UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended:    July 2, 2021

Or

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

Commission file number: 0-11634

STAAR SURGICAL COMPANY

(Exact Name of Registrant as Specified in its Charter)

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

(626) 303-7902

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

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

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

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

The registrant has 47,395,678 shares of common stock, par value $0.01 per share, issued and outstanding as of July 30, 2021.

STAAR SURGICAL COMPANY

INDEX

		PAGE NUMBER
PART I – FINANCIAL INFORMATION		1
ITEM 1	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
ITEM 4.	CONTROLS AND PROCEDURES	23
PART II – OTHER INFORMATION		24
ITEM 1.	LEGAL PROCEEDINGS	24
ITEM 1A.	RISK FACTORS	24
ITEM 4.	MINE SAFETY DISCLOSURES	24
ITEM 5.	OTHER INFORMATION	24
ITEM 6.	EXHIBITS	25

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	July 2, 2021			January 1, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	173,083		$	152,453
Accounts receivable trade, net of allowance of doubtful accounts of    $52 and $59, respectively		48,647			35,229
Inventories, net		15,590			18,111
Prepayments, deposits and other current assets		10,797			10,625
Total current assets		248,117			216,418
Property, plant and equipment, net		28,616			24,030
Finance lease right-of-use assets, net		59			596
Operating lease right-of-use assets, net		11,243			8,764
Intangible assets, net		239			270
Goodwill		1,786			1,786
Deferred income taxes		3,720			4,944
Other assets		658			608
Total assets	$	294,438		$	257,416
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	1,280		$	1,379
Accounts payable		7,579			7,874
Obligations under finance leases		85			360
Obligations under operating leases		2,765			2,485
Allowance for sales returns		5,429			4,532
Other current liabilities		24,663			24,606
Total current liabilities		41,801			41,236
Obligations under finance leases		25			38
Obligations under operating leases		8,654			6,537
Deferred income taxes		222			222
Asset retirement obligations		205			221
Pension liability		8,909			11,940
Total liabilities		59,816			60,194
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 47,391 and    46,448 shares issued and outstanding at July 2, 2021 and    January 1, 2021, respectively		474			464
Additional paid-in capital		360,316			338,194
Accumulated other comprehensive loss		(3,836	)		(5,545	)
Accumulated deficit		(122,332	)		(135,891	)
Total stockholders’ equity		234,622			197,222
Total liabilities and stockholders’ equity	$	294,438		$	257,416

See accompanying notes to the condensed consolidated financial statements.

1

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020
Net sales	$	62,367		$	35,194		$	113,119		$	70,381
Cost of sales		13,164			10,764			24,774			21,191
Gross profit		49,203			24,430			88,345			49,190
Selling, general and administrative expenses:
General and administrative		11,441			7,848			21,653			15,817
Selling and marketing		18,853			10,326			32,054			21,354
Research and development		8,260			7,311			16,519			14,209
Total selling, general and administrative expenses		38,554			25,485			70,226			51,380
Operating income (loss)		10,649			(1,055	)		18,119			(2,190	)
Other income (expense), net:
Interest income (expense), net		(5	)		20			(12	)		236
Gain (loss) on foreign currency transactions		(131	)		388			(1,430	)		(80	)
Royalty income		151			52			311			146
Other income (expense), net		51			(21	)		(34	)		(20	)
Total other income (expense), net		66			439			(1,165	)		282
Income (loss) before income taxes		10,715			(616	)		16,954			(1,908	)
Provision (benefit) for income taxes		2,148			556			3,395			(602	)
Net income (loss)	$	8,567		$	(1,172	)	$	13,559		$	(1,306	)
Net income (loss) per share:
Basic	$	0.18		$	(0.03	)	$	0.29		$	(0.03	)
Diluted	$	0.17		$	(0.03	)	$	0.27		$	(0.03	)
Weighted average shares outstanding:
Basic		47,099			45,354			46,858			45,152
Diluted		49,491			45,354			49,373			45,152

See accompanying notes to the condensed consolidated financial statements.

2

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020
Net income (loss)	$	8,567		$	(1,172	)	$	13,559		$	(1,306	)
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		(457	)		(28	)		2,627			(53	)
Reclassification into other income (expense), net		120			72			240			142
Foreign currency translation gain (loss)		(111	)		113			(1,227	)		86
Tax effect		69			(40	)		69			(36	)
Other comprehensive income (loss), net of tax		(379	)		117			1,709			139
Comprehensive income (loss)	$	8,188		$	(1,055	)	$	15,268		$	(1,167	)

See accompanying notes to the condensed consolidated financial statements.

3

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at April 2, 2021		46,857	$	469	$	348,063	$	(3,457	)	$	(130,899	)	$	214,176
Net income		—		—		—		—			8,567			8,567
Other comprehensive loss		—		—		—		(379	)		—			(379	)
Common stock issued upon exercise of options		530		5		7,871		—			—			7,876
Stock-based compensation		—		—		4,382		—			—			4,382
Unvested restricted stock		3		—		—		—			—			—
Vested restricted stock		1		—		—		—			—			—
Balance, at July 2, 2021		47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622
Balance, at April 3, 2020		45,105	$	451	$	309,480	$	(3,026	)	$	(141,938	)	$	164,967
Net loss		—		—		—		—			(1,172	)		(1,172	)
Other comprehensive income		—		—		—		117			—			117
Common stock issued upon exercise of options		681		7		7,546		—			—			7,553
Stock-based compensation		—		—		3,209		—			—			3,209
Vested restricted stock		2		—		—		—			—			—
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674

See accompanying notes to the condensed consolidated financial statements.

4

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Six Months Ended
	Common Stock Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Compre- hensive Income (Loss)			Accumulated Deficit			Total
Balance, at January 1, 2021		46,448	$	464	$	338,194	$	(5,545	)	$	(135,891	)	$	197,222
Net income		—		—		—		—			13,559			13,559
Other comprehensive income		—		—		—		1,709			—			1,709
Common stock issued upon exercise of options		906		9		14,101		—			—			14,110
Stock-based compensation		—		—		8,021		—			—			8,021
Unvested restricted stock		3		—		—		—			—			—
Vested restricted stock		34		1		—		—			—			1
Balance, at July 2, 2021		47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622
Balance, at January 3, 2020		44,822	$	448	$	304,288	$	(3,048	)	$	(141,804	)	$	159,884
Net loss		—		—		—		—			(1,306	)		(1,306	)
Other comprehensive income		—		—		—		139			—			139
Common stock issued upon exercise of options		877		9		9,548		—			—			9,557
Stock-based compensation		—		—		6,399		—			—			6,399
Vested restricted stock		89		1		—		—			—			1
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674

See accompanying notes to the condensed consolidated financial statements.

5

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	July 2, 2021			July 3, 2020
Cash flows from operating activities:
Net income (loss)	$	13,559		$	(1,306	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)    operating activities:
Depreciation of property, plant, and equipment		1,754			1,518
Amortization of intangibles		17			17
Deferred income taxes		845			(1,369	)
Change in net pension liability		(27	)		376
Loss on disposal of property and equipment		2			3
Stock-based compensation expense		7,322			5,839
Provision for sales returns and bad debts		932			605
Inventory provision		697			816
Changes in working capital:
Accounts receivable		(13,797	)		(8,409	)
Inventories		2,238			(932	)
Prepayments, deposits, and other current assets		(307	)		(2,172	)
Accounts payable		(268	)		297
Other current liabilities		181			(3,471	)
Net cash provided by (used in) operating activities		13,148			(8,188	)
Cash flows from investing activities: