8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 3, 2020

STAAR Surgical Company

(Exact Name of Registrant as Specified in Charter)

Delaware	0-11634	95-3797439
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
25651 Atlantic Ocean Drive Lake Forest, California		92630
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: 626-303-7902

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1 933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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. ☐

Item 2.02 Results of Operations and Financial Condition.

On May 6, 2020, STAAR Surgical Company (the “Company”) published a press release reporting its financial results for the quarter ended April 3, 2020, a copy of which is furnished as Exhibit 99.1 to this report and is incorporated herein by this reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 3, 2020, Mr. William Wall submitted his resignation as a Director of the Company, to be effective May 3, 2020. Mr. Wall’s resignation relates to his acceptance of employment with a company that prohibits Mr. Wall from serving as a director of a publicly traded company.  Mr. Wall’s resignation was not submitted as the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices. Based on the Company’s previous efforts to identify qualified candidates to serve as a member of the Board of Directors, the Company continues to interview candidates for Mr. Wall’s replacement.

 This information and the information contained in the press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 2.02 of this Current Report, and Exhibit 99.1 are not incorporated by reference into any filings of STAAR made under the Securities Act of 1933, as amended, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing unless specifically stated so therein.

Item 9.01 Financial Statements and Exhibits

Exhibit No.	Description
99.1	Press release of the Company dated May 6, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

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 hereunto duly authorized.

STAAR Surgical Company
May 6, 2020	By:	/s/ Caren Mason
		Caren Mason
		President and Chief Executive Officer

EX-99.1

Exhibit 99.1

STAAR Surgical Reports First Quarter 2020 Results

LAKE FOREST, CA, May 6, 2020 ---STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye, today reported financial results for the first quarter ended April 3, 2020.

First Quarter 2020 Overview

• Net Sales of $35.2 Million Up 8% from the Prior Year Quarter

• ICL Sales of $29.3 Million Up 6% and Units Up 9% from the Prior Year Quarter

• Gross Margin at 70.4% vs. 74.2% in the Prior Year Quarter

• Net Loss Approximately Breakeven per Share vs. Prior Year Quarter Net Income of $0.03 per Share

• Cash and Cash Equivalents Ended the Quarter at $110.9 Million.

“On April 13, 2020, we reported on the state of STAAR’s business and our projections for Q1 revenue at $34.9 million. We also estimated at that time a negative impact on revenue of approximately $4.0 million from COVID-19. We are pleased to have improved on that initial estimate and to report continuing strength in our largest markets in Asia in April. The offset is a significant winding down or pause of implants in COVID-19 hotspots in Europe, North America, Latin America, the Middle East and smaller Asian markets that will challenge us until there is a re-start which results in steady and improving volume in surgeons’ offices. In discussions with our impacted surgeon partners, it is clear that there is a strong desire to resume refractive surgery quickly once elective procedures are allowed by local public health authorities. We expect that Q2 will be negatively impacted by the markets that are just returning to re-open their clinics and practices in late May into June. We started 2020 off with the highest ICL sales and unit growth experienced in the last five years for a January. In our major markets which remained open that trend continued into the middle of March. The large Asian markets, China, Japan and South Korea are all growing well now. Unless there is another forced closure or challenging COVID-19 scenario for surgeons and patients beyond Q2, we fully expect to resume the double-digit growth outlook originally targeted in Q3 and Q4,” said Caren Mason, President and CEO of STAAR Surgical.

Financial Overview – Q1 2020

Net sales were $35.2 million for the first quarter of 2020, up 8% compared to $32.6 million reported in the prior year quarter. The sales increase was driven by ICL revenue and unit growth of 6% and 9%, respectively. Other Product Sales increased 22% compared to the prior year quarter. ICL revenue was 83% of total Net sales for the first quarter of 2020.

Gross profit margin for the first quarter of 2020, was 70.4% compared to the prior year period of 74.2%. The decrease in gross margin for the quarter is primarily due to the increased mix of injector part sales which carry a lower margin and period costs associated with manufacturing expansion projects.

Operating expenses for the first quarter were $25.9 million compared to the prior year quarter of $22.6 million. General and administrative expenses were $8.0 million compared to the prior year quarter of $6.8 million. The increase in general and administrative expenses was due to increased headcount and salary-related expenses, increased tax

consulting costs, and increased facilities costs. Marketing and selling expenses were $11.0 million compared to the prior year quarter of $10.1 million.The increase in marketing and selling expenses was due to increased advertising and promotional activities and increased headcount and salary-related expenses, partially offset by decreased travel expense. Research and development expenses were $6.9 million compared to the prior year quarter of $5.6 million.The increase in research and development expenses was due to increased clinical expenses associated with our EVO clinical trial in the U.S., increased quality validation expenses, andan increase in headcount and salary-related expenses.

Net loss for the first quarter of 2020 was ($0.1) million or approximately ($0.00) per diluted share compared with net income of $1.4 million or $0.03 per diluted share for the prior year quarter. Adjusted Net Income for the first quarter of 2020 was $1.9 million or $0.04 per diluted share compared to $4.3 million or $0.09 per diluted share for the prior year quarter. The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash, cash equivalents and restricted cash at April 3, 2020 totaled $110.9 million, compared to $120.0 million at the end of fiscal 2019. The Company had $1.3 million drawn on its line of credit in Japan and no other debt at April 3, 2020. During the first quarter of 2020, the Company used $8.2 million in cash for operations primarily associated with changes in working capital, invested $2.2 million in property and equipment and reduced the balance on its line of credit by $0.5 million. These uses of cash were partially offset by $1.3 million in cash from financing activities, primarily stock option exercises. The Company believes its cash balances and operating cash flows, including anticipated cost containment measures, will provide sufficient liquidity for the next 12 months and beyond.

Conference Call

The Company will host a conference call and webcast today, Wednesday, May 6 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress. To access the conference call (Conference ID 8879484), please dial 866-209-9722 for domestic participants and 825-312-2235 for international participants. The live webcast can be accessed from the investor relations section of the STAAR website at www.staar.com.

A taped replay of the conference call (Conference ID 8879484) will be available beginning approximately one hour after the call’s conclusion for seven days. This replay can be accessed by dialing 800-585-8367 for domestic callers and 416-621-4642 for international callers. An archived webcast will also be available at www.staar.com.

Use of Non-GAAP Financial Measures

This press release includes supplemental non-GAAP financial information, which STAAR believes investors will find helpful in understanding its operating performance. “Adjusted Net Income” and “Adjusted Net Income Per Share” exclude the following items that are included in “Net Income” as calculated in accordance with U.S. generally accepted accounting principles (“GAAP”): gain or loss on foreign currency transactions, stock-based compensation expenses, and valuation allowance adjustments.  Management believes that “Adjusted Net Income” and “Adjusted Net Income per share” are useful to investors in gauging the outcome of the key drivers of the business performance:  the ability to increase sales revenue and our ability to increase profit margin by improving the mix of high value products while reducing the costs over which management has control.  

Management has also excluded gains and losses on foreign currency transactions because of the significant fluctuations that can result from period to period as a result of market driven factors. Stock-based compensation expenses consist of expenses for stock options and restricted stock under the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 718.  Valuation allowance adjustments can occur from time to time based on forecasted changes in operating results until all net operating loss carryforwards are fully utilized.  In calculating Adjusted Net Income and Adjusted Net Income Per Share, STAAR excludes these expenses because they are non-

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cash expenses and because of the considerable judgment involved in calculating their values.  In addition, these expenses tend to be driven by fluctuations in the price of our stock and not by the same factors that generally affect our other business expenses.

The Company also uses Constant Currency as a Non-GAAP financial measure to exclude the effects of currency fluctuations on net sales. The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on the Company’s results when reported in U.S. dollars. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long-term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table below shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency.  

About STAAR Surgical

STAAR, which has been dedicated solely to ophthalmic surgery for over 30 years, designs, develops, manufactures and markets implantable lenses for the eye with companion delivery systems. These lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR’s lens used in refractive surgery is called an Implantable Collamer® Lens or “ICL”, which includes the EVO Visian ICL™ product line. More than 1,000,000 Visian^® ICLs have been implanted to date and STAAR markets these lenses in over 75 countries. To learn more about the ICL go to: www.discovericl.com.  Headquartered in Lake Forest, CA, the company operates manufacturing and packaging facilities in Aliso Viejo, CA, Monrovia, CA and Nidau, Switzerland. For more information, please visit the Company’s website at www.staar.com.

Safe Harbor

All statements in this press release that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections, plans, strategies, and objectives of management for 2020 or prospects for achieving such plans, expectations for sales, revenue, or earnings, the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to its impact on sales, operations or clinical trials globally), product safety or effectiveness, the status of our pipeline of ICL products with regulators, including our EDOF lens for Presbyopia and our EVO family of lenses in the U.S., and any statements of assumptions underlying any of the foregoing, including those relating to our product pipeline and market expansion activities. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties related to the COVID-19 pandemic and related public health measures, as well as the factors set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2020, and Annual Report on Form 10-K for the year ended January 3, 2020 under the caption “Risk Factors,” which is on file with the Securities and Exchange Commission and available in the “Investor Information” section of the company’s website under the heading “SEC Filings.” We disclaim any intention or obligation to update or revise any financial projections or forward-looking statement due to new information or events. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: global economic conditions; the discretion of regulatory agencies to approve

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or reject existing, new or improved products, or to require additional actions before approval, or to take enforcement action; international trade disputes; and the willingness of surgeons and patients to adopt a new or improved product and procedure. The Visian ICL with CentraFLOW, now known as EVO Visian ICL, is not yet approved for sale in the United States.

CONTACT:Investors & Media

Brian Moore

Vice President, Investor, Media Relations and Corporate Development

(626) 303-7902, Ext. 3023

bmoore@staar.com

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Consolidated Balance Sheets

(in 000's)

Unaudited

ASSETS	April3,2020			January3, 2020
Current assets:
Cash and cash equivalents	$	110,851		$	119,968
Accounts receivable trade, net		34,492			30,996
Inventories, net		17,565			17,142
Prepayments, deposits, and other current assets		9,168			6,560
Total current assets		172,076			174,666
Property, plant, and equipment, net		20,184			17,065
Finance lease right-of-use assets, net		717			1,867
Operating lease right-of-use assets, net		6,038			6,684
Intangible assets, net		287			296
Goodwill		1,786			1,786
Deferred income taxes		5,112			3,750
Other assets		588			751
Total assets	$	206,788		$	206,865
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit	$	1,316		$	1,827
Accounts payable		9,507			8,050
Obligations under finance leases		557			560
Obligations under operating leases		2,531			2,700
Allowance for sales returns		3,761			3,644
Other current liabilities		12,230			17,697
Total current liabilities		29,902			34,478
Obligations under finance leases		132			366
Obligations under operating leases		3,612			4,086
Asset retirement obligations		210			211
Pension liability		7,965			7,840
Total liabilities		41,821			46,981
Stockholders' equity:
Common stock		451			448
Additional paid-in capital		309,480			304,288
Accumulated other comprehensive loss		(3,026	)		(3,048	)
Accumulated deficit		(141,938	)		(141,804	)
Total stockholders' equity		164,967			159,884
Total liabilities and stockholders' equity	$	206,788		$	206,865

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Consolidated Statements of Operations

(In 000's except for per share data)

Unaudited

	Three Months Ended
	% of						% of						Fav (Unfav)
	Sales			April3,2020			Sales			March29,2019			Amount			%
Net sales		100.0	%	$	35,187			100.0	%	$	32,583		$	2,604			8.0	%
Cost of sales		29.6	%		10,427			25.8	%		8,403			(2,024	)		-24.1	%
Gross profit		70.4	%		24,760			74.2	%		24,180			580			2.4	%
Selling, general and administrative expenses:
General and administrative		22.6	%		7,969			21.0	%		6,837			(1,132	)		-16.6	%
Marketing and selling		31.4	%		11,028			31.1	%		10,143			(885	)		-8.7	%
Research and development		19.6	%		6,898			17.3	%		5,635			(1,263	)		-22.4	%
Total selling, general, and administrative         expenses		73.6	%		25,895			69.4	%		22,615			(3,280	)		-14.5	%
Operating income (loss)		-3.2	%		(1,135	)		4.8	%		1,565			(2,700	)		-172.5	%
Other income (expense):
Interest income, net		0.6	%		216			0.8	%		271			(55	)		-20.3	%
Loss on foreign currency transactions		-1.3	%		(468	)		-0.7	%		(248	)		(220	)		-88.7	%
Royalty income		0.2	%		94			0.5	%		171			(77	)		-45.0	%
Other income, net		0.0	%		1			0.3	%		97			(96	)		-99.0	%
Total other income (expense), net		-0.5	%		(157	)		0.9	%		291			(448	)		-154.0	%
Income (loss) before provision for income taxes		-3.7	%		(1,292	)		5.7	%		1,856			(3,148	)		-169.6	%
Provision (benefit) for income taxes		-3.3	%		(1,158	)		1.5	%		489			1,647			336.8	%
Net income (loss)		-0.4	%	$	(134	)		4.2	%	$	1,367		$	(1,501	)		-109.8	%
Net income (loss) per share - basic				$	-					$	0.03
Net income (loss) per share - diluted				$	-					$	0.03
Weighted average shares outstanding - basic					44,953						44,235
Weighted average shares outstanding - diluted					44,953						46,913

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Consolidated Statements of Cash Flows

(in 000's)

Unaudited

	Three Months Ended
	April3,2020			March29,2019
Cash flows from operating activities:
Net income (loss)	$	(134	)	$	1,367
Adjustments to reconcile net income (loss) to net cash provided by       operating activities:
Depreciation of property and equipment		766			1,222
Amortization of long-lived intangibles		9			8
Deferred income taxes		(1,369	)		79
Change in net pension liability		173			119
Stock-based compensation expense		2,921			2,641
Loss on disposal of property and equipment		3			-
Provision for sales returns and bad debts		80			(34	)
Inventory provision		336			455
Changes in working capital:
Accounts receivable		(3,462	)		(554	)
Inventories		(491	)		(7	)
Prepayments, deposits and other current assets		(2,446	)		(2,317	)
Accounts payable		907			(185	)
Other current liabilities		(5,464	)		(2,063	)
Net cash provided by (used in) operating activities		(8,171	)		731
Cash flows from investing activities:
Acquisition of property and equipment		(2,185	)		(2,203	)
Increase in patents and licenses		-			(30	)
Net cash used in investing activities		(2,185	)		(2,233	)
Cash flows from financing activities:
Repayment on line of credit		(505	)		(499	)
Repayment of finance lease obligations		(236	)		(365	)
Proceeds from vested resricted stock and exercise of stock options		2,005			624
Net cash provided by (used in) financing activities		1,264			(240	)
Effect of exchange rate changes on cash and cash equivalents		(25	)		(24	)
Decrease in cash and cash equivalents		(9,117	)		(1,766	)
Cash, cash equivalents and restricted cash, at beginning of the period		119,968			103,999
Cash, cash equivalents and restricted cash, at end of the period	$	110,851		$	102,233

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Reconciliation of Non-GAAP Financial Measure

Adjusted Net Income (Loss) and Net Income (Loss) Per Share

(in 000's)

Unaudited

	Three Months Ended
	April 3, 2020			March 29, 2019
Net income (loss) (as reported)	$	(134	)	$	1,367
Less:
Foreign currency impact		468			248
Stock-based compensation expense		2,921			2,641
Valuation allowance adjustment		(1,369	)		-
Net income (adjusted)	$	1,886		$	4,256
Net income (loss) per share, basic (as reported)	$	-		$	0.03
Foreign currency impact		0.01			0.01
Stock-based compensation expense		0.06			0.06
Valuation allowance adjustment		(0.03	)		-
Net income per share, basic (adjusted)	$	0.04		$	0.10
Net income (loss) per share, diluted (as reported)	$	-		$	0.03
Foreign currency impact		0.01			0.01
Stock-based compensation expense		0.06			0.05
Valuation allowance adjustment		(0.03	)		-
Net income per share, diluted (adjusted)	$	0.04		$	0.09
Weighted average shares outstanding - Basic		44,953			44,235
Weighted average shares outstanding - Diluted		47,131			46,913

Note:  Net income per share (adjusted), basic and diluted, may not add due to rounding

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STAAR Surgical Company

Reconciliation of Non-GAAP Financial Measure

Constant Currency Sales

(in 000's)

Unaudited

	Three Months Ended
			Effect of		Constant				As Reported						Constant Currency
Sales	April3,2020		Currency		Currency		March29,2019		$ Change			% Change			$ Change			% Change
ICL	$	29,340	$	101	$	29,441	$	27,786	$	1,554			5.6	%	$	1,655			6.0	%
IOL		3,994		-		3,994		4,017		(23	)		-0.6	%		(23	)		-0.6	%
Other		1,853		-		1,853		780		1,073			137.6	%		1,073			137.6	%
Other Products		5,847		-		5,847		4,797		1,050			21.9	%		1,050			21.9	%
Total Sales	$	35,187	$	101	$	35,288	$	32,583	$	2,604			8.0	%	$	2,705			8.3	%

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XML

Document And Entity Information	May 03, 2020
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 03, 2020
Entity Registrant Name	STAAR Surgical Co
Entity Central Index Key	0000718937
Entity Emerging Growth Company	false
Entity File Number	0-11634
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-3797439
Entity Address, Address Line One	25651 Atlantic Ocean Drive
Entity Address, City or Town	Lake Forest
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92630
City Area Code	626
Local Phone Number	303-7902
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of each class	Common
Trading Symbol(s)	STAA
Name of each exchange on which registered	NASDAQ