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:    October 1, 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 47,600,293 shares of common stock, par value $0.01 per share, issued and outstanding as of October 29, 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)

	October 1, 2021			January 1, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	196,246		$	152,453
Accounts receivable trade, net of allowance of doubtful accounts of    $55 and $59, respectively		41,917			35,229
Inventories, net		16,518			18,111
Prepayments, deposits and other current assets		9,264			10,625
Total current assets		263,945			216,418
Property, plant and equipment, net		32,266			24,030
Finance lease right-of-use assets, net		45			596
Operating lease right-of-use assets, net		22,006			8,764
Intangible assets, net		232			270
Goodwill		1,786			1,786
Deferred income taxes		3,700			4,944
Other assets		625			608
Total assets	$	324,605		$	257,416
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	1,282		$	1,379
Accounts payable		9,092			7,874
Obligations under finance leases		50			360
Obligations under operating leases		2,646			2,485
Allowance for sales returns		5,566			4,532
Other current liabilities		28,160			24,606
Total current liabilities		46,796			41,236
Obligations under finance leases		21			38
Obligations under operating leases		19,437			6,537
Deferred income taxes		222			222
Asset retirement obligations		205			221
Pension liability		8,816			11,940
Total liabilities		75,497			60,194
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 47,599 and    46,448 shares issued and outstanding at October 1, 2021 and    January 1, 2021, respectively		476			464
Additional paid-in capital		368,572			338,194
Accumulated other comprehensive loss		(3,628	)		(5,545	)
Accumulated deficit		(116,312	)		(135,891	)
Total stockholders’ equity		249,108			197,222
Total liabilities and stockholders’ equity	$	324,605		$	257,416

See accompanying notes to the condensed consolidated financial statements.

1

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
Net sales	$	58,352		$	47,081		$	171,471		$	117,462
Cost of sales		13,051			12,210			37,825			33,401
Gross profit		45,301			34,871			133,646			84,061
Selling, general and administrative expenses:
General and administrative		11,018			8,589			32,671			24,406
Selling and marketing		18,175			12,649			50,229			34,003
Research and development		8,271			8,751			24,790			22,960
Total selling, general and administrative expenses		37,464			29,989			107,690			81,369
Operating income		7,837			4,882			25,956			2,692
Other income (expense), net:
Interest income (expense), net		(23	)		1			(35	)		237
Gain (loss) on foreign currency transactions		(610	)		468			(2,040	)		388
Royalty income		185			93			496			239
Other expense, net		(13	)		(63	)		(47	)		(83	)
Total other income (expense), net		(461	)		499			(1,626	)		781
Income before income taxes		7,376			5,381			24,330			3,473
Provision for income taxes		1,356			1,489			4,751			887
Net income	$	6,020		$	3,892		$	19,579		$	2,586
Net income per share:
Basic	$	0.13		$	0.08		$	0.42		$	0.06
Diluted	$	0.12		$	0.08		$	0.40		$	0.05
Weighted average shares outstanding:
Basic		47,483			45,903			47,064			45,394
Diluted		49,592			48,180			49,448			47,589

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						Nine Months Ended
	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
Net income	$	6,020		$	3,892		$	19,579		$	2,586
Other comprehensive income (loss):
Defined benefit plans:
Net change in plan assets		90			(334	)		2,717			(387	)
Reclassification into other income (expense), net		121			70			361			212
Foreign currency translation gain (loss)		29			316			(1,198	)		402
Tax effect		(32	)		(68	)		37			(104	)
Other comprehensive income (loss), net of tax		208			(16	)		1,917			123
Comprehensive income	$	6,228		$	3,876		$	21,496		$	2,709

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 July 2, 2021		47,391	$	474	$	360,316	$	(3,836	)	$	(122,332	)	$	234,622
Net income		—		—		—		—			6,020			6,020
Other comprehensive income		—		—		—		208			—			208
Common stock issued upon exercise of options		183		2		4,210		—			—			4,212
Stock-based compensation		—		—		4,046		—			—			4,046
Vested restricted and performance stock		25		—		—		—			—			—
Balance, at October 1, 2021		47,599	$	476	$	368,572	$	(3,628	)	$	(116,312	)	$	249,108
Balance, at July 3, 2020		45,788	$	458	$	320,235	$	(2,909	)	$	(143,110	)	$	174,674
Net income		—		—		—		—			3,892			3,892
Other comprehensive loss		—		—		—		(16	)		—			(16	)
Common stock issued upon exercise of options		269		3		4,426		—			—			4,429
Stock-based compensation		—		—		3,413		—			—			3,413
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		4		—		—		—			—			—
Balance, at October 2, 2020		46,072	$	461	$	328,074	$	(2,925	)	$	(139,218	)	$	186,392

See accompanying notes to the condensed consolidated financial statements.

4

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Nine 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		—		—		—		—			19,579			19,579
Other comprehensive income		—		—		—		1,917			—			1,917
Common stock issued upon exercise of options		1,089		11		18,311		—			—			18,322
Stock-based compensation		—		—		12,067		—			—			12,067
Unvested restricted stock		3		—		—		—			—			—
Vested restricted and performance stock		59		1		—		—			—			1
Balance, at October 1, 2021		47,599	$	476	$	368,572	$	(3,628	)	$	(116,312	)	$	249,108
Balance, at January 3, 2020		44,822	$	448	$	304,288	$	(3,048	)	$	(141,804	)	$	159,884
Net income		—		—		—		—			2,586			2,586
Other comprehensive income		—		—		—		123			—			123
Common stock issued upon exercise of options		1,146		12		13,974		—			—			13,986
Stock-based compensation		—		—		9,812		—			—			9,812
Unvested restricted stock		11		—		—		—			—			—
Vested restricted stock		93		1		—		—			—			1
Balance, at October 2, 2020		46,072	$	461	$	328,074	$	(2,925	)	$	(139,218	)	$	186,392

See accompanying notes to the condensed consolidated financial statements.

5

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	October 1, 2021			October 2, 2020
Cash flows from operating activities:
Net income	$	19,579		$	2,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant, and equipment		2,671			2,276
Amortization of intangibles		26			26
Deferred income taxes		845			(1,215	)
Change in net pension liability		91			522
Loss on disposal of property and equipment		2			3
Stock-based compensation expense		10,985			8,965
Provision for sales returns and bad debts		1,069			815
Inventory provision		1,097			1,195
Changes in working capital:
Accounts receivable		(7,072	)		(10,975	)
Inventories		1,301			(1,353	)
Prepayments, deposits, and other current assets		1,288			(636	)
Accounts payable