income (loss)	(282)			(282)
Common stock issued upon exercise of options	$ 1,110	$ 1	1,109
Common stock issued upon exercise of options (in shares)	126	126
Stock-based compensation	$ 5,685		5,685
Unvested restricted stock (in shares)	(11)	11
Vested restricted stock	$ 2	$ 2
Vested restricted stock (in shares)		202
Balance at Jun. 28, 2019	144,335	$ 445	296,063	(1,602)	(150,571)
Balance (in shares) at Jun. 28, 2019		44,534
Balance at Mar. 29, 2019	137,338	$ 444	292,722	(1,343)	(154,485)
Balance (in shares) at Mar. 29, 2019		44,447
Net income	3,914				3,914
Other comprehensive income (loss)	(259)			(259)
Common stock issued upon exercise of options	487	$ 1	486
Common stock issued upon exercise of options (in shares)		52
Stock-based compensation	$ 2,855		2,855
Unvested restricted stock (in shares)	(10)	11
Vested restricted stock (in shares)		24
Balance at Jun. 28, 2019	$ 144,335	$ 445	$ 296,063	$ (1,602)	$ (150,571)
Balance (in shares) at Jun. 28, 2019		44,534

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2019	Jun. 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

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Note 1 — Basis of Presentation and Significant Accounting Policies

The Condensed Consolidated Financial Statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 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 28, 2018.

The Condensed Consolidated Financial Statements for the three and six months ended June 28, 2019 and June 29, 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 six months ended June 28, 2019 and June 29, 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.

Cash, Cash Equivalents and Restricted Cash

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

	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 had restricted cash 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.  During the three months ended June 28, 2019, the Company was no longer required to set aside collateral for this standby letter of credit.

Lease Accounting

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted Financial Accounting Standards Board (“FASB”) 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 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 terms greater than twelve months in the Condensed Consolidated Balance Sheets.  Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statement of Income.  

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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):  Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies certain disclosures requirements for reporting fair value measurements.  This is effective for fiscal years ending after December 15, 2019.  Early adoption is permitted.  The Company will adopt this standard as of January 4, 2020 (beginning of fiscal year 2020) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

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

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

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20); Disclosure Framework – Changes in the Disclosure Requirement for Defined Benefit Plans,” which modifies disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.  This is effective for fiscal years ending after December 15, 2020.  Early adoption is permitted.  The Company will adopt this standard as of January 2, 2021 (beginning of fiscal year 2021) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

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Inventories

6 Months Ended

Jun. 28, 2019

Inventory Disclosure [Abstract]

Inventories

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):

	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

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Prepayments, Deposits, and Other Current Assets

6 Months Ended

Jun. 28, 2019

Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]

Prepayments, Deposits, and Other Current Assets

Note 3 — Prepayments, Deposits, and Other Current Assets

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

	June 28, 2019		December 28, 2018
Prepayments and deposits	$	2,953	$	1,707
Prepaid insurance		928		1,271
Consumption tax receivable		284		912
Value added tax (VAT) receivable		1,078		565
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” exceeds 5% of the total prepayments, deposits and other current assets.}

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Property, Plant and Equipment

6 Months Ended

Jun. 28, 2019

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

Note 4 — Property, Plant and Equipment

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

	June 28, 2019		December 28, 2018
Machinery and equipment	$	21,266	$	19,000
Furniture and fixtures		9,880		9,860
Leasehold improvements		10,095		10,045
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

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Intangible Assets

6 Months Ended

Jun. 28, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 5 –Intangible Assets

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

	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

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Other Current Liabilities

6 Months Ended

Jun. 28, 2019

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

Note 6 – Other Current Liabilities

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

	June 28, 2019		December 28, 2018
Accrued salaries and wages	$	3,907	$	3,172
Accrued insurance		283		1,061
Accrued consumption tax		488		995
Accrued bonuses		1,784		5,113
Income taxes payable		1,914		1,105
Other(1)		2,395		1,985
Total other current liabilities	$	10,771	$	13,431

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

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Lines of Credit

6 Months Ended

Jun. 28, 2019

Debt Disclosure [Abstract]

Lines of Credit

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 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.

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Leases

6 Months Ended

Jun. 28, 2019

Leases [Abstract]

Leases

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):

Note 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

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Income Taxes

6 Months Ended

Jun. 28, 2019

Income Tax Disclosure [Abstract]

Income Taxes

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. 

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Defined Benefit Pension Plans

6 Months Ended

Jun. 28, 2019

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure

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

⁽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).

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	$	79	$	263	$	145

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Stockholders' Equity

6 Months Ended

Jun. 28, 2019

Stockholders Equity Note [Abstract]

Stockholders' Equity

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

Note 11 — 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

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

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Commitments and Contingencies

6 Months Ended

Jun. 28, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

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.

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Basic and Diluted Net Income Per Share

6 Months Ended

Jun. 28, 2019

Earnings Per Share [Abstract]

Basic and Diluted Net Income Per Share

Note 13 — Basic and Diluted Net Income Per Share

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
	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 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.

	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

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Disaggregation of Sales, Geographic Sales and Product Sales

6 Months Ended

Jun. 28, 2019

Segment Reporting [Abstract]

Disaggregation of Sales, Geographic Sales and Product Sales

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				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

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

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 is set forth below (in thousands):

	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% 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				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
ICLs	$	34,432	$	27,292	$	62,218	$	48,450
Other product sales
IOLs		3,874		4,186		7,891		8,244
Other surgical products		1,358		2,427		2,138		4,304
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 49% and 43% of net sales for the three and six months ended June 28, 2019, respectively, and the same customer accounted for 41% and 36% of net sales for the three and six months ended June 29, 2018, respectively.  As of June 28, 2019 and December 28, 2018, respectively, one customer, our distributor in China, accounted for 48% and 37% of consolidated trade receivables.

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

Basis of Presentation

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 Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 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 28, 2018.

The Condensed Consolidated Financial Statements for the three and six months ended June 28, 2019 and June 29, 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 six months ended June 28, 2019 and June 29, 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.

Cash and Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

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

	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 had restricted cash 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.  During the three months ended June 28, 2019, the Company was no longer required to set aside collateral for this standby letter of credit.

Lease Accounting

Lease Accounting

On December 29, 2018 (beginning of fiscal year 2019), the Company adopted Financial Accounting Standards Board (“FASB”) 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 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 terms greater than twelve months in the Condensed Consolidated Balance Sheets.  Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statement of Income.  

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

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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):  Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies certain disclosures requirements for reporting fair value measurements.  This is effective for fiscal years ending after December 15, 2019.  Early adoption is permitted.  The Company will adopt this standard as of January 4, 2020 (beginning of fiscal year 2020) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

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

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

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20); Disclosure Framework – Changes in the Disclosure Requirement for Defined Benefit Plans,” which modifies disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.  This is effective for fiscal years ending after December 15, 2020.  Early adoption is permitted.  The Company will adopt this standard as of January 2, 2021 (beginning of fiscal year 2021) and is currently evaluating the disclosure requirements and its effect on the Condensed Consolidated Financial Statements.

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Basis of Presentation and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

Schedule of Reconciliation of Cash And Cash Equivalents And Restricted Cash

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

	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.}

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Inventories (Tables)

6 Months Ended

Jun. 28, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

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):

	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

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Prepayments, Deposits, and Other Current Assets (Tables)

6 Months Ended

Jun. 28, 2019

Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]

Schedule Of Prepayments, Deposits, and Other Current Assets

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

	June 28, 2019		December 28, 2018
Prepayments and deposits	$	2,953	$	1,707
Prepaid insurance		928		1,271
Consumption tax receivable		284		912
Value added tax (VAT) receivable		1,078		565
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” exceeds 5% of the total prepayments, deposits and other current assets.}

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 28, 2019

Property Plant And Equipment [Abstract]

Property, Plant and Equipment, Net

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

	June 28, 2019		December 28, 2018
Machinery and equipment	$	21,266	$	19,000
Furniture and fixtures		9,880		9,860
Leasehold improvements		10,095		10,045
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

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Intangible Assets (Tables)

6 Months Ended

Jun. 28, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

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

	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

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Other Current Liabilities (Tables)

6 Months Ended

Jun. 28, 2019

Other Liabilities Disclosure [Abstract]

Schedule of Other Current Liabilities

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

	June 28, 2019		December 28, 2018
Accrued salaries and wages	$	3,907	$	3,172
Accrued insurance		283		1,061
Accrued consumption tax		488		995
Accrued bonuses		1,784		5,113
Income taxes payable		1,914		1,105
Other(1)		2,395		1,985
Total other current liabilities	$	10,771	$	13,431

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

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Leases (Tables)

6 Months Ended

Jun. 28, 2019

Leases [Abstract]

Supplemental Balance Sheet Information Related to Finance Leases

	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

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

Supplemental Balance Sheet Information Related to Operating Leases

Note 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

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

Schedule of Estimated Future Minimum Lease Payments under Operating and Finance Leases Having Initial or Remaining Non-Cancelable Lease Terms More Than One Year

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

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Income Taxes (Tables)

6 Months Ended

Jun. 28, 2019

Income Tax Disclosure [Abstract]

Schedule of Income Tax Provision

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

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Defined Benefit Pension Plans (Tables)

6 Months Ended

Jun. 28, 2019

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

Schedule of Net Benefit Costs

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

⁽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).

Schedule of Defined Benefit Plans Disclosures

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	$	79	$	263	$	145

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 28, 2019

Stockholders Equity Note [Abstract]

Schedule of Compensation Cost

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

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

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

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

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

Schedule of Share-based Compensation, Stock Options, Activity

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

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

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

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Basic and Diluted Net Income Per Share (Tables)

6 Months Ended

Jun. 28, 2019

Earnings Per Share [Abstract]

Summary of Computation of Basic and Diluted Net Income Per Share

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
	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

Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share

	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

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Disaggregation of Sales, Geographic Sales and Product Sales (Tables)

6 Months Ended

Jun. 28, 2019

Segment Reporting [Abstract]

Disaggregation of 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				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

Net Sales by Geographic Areas

The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

	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

Net Sales by Products and Services

The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
ICLs	$	34,432	$	27,292	$	62,218	$	48,450
Other product sales
IOLs		3,874		4,186		7,891		8,244
Other surgical products		1,358		2,427		2,138		4,304
Total other product sales		5,232		6,613		10,029		12,548
Total net sales	$	39,664	$	33,905	$	72,247	$	60,998

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Basis of Presentation and Significant Accounting Policies - Schedule of Reconciliation of Cash And Cash Equivalents And Restricted Cash (Details) - USD ($) $ in Thousands		Jun. 28, 2019	Dec. 28, 2018	Jun. 29, 2018	Dec. 29, 2017
Accounting Policies [Abstract]
Cash and cash equivalents		$ 103,251	$ 103,877	$ 21,246
Restricted cash	[1]		122	121
Total cash, cash equivalents and restricted cash		$ 103,251	$ 103,999	$ 21,367	$ 18,641

[1] Included in other assets on the Condensed Consolidated Balance Sheets.

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Basis of Presentation and Significant Accounting Policies - Additional Information (Details)	Dec. 29, 2018 USD ($)
Accounting Standards Update 2016-02
Organization And Description Of Business And Accounting Policies [Line Items]
Cumulative adjustment accumulated deficit	$ 113,000
Accounting Standards Update 2018-07
Organization And Description Of Business And Accounting Policies [Line Items]
Cumulative adjustment accumulated deficit	$ 315,000

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Inventories - Schedule of Inventory, Current (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Inventory Disclosure [Abstract]
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

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Prepayments, Deposits, and Other Current Assets - Schedule Of Prepayments, Deposits, and Other Current Assets (Details) - USD ($) $ in Thousands		Jun. 28, 2019	Dec. 28, 2018
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]
Prepayments and deposits		$ 2,953	$ 1,707
Prepaid insurance		928	1,271
Consumption tax receivable		284	912
Value added tax (VAT) receivable		1,078	565
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” exceeds 5% of the total prepayments, deposits and other current assets.

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Prepayments, Deposits, and Other Current Assets - Schedule Of Prepayments, Deposits, and Other Current Assets (Parenthetical) (Details)	Jun. 28, 2019	Dec. 28, 2018
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]
Percent of prepayments deposits and other current assets included in other current assets	5.00%	5.00%

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Property, Plant and Equipment - Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Property Plant And Equipment [Abstract]
Machinery and equipment	$ 21,266	$ 19,000
Furniture and fixtures	9,880	9,860
Leasehold improvements	10,095	10,045
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

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Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Long-lived intangible assets
Long-lived intangible assets, Net	$ 261	$ 243
Patents and licenses
Long-lived intangible assets
Long-lived intangible assets, Gross Carrying Amount	9,302	9,257
Long-lived intangible assets, Accumulated Amortization	(9,041)	(9,014)
Long-lived intangible assets, Net	$ 261	$ 243

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Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) $ in Thousands		Jun. 28, 2019	Dec. 28, 2018
Other Liabilities Disclosure [Abstract]
Accrued salaries and wages		$ 3,907	$ 3,172
Accrued insurance		283	1,061
Accrued consumption tax		488	995
Accrued bonuses		1,784	5,113
Income taxes payable		1,914	1,105
Other	[1]	2,395	1,985
Total other current liabilities		$ 10,771	$ 13,431

[1] No individual item in “Other” exceeds 5% of the other current liabilities

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Other Current Liabilities - Schedule of Other Current Liabilities (Parenthetical) (Details)	Jun. 28, 2019	Dec. 28, 2018
Other Liabilities Disclosure [Abstract]
Percent of Other Current Liabilities Included in Other	5.00%	5.00%

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Lines of Credit - Additional Information (Details)	6 Months Ended
	Jun. 28, 2019 USD ($)	Jun. 28, 2019 JPY (¥)	Dec. 28, 2018 USD ($)	Dec. 28, 2018 JPY (¥)	Sep. 30, 2013 CHF (SFr)
Line Of Credit Facility [Line Items]
Line of Credit, Current	$ 2,854,000		$ 3,780,000
Finance lease liability	1,540,000
Farnam Street Financial, Inc.
Line Of Credit Facility [Line Items]
Finance lease liability	$ 500,000
Mizuho Bank
Line Of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity | ¥		¥ 500,000,000
Line of Credit Facility, Interest Rate Description	(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).
Line of credit facility, interest rate	0.06%	0.06%
Line of credit facility, spread rate	0.50%
Line of credit facility, expiration date	Aug. 21, 2019
Line of Credit, Current	$ 2,854,000	¥ 307,500,000	3,780,000	¥ 417,500,000
Interest Rate Increase In Case Of Default	14.00%
Line of Credit Facility, Remaining Borrowing Capacity	$ 1,786,000	¥ 192,500,000	747,000	¥ 82,500,000
Credit Suisse Bank
Line Of Credit Facility [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 1,000,000		1,000,000		SFr 1,000,000
Percentage Of Commission On Outstanding Notes Payable	0.25%
Borrowings outstanding	$ 0		$ 0

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Leases - Additional Information (Details)	Jun. 28, 2019
Minimum
Lessee Lease Description [Line Items]
Finance lease, term of contract	2 years
Operating lease, term of contract	2 years
Maximum
Lessee Lease Description [Line Items]
Finance lease, term of contract	5 years
Operating lease, term of contract	5 years

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Leases - Supplemental Balance Sheet Information Related to Finance Leases (Details) $ in Thousands	Jun. 28, 2019 USD ($)
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 3,227
Less accumulated depreciation	889
Finance lease right-of-use assets, net	2,338
Finance lease liability	$ 1,540
Weighted-average remaining lease term (in years)	1 year 4 months 24 days
Weighted-average discount rate	6.47%
Machinery and Equipment
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 2,158
Furniture and Fixtures
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	1,042
Leasehold Improvements
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 27

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Leases - Supplemental Cash Flow Information Related to Finance Leases (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 28, 2019	Jun. 28, 2019	Jun. 29, 2018
Leases [Abstract]
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	$ 881
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 37	$ 679

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Leases - Supplemental Balance Sheet Information Related to Operating Leases (Details) $ in Thousands	Jun. 28, 2019 USD ($)
Lessee Lease Description [Line Items]
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 years 7 months 6 days
Weighted-average discount rate	1.84%
Machinery and Equipment
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	$ 757
Furniture and Fixtures
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	462
Real Property
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	$ 10,552

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Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 28, 2019	Jun. 28, 2019
Leases [Abstract]
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

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Leases - Schedule of Estimated Future Minimum Lease Payments under Operating and Finance Leases Having Initial or Remaining Non-Cancelable Lease Terms More Than One Year (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Dec. 28, 2018
Operating Lease Liabilities, Payments, Due, Rolling Maturity [Abstract]
June 2020	$ 2,916
June 2021	2,201
June 2022	1,115
June 2023	942
June 2024	440
Thereafter	2
Total minimum lease payments, including interest	7,616
Less amounts representing interest	270
Total operating lease liability	7,346
Finance Lease Liabilities, Payments, Rolling Maturity [Abstract]
June 2020	1,009
June 2021	506
June 2022	78
June 2023	8
June 2024	6
Total minimum lease payments, including interest	1,607
Less amounts representing interest	67
Finance lease liability	$ 1,540
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
December 2019		$ 2,606
December 2020		2,202
December 2021		980
December 2022		507
December 2023		202
Thereafter		12
Total minimum lease payments, including interest		6,509
Total minimum lease payments		6,509
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
December 2019		1,153
December 2020		332
December 2021		143
December 2022		4
Total minimum lease payments, including interest		1,632
Less amounts representing interest		75
Total minimum lease payments		$ 1,557

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Income Taxes - Schedule of Income Tax Provision (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 1,131	$ 805	$ 1,620	$ 1,106

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Income Taxes - Additional Information (Details)	6 Months Ended
	Jun. 28, 2019 USD ($)
Income Tax Disclosure [Abstract]
Percentage of deduction in GILTI	50.00%
Income tax reconciliation of global intangible low-taxed income	$ 7,699,000
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	$ 273,000

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Defined Benefit Pension Plans - Schedule of Net Benefit Costs (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]
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

[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).

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Defined Benefit Pension Plans - Schedule of Defined Benefit Plans Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Swiss pension plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 137	$ 79	$ 263	$ 145

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Stockholders' Equity - Schedule of Compensation Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 2,579	$ 1,598	$ 5,220	$ 2,899
Employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	2,162	897	3,592	1,516
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	77	59	159	110
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	311	494	1,415	1,092
Non Employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 29	$ 148	$ 54	$ 181

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Stockholders' Equity - Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
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
Cost of Sales
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, net	22	4	36	7
General and Administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, net	1,018	655	1,796	1,174
Marketing and Selling
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, net	690	366	1,861	826
Research and Development Expense
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, net	$ 849	$ 573	$ 1,527	$ 892

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Stockholders' Equity - Additional Information (Details)	6 Months Ended
	Jun. 28, 2019 shares
Stockholders Equity Note [Line Items]
Estimated forfeiture rate	8.00%
Omnibus Plan
Stockholders Equity Note [Line Items]
Share-based compensation arrangement by share-based payment award, expiration period	10 years
Omnibus Plan | Employee Stock Option
Stockholders Equity Note [Line Items]
Share-based compensation arrangement by share-based payment award, vesting period	3 years
Omnibus Plan | Restricted Stock
Stockholders Equity Note [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares available for grant	1,639,474
Omnibus Plan | Restricted Stock | Minimum
Stockholders Equity Note [Line Items]
Share-based compensation arrangement by share-based payment award, vesting period	1 year
Omnibus Plan | Restricted Stock | Maximum
Stockholders Equity Note [Line Items]
Share-based compensation arrangement by share-based payment award, vesting period	3 years

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Stockholders' Equity - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details)	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Stockholders Equity Note [Abstract]
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	53.00%	53.00%	53.00%	53.00%
Risk-free interest rate	2.05%	2.81%	2.41%	2.70%
Expected term (in years)	5 years 8 months 1 day	5 years 8 months 19 days	5 years 8 months 1 day	5 years 8 months 19 days

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Stockholders' Equity - Schedule of Share-based Compensation, Stock Options, Activity (Details) - $ / shares shares in Thousands	6 Months Ended
	Jun. 28, 2019
Stockholders Equity Note [Abstract]
Options, Outstanding at December 28, 2018	3,920
Options, Granted, Shares	801
Options, Exercised, Shares	(126)
Options, Forfeited or expired, Shares	(16)
Options,Outstanding at June 28, 2019	4,579
Options, Exercisable at June 28, 2019	3,026
Minimum Exercise Price	$ 3.50
Maximum Exercise Price	$ 43.84

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Stockholders' Equity - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity (Details) shares in Thousands	6 Months Ended
	Jun. 28, 2019 shares
Restricted Stock
Schedule Of Restricted Stock And Restricted Stock Units [Line Items]
Unvested at December 28, 2018	11
Granted	11
Vested	(11)
Unvested at June 28, 2019	11
Restricted Stock Units (RSUs)
Schedule Of Restricted Stock And Restricted Stock Units [Line Items]
Unvested at December 28, 2018	322
Granted	19
Vested	(202)
Forfeited or expired	(5)
Unvested at June 28, 2019	134

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Basic and Diluted Net Income Per Share - Summary of Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Numerator:
Net income	$ 3,914	$ 1,830	$ 5,281	$ 2,413
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:
Diluted	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
Employee Stock Option
Weighted average effects of potentially diluted common stock:
Diluted	2,149	2,037	2,292	1,800
Unvested Restricted Stock
Weighted average effects of potentially diluted common stock:
Diluted	97	17	185	17
Restricted Stock Units
Weighted average effects of potentially diluted common stock:
Diluted	8	222	8	269

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Basic and Diluted Net Income Per Share - Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	1,992	556	1,256	540
Employee Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	1,991	554	1,256	539
Restricted Stock and Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	1	2		1

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Disaggregation of Sales, Geographic Sales and Product Sales - Disaggregation of Sales (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Total net sales	$ 39,664	$ 33,905	$ 72,247	$ 60,998
Non Consignment Sales [Member]
Total net sales	35,556	29,661	63,822	51,842
Consignment Sales [Member]
Total net sales	$ 4,108	$ 4,244	$ 8,425	$ 9,156

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Disaggregation of Sales, Geographic Sales and Product Sales - Additional Information (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 28, 2019 Country	Jun. 29, 2018	Jun. 28, 2019 Country Segment	Jun. 29, 2018	Dec. 28, 2018
Geographic and Product Data [Line Items]
Number of countries in which Company operates | Country	75		75
Number of operating segments | Segment			1
Sales Revenue, Net | Customer One [Member]
Geographic and Product Data [Line Items]
Concentration risk, percentage	49.00%	41.00%	43.00%	36.00%
Sales Revenue, Net | Geographic Concentration Risk [Member] | Other than China and Japan [Member] | Maximum
Geographic and Product Data [Line Items]
Concentration risk, percentage			10.00%
Sales Revenue, Net | Product Concentration Risk [Member] | Ophthalmic Surgical Product [Member]
Geographic and Product Data [Line Items]
Concentration risk, percentage			100.00%
Accounts Receivable [Member] | Customer One [Member]
Geographic and Product Data [Line Items]
Concentration risk, percentage			48.00%		37.00%

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Disaggregation of Sales, Geographic Sales and Product Sales - Net Sales by Geographic Areas (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Geographic And Sales [Line Items]
Total net sales		$ 39,664	$ 33,905	$ 72,247	$ 60,998
Geographic Distribution, Domestic [Member]
Geographic And Sales [Line Items]
Total net sales		2,114	1,895	4,066	3,651
Geographic Distribution, Foreign [Member]
Geographic And Sales [Line Items]
Total net sales		37,550	32,010	68,181	57,347
China [Member]
Geographic And Sales [Line Items]
Total net sales		19,394	13,965	31,165	21,875
JAPAN
Geographic And Sales [Line Items]
Total net sales		6,275	6,692	11,794	11,775
Other [Member]
Geographic And Sales [Line Items]
Total net sales	[1]	$ 13,995	$ 13,248	$ 29,288	$ 27,348

[1] No other location individually exceeds 10% of the total sales.

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Disaggregation of Sales, Geographic Sales and Product Sales - Net Sales by Products and Services (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Product Information [Line Items]
Revenue from contract with customer, excluding assessed tax	$ 5,232	$ 6,613	$ 10,029	$ 12,548
Total net sales	39,664	33,905	72,247	60,998
ICLs [Member]
Product Information [Line Items]
Revenue from contract with customer, excluding assessed tax	34,432	27,292	62,218	48,450
IOLs [Member]
Product Information [Line Items]
Revenue from contract with customer, excluding assessed tax	3,874	4,186	7,891	8,244
Other surgical products [Member]
Product Information [Line Items]
Revenue from contract with customer, excluding assessed tax	$ 1,358	$ 2,427	$ 2,138	$ 4,304