staa-10q_20200703.htm

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

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

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

The registrant has 45,806,406 shares of common stock, par value $0.01 per share, issued and outstanding as of July 31, 2020.

	July 3, 2020			January 3, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	116,315		$	119,968
Accounts receivable trade, net of allowance of doubtful accounts of $52 and $88, respectively		39,469			30,996
Inventories, net		17,836			17,142
Prepayments, deposits and other current assets		8,897			6,560
Total current assets		182,517			174,666
Property, plant and equipment, net		21,478			17,065
Finance lease right-of-use assets, net		687			1,867
Operating lease right-of-use assets, net		5,587			6,684
Intangible assets, net		280			296
Goodwill		1,785			1,786
Deferred income taxes		5,114			3,750
Other assets		591			751
Total assets	$	218,039		$	206,865
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	1,325		$	1,827
Accounts payable		8,890			8,050
Obligations under finance leases		493			560
Obligations under operating leases		2,355			2,700
Allowance for sales returns		4,285			3,644
Other current liabilities		14,241			17,697
Total current liabilities		31,589			34,478
Obligations under finance leases		108			366
Obligations under operating leases		3,320			4,086
Asset retirement obligations		212			211
Pension liability		8,136			7,840
Total liabilities		43,365			46,981
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 45,788 and 44,822 shares issued and outstanding at July 3, 2020 and January 3, 2020, respectively		458			448
Additional paid-in capital		320,235			304,288
Accumulated other comprehensive loss		(2,909	)		(3,048	)
Accumulated deficit		(143,110	)		(141,804	)
Total stockholders’ equity		174,674			159,884
Total liabilities and stockholders’ equity	$	218,039		$	206,865

	Three Months Ended					Six Months Ended
	July 3, 2020			June 28, 2019		July 3, 2020			June 28, 2019
Net sales	$	35,194		$	39,664	$	70,381		$	72,247
Cost of sales		10,764			9,765		21,191			18,168
Gross profit		24,430			29,899		49,190			54,079
Selling, general and administrative expenses:
General and administrative		7,848			7,508		15,817			14,345
Marketing and selling		10,326			11,682		21,354			21,825
Research and development		7,311			6,098		14,209			11,733
Total selling, general and administrative expenses		25,485			25,288		51,380			47,903
Operating income (loss)		(1,055	)		4,611		(2,190	)		6,176
Other income (expense), net:
Interest income, net		20			259		236			530
Gain (loss) on foreign currency transactions		388			11		(80	)		(237	)
Royalty income		52			163		146			334
Other income (expense), net		(21	)		1		(20	)		98
Total other income, net		439			434		282			725
Income (loss) before income taxes		(616	)		5,045		(1,908	)		6,901
Provision (benefit) for income taxes		556			1,131		(602	)		1,620
Net income (loss)	$	(1,172	)	$	3,914	$	(1,306	)	$	5,281
Net income (loss) per share:
Basic	$	(0.03	)	$	0.09	$	(0.03	)	$	0.12
Diluted	$	(0.03	)	$	0.08	$	(0.03	)	$	0.11
Weighted average shares outstanding:
Basic		45,354			44,479		45,152			44,357
Diluted		45,354			46,733		45,152			46,842

	Three Months Ended						Six Months Ended
	July 3, 2020			June 28, 2019			July 3, 2020			June 28, 2019
Net income (loss)	$	(1,172	)	$	3,914		$	(1,306	)	$	5,281
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		(28	)		(614	)		(53	)		(640	)
Reclassification into other income, net		72			28			142			54
Foreign currency translation loss		113			382			86			339
Tax effect		(40	)		(55	)		(36	)		(35	)
Other comprehensive income (loss), net of tax		117			(259	)		139			(282	)
Comprehensive income (loss)	$	(1,055	)	$	3,655		$	(1,167	)	$	4,999

	Three Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at April 3, 2020		45,105	$	451	$	309,480	$	(3,026	)	$	(141,938	)	$	164,967
Net loss		—		—		—		—			(1,172	)		(1,172	)
Other comprehensive income		—		—		—		117			—			117
Common stock issued upon exercise of options		681		7		7,546		—			—			7,553
Stock-based compensation		—		—		3,209		—			—			3,209
Vested restricted stock		2		—		—		—			—			—
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674
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

	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 January 3, 2020		44,822	$	448	$	304,288		$	(3,048	)	$	(141,804	)	$	159,884
Net loss		—		—		—			—			(1,306	)		(1,306	)
Other comprehensive income		—		—		—			139			—			139
Common stock issued upon exercise of options		877		9		9,548			—			—			9,557
Stock-based compensation		—		—		6,399			—			—			6,399
Vested restricted stock		89		1		—			—			—			1
Balance, at July 3, 2020		45,788	$	458	$	320,235		$	(2,909	)	$	(143,110	)	$	174,674
Balance, at December 28, 2018		44,195	$	442	$	289,584		$	(1,320	)	$	(156,280	)	$	132,426
Net income		—		—		—			—			5,281			5,281
Impact of the adoption of lease accounting standard		—		—		—			—			113			113
Impact of adoption of nonemployee share-based payment standard		—		—		(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

	Six Months Ended
	July 3, 2020			June 28, 2019
Cash flows from operating activities:
Net income (loss)	$	(1,306	)	$	5,281
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property, plant, and equipment		1,518			1,983
Amortization of intangibles		17			17
Deferred income taxes		(1,369	)		393
Change in net pension liability		376			203
Loss on disposal of property and equipment		3			—
Stock-based compensation expense		5,839			5,220
Provision for sales returns and bad debts		605			(32	)
Inventory provision		816			787
Changes in working capital:
Accounts receivable		(8,409	)		(6,533	)
Inventories		(932	)		106
Prepayments, deposits, and other current assets		(2,172	)		(1,154	)
Accounts payable		297			563
Other current liabilities		(3,471	)		(2,626	)
Net cash provided by (used in) operating activities		(8,188	)		4,208
Cash flows from investing activities:
Acquisition of property and equipment		(4,210	)		(4,601	)
Acquisition of patents and licenses		—			(30	)
Net cash used in investing activities		(4,210	)		(4,631	)
Cash flows from financing activities:
Repayment of finance lease obligations		(346	)		(681	)
Repayment on line of credit		(508	)		(999	)
Proceeds from the exercise of stock options		9,557			1,110
Proceeds from vested restricted stock		1			2
Net cash provided by (used in) financing activities		8,704			(568	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		41			243
Decrease in cash, cash equivalents and restricted cash		(3,653	)		(748	)
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	$	116,315		$	103,251

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 expected impact of the COVID-19 pandemic and related public health measures (including but not limited to their impact on sales, operations or clinical trials globally), the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of a new or improved products (including the EVO family of lenses in the U.S. and the 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 2020 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, risks and uncertainties related to the COVID-19 pandemic and related public health measures, and those described in in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on February 26, 2020, as well as the updated risk factor disclosed herein. We undertake no obligation to update these forward-looking statements after the date of this report to reflect future events or circumstances or to reflect actual outcomes.

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

STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and companion delivery systems used to deliver the lenses into the eye. We are the world’s leading manufacturer of intraocular lenses for patients seeking refractive vision correction, and we also make lenses for use in surgery to treat cataracts. All the lenses we make are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Refractive surgery is performed to treat the type of visual disorders that have traditionally been corrected using eyeglasses or contact lenses. We refer to our lenses used in refractive surgery as “implantable Collamer® lenses” or “ICLs.” The field of refractive surgery includes both lens-based procedures, using products like our ICL family of products, and laser-based procedures like LASIK. Successful refractive surgery can correct common vision disorders such as myopia, hyperopia, and astigmatism. Cataract surgery is a common outpatient procedure where the eye’s natural lens that has become cloudy with age is removed and replaced with an artificial lens called an intraocular lens (IOL) 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.

While refractive procedures were down significantly or came to a halt in April and May in much of North America, Europe, Latin America, India and the Middle East, continuing recovery and growth were recorded in Japan, Korea and China. The positive trending continued in July with China experiencing stronger than anticipated demand as the peak season began in earnest. While COVID-19 hotspots and government public health mandates may reoccur moving forward, we anticipate less business interruption and continued increased interest in our EVO ICL lens-based refractive solutions in the third and fourth quarter of 2020. We also continue to believe that we will achieve a 20% share of the refractive procedure market in China by the end of the year. Assuming significant COVID-19 hotspots and government public health mandates do not reoccur and global economic improvement progresses, our outlook for the third quarter of 2020 currently anticipates a sequential revenue increase of over 20% from our second quarter of 2020 results which would then result in year-over-year double digit growth. Also, we currently expect fourth quarter of 2020 revenue will be similar to third quarter of 2020.

We resumed production at our California manufacturing facilities on April 27, 2020 and anticipate that we will be able to meet the demand for both our Spheric and Toric EVO lenses through the remainder of 2020. We are moving forward with our plans to restart manufacturing in our Nidau, Switzerland facility in 2021. With respect to our U.S. clinical trial for our EVO family of myopia lenses, assuming no material change in the current operating environment we anticipate that we will complete enrollment in the trial by the end of September. Considering the subsequent six-month patient follow-up and time to prepare our data submission to the FDA, we believe we are on track for potential marketing approval and commercialization of EVO in the U.S. in the second half of 2021.

As previously disclosed, we received on July 2, 2020, CE Mark approval for our extended depth of focus or EDOF presbyopia lens, EVO Viva, that is designed to correct near, intermediate and distance vision. We will commence a phased-rollout beginning in Spain, Belgium and Germany. We anticipate the first implants will occur in September following physician training and certification.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited Condensed Consolidated Financial Statements provided in this report, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that there have been no significant changes during the six months ended July 3, 2020 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 3, 2020.

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

	Percentage of Net Sales for Three Months						Percentage of Net Sales for Six Months
	July 3, 2020			June 28, 2019			July 3, 2020			June 28, 2019
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		30.6	%		24.6	%		30.1	%		25.1	%
Gross profit		69.4	%		75.4	%		69.9	%		74.9	%
General and administrative		22.3	%		18.9	%		22.5	%		19.9	%
Marketing and selling		29.3	%		29.5	%		30.3	%		30.2	%
Research and development		20.8	%		15.4	%		20.2	%		16.3	%
Total selling, general and administrative		72.4	%		63.8	%		73.0	%		66.4	%
Operating income (loss)		(3.0	)%		11.6	%		(3.1	)%		8.5	%
Total other income (expense), net		1.2	%		1.1	%		0.4	%		1.0	%
Income (loss) before income taxes		(1.8	)%		12.7	%		(2.7	)%		9.5	%
Provision (benefit) for income taxes		1.5	%		2.9	%		(0.8	)%		2.2	%
Net income (loss)		(3.3	)%		9.8	%		(1.9	)%		7.3	%

	Three Months Ended				Percentage Change			Six Months Ended				Percentage Change
	July 3, 2020		June 28, 2019		2020 vs. 2019			July 3, 2020		June 28, 2019		2020 vs. 2019
ICLs	$	30,728	$	34,432		(10.8	)%	$	60,068	$	62,218		(3.5	)%
Other product sales
IOLs		2,561		3,874		(33.9	)%		6,555		7,891		(16.9	)%
Other surgical products		1,905		1,358		40.3	%		3,758		2,138		75.8	%
Total other product sales		4,466		5,232		(14.6	)%		10,313		10,029		2.8	%
Net sales	$	35,194	$	39,664		(11.3	)%	$	70,381	$	72,247		(2.6	)%

Net sales for the three months ended July 3, 2020 were $35.2 million, a decrease of 11% from $39.7 million reported during the same period of 2019. The decrease in net sales was due to decreases in ICL sales of $3.7 million and other product sales of $0.8 million.

Net sales for the six months ended July 3, 2020 were $70.4 million, a decrease of 3% from $72.2 million reported during the same period of 2019. The decrease in net sales was due to a decrease in ICL sales of $2.2 million, partially offset by an increase in other product sales of $0.3 million.

Total ICL sales for the three months ended July 3, 2020 were $30.7 million, a decrease of 11% from $34.4 million reported for the same period of 2019, with unit decrease of 3%. The Europe, Middle East, Africa and Latin America region sales decreased 30% with unit decrease of 31%. The North America region sales decreased 55%, with unit decrease of 56%. The decrease in both these regions were impacted by the COVID-19 pandemic when markets started to reopen in mid-May/early June. The APAC region sales decreased by 2%, with unit growth up 5% due to unit growth in Japan up 39%, Korea up 16% and China up 6%. ICL sales represented 87.3% and 86.8% of our total sales for the three months ended July 3, 2020 and June 28, 2019, respectively.

Total ICL sales for the six months ended July 3, 2020 were $60.1 million, a 4% decrease from $62.2 million reported for the same period of 2019, with unit growth up 2%. The Europe, Middle East, Africa and Latin America region sales and units decreased 17%. The North America region sales and units decreased 32%. The decrease in both these regions were impacted by the COVID-19 pandemic when markets started to reopen in mid-May/early June. The APAC region sales increased by 3%, with unit growth up 8% due to unit growth in Japan up 58%, Korea up 15% and China up 7%. ICL sales represented 85.3% and 86.1% of our total sales for the six months ended July 3, 2020 and June 28, 2019, respectively.

Other product sales, including IOLs were $4.5 million for the three months ended July 3, 2020, a decrease of 15% from $5.2 million reported for the same period of 2019. The decrease is due to a decrease in IOL sales, partially offset by an increase in preloaded injector part sales to a third-party manufacturer for product they sell to their customers. Other product sales were $10.3 million for the six months ended July 3, 2020, an increase of 3% from $10.0 million reported for the same period of 2019. The increase is due to an increase in preloaded injector part sales to a third-party manufacturer for product they sell to their customers, offset by a decrease in IOL sales. Other product sales represented 12.7% and 13.2% of our total sales for the three months ended July 3, 2020 and June 28, 2019, respectively, and represented 14.7% and 13.9% of our total sales for the six months ended July 3, 2020 and June 28, 2019, respectively.

Gross profit for the three months ended July 3, 2020 was $24.4 million, an 18.3% decrease compared to the $29.9 million reported for the same period of 2019. Gross profit margin decreased to 69.4% of revenue for the three months ended July 3, 2020 compared to 75.4% of revenue for the three months ended June 28, 2019, due to geographic sales mix, $1.0 million in expenses related to the COVID-19 manufacturing pause from April 4 through April 27, 2020, period costs associated with the manufacturing expansion projects, and increased mix of injector part sales which carry a lower margin.

Gross profit for the six months ended July 3, 2020 was $49.2 million, a 9.0% decrease compared to the $54.1 million reported for the same period of 2019. Gross profit margin decreased to 69.9% of revenue for the six months ended July 3, 2020 compared to 74.9% of revenue for the three months ended June 28, 2019, due primarily to geographic sales mix, $1.2 million in expenses related to the COVID-19 manufacturing pause from March 17 through April 27, 2020, period costs associated with the manufacturing expansion projects and increased mix of injector part sales which carry a lower margin.

General and administrative expenses for the three months ended July 3, 2020 were $7.8 million, a 4.5% increase compared to the $7.5 million reported for the same period of 2019. General and administrative expenses for the six months ended July 3, 2020 were $15.8 million, a 10.3% increase compared to the $14.3 million reported for the same period of 2019. The increase in general and administrative expenses for both periods was due to an increase in headcount and salary-related expenses, partially offset by a decrease in variable compensation and travel expenses, and for the six months also due to increased tax consulting and facilities costs.

Marketing and selling expenses for the three months ended July 3, 2020 were $10.3 million, a 11.6% decrease compared to the $11.7 million reported for the same period of 2019. The decrease in marketing and selling expenses was due to decreased trade show expenses and travel expenses, partially offset by increased advertising and promotional activities.

Marketing and selling expenses for the six months ended July 3, 2020 were $21.4 million, a 2.2% decrease compared to the $21.8 million reported for the same period of 2019. The decrease in marketing and selling expenses was due to decreased trade show expenses and travel expenses, partially offset by increased advertising, promotional activities and salary-related expenses.

Research and development expenses for the three months ended July 3, 2020 were $7.3 million, a 19.9% increase compared to the $6.1 million reported for the same period of 2019. Research and development expenses for the six months ended July 3, 2020 were $14.2 million, a 21.1% increase compared to the $11.7 million reported for the same period of 2019. The increase in research and development expenses for both periods was primarily due to an increase in expenses related to clinical expenses associated with our EVO clinical trial in the U.S., and increased headcount and salary-related expenses, partially offset by variable compensation and travel expense.

Other income, net for the three months ended July 3, 2020 was $0.4 million, comparable to that reported for the same period of 2019. Other income, net for the six months ended July 3, 2020 was $0.3 million compared to other income of $0.7 million reported for the same period of 2019. The decrease in other income, net for the six months was due to decreases in interest income, as a result of lower interest rates, and royalty income, which was impacted by COVID-19 pandemic, partially offset by a decrease in foreign exchange losses (primarily the euro).

We recorded income taxes of $0.6 million and $1.1 million for the three months ended July 3, 2020 and June 28, 2019, respectively, primarily due to pre-tax income generated in certain foreign jurisdictions. Also for the three months ended June 28, 2019 withholding taxes on foreign operations. We recorded an income tax benefit of $0.6 million for the six months ended July 3, 2020 due to the income tax benefit from the release of our U.S. valuation allowances, offset by income tax expense from profits generated by our foreign operations. We recorded income taxes of $1.6 million for the six months ended June 28, 2019 primarily due to pre-tax income generated in certain foreign jurisdictions and withholding taxes on foreign operations. In the fourth quarter of fiscal year 2019, we reversed all previously recorded withholding taxes recorded for 2019, at which time we formed STAAR Surgical UK Limited as a holding company for our foreign operations. Based on the current tax treaties between the U.S., United Kingdom and Switzerland, we will no longer accrue for Switzerland withholding taxes on foreign earnings after fiscal 2018 (see also Note 10 in our fiscal 2019 Form 10-K for more information). We have no unrecognized tax benefits pertaining to any uncertain tax positions as of any period presented.

ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset may not be realizable. As further described in Notes 1 and 10 of our fiscal 2019 Form 10-K, under the “incremental cash tax savings approach,” we recorded a valuation release of $3.0 million and $0.4 million against federal and certain states deferred tax assets, respectively. During the six months ended July 3, 2020, we revised our global forecasts as a result of COVID-19, and released an additional $1.4 million of valuation allowance. As of July 3, 2020, we released approximately $4.9 million of valuation allowance on our deferred tax assets in the U.S. jurisdiction utilizing the incremental cash tax savings approach. The ultimate realization of deferred tax assets is dependent upon future generation of income during the periods in which temporary differences representing net future deductible amounts become deductible. We considered the projected future income, tax planning strategies and all other available evidence both positive and negative, as well as results of recent operations in making this assessment. In applying the incremental cash tax savings approach, we will continue to maintain a valuation allowance on the balance of the Company’s net U.S. deferred tax assets of $36.5 million.

We believe that current cash, cash equivalents and future cash flow from operating activities will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements included in this quarterly report. We have experienced some delays in payments on accounts receivable as a result of the COVID-19 pandemic but expect this to improve during the third quarter of 2020 as our customers resume elective refractive surgery. This has had a temporary impact on our working capital. However, at this time we are unaware of any impairment of assets resulting from the COVID19 pandemic. The Company did not apply for or require financing available under the Coronavirus Aid, Relief, and Economic Security “CARES” Act and

does not expect to do so given the strength of our balance sheet. Our financial condition at July 3, 2020 and January 3, 2020 included the following (in millions):

We invest the net proceeds in short-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. Additionally, at July 3, 2020, we have a line of credit with a Japanese lender, in the amount of $1.3 million, with $3.3 million of availability and a line of credit with a Swiss lender, in the amount of $1.1 million, which is fully available for borrowing.

Net cash used in operating activities was $8.2 million for the six months ended July 3, 2020 compared to net cash provided by operating activities of $4.2 million for the six months ended June 28, 2019. Net cash used in operating activities for the six months ended July 3, 2020, consisted of $14.7 million in working-capital changes and a $1.3 million net loss, offset by $7.8 in non-cash items. The change in net cash used in operating activities during the six months ended July 3, 2020 was due to a decrease in net working capital of $5.0 million, a decrease of $0.8 million in non-cash items and the net loss of $1.3 million during the six months ended July 3, 2020 compared to net income of $5.3 million during the six months ended June 28, 2019.

Net cash used in investing activities was $4.2 million and $4.6 million for the six months ended July 3, 2020 and June 28, 2019, respectively, and relate primarily to the acquisition of property, plant, and equipment.

Net cash provided by financing activities was $8.7 million for the six months ended July 3, 2020 compared to net cash used in financing activities of $0.6 million for the six months ended June 28, 2019. Net cash provided by financing activities for the six months ended July 3, 2020 consisted of $9.6 million of proceeds from the exercise of stock options, offset by $0.5 million repayment on the Japan line of credit and $0.3 million repayment of finance lease obligations.

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

The Company is in compliance with the covenants of its credit facilities as of July 3, 2020.

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

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

During the six months ended July 3, 2020, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended January 3, 2020.

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

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

There were no changes in our internal control over financial reporting during the quarter ended July 3, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully information contained in this report and the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended January 3, 2020 and in “Part II—Item 1A—Risk Factors” of the Company’s Form 10-Q for the three months ended April 3, 2020. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

Effective May 1, 2020, the Compensation Committee of the Board of Directors, as Administrator of STAAR’s Equity Incentive Plan, approved an amendment to Section 12.5 of STAAR’s Amended and Restated Omnibus Equity Incentive Plan to permit discretionary acceleration of vesting of equity awards granted to a non-employee director in the event of a Termination of Service, as defined by the Plan, after serving a minimum of at least one-half of the relevant term under any Award Agreement, as defined by the Plan.

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

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


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

		PAGE NUMBER

PART I – FINANCIAL INFORMATION		1

ITEM 1	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24

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	25

ITEM 5.	OTHER INFORMATION	26

ITEM 6.	EXHIBITS	26

	July 3, 2020		January 3, 2020
Raw materials and purchased parts	$	1,606	$	3,334
Work in process		4,997		1,870
Finished goods		12,487		12,976
Total inventories, gross		19,090		18,180
Less inventory reserves		1,254		1,038
Total inventories, net	$	17,836	$	17,142

	July 3, 2020		January 3, 2020
Prepayments and deposits	$	5,106	$	3,031
Prepaid insurance		726		1,488
Consumption tax receivable		661		875
Value added tax (VAT) receivable		1,313		713
BVG (Swiss Pension) prepayment		451		—
Other⁽¹⁾		640		453
Total prepayments, deposits and other current assets	$	8,897	$	6,560

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

	July 3, 2020		January 3, 2020
Machinery and equipment	$	20,970	$	17,173
Computer equipment and software		6,593		6,244
Furniture and fixtures		4,561		4,169
Leasehold improvements		11,100		10,151
Construction in process		8,889		8,477
Total property, plant and equipment, gross		52,113		46,214
Less accumulated depreciation		30,635		29,149
Total property, plant and equipment, net	$	21,478	$	17,065

	July 3, 2020		January 3, 2020
Accrued salaries and wages	$	5,752	$	4,400
Accrued bonuses		—		4,184
Accrued insurance		372		1,346
Income taxes payable		2,579		2,710
Accrued consumption tax		750		1,164
Accrued professional fees for clinical trials		968		567
Marketing obligations		838		633
Other⁽¹⁾		2,982		2,693
Total other current liabilities	$	14,241	$	17,697

As of July 3, 2020 12 Months Ended	Operating Leases		Finance Leases
June 2021	$	2,473	$	510
June 2022		1,394		84
June 2023		1,216		14
June 2024		665		11
June 2025		171		—
Thereafter		—		—
Total minimum lease payments, including interest	$	5,919	$	619
Less amounts representing interest		244		18
Total minimum lease payments	$	5,675	$	601

	Stock Options (in 000’s)			Minimum Exercise Price		Maximum Exercise Price
Outstanding at January 3, 2020		4,326
Granted		609
Exercised		(876	)
Forfeited or expired		(12	)
Outstanding at July 3, 2020		4,047		$	5.05	$	43.84
Exercisable at July 3, 2020		2,717

	Restricted Stock (in 000’s)			Restricted Stock Units (in 000’s)
Unvested at January 3, 2020		11			104
Granted		—			97
Vested		(11	)		(89	)
Forfeited or expired		—			(1	)
Unvested at July 3, 2020		—			111

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.*

†10.38	Letter of the Company dated June 30, 2020 to Patrick Williams, Chief Financial Officer, regarding compensation.*

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

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

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

101	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended July 3, 2020 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.*

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2020, has been formatted in Inline XBRL with applicable taxonomy extension information contained in Exhibit 101.

		STAAR SURGICAL COMPANY

Dated:	August 5, 2020	By:	/s/ PATRICK F. WILLIAMS
			Patrick F. Williams
			Chief Financial Officer
			(on behalf of the Registrant and as its principal financial officer)

Dated:	August 5, 2020	/s/ CAREN MASON
		Caren Mason
		President, Chief Executive Officer, and Director
		(principal executive officer)

Document And Entity Information - shares	6 Months Ended
Document And Entity Information - shares	Jul. 03, 2020	Jul. 31, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 03, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Registrant Name	STAAR SURGICAL CO
Entity Central Index Key	0000718937
Current Fiscal Year End Date	--01-01
Entity Filer Category	Large Accelerated Filer
Trading Symbol	STAA
Entity Common Stock, Shares Outstanding		45,806,406
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity File Number	0-11634
Title of 12(b) Security	Common
Security Exchange Name	NASDAQ
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
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false

	Three Months Ended						Six Months Ended
	July 3, 2020			June 28, 2019			July 3, 2020			June 28, 2019
Service cost⁽¹⁾	$	320		$	248		$	639		$	480
Interest cost⁽²⁾		11			20			22			40
Expected return on plan assets⁽²⁾		(46	)		(34	)		(89	)		(67	)
Prior service credit^(2),(3)		(8	)		(5	)		(17	)		(11	)
Actuarial loss recognized in current period^(2),(3)		80			33			159			65
Net periodic pension cost	$	357		$	262		$	714		$	507

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Current assets:
Cash and cash equivalents	$ 116,315	$ 119,968
Accounts receivable trade, net of allowance of doubtful accounts of $52 and $88, respectively	39,469	30,996
Inventories, net	17,836	17,142
Prepayments, deposits and other current assets	8,897	6,560
Total current assets	182,517	174,666
Property, plant and equipment, net	21,478	17,065
Finance lease right-of-use assets, net	687	1,867
Operating lease right-of-use assets, net	5,587	6,684
Intangible assets, net	280	296
Goodwill	1,785	1,786
Deferred income taxes	5,114	3,750
Other assets	591	751
Total assets	218,039	206,865
Current liabilities:
Line of credit	1,325	1,827
Accounts payable	8,890	8,050
Obligations under finance leases	493	560
Obligations under operating leases	2,355	2,700
Allowance for sales returns	4,285	3,644
Other current liabilities	14,241	17,697
Total current liabilities	31,589	34,478
Obligations under finance leases	108	366
Obligations under operating leases	3,320	4,086
Asset retirement obligations	212	211
Pension liability	8,136	7,840
Total liabilities	43,365	46,981
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 45,788 and 44,822 shares issued and outstanding at July 3, 2020 and January 3, 2020, respectively	458	448
Additional paid-in capital	320,235	304,288
Accumulated other comprehensive loss	(2,909)	(3,048)
Accumulated deficit	(143,110)	(141,804)
Total stockholders’ equity	174,674	159,884
Total liabilities and stockholders’ equity	$ 218,039	$ 206,865

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable, current	$ 52	$ 88
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	45,788,000	44,822,000
Common stock, shares outstanding	45,788,000	44,822,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jul. 03, 2020	Jun. 28, 2019	Jul. 03, 2020	Jun. 28, 2019
Income Statement [Abstract]
Net sales	$ 35,194,000	$ 39,664,000	$ 70,381,000	$ 72,247,000
Cost of sales	10,764,000	9,765,000	21,191,000	18,168,000
Gross profit	24,430,000	29,899,000	49,190,000	54,079,000
Selling, general and administrative expenses:
General and administrative	7,848,000	7,508,000	15,817,000	14,345,000
Marketing and selling	10,326,000	11,682,000	21,354,000	21,825,000
Research and development	7,311,000	6,098,000	14,209,000	11,733,000
Total selling, general and administrative expenses	25,485,000	25,288,000	51,380,000	47,903,000
Operating income (loss)	(1,055,000)	4,611,000	(2,190,000)	6,176,000
Other income (expense), net:
Interest income, net	20,000	259,000	236,000	530,000
Gain (loss) on foreign currency transactions	388,000	11,000	(80,000)	(237,000)
Royalty income	52,000	163,000	146,000	334,000
Other income (expense), net	(21,000)	1,000	(20,000)	98,000
Total other income, net	439,000	434,000	282,000	725,000
Income (loss) before income taxes	(616,000)	5,045,000	(1,908,000)	6,901,000
Provision (benefit) for income taxes	556,000	1,131,000	(602,000)	1,620,000
Net income (loss)	$ (1,172,000)	$ 3,914,000	$ (1,306,000)	$ 5,281,000
Net income (loss) per share:
Basic	$ (0.03)	$ 0.09	$ (0.03)	$ 0.12
Diluted	$ (0.03)	$ 0.08	$ (0.03)	$ 0.11
Weighted average shares outstanding:
Basic	45,354	44,479	45,152	44,357
Diluted	45,354	46,733	45,152	46,842

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Revision of Prior Period, Accounting Standards Update, Adjustment	Common Stock	Additional Paid-in Capital	Additional Paid-in Capital Revision of Prior Period, Accounting Standards Update, Adjustment	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Accumulated Deficit Revision of Prior Period, Accounting Standards Update, Adjustment
Balance at Dec. 28, 2018	$ 132,426		$ 442	$ 289,584		$ (1,320)	$ (156,280)
Balance (Lease Accounting Standard) at Dec. 28, 2018		$ 113						$ 113
Balance (Nonemployee Share-Based Payment Standard) at Dec. 28, 2018					$ (315)			$ 315
Balance (in shares) at Dec. 28, 2018			44,195
Net income (loss)	5,281						5,281
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
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 (loss)	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
Balance at Jan. 03, 2020	159,884		$ 448	304,288		(3,048)	(141,804)
Balance (in shares) at Jan. 03, 2020			44,822
Net income (loss)	(1,306)						(1,306)
Other comprehensive income (loss)	139					139
Common stock issued upon exercise of options	$ 9,557		$ 9	9,548
Common stock issued upon exercise of options (in shares)	876		877
Stock-based compensation	$ 6,399			6,399
Vested restricted stock	1		$ 1
Vested restricted stock (in shares)			89
Balance at Jul. 03, 2020	174,674		$ 458	320,235		(2,909)	(143,110)
Balance (in shares) at Jul. 03, 2020			45,788
Balance at Apr. 03, 2020	164,967		$ 451	309,480		(3,026)	(141,938)
Balance (in shares) at Apr. 03, 2020			45,105
Net income (loss)	(1,172)						(1,172)
Other comprehensive income (loss)	117					117
Common stock issued upon exercise of options	7,553		$ 7	7,546
Common stock issued upon exercise of options (in shares)			681
Stock-based compensation	3,209			3,209
Vested restricted stock (in shares)			2
Balance at Jul. 03, 2020	$ 174,674		$ 458	$ 320,235		$ (2,909)	$ (143,110)
Balance (in shares) at Jul. 03, 2020			45,788

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jul. 03, 2020	Jun. 28, 2019
Cash flows from operating activities:
Net income (loss)	$ (1,306)	$ 5,281
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property, plant, and equipment	1,518	1,983
Amortization of intangibles	17	17
Deferred income taxes	(1,369)	393
Change in net pension liability	376	203
Loss on disposal of property and equipment	3
Stock-based compensation expense	5,839	5,220
Provision for sales returns and bad debts	605	(32)
Inventory provision	816	787
Changes in working capital:
Accounts receivable	(8,409)	(6,533)
Inventories	(932)	106
Prepayments, deposits, and other current assets	(2,172)	(1,154)
Accounts payable	297	563
Other current liabilities	(3,471)	(2,626)
Net cash provided by (used in) operating activities	(8,188)	4,208
Cash flows from investing activities:
Acquisition of property and equipment	(4,210)	(4,601)
Acquisition of patents and licenses		(30)
Net cash used in investing activities	(4,210)	(4,631)
Cash flows from financing activities:
Repayment of finance lease obligations	(346)	(681)
Repayment on line of credit	(508)	(999)
Proceeds from the exercise of stock options	9,557	1,110
Proceeds from vested restricted stock	1	2
Net cash provided by (used in) financing activities	8,704	(568)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	41	243
Decrease in cash, cash equivalents and restricted cash	(3,653)	(748)
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	$ 116,315	$ 103,251

Basis of Presentation and Significant Accounting Policies (Policies)	6 Months Ended
	Jul. 03, 2020
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 the Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of January 3, 2020 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 3, 2020. The Condensed Consolidated Financial Statements for the three and six months ended July 3, 2020 and June 28, 2019, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three and six months ended July 3, 2020 and June 28, 2019, 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.
Vendor Concentration	Vendor Concentration There were two vendors which accounted for over 27% of the Company’s consolidated accounts payable as of July 3, 2020. There was one vendor which accounted for over 11% of the Company’s consolidated accounts payable as of January 3, 2020. There were no vendors who accounted for over 10% of the Company’s consolidated purchases for the three months ended July 3, 2020. There were three vendors who accounted for over 43% of the Company’s consolidated purchases for the six months ended July 3, 2020.
Use of Estimates	Use of Estimates During the COVID-19 pandemic, the Company believes it has used reasonable estimates and assumptions in determining valuation allowances for uncollectible trade receivables, sales returns reserves, obsolete and excess inventory reserves, deferred income taxes, and tax reserves, including valuation allowances for deferred tax assets, pension liabilities, evaluation of asset impairment, in determining the useful life of depreciable and definite-lived intangible assets, and in the variables and assumptions used to calculate and record stock-based compensation. During the quarter ended July 3, 2020, the Company has experienced some delays in customer payments but is unaware of any material impairment of customer receivables. The Company’s sales representatives throughout the world remain engaged with customers conducting online training and other educational courses which have been very well attended. This activity has given the Company insight as to the impact to customers of COVID-19 and potential impairment of receivables.
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted	Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted On January 4, 2020 (beginning of fiscal year 2020), the Company adopted Accounting Standards Update (“ASU”) 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which (i) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model; and (ii) provides for recording credit losses on available-for-sale debt securities through an allowance account. ASU 2016-13 also requires certain incremental disclosures. Subsequently, the FASB issued ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2020-02 and ASU 2020-03 to clarify and improve ASU 2016-13. The adoption of ASU 2016-13 did not have a material impact on the Condensed Consolidated Financial Statements. On January 4, 2020 (beginning of fiscal year 2020), the Company adopted 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. The adoption of ASU 2018-13 did not have a material impact 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) On January 4, 2020 (beginning of fiscal year 2020), the Company adopted 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. The adoption of ASU 2018-14 did not have a material impact on the Condensed Consolidated Financial Statements. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 removes the following exceptions: exception to the incremental approach for intra period tax allocation; exception to accounting for basis differences when there are ownership changes in foreign investments; and exception to interim period tax accounting for year to date losses that exceed anticipated losses. ASU 2019-12 also improves financial reporting for franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. 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.

Basis of Presentation and Significant Accounting Policies - Additional Information (Details) - Vendor Concentration Risk - Maximum	3 Months Ended	6 Months Ended	12 Months Ended
	Jul. 03, 2020	Jul. 03, 2020	Jan. 03, 2020
Consolidated Accounts Payable
Organization And Description Of Business And Accounting Policies [Line Items]
Concentration risk, percentage		27.00%	11.00%
Consolidated Purchases
Organization And Description Of Business And Accounting Policies [Line Items]
Concentration risk, percentage	10.00%	43.00%

Inventories - Schedule of Inventory, Current (Details) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Inventory Disclosure [Abstract]
Raw materials and purchased parts	$ 1,606	$ 3,334
Work in process	4,997	1,870
Finished goods	12,487	12,976
Total inventories, gross	19,090	18,180
Less inventory reserves	1,254	1,038
Total inventories, net	$ 17,836	$ 17,142

Prepayments, Deposits, and Other Current Assets - Schedule Of Prepayments, Deposits, and Other Current Assets (Parenthetical) (Details)	Jul. 03, 2020	Jan. 03, 2020
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%

Property, Plant and Equipment - Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Property Plant And Equipment [Abstract]
Machinery and equipment	$ 20,970	$ 17,173
Computer equipment and software	6,593	6,244
Furniture and fixtures	4,561	4,169
Leasehold improvements	11,100	10,151
Construction in process	8,889	8,477
Total property, plant and equipment, gross	52,113	46,214
Less accumulated depreciation	30,635	29,149
Total property, plant and equipment, net	$ 21,478	$ 17,065

Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Long-lived intangible assets
Long-lived intangible assets, Net	$ 280	$ 296
Patents and licenses
Long-lived intangible assets
Long-lived intangible assets, Gross Carrying Amount	9,356	9,353
Long-lived intangible assets, Accumulated Amortization	(9,076)	(9,057)
Long-lived intangible assets, Net	$ 280	$ 296

Other Current Liabilities - Schedule of Other Current Liabilities (Parenthetical) (Details)	Jul. 03, 2020	Jan. 03, 2020
Other Liabilities Disclosure [Abstract]
Percent of Other Current Liabilities Included in Other	5.00%	5.00%

Lines of Credit - Additional Information (Details)	6 Months Ended
Lines of Credit - Additional Information (Details)	Jul. 03, 2020 USD ($)	Jul. 03, 2020 JPY (¥)	Jan. 03, 2020 USD ($)	Jan. 03, 2020 JPY (¥)	Sep. 30, 2013 CHF (SFr)
Line Of Credit Facility [Line Items]
Line of Credit, Current	$ 1,325,000		$ 1,827,000
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 July 3, 2020) plus a 0.50% spread, and may be renewed quarterly (the current line expires on August 21, 2020).
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, 2020
Line of Credit, Current	$ 1,325,000	¥ 142,500,000	1,827,000	¥ 197,500,000
Interest Rate Increase In Case Of Default	14.00%
Line of Credit Facility, Remaining Borrowing Capacity	$ 3,325,000	¥ 357,500,000	2,798,000	¥ 302,500,000
Credit Suisse Bank
Line Of Credit Facility [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 1,100,000		1,000,000		SFr 1,000,000
Percentage Of Commission On Outstanding Notes Payable	0.25%
Borrowings outstanding	$ 0		$ 0

Leases - Additional Information (Details)	Jul. 03, 2020
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

Leases - Supplemental Balance Sheet Information Related to Finance Leases (Details) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 1,428	$ 2,926
Less accumulated depreciation	741	1,059
Finance lease right-of-use assets, net	687	1,867
Total finance lease liability	$ 601	$ 926
Weighted-average remaining lease term (in years)	2 years	1 year 1 month 6 days
Weighted-average discount rate	5.40%	6.17%
Machinery and Equipment
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 568	$ 1,885
Computer Equipment and Software
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross	$ 860	912
Furniture and Fixtures
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross		102
Leasehold Improvements
Lessee Lease Description [Line Items]
Finance lease right-of-use assets, gross		$ 27

Leases - Supplemental Balance Sheet Information Related to Operating Leases (Details) - USD ($) $ in Thousands	Jul. 03, 2020	Jan. 03, 2020
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	$ 12,546	$ 12,343
Less accumulated depreciation	6,959	5,659
Operating lease right-of-use assets, net	5,587	6,684
Total operating lease liability	$ 5,675	$ 6,786
Weighted-average remaining lease term (in years)	2 years 2 months 12 days	2 years 3 months 18 days
Weighted-average discount rate	1.75%	1.82%
Machinery and Equipment
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	$ 837	$ 765
Computer Equipment and Software
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	462	462
Real Property
Lessee Lease Description [Line Items]
Operating lease right-of-use assets, gross	$ 11,247	$ 11,116

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	Jul. 03, 2020	Jan. 03, 2020
Operating Lease Liabilities, Payments, Due, Rolling Maturity [Abstract]
June 2021	$ 2,473
June 2022	1,394
June 2023	1,216
June 2024	665
June 2025	171
Total minimum lease payments, including interest	5,919
Less amounts representing interest	244
Total operating lease liability	5,675	$ 6,786
Finance Lease Liabilities, Payments, Rolling Maturity [Abstract]
June 2021	510
June 2022	84
June 2023	14
June 2024	11
Total minimum lease payments, including interest	619
Less amounts representing interest	18
Total finance lease liability	$ 601	$ 926

Stockholders' Equity - Additional Information (Details)	6 Months Ended
Stockholders' Equity - Additional Information (Details)	Jul. 03, 2020 shares
Stockholders Equity Note [Line Items]
Estimated forfeiture rate	6.00%
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	842,975
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

Stockholders' Equity - Schedule of Share-based Compensation, Stock Options, Activity (Details) - $ / shares shares in Thousands	6 Months Ended
	Jul. 03, 2020
Stockholders Equity Note [Abstract]
Options, Outstanding at January 3, 2020	4,326
Options, Granted, Shares	609
Options, Exercised, Shares	(876)
Options, Forfeited or expired, Shares	(12)
Options,Outstanding at July 3, 2020	4,047
Options, Exercisable at July 3, 2020	2,717
Minimum Exercise Price	$ 5.05
Maximum Exercise Price	$ 43.84

Stockholders' Equity - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity (Details) shares in Thousands	6 Months Ended
	Jul. 03, 2020 shares
Restricted Stock
Schedule Of Restricted Stock And Restricted Stock Units [Line Items]
Unvested at January 3, 2020	11
Vested	(11)
Restricted Stock Units (RSUs)
Schedule Of Restricted Stock And Restricted Stock Units [Line Items]
Unvested at January 3, 2020	104
Granted	97
Vested	(89)
Forfeited or expired	(1)
Unvested at July 3, 2020	111