STAAR SURGICAL CO (Form: 10-Q, Received: 08/01/2018 16:14:00)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: June 29, 2018
	Or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

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.)

1911 Walker Avenue

Monrovia, California 91016

(Address of principal executive offices)

(626) 303-7902

(Registrant’s telephone number, including area code))

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 þ No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ 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. (Check one):

¨ Large accelerated filer

þ Accelerated filer

¨ Non-accelerated filer

(Do not check if a smaller reporting company)

¨ 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 þ

The registrant has 41,902,571 shares of common stock, par value $0.01 per share, issued and outstanding as of July 27, 2018.

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)

	June 29, 2018			December 29, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	21,246		$	18,520
Accounts receivable trade, net of allowance for doubtful accounts of $600 and $350, respectively		26,233			20,035
Inventories, net		14,387			13,674
Prepayments, deposits, and other current assets		5,059			4,207
Total current assets		66,925			56,436
Property, plant and equipment, net		11,593			9,776
Intangible assets, net		259			271
Goodwill		1,786			1,786
Deferred income taxes		1,139			1,242
Other assets		1,007			967
Total assets	$	82,709		$	70,478

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	4,517		$	4,438
Accounts payable		7,197			6,033
Obligations under capital leases		1,599			1,278
Allowance for sales returns		2,582			2,546
Other current liabilities		9,038			7,339
Total current liabilities		24,933			21,634
Obligations under capital leases		868			531
Deferred income taxes		585			350
Asset retirement obligations		206			202
Deferred rent		219			172
Pension liability		4,815			4,653
Total liabilities		31,626			27,542
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized: 41,877 and 41,383 shares issued and outstanding at June 29, 2018 and December 29, 2017, respectively		419			414
Additional paid-in capital		210,488			204,920
Accumulated other comprehensive loss		(989	)		(1,150	)
Accumulated deficit		(158,835	)		(161,248	)
Total stockholders’ equity		51,083			42,936
Total liabilities and stockholders’ equity	$	82,709		$	70,478

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017

Net sales	$	33,905		$	21,936		$	60,998		$	42,286
Cost of sales		8,678			6,462			16,340			12,235
Gross profit		25,227			15,474			44,658			30,051

Selling, general and administrative expenses:
General and administrative		6,196			4,685			11,967			9,664
Marketing and selling		10,659			7,342			18,113			13,978
Research and development		5,346			4,767			10,753			9,824
Total selling, general and administrative expenses		22,201			16,794			40,833			33,466

Operating income (loss)		3,026			(1,320	)		3,825			(3,415	)

Other income (expense):
Interest expense, net		(24	)		(33	)		(36	)		(61	)
Gain (loss) on foreign currency transactions		(520	)		380			(597	)		294
Royalty income		149			128			306			259
Other income, net		4			20			21			36
Other income (expense), net		(391	)		495			(306	)		528

Income (loss) before income taxes		2,635			(825	)		3,519			(2,887	)
Income tax provision		805			146			1,106			287
Net income (loss)	$	1,830		$	(971	)	$	2,413		$	(3,174	)

Net income (loss) per share:
Basic	$	0.04		$	(0.02	)	$	0.06		$	(0.08	)
Diluted	$	0.04		$	(0.02	)	$	0.06		$	(0.08	)

Weighted average shares outstanding:
Basic		41,723			40,933			41,568			40,841
Diluted		43,999			40,933			43,654			40,841

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017

Net income (loss)	$	1,830		$	(971	)	$	2,413		$	(3,174	)
Other comprehensive income (loss)
Defined benefit plans:
Net change in plan assets		(21	)		(23	)		(30	)		(37	)
Reclassification into other income, net		26			19			51			37
Foreign currency translation gains (losses)		(521	)		(42	)		207			406
Tax effect		156			21			(67	)		(112	)
Other comprehensive income (loss), net of tax		(360	)		(25	)		161			294
Comprehensive income (loss)	$	1,470		$	(996	)	$	2,574		$	(2,880	)

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 29, 2018			June 30, 2017
Cash flows from operating activities:
Net income (loss)	$	2,413		$	(3,174	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property, plant, and equipment		1,168			1,548
Amortization of intangibles		17			110
Deferred income taxes		358			9
Change in net pension liability		159			30
Loss on disposal of property and equipment		6			—
Stock-based compensation expense		2,899			1,378
Provision for sales returns and bad debts		644			66
Inventory provision		753			789
Changes in working capital:
Accounts receivable		(6,390	)		(21	)
Inventories		(1,536	)		908
Prepayments, deposits, and other current assets		(889	)		(278	)
Accounts payable		956			(1,767	)
Other current liabilities		1,748			(961	)
Net cash provided by (used in) operating activities		2,306			(1,363	)

Cash flows from investing activities:
Acquisition of property and equipment		(1,269	)		(624	)
Net cash used in investing activities		(1,269	)		(624	)

Cash flows from financing activities:
Repayment of capital lease obligations		(881	)		(661	)
Repurchase of employee common stock for taxes withheld		—			(234	)
Proceeds from vested restricted stock and exercise of stock options		2,407			1,963
Net cash provided by financing activities		1,526			1,068

Effect of exchange rate changes on cash, cash equivalents and restricted cash		163			359
Increase (decrease) in cash, cash equivalents and restricted cash		2,726			(560	)
Cash, cash equivalents and restricted cash, at beginning of the period		18,641			14,118
Cash, cash equivalents and restricted cash, at end of the period	$	21,367		$	13,558

See accompanying notes to the condensed consolidated financial statements.

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation and Significant Accounting Policies

The Condensed Consolidated Financial Statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in Comprehensive Financial Statements have been condensed or omitted pursuant to such rules and regulations. The Consolidated Balance Sheet as of December 29, 2017 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2017.

The Condensed Consolidated Financial Statements for the three and six months ended June 29, 2018 and June 30, 2017, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three and six months ended June 29, 2018 and June 30, 2017, are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Each of the Company’s fiscal reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks. Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Cash, Cash Equivalents and Restricted Cash

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

	June 29, 2018		December 29, 2017		June 30, 2017
Cash and cash equivalents	$	21,246	$	18,520	$	13,438
Restricted cash included in other long-term assets		121		121		120
Total cash, cash equivalents and restricted cash as shown in the Consolidated Statements of Cash Flows	$	21,367	$	18,641	$	13,558

The Company has restricted cash of approximately $121,000 set aside as collateral for a standby letter of credit required by the California Department of Public Health for unforeseen future regulatory costs related to the decommissioning of certain manufacturing equipment.

Revenue

On December 30, 2017 (beginning of FY 2018), the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” and its subsequent amendments: (i) ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”; (ii) ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” (iii) ASU No. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”; (iv) ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”; and (v) ASU No. 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606”, using the modified retrospective method, and determined that there was no cumulative effect adjustment on the Consolidated Financial Statements. The Company determined that the adoption of the new standard did not materially impact the revenue recognition on its Consolidated Financial Statements.

STAAR SURGICAL COMPANY

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

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

Revenue (Continued)

The Company recognizes revenue when its contractual performance obligations with customers are satisfied. The Company’s performance obligations are generally limited to single sales orders with product shipping to the customer within a month of receipt of the sales order. Substantially all of the Company’s revenues are recognized at a point-in-time when control of its products transfers to the customer, which is typically upon shipment (as discussed below). The Company presents sales tax and similar taxes it collects from its customers on a net basis (excluded from revenues).

The Company sells certain injector parts to an unrelated customer and supplier (collectively referred to as “supplier”) whereby these injector part sales are either made as a final sale to the supplier or, are sold to be combined with an acrylic IOL by the supplier into finished goods inventory (a preloaded acrylic IOL). These finished goods are then sold back to the Company at an agreed upon, contractual price. The Company makes a profit margin on either type of sale with the supplier and each type of sale is made under separate purchase and sales orders between the two parties resulting in cash settlement for the orders sold or repurchased. For parts that are sold as a final sale, the Company recognizes a sale and those sales are classified as other product sales in total net sales. For the injector parts that are sold to be combined with an acrylic IOL into finished goods, the Company records the transaction at its carrying value deferring any profit margin as contra-inventory, until the finished goods inventory is sold to an end-customer (not the supplier) at which point the Company recognizes revenues.

For all sales, the Company is considered the principal in the transaction as the Company is the party providing specified goods it has control over prior to when control is transferred to the customer. Cost of sales includes cost of production, freight and distribution, and inventory provisions, net of any purchase discounts. Shipping and handling activities that occur after the customer obtains control of the goods are recognized as fulfillment costs.

The Company generally permits returns of product if the product is returned within the time allowed by its return policies and records an allowance for estimated returns at the time revenue is recognized. The Company’s allowance for estimated returns considers historical trends and experience, the impact of new product launches, the entry of a competitor, availability of timely and pertinent information and the various terms and arrangements offered, including sales with extended credit terms. For estimated returns, sales are reported net of estimated returns and cost of sales are reported net of estimated returns that can be resold. On the Condensed Consolidated Balance Sheets, the balances associated for estimated sales returns are as follows:

	June 29, 2018		December 29, 2017
Estimated returns - inventory ⁽¹⁾	$	462	$	534
Allowance for sales returns		2,582		2,546

⁽¹⁾

Recognized in inventories, net on the Condensed Consolidated Balance Sheets

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment history and credit worthiness, as determined by the Company’s review of its customers’ current credit information. The Company continuously monitors collections and payments from customers and maintains a provision for estimated credit losses and uncollectible accounts based upon its historical experience and any specific customer collection issues that have been identified. Amounts determined to be uncollectible are written off against the allowance for doubtful accounts.

The Company disaggregates its revenue into the following categories: non-consignment sales, consignment sales and royalty income.

Non-consignment Sales

The Company recognizes revenue from non-consignment product sales at a point-in-time when control has been transferred, which is typically at shipping point, except for certain customers and for the STAAR Japan subsidiary, which is typically recognized when the customer receives the product. The Company does not have significant deferred revenues as of June 29, 2018 or June 30, 2017, as delivery to the customer is generally made within the same or the next day of shipment.

STAAR SURGICAL COMPANY

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

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

Revenue (Continued)

The Company also enters into certain strategic cooperation agreements with customers in which, as consideration for certain commitments made by the customer, including minimum purchase commitments, the Company agrees, among other things, to pay for marketing, educational training and general support of the Company’s products. The provisions in these arrangements allow for these payments to be made directly to the customer or payments can be made directly to a third party for distinct marketing, educational training and general support services provided to or on behalf of the customer by the third party. For payments the Company makes to another party, or reimburses the customer for distinct marketing and support services, the Company recognizes these payments as sales and marketing expense as incurred. These strategic cooperation agreements are generally for periods of 12 months with quarterly minimum purchase commitments. The Company recognizes sales and marketing expenses in the period in which it expects the customer will achieve its minimum purchase commitment, generally quarterly, and any unpaid amounts are recorded in Other Current Liabilities in “Other” on the Condensed Consolidated Statements of Operations, see Note 6. Reimbursements made directly to the customer for general marketing incentives are treated as a reduction in revenues. The Company’s performance obligations generally occur in the same quarter as the shipment of product.

Since the payments for distinct or non-distinct services occur within the quarter corresponding with the purchases made by the customer and the shipments made by the Company to that customer, there is no remaining performance obligation by the Company to the customer. Accordingly, there are no deferred revenues associated with these types of arrangements as of June 29, 2018 and June 30, 2017.

Consignment Sales

The Company’s products are marketed to ophthalmic surgeons, hospitals, ambulatory surgery centers or vision centers, and distributors. IOLs and ICLs may be offered to surgeons and hospitals on a consignment basis. The Company maintains title and risk of loss on consigned inventory and recognizes revenue for consignment inventory at a point-in-time when the Company is notified that the lenses have been implanted, thus completing the performance obligation.

Royalty Income

From time to time, the Company licenses its patents to third parties in connection with the manufacture of product. One type of licensing contract requires that the licensee pay the Company a quarterly royalty based on a percentage of the licensee’s quarterly sales. The Company recognizes the revenue at a point-in-time, typically quarterly based on various factors including information from the licensee, historical performance and contract minimums; royalty income was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Royalty income ⁽¹⁾	$	149	$	128	$	306	$	259

⁽¹⁾

Shown as a separate line item in other income, net on the Condensed Consolidated Statements of Operations.

Another type of licensing contract requires that the licensee pay the Company a lump sum royalty once certain milestones are achieved, such as upon the first commercial sale of a product incorporating a licensed patent or technology (performance obligation occurs over a period of time); no such income was recognized for the three and six months ended June 29, 2018 and June 30, 2017, respectively.

See Note 9 for additional information on disaggregation of revenues, geographic sales information and product sales.

STAAR SURGICAL COMPANY

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

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

Revenue (Continued)

The following table summarizes the impact of adopting Topic 606 on the Company’s Condensed Consolidated Balance Sheets for June 29, 2018 (in 000’s) (see also Note 13):

	As Reported		Adjustments			Balances without the adoption of 606
Accounts receivable trade, net	$	26,233	$	(2,582	)	$	23,651
Total current assets		66,925		(2,582	)		64,343
Total assets		82,709		(2,582	)		80,127
Allowance for sales returns		2,582		(2,582	)		—
Total current liabilities		24,933		(2,582	)		22,351
Total liabilities		31,626		(2,582	)		29,044
Total liabilities and stockholders’ equity		82,709		(2,582	)		80,127

Recently Adopted Accounting Pronouncements

On December 30, 2017 (beginning of FY 2018), the Company adopted ASU 2017-09 “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting,” which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The adoption of ASU 2017-09 did not have a material impact on the Condensed Consolidated Financial Statements.

On December 30, 2017 (beginning of FY 2018), the Company adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires that an employer report the service cost component in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of operating profit. The adoption of ASU 2017-09 did not have a material impact on the Condensed Consolidated Financial Statements, see Note 7 for additional information.

On December 30, 2017 (beginning of FY 2018), the Company adopted ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory, using the modified retrospective method, and determined that there was no cumulative effect adjustment on the Consolidated Financial Statements. The adoption of ASU 2016-16 did not have a material impact on the Condensed Consolidated Financial Statements.

On December 30, 2017 (beginning of FY 2018), the Company adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The adoption of ASU 2016-15 did not have a material impact on the Condensed Consolidated Financial Statements.

STAAR SURGICAL COMPANY

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

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

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which requires lessees to recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period. Early adoption is permitted. As of June 29, 2018, the Company’s evaluation of the impact of adopting ASU 2016-02 on its Condensed Consolidated Financial Statements is in process.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” provides an option to reclassify stranded tax effects within Accumulated Other Comprehensive Income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded. This is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company will adopt this standard as of December 29, 2018 (beginning of Fiscal Year 2019) and is currently evaluating the impact on ASU 2018-02 will have on its Condensed Consolidated Financial Statements.

In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” aligns the accounting for share-based payments to nonemployees similar to employees. This is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company will adopt this standard as of December 29, 2018 (beginning of Fiscal Year 2019) and is currently evaluating the impact on ASU 2018-07 will have on its Condensed Consolidated Financial Statements.

Note 2 — Inventories

Inventories, net are stated at the lower of cost and net realizable value, determined on a first-in, first-out basis and consisted of the following (in thousands):

	June 29, 2018		December 29, 2017
Raw materials and purchased parts	$	2,606	$	2,506
Work in process		2,700		1,996
Finished goods		10,436		11,533
		15,742		16,035
Less inventory reserves		1,355		2,361
Total	$	14,387	$	13,674

Note 3 — Prepayments, Deposits, and Other Current Assets

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

	June 29, 2018		December 29, 2017
Prepayments and deposits	$	1,958	$	1,435
Prepaid insurance		822		943
Income tax receivable		—		181
Consumption tax receivable		525		541
Value added tax (VAT) receivable		1,029		910
BVG Prepayment		313		10
Other current assets ⁽¹⁾		412		187
Total	$	5,059	$	4,207

⁽¹⁾ No individual item in “other current assets” exceeds 5% of the total prepayments, deposits and other current assets.

STAAR SURGICAL COMPANY

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

Note 4 — Property, Plant and Equipment

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

	June 29, 2018		December 29, 2017
Machinery and equipment	$	18,551	$	16,562
Furniture and fixtures		9,657		9,201
Leasehold improvements		9,718		9,631
		37,926		35,394
Less accumulated depreciation		26,333		25,618
Total	$	11,593	$	9,776

Note 5 — Intangible Assets

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

	June 29, 2018							December 29, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Long-lived amortized intangible assets:
Patents and licenses	$	9,255	$	(8,996	)	$	259	$	9,244	$	(8,973	)	$	271
Customer relationships		1,417		(1,417	)		—		1,392		(1,392	)		—
Developed technology		900		(900	)		—		885		(885	)		—
Total	$	11,572	$	(11,313	)	$	259	$	11,521	$	(11,250	)	$	271

Note 6 — Other Current Liabilities

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

	June 29, 2018		December 29, 2017
Accrued salaries and wages	$	2,939	$	2,407
Accrued insurance		315		565
Accrued consumption tax		579		446
Accrued income taxes		850		210
Accrued bonuses		2,704		2,026
Other ⁽¹⁾		1,651		1,685
Total	$	9,038	$	7,339

⁽¹⁾

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

STAAR SURGICAL COMPANY

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

Note 7 — Defined Benefit Pension Plans

The Company has defined benefit plans covering employees of its Switzerland and Japan operations. The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

	Three Months Ended						Six Months Ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Service cost ⁽¹⁾	$	139		$	129		$	277		$	258
Interest cost ⁽²⁾		15			14			29			28
Expected return on plan assets ⁽²⁾		(28	)		(24	)		(54	)		(47	)
Net amortization of transitional obligation ^(2),(3)		2			3			5			6
Prior service credit ^(2),(3)		(5	)		(2	)		(11	)		(4	)
Actuarial loss recognized in current period ^(2),(3)		29			18			57			35
Net periodic pension cost	$	152		$	138		$	303		$	276

⁽¹⁾

Recognized in selling general and administrative expenses on the Condensed Consolidated Statements of Operations.

	⁽²⁾	For 2018, recognized in other income, net, and for 2017, recognized in selling, general and administrative on the Condensed Consolidated Statements of Operations.
	⁽³⁾	Amounts reclassified from accumulated other comprehensive loss.

The Company currently is not required to and does not make contributions to its Japan pension plan. The Company’s contributions to its Swiss pension plan is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Employer contribution	$	79	$	67	$	145	$	131

Note 8 — Basic and Diluted Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share amounts):

	Three Months Ended						Six Months Ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Numerator:
Net income (loss)	$	1,830		$	(971	)	$	2,413		$	(3,174	)
Denominator:
Weighted average common shares:
Common shares outstanding		41,734			40,954			41,579			40,862
Less: Unrestricted stock		(11	)		(21	)		(11	)		(21	)
Denominator for basic calculation		41,723			40,933			41,568			40,841
Weighted average effects of potentially dilutive common stock:
Stock options		2,037			—			1,800			—
Unvested restricted stock		17			—			17			—
Restricted stock units		222			—			269			—
Warrants		—			—			—			—
Denominator for diluted calculation		43,999			40,933			43,654			40,841

Net income (loss) per share:
Basic	$	0.04		$	(0.02	)	$	0.06		$	(0.08	)
Diluted	$	0.04		$	(0.02	)	$	0.06		$	(0.08	)

STAAR SURGICAL COMPANY

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

Note 8 — Basic and Diluted Net Income (Loss) Per Share (Continued)

Because the Company had a net loss for the three months and six months ended June 30, 2017, the number of diluted shares is equal to the number of basic shares. Outstanding options and warrants to purchase common stock, restricted stock and restricted stock units would have had an anti-dilutive effect on diluted per share amounts.

The following table sets forth (in thousands) the weighted average number of options and warrants to purchase shares of common stock, restricted stock, and restricted stock units with either exercise prices or unrecognized compensation cost per share greater than the average market price per share of the Company’s common stock, which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive.

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Options		554		3,225		539		2,953
Restricted stock and restricted stock units		2		111		1		144
Total		556		3,336		540		3,097

Note 9 — Disaggregation of Revenues, Geographic Sales and Product Sales

In the following tables, revenues are disaggregated by category, sales by geographic market and sales by product data. The following breaks down revenues into the following categories (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Non-consignment sales	$	29,661	$	18,086	$	51,842	$	33,842
Consignment sales		4,244		3,850		9,156		8,444
Total net sales		33,905		21,936		60,998		42,286
Royalty income ⁽¹⁾		149		128		306		259
Total revenues	$	34,054	$	22,064	$	61,304	$	42,545

⁽¹⁾

Shown as a separate line item in other income, net on the Condensed Consolidated Statements of Operations.

The Company markets and sells its products in over 75 countries and conducts its manufacturing in the United States. Other than China and Japan, the Company does not conduct business in any country in which its sales exceed 10% of worldwide consolidated net sales. Sales are attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
China	$	13,965	$	6,046	$	21,875	$	10,672
Japan		6,692		4,417		11,775		8,216
Other ⁽¹⁾		13,248		11,473		27,348		23,398
Total revenues	$	33,905	$	21,936	$	60,998	$	42,286

⁽¹⁾

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

In addition, domestic and foreign sales are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Domestic	$	1,895	$	2,092	$	3,651	$	4,050
Foreign		32,010		19,844		57,347		38,236
Total revenues	$	33,905	$	21,936	$	60,998	$	42,286

STAAR SURGICAL COMPANY

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

Note 9 — Disaggregation of Revenues, Geographic Sales and Product Sales (Continued)

100% of the Company’s sales are generated from the ophthalmic surgical product segment and the chief operating decision maker makes operating decisions and allocates resources based upon the consolidated operating results, and therefore the Company operates as one operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer lenses (“ICLs”) used in refractive surgery and intraocular lenses (“IOLs”) used in cataract surgery. The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
ICLs	$	27,292	$	16,317	$	48,450	$	31,588
Other product sales
IOLs		4,186		4,377		8,244		8,983
Other surgical products		2,427		1,242		4,304		1,715
Total other product sales		6,613		5,619		12,548		10,698
Total net sales	$	33,905	$	21,936	$	60,998	$	42,286

One customer, our distributor in China, accounted for 41% and 36% of net sales for the three and six months ended June 29, 2018, respectively, and the same customer accounted for 28% and 25% of net sales for the three and six months ended June 30, 2017, respectively. As of June 29, 2018 and December 29, 2017, respectively, one customer, our distributor in China, accounted for 40% and 24% of consolidated trade receivables.

Note 10 — Stock-Based Compensation

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Employee stock options	$	897	$	493	$	1,516	$	761
Restricted stock		59		46		110		86
Restricted stock units		494		329		1,092		531
Nonemployee stock options		148		—		181		—
Total	$	1,598	$	868	$	2,899	$	1,378

The Company recorded stock-based compensation costs in the following categories on the accompanying Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended				Six Months Ended
	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Cost of sales	$	4	$	2	$	7	$	4
General and administrative		655		394		1,174		658
Marketing and selling		366		228		826		344
Research and development		573		244		892		372
Total stock-based compensation expense		1,598		868		2,899		1,378
Amounts capitalized as part of inventory		145		110		267		162
Total stock-based compensation	$	1,743	$	978	$	3,166	$	1,540

STAAR SURGICAL COMPANY

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

Note 10 — Stock-Based Compensation (Continued)

Stock Option Plan

Our Amended and Restated Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted stock options, restricted stock, unrestricted share grants, restricted stock units (“RSUs”), and performance contingent stock units. Options under the plan are granted at fair market value on the date of grant, become exercisable over a three-year period, or as determined by our Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for accelerated vesting under certain circumstances in the event of a change in control (as defined in the Plan). Pursuant to the Plan, options for 4,183,656 shares were outstanding at June 29, 2018 with exercise prices ranging between $0.95 and $29.80 per share. Restricted stock grants under the Plan generally vest over a period between one to three years. There were 11,073 shares of restricted stock and 353,801 RSUs outstanding at June 29, 2018. As of June 29, 2018, there were 2,504,392 shares available for grants under the Plan.

Assumptions

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model applying the weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that options granted are expected to be outstanding. The Company has calculated an 11% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

	Three Months Ended						Six Months Ended
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		53	%		57	%		53	%		57	%
Risk-free interest rate		2.81	%		1.81	%		2.70	%		1.95	%
Expected term (in years)		5.72			5.67			5.72			5.67

A summary of option activity under the Plan for the quarter ended June 29, 2018 is presented below:

	Option Shares (000’s)
Outstanding at December 29, 2017		3,725
Granted		786
Exercised		(306	)
Forfeited or expired		(21	)
Outstanding at June 29, 2018		4,184
Exercisable at June 29, 2018		2,689

A summary of restricted stock and RSU activity under the Plan for the quarter ended June 29, 2018 is presented below:

	Restricted Shares (000’s)			Restricted Units (000’s)
Outstanding at December 29, 2017		21			488
Granted		11			47
Vested		(21	)		(177	)
Forfeited or expired		—			(4	)
Outstanding at June 29, 2018		11			354

STAAR SURGICAL COMPANY

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

Note 11 — Income Taxes

The Company’s quarterly provision for income taxes is determined by estimating an annual effective tax rate. This estimate may fluctuate throughout the year as new information becomes available affecting its underlying assumptions.

The Company recorded an income tax provision of $805,000 and $1,106,000 for the three and six months ended June 29, 2018, respectively, and $146,000 and $287,000 for the three and six months ended June 30, 2017, respectively, primarily due to pre-tax income generated in certain foreign jurisdictions. There are no unrecognized tax benefits related to uncertain tax positions taken by the Company.

For the fiscal year-ended December 29, 2017 and prior years, the Company provided foreign withholding and U.S. income taxes on all unremitted foreign earnings, as the earnings from the Company’s foreign subsidiaries were not considered to be permanently reinvested. Effective for the current year, the Company no longer provides U.S. income taxes on foreign earnings (see discussion below). Although foreign earnings are no longer subject to U.S. taxation, the Company continues to provide withholding taxes related to such unremitted earnings.

U.S. Federal Income Tax Reform

On December 22, 2017, the United States enacted major tax reform legislation. Most of the changes from the new law are effective for years beginning after December 31, 2017 with the noted exemption of the deemed repatriation of offshore earnings. Public Law No. 115-97, commonly referred to as the 2017 Tax Cuts and Jobs Act (“2017 Tax Act”) put into effect a number of changes impacting operations outside the United States including, but not limited to, the imposition of a one-time tax “deemed repatriation” on accumulated offshore earnings not previously subject to U.S. tax, and shifts the U.S taxation of multinational corporations from a worldwide system of taxation to a territorial system. As such, the 2017 Tax Act provides an exemption against U.S. federal taxation on foreign earnings generated after December 31, 2017 and repatriated back to the U.S.

Note 12 — Commitments and Contingencies

Lines of Credit

Since 1998, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.06% as of June 29, 2018) plus a 0.50% spread, and may be renewed quarterly (the current line expires on August 21, 2018). The credit facility is not collateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of June 29, 2018 and December 29, 2017 (approximately $4,517,000 and $4,438,000 based on the foreign exchange rates on June 29, 2018 and December 29, 2017, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of June 29, 2018 and December 29, 2017, there were no available borrowings under the line. At maturity on August 21, 2018, the Company expects to renew this line of credit for an additional three months, with similar terms.

In September 2013, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a framework agreement for loans (“framework agreement”) with Credit Suisse (the “Bank”). The framework agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) (approximately $1,000,000 at the rate of exchange on June 29, 2018 and December 29, 2017), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The framework agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The framework agreement may be terminated by either party at any time in accordance with its general terms and conditions. The framework agreement is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the framework agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of June 29, 2018 and December 29, 2017.

STAAR SURGICAL COMPANY

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

Note 12 — Commitments and Contingencies (Continued)

Covenant Compliance

The Company is in compliance with the covenants of its credit facilities as of the date of this filing.

Lease Line of Credit (Capital Leases)

On March 8, 2018, the Company entered into lease schedule 011 with Farnam Street Financial, Inc. (“Farnam”). The line of credit provides for borrowings of up to $500,000 at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. Interim rent is paid until the full amount of the line is used at which time the lease commences. As of June 29, 2018, approximately $468,000 of the line was available for borrowing.

On March 8, 2018, the Company entered into lease schedule 010R with Farnam. Under 010R, equipment with a cost of $1,560,000 was financed over a period of 24 months at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. As of June 29, 2018, approximately $1,221,000 was outstanding on this capital lease.

On January 31, 2017, the Company entered into lease schedule 009R with Farnam. Under 009R, equipment with a cost of $1,957,000 was financed over a period of 24 months at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. As of June 29, 2018 and December 29, 2017, approximately $576,000 and $1,067,000, respectively, was outstanding on this capital lease.

Litigation and Claims

From time to time the Company may be subject to various claims and legal proceedings arising in the normal course of our business. These claims and legal proceedings may relate to contractual rights and obligations, employment matters, and claims of product liability. The most significant of these actions, proceedings and investigations are described below. STAAR maintains insurance coverage for product liability and certain securities claims. Legal proceedings can extend for several years, and most of the matters concerning the Company are at early stages of the legal and administrative process. As a result, these matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceedings are material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company’s Condensed Consolidated Statements of Operations, Balance Sheets, or Statements of Cash Flows.

Stockholder Derivative Litigation: Forestal Action

On June 21, 2016, Kevin Forestal filed a stockholder derivative complaint against our then-current Board of Directors, which included Caren Mason, Mark B. Logan, Stephen C. Farrell, Richard A. Meier, John C. Moore, J. Steven Roush, Louis E. Silverman, and William P. Wall, and STAAR as well as Barry G. Caldwell and John S. Santos in the U.S. District Court for the Central District of California. The plaintiff alleges breaches of fiduciary duties by, among other things, allowing STAAR to disseminate misleading statements to investors regarding the condition of the Company’s Quality System, failing to properly oversee the Company, and unjust enrichment. The complaint seeks damages, restitution and governance reforms, attorneys’ fees, and costs. On January 31, 2017, the court granted the Company’s Motion to Dismiss. On February 6, 2017, plaintiff filed a Notice of Appeal, and on July 17, 2017 plaintiff filed his appellate brief. On September 14, 2017, the Company filed its appellate answering brief. On June 29, 2018, the Ninth Circuit Court of Appeals affirmed the District Court’s ruling dismissing the complaint. The Company did not record any loss or accrual in the accompanying Condensed Consolidated Financial Statements at June 29, 2018 and December 29, 2017.

Employment Agreements

The Company’s Chief Executive Officer 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.

STAAR SURGICAL COMPANY

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

Note 13 — Reclassifications

In accordance with ASU 2014-09, in order to disclose contract assets and contract liabilities, the Company reclassified the estimated amount of inventory expected to be returned from the allowance for sales returns to inventories, net on the Condensed Consolidated Balance Sheets. In addition, the Company reclassified the allowance for sales returns from accounts receivable, net to a separate line item in current liabilities on the Condensed Consolidated Balance Sheets, see Note 1.

Certain compensation related expenses were reclassified from General and Administrative to Marketing and Selling and Research and Development line items on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 to conform with 2018 presentation.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “forecast” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements about any of the following: any projections of or guidance as to earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, capital expense or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of new or improved products (including the Toric ICL and EVO family of lenses in the U.S.); commercialization of new or improved products; future economic conditions or size of market opportunities; and expected costs of quality systems or operations; statements of belief, including as to achieving 2018 business plans; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risks and we can give no assurance that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on February 28, 2018. 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 unaudited consolidated financial statements of STAAR, including the related notes, provided in this report.

Overview

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

Recent Developments

We achieved record net total sales and record ICL sales in the second quarter of 2018. Growth in the quarter was broad-based across products and international geographies. ICL unit growth of 66% for the second quarter of 2018 arose in part from EVO Visian ICL unit growth of 131% in Japan, 127% growth in China, 64% growth in Canada, 61% growth in India, 30% growth in Germany and 20% growth in European distributor markets.

We believe our sales momentum can continue for the remainder of the year. Therefore, we believe our sales growth for the second half of 2018 may exceed 20% based on current market conditions. In addition, we believe our full year fiscal 2018 sales growth percentage target may exceed 25% compared with our prior target for sales growth closer to 20% over 2017 based on current market conditions.

Furthermore, we believe gross margins will increase as compared to 2017. We anticipate operating expenses in the third quarter of 2018 will be higher than the comparable period in 2017 and sequentially due to the timing of the European Society of Cataract & Refractive Surgeons (ESCRS) congress, which was held in the fourth quarter of 2017 compared to the third quarter of 2018. We expect operating expenses in the second half of 2018 will exceed that of the first half of 2018.

We continue to expect profitability improvement as compared to 2017 and expect to achieve at least breakeven GAAP net income for the full year of 2018. We continue to expect to increase cash from operations for the full year.

We remain in discussion with the FDA regarding the Visian Toric ICL PMA submission. We are also in the early stages of our European multi-site EVO with EDOF presbyopia clinical trial. While the Visian Toric ICL PMA submission remains pending, and while the clinical trial continues, we cannot predict when, or if, we will succeed with these efforts.

Critical Accounting Policies

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

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. On December 30, 2017 (beginning of fiscal year 2018), the Company adopted Accounting Standards Update 2014-09, “Revenue from Contract with Customers (Topic 606) and its subsequent amendments. The Company determined that the adoption of this new standard did not materially impact revenue recognition, see Note 1 of the Condensed Consolidated Financial Statements. Other than the adoption of Topic 606, management believes that there have been no significant changes during the six months ended June 29, 2018 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 29, 2017.

Results of Operations

The following table shows the percentage of our total sales represented by the specific items listed in our condensed consolidated statements of operations for the periods indicated, and the percentage by which these items increased or decreased over the prior period.

	Percentage of Net Sales for Three Months						Percentage of Net Sales for Six Months
	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		25.6			29.5			26.8			28.9
Gross profit		74.4			70.5			73.2			71.1

General and administrative		18.3			21.4			19.6			22.9
Marketing and selling		31.4			33.5			29.7			33.1
Research and development		15.8			21.7			17.6			23.2
Total selling, general and administrative expenses		65.5			76.6			66.9			79.2
Operating income (loss)		8.9			(6.1	)		6.3			(8.1	)
Other income (expense), net		(1.1	)		2.3			(0.5	)		1.3
Income (loss) before provision for income taxes		7.8			(3.8	)		5.8			(6.8	)
Provision for income taxes		2.4			0.7			1.8			0.7
Net income (loss)		5.4	%		(4.5	)%		4.0	%		(7.5	)%

Net Sales

	Three Months Ended				Percentage Change			Six Months Ended				Percentage Change
	June 29, 2018		June 30, 2017		2018 vs. 2017			June 29, 2018		June 30, 2017		2018 vs. 2017
ICL	$	27,292	$	16,317		67.3	%	$	48,450	$	31,588		53.4	%
Other product sales:
IOL		4,186		4,377		(4.4	)		8,244		8,983		(8.2	)
Other		2,427		1,242		95.4			4,304		1,715		—	*
Total other product sales		6,613		5,619		17.7			12,548		10,698		17.3
Net sales		33,905		21,936		54.6	%		60,998		42,286		44.3	%

Denotes change is greater than + 100%.

Net sales for the three months ended June 29, 2018 were $33.9 million, an increase of 55% from $21.9 million reported during the same period of 2017. Net sales for the six months ended June 29, 2018 were $61.0 million, an increase of 44% from $42.3 million reported during the same period of 2017.

Total ICL sales for the three months ended June 29, 2018 were $27.3 million, an increase of 67% from $16.3 million reporting during the same period of 2017, with unit growth of 66%. The sales increase was driven by the APAC region, which grew 106% with unit growth of 102%, primarily due to sales growth in Japan up 130%, China up 134%, and India up 47%. The EMEA region grew 25% with unit growth of 10% primarily due to increased sales in Germany, Distributor Operations, and Latin America. ASPs in Europe were favorably impacted by the strength of the Euro compared to the U.S. dollar. North America sales increased due to a 56% increase in sales in Canada. ICL sales represented 80.5% and 74.4% of total sales for the three months ended June 29, 2018 and June 30, 2017, respectively.

Total ICL sales for the six months ended June 29, 2018 were $48.5 million, an increase of 53% from $31.6 million reported during the same period of 2017, with unit growth of 54%. The sales increase was driven by the APAC region, which grew 81% with unit growth of 82%, primarily due to sales growth in China up 109%, Japan up 90%, and Korea up 35%. The EMEA region grew 27% with unit growth of 12% primarily due to increased sales in Germany, Middle East, Distributor Operations, Latin America and Spain. ASPs in Europe were favorably impacted by the strength of the Euro compared to the U.S. dollar. Within North America Canada sales increased 30%. ICL sales represented 79.4% and 74.7% of total sales for the six months ended June 29, 2018 and June 30, 2017, respectively.

Other product sales, including IOLs, for the three months ended June 29, 2018 were $6.6 million, compared to $5.6 million reported during the same period of 2017. Other product sales, including IOLs, for the six months ended June 29, 2018 were $12.5 million, compared to $10.7 million reported during the same period of 2017. The increase in other product sales for both periods is due to an increase in injector part sales, partially offset by a decrease in IOL sales.

Gross Profit

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
Gross Profit	$	25,227		$	15,474			63.0	%	$	44,658		$	30,051			48.6	%
Gross Profit Margin		74.4	%		70.5	%					73.2	%		71.1	%

Gross profit for the three months ended June 29, 2018 was $25.2 million or 74.4% of sales, an increase of 63% from $15.5 million, or 70.5% of sales, reported during the same period of 2017. The improvement in gross margin resulted primarily from lower unit costs as a result of significantly increased production volumes, to support the 67% increase in ICL sales for the second quarter, resulting in better overhead absorption and due to lower inventory provisions.

Gross profit for the six months ended June 29, 2018 was $44.7 million or 73.2% of sales, an increase of 49% from $30.1 million, or 71.1% of sales, reported during the same period of 2017. The improvement in gross margin resulted from lower unit costs, lower inventory provisions and freight costs as a percent of sales, improved product mix, partially offset by unfavorable price mix.

General and Administrative

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
General and Administrative	$	6,196		$	4,685			32.3	%	$	11,967		$	9,664			23.8	%
Percentage of Sales		18.3	%		21.4	%					19.6	%		22.9	%

General and administrative expenses for the three months ended June 29, 2018 was $6.2 million, an increase of 32% from $4.7 million reported for the same period of 2017. The increase in general and administrative expenses was due to an increase in salary-related expenses including stock compensation, as well as additional expense in finance and information systems and increased facility costs versus prior year.

General and administrative expenses for the six months ended June 29, 2018 was $12.0 million, an increase of 24% from $9.7 million reported for the same period of 2017. The increase was mainly due to increases in salary-related expenses including stock compensation, as well as additional expense in finance and information systems, and increased travel, legal fees, and facility costs.

Marketing and Selling

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
Marketing and Selling	$	10,659		$	7,342			45.2	%	$	18,113		$	13,978			29.6	%
Percentage of Sales		31.4	%		33.5	%					29.7	%		33.1	%

Marketing and selling expenses for the three months ended June 29, 2018 was $10.7 million, an increase of 45% from $7.3 million reported for the same period of 2017. Marketing and selling expenses for the six months ended June 29, 2018 was $18.1 million, an increase of 30% from $14.0 million reported for the same period of 2017. The increase for both periods was due to investments in digital, consumer, and strategic marketing and commercial infrastructure.

Research and Development

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
Research and Development	$	5,346		$	4,767			12.1	%	$	10,753		$	9,824			9.5	%
Percentage of Sales		15.8	%		21.7	%					17.6	%		23.2	%

Research and development expenses for the three months ended June 29, 2018 was $5.3 million, an increase of 12% from $4.8 million reported for the same period of 2017. Research and development expenses for the six months ended June 29, 2018 was $10.8 million, an increase of 10% from $9.8 million reported for the same period of 2017. The increase for both periods was primarily due to an increase in clinical expenses associated with our clinical trial for the next generation ICL with an EDOF optic, and an increase in medical affairs expenses.

Research and development expense consists primarily of compensation and related costs for personnel responsible for the research and development of new and existing products and the regulatory and clinical activities required to acquire and maintain product approvals globally. These costs are expensed as incurred.

Other Income, Net

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
Other Income/(Expense), Net	$	(391	)	$	495			—	*	$	(306	)	$	528			—	*
Percentage of Sales		(1.1	)%		2.3	%					(0.5	)%		1.3	%

Denotes change is greater than + 100%.

Other expense, net for the three and six months ended June 29, 2018 was $0.4 million and $0.3 million, respectively, compared to other income, net of $0.5 million and $0.5 million reported for the same periods of 2017, respectively. The change in other income, net for the three and six months ended June 30, 2017 to other expense, net for the three months and the six months ended June 29, 2018 was a result of foreign exchange losses (primarily the Euro).

Income Taxes

	Three Months Ended						Percentage Change			Six Months Ended						Percentage Change
	June 29, 2018			June 30, 2017			2018 vs. 2017			June 29, 2018			June 30, 2017			2018 vs. 2017
Income tax provision	$	805		$	146			—	*	$	1,106		$	287			—	*
Percentage of Sales		2.4	%		0.7	%					1.8	%		0.7	%

Denotes change is greater than + 100%.

The provision for income taxes is determined using an estimated annual effective tax rate. We recorded income taxes of $0.8 million and $1.1 million for the three and six months ended June 29, 2018, respectively and $0.1 million and $0.3 million for the three and six months ended June 30, 2017. The income tax provision was due primarily to pre-tax income generated in certain foreign jurisdictions. We have no unrecognized tax benefits pertaining to any uncertain tax positions as of any period presented.

Liquidity and Capital Resources

As of June 29, 2018, we had cash, cash equivalents and restricted cash of $21.4 million. Additionally, we have a line of credit with a Japanese lender, in the amount of $4.5 million, that is fully drawn and a line of credit with a Swiss lender, in the amount of $1.0 million, which is fully available for borrowing. In recent years, we have been able to finance our operations through cash generated from operating activities, proceeds from the exercise of stock options, capital lease financing, and availability under our lines of credit. We believe that our existing cash and cash equivalents will be sufficient to meet our working capital expenditure requirements for at least the next 12 months. From time to time, we may opportunistically explore additional financing to develop or enhance our products, to accelerate commercialization of products, to fund expansion or clinical trials, to fund investments in operations, to acquire or to invest in complementary products, businesses or technologies, to lower our cost of capital, or for general corporate purposes, which could include equity and/or debt financing.

Net cash provided by operating activities was $2.3 million for the six months ended June 29, 2018 and net cash used in operating activities was $1.4 million for the six months ended June 30, 2017. The net cash provided by operating activities for the six months ended June 29, 2018, resulted from net income of $2.4 million and $6.0 million in non-cash items offset by a $6.1 million decrease in net working capital. The increase in net cash provided by operating activities during the six months ended June 29, 2018 was due to recognition of net income of $2.4 million for the six months ended June 29, 2018 compared to a net loss of $3.2 million for the six months ended June 30, 2017 and an increase of $2.1 million in non-cash items, offset by a decrease in net working capital of $4.0 million.

Net cash used in investing activities was $1.3 million and $0.6 million for the six months ended June 29, 2018 and June 30, 2017, respectively, due to the acquisition of property, plant and equipment.

Net cash provided by financing activities was $1.5 million and $1.1 million for the six months ended June 29, 2018 and June 30, 2017, respectively. Net cash provided by financing activities during the first six months of 2018 resulted primarily from the proceeds from vested restricted stock and exercises of stock options, partially offset by the repayment of capital lease obligations.

Credit Facilities and Commitments

Lines of Credit and Lease Line of Credit (Capital Leases)

See Note 12 of the accompanying Condensed Consolidated Financial Statements.

Covenant Compliance

The Company is in compliance with the covenants of its credit facilities as of June 29, 2018.

Employment Agreements

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

Off-Balance Sheet Arrangements

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

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended June 29, 2018, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended December 29, 2017.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 29, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. Certain legal proceedings in which we are currently involved are discussed under “Litigation and Claims” in Note 12, “Commitments and Contingencies,” to our Condensed Consolidated Financial Statements provided in this report, and such discussions are hereby incorporated by reference.

ITEM 1A.

RISK FACTORS

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully information contained in this report and the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended December 29, 2017. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.

OTHER INFORMATION

On August 1, 2018, the Board of Directors approved revisions to the form of Indemnity Agreement entered into by and between the Company and its directors and officers. The revisions are intended to more closely align the form of Indemnity Agreement with current practices. Section 1(a)(iii) was revised to exclude from Covered Claims any claims initiated by an Indemnitee against the Company or other directors. Section 1(c) (renumbered as Section 1(d)) was revised to more expressly provide coverage for “Informal” Investigations, as defined by the Indemnity Agreement. Section 2(b) was revised to clarify that the only Directors and Officers (“D&O”) insurance payments that would preclude indemnity under the Indemnity Agreement are those payments from D&O policies maintained by the Company (and excluding any “Wealth Security” policies held by a director or officer). Section 3(c) was revised to prohibit the Company from obtaining a “bar order” against advancement of expenses to an Indemnitee. Section 3(b) was revised to expressly require that an Indemnitee be included in any D&O policy, including a tail policy, bought for anyone else covered by the Company’s then-current D&O policy. The foregoing summary is qualified in its entirety by reference to the form of Indemnity Agreement, which is filed as Exhibit 10.38 to this Quarterly Report on Form 10-Q.

ITEM 6.

EXHIBITS

3.1	Amended Restated Certificate of Incorporation.(1)

3.2	Amended and Restated Bylaws.(2)

4.1	Form of Certificate for Common Stock, par value $0.01 per share.(3)

†4.2	Amended and Restated Omnibus Equity Incentive Plan.(4)

10.37	Form of Distributorship Agreement.*

†10.38	Form of Indemnity Agreement between the Company and certain officers and directors.*

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

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

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

101	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended June 29, 2018, formatted in Extensible Business Reporting Language (XBRL), are filed herewith and include: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text.*

(1)

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

(2)

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

(3)

Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A/A as filed with the Commission on April 18, 2003.

(4)

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

Filed herewith.

Furnished herewith.

†

Management contract or compensatory plan.

SIGNATURES

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

	STAAR SURGICAL COMPANY

Dated: August 1, 2018	By:	/s/ DEBORAH J. ANDREWS
		Deborah J. Andrews
		*Chief Financial Officer*
		*(on behalf of the Registrant and as its principal financial officer)*

Exhibit 10.37

DISTRIBUTORSHIP AGREEMENT

THIS DISTRIBUTORSHIP AGREEMENT (the “Agreement”) is entered into and made effective as of ____________ (the “Effective Date”), by and between STAAR SURGICAL AG, a Swiss corporation, with a principal place of business at Hauptstrasse 104, CH – 2560 Nidau, Switzerland, (“STAAR”), and _______________, a corporation organized and existing under the laws of _________________, with its principal place of business at _______________________ (“Distributor”).

Recitals

A. STAAR is engaged in the manufacture, global distribution and sale of ophthalmic products, including a range of devices for cataract, glaucoma and refractive surgery.

B. Distributor is engaged in and has experienced and trained personnel for the marketing, distribution and sale of ophthalmic products in ________________.

C. STAAR desires to engage Distributor, and Distributor desires to be engaged by STAAR, to market, distribute and sell the Products (as defined below) in _______________ on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises, and the mutual covenants and conditions contained herein, and other good and valuable consideration, the parties hereby agree as follows:

Agreement

Appointment and Acceptance

1.1 STAAR hereby appoints Distributor, and Distributor hereby accepts such appointment, to purchase the Products from STAAR and market, distribute and sell them in the Territory on the terms and conditions set forth herein. Distributor shall not have the right to appoint any subdistributors, subcontractors or other third parties to market, distribute or sell the Products. All Products shall be marketed, distributed and sold solely under STAAR’s Trademarks. STAAR may utilize any of its affiliates to carry out STAAR’s obligations under this Agreement; provided that STAAR shall remain liable for the due observance and performance of this Agreement by any such affiliate.

1.2 Distributor shall (a) procure the Products solely from STAAR (or its affiliates) and not (b) procure, manufacture, market or sell in the Territory any implantable medical devices that compete directly or indirectly with the Products, during the term of this Agreement. Distributor shall use its best efforts to promote and sell the Products to the maximum number of responsible customers in the Territory.

1.3 Subject to Section 8.3, Distributor’s right to market, distribute and sell the Products in the Territory shall be exclusive. Distributor shall not sell any Products to a customer if Distributor knows or has reason to believe that such customer intends to remove those Products from the Territory. Distributor acknowledges and agrees that STAAR retains the right to sell the Products in the Territory directly or indirectly, including but not limited to via electronic commerce (without compensation to the Distributor). The Distributor shall cooperate with STAAR in servicing corporate accounts for customers operating in multiple Territories.

1.4 During the term of this Agreement, and subject to the terms and conditions hereof, STAAR hereby grants to Distributor, and Distributor hereby accepts, the limited, nontransferable, nonexclusive right and license to use the trade name, trademarks, and logos of STAAR (collectively, “Trademarks”), without the right to grant sublicenses, solely in connection with the marketing, distribution and sale of the Products in the Territory pursuant to this Agreement. Distributor shall use and display the Trademarks solely in the manner, form, design, color and layout agreed by STAAR in its sole discretion. Distributor shall not use the Trademarks as part of or in combination with Distributor’s trade name or marks. Distributor shall only market, distribute and sell the Products under the Trademarks and shall not use the Trademarks in any advertising or promotional campaigns or otherwise, or use any confusingly similar names or logos, in any manner that, in STAAR’s sole discretion, may be misleading or harmful to STAAR (or its affiliates). Subject to the limited use rights granted to Distributor in respect of the Trademarks under this Agreement, all powers that would be conferred on authorized users under other laws are expressly excluded.

1.5 The term “Products” shall mean those certain products, specified by brand name, manufactured and marketed under the Trademarks by STAAR that are listed on Exhibit A-1 hereto. STAAR may from time to time modify or change the Products on Exhibit A-1 in its sole discretion, and if so, will notify Distributor promptly thereof. In the event that STAAR discontinues a Product, it will provide at least thirty (30) days’ prior written notice to Distributor. Distributor shall not modify, disassemble or reverse engineer any Product, in whole or in part.

1.6 The term “Territory” shall mean ________. Distributor shall not promote, market, distribute or sell the Products outside the Territory.

1.7 Except for the rights expressly granted to Distributor pursuant to Sections 1 and 2, Distributor acknowledges and agrees that STAAR reserves and retains all rights with respect to the marketing, distribution and sale of the Products in the Territory (and elsewhere). Notwithstanding any other provision hereof to the contrary, STAAR shall have the unrestricted right, at its sole discretion, directly or indirectly through third party distributors, to among other things (a) supply, market, distribute and sell any product in the Territory other than the Products, (b) supply, market, distribute and sell any Product in the Territory on an OEM basis under third party trademarks, and (c) market, distribute and sell the Products (or any other product) in any geographic region outside the Territory.

Business of Distributor

Distributor is and shall remain an independent contractor. Distributor agrees that STAAR has granted it no authority to act or make any representations or warranties on behalf of STAAR. Distributor is at all times acting for its own account, and at its own expense. Distributor represents to STAAR that Distributor has trained and experienced personnel, facilities and other resources in the Territory in order to diligently, professionally and effectively market, distribute and sell the Products. Distributor shall comply with all applicable laws, statutes, regulations and treaties relating to the marketing, distribution and sale of the Products and the performance of its duties and obligations hereunder. Distributor shall be free to establish its own pricing for Products sold by Distributor and shall notify STAAR of its pricing, as in effect from time to time.

Term

The term of this Agreement shall commence on the Effective Date and terminate in _____________, on _____________, unless terminated earlier pursuant to the terms of this Agreement; provided , however , that this Agreement may be renewed for successive one (1) year periods if STAAR and Distributor expressly agree in writing and in their sole discretion to renew this Agreement prior to the foregoing termination date or any successive renewal term.

Prices and Terms

4.1 The prices which Distributor shall pay to STAAR for the Products shall be as specified on Exhibit A 1 . Such prices are exclusive of any national, state, local or other governmental sales, transfer, use, excise, value-added or other taxes, customs duties, or similar tariffs and fees, which shall be the sole responsibility of Distributor. In the event that STAAR is required to pay any such taxes, duties, tariffs or fees, the full amount thereof shall be added to the applicable invoice and payable by Distributor. Company may change the prices of the Products from time to time with thirty (30) days prior written notice to Distributor.

4.2 Payment for the Products shall be in U.S. Dollars, or such other currency as STAAR may require in its sole discretion, and made within thirty (30) days of STAAR’s invoice. Late payments shall be subject to an interest charge of 1% per month or the maximum amount permitted by applicable law, whichever is less.

4.3 In the event STAAR establishes a line of credit for Distributor or permits Distributor to purchase Products on open account, STAAR retains title to said Products and reserves all rights with respect to such delivered Products permitted by law, including, without limitation, the rights of recession, repossession, resale and stoppage in transit until the full amount due from Distributor in respect of such Products has been paid.

STAAR Obligations

STAAR shall, during the term of this Agreement:

5.1 Provide Product training, at mutually acceptable times and places, for a reasonable number of Distributor’s personnel; provided that Distributor shall pay all expenses of its personnel attending such training sessions (including without limitation salaries and transportation);

5.2 Furnish Distributor, without charge, reasonable quantities of English-language Product literature which STAAR may publish or prepare from time to time;

5.3 Render reasonable periodic assistance to Distributor on Product technical and sales issues; and

5.4 Invoice Distributor for each Product sold by Distributor.

Distributor Obligations

Distributor shall, during the term of this Agreement, and at its expense:

6.1 Actively use its best efforts to advertise, promote and penetrate the market for the Products in the Territory;

6.2 Employ adequate staff having specialized technical training, maintain adequate stocks of Products, and maintain facilities and other resources within the Territory, at its own expense, in order to maximize the distribution and sale of the Products;

6.3 Provide STAAR with an annual marketing plan setting forth Distributor’s plan for the marketing, distribution and sale of the Products in the Territory, including (a) Distributor’s goals and objectives for Product promotion, sales, and distribution, (b) advertising campaigns for trade journals and other publications, (c) customer training and education, (d) participation at trade shows and exhibits, (e) special promotions and financing and acquisition programs, such as reagent rental programs, (f) distribution strategies and market analysis, including a detailed summary of the activities of competitors in the marketplace, and (g) anticipated capital expenditures, personnel requirements and other resources to be utilized in the succeeding year;

6.4 Participate in appropriate exhibitions and trade shows as part of its marketing of the Products in the Territory, it being understood and agreed that STAAR and its affiliates also shall have the right to participate in exhibitions and trade shows in the Territory;

6.5 Submit to STAAR regular quarterly status reports reflecting sales activities (detailed by customer name and units sold per customer per month), anticipated requirements of customers in the Territory, general market conditions, and a summary of activities by competitors;

6.6 Provide customer training and warranty services; and

6.7 Refrain from making any claims or representations concerning the Products other than as set forth in the applicable specifications or labeling therefor and never disparage either STAAR or the Products.

6.8 In the event that Distributor terminates this Agreement, then for one year thereafter, Distributor shall not sell, promote, advertise or market in the Territory products which are competitive with the Products.

Forecasts/Purchase Orders/Minimum Product Quantities

7.1 Distributor shall on a calendar-quarter basis furnish to STAAR a written good-faith, non-binding estimate of Distributor’s Product requirements in the Territory and requested shipping dates (the “Forecast”) for each of the succeeding twelve (12) months. Any purchase orders issued by Distributor are subject to acceptance by STAAR and will not be deemed accepted until a written confirmation has been dispatched by STAAR.

7.2 Distributor shall order Products from STAAR under this Agreement by submitting to STAAR a written purchase order specifying Products, quantities, and requested delivery dates to enable STAAR to fill the order. Each purchase order submitted to STAAR is subject to acceptance by STAAR at its offices to which such order was submitted. The purpose of the purchase order to be issued under this Agreement is for scheduling only; no terms and conditions of Distributor’s purchase orders or any other document or instrument of Distributor shall be binding upon STAAR or amend or modify this Agreement in any manner, notwithstanding any language to the contrary contained in any such purchase order, instrument or document. Distributor should place its last order in each quarter by the tenth day of the last month in each quarter (e.g., March 10, June 10, September 10, and December 10).

7.3 During each Contract Year, as defined below, Distributor shall purchase from STAAR the minimum quantity of each Product that shall be mutually agreed between the parties in advance of the applicable Contract Year (“Minimum Product Quantities”). The Minimum Purchase Quantities for the Contract Year are as set forth on Exhibit B attached hereto. Within ninety (90) days prior to the expiration of each Contract Year, the parties will discuss in good faith and agree on the Minimum Product Quantities for the successive Contract Year; provided , however , that, if the parties fail to reach agreement on or otherwise specify the Minimum Purchase Quantities for the successive Contract Year, the Minimum Product Quantities for such successive Contract Year shall be __________ percent (___%) of the Minimum Purchase Quantities for the existing Contract Year. “Contract Year” means for the first Contract Year of the Agreement, the period commencing on the Effective Date hereof and ending one year thereafter and for subsequent Contract Years, the successive twelve (12) month period thereafter. Failure of Distributor to purchase the Minimum Purchase Quantities for any Contract Year, shall be considered a material breach of this Agreement.

Delivery

8.1 Delivery of all Products ordered by Distributor shall be made Ex Works at STAAR’s export manufacturing or other facility or named shipping point as determined by STAAR. ICC INCOTERMS (2010 edition) shall apply, except insofar as these INCOTERMS may be inconsistent with the terms of this Agreement.

8.2 In the event Distributor fails to take delivery and/or shipment of Products pursuant to the terms of this Agreement: (a) STAAR shall be entitled to store the Products in a warehouse at the expense and risk of Distributor; (b) the price of the Products shall become immediately due and payable by Distributor; and (c) after thirty (30) days from the date upon which the price becomes payable, STAAR may dispose of the Products in a commercially reasonable manner without notice to Distributor and recover any shortfall and related expenses from Distributor.

8.3 All Products ordered pursuant to accepted purchase orders shall be scheduled for delivery in accordance with STAAR’s then current and normal delivery times.

Warranty and Quality Control

9.1 STAAR warrants that, for the period of twelve (12) months from the date of delivery to Distributor hereunder (the “Warranty Period”), the Products will meet STAAR’s published specifications or labeling for such Products as in effect at the time of such delivery (“Warranty”). To the maximum extent permitted by applicable law and except as otherwise stated in this Agreement: (a) the foregoing Warranty is exclusive; and (b) all other terms, representations, undertakings, rights, remedies and warranties are excluded, whether express or implied (including but not limited to any warranties of merchantability, fitness for a particular purpose or against infringement). To the maximum extent permitted by applicable law, the exclusive remedy for breach of the Warranty shall be, at STAAR’s option, the repair or replacement, at STAAR’s expense, of the non-conforming Product; provide d that Distributor notifies STAAR of the non-conformity and returns the non-conforming Product within the Warranty Period. Products may only be returned by Distributor when accompanied by a return material authorization number issued by STAAR. Shipping expenses for Products returned by Distributor will be prepaid by Distributor. STAAR shall pay for the return or replacement shipment to Distributor of Products repaired or replaced under the Warranty. For Products returned for repair or replacement that are not covered under Warranty, STAAR’s standard repair charges shall be applicable in addition to all shipping expenses. The above Warranty is contingent upon proper installation, use and maintenance of the Products and does not apply to Products which have been misused, mishandled, adulterated, repaired or modified without STAAR’s written approval. To the maximum extent permitted by applicable law, STAAR shall not be responsible for any incidental or consequential loss, damage, or expense which arises directly or indirectly from the use of any Product. Without limiting the above, and to the maximum extent permitted by applicable law, Distributor’s sole remedy in contract or in tort (including in negligence) and STAAR’s liability shall be limited to the repair or replacement of any Product which is returned to and found to be defective or non-conforming by STAAR.

9.2 Distributor shall not make any representation or warranty as to the Products except for the warranty stated in Section 9.1 above. Distributor shall not alter the Products and shall not recommend or knowingly sell the Products for any uses except as described in STAAR’s Product label and labeling and in accordance with the written instructions and warnings furnished by STAAR. Distributor agrees to deliver to its customers at or before sale all specifications, inserts, instructions, and warnings furnished by STAAR and to retain records evidencing such delivery.

10.

Regulatory and Post-Market Surveillance Requirements

10.1 During the term of this Agreement and for at least ten (10) years thereafter, Distributor shall maintain records to allow for traceability of individual serial/lot numbers to customers for all sales of the Products. Upon request by STAAR, Distributor shall supply STAAR with a report of the information contained in such records.

10.2 In the event that STAAR deems it necessary to recall any Product, or any governmental authority requests recall of any Product distributed or sold by Distributor in the Territory, Distributor and STAAR shall cooperate fully with each other in effecting such recall, with an effort to reduce as much as possible the expense thereof and Distributor must notify STAAR of any contemplated or requested recalls as soon as possible (and at all times within any period required to notify any regulatory authority under applicable law) and prior to Distributor taking any steps to effect such a recall. Without limiting Distributor’s obligations under law, as between Distributor and STAAR, the decision of whether or not to recall any Product shall be made solely by STAAR. Distributor shall notify all customers who received the recalled Product and shall record all receipts of Product returned under any recall. Distributor shall maintain copies of recall notification letters and maintain distribution logs that detail where each Product was shipped by Distributor.

10.3 Distributor shall fully document and inform STAAR in writing of any Complaints or other matters addressed in this Section 10. Documentation with respect to Complaints shall include the Product model and serial or lot number, customer contact information, and as much detail as possible regarding the nature of the Complaint. Distributor will forward to STAAR any Complaint involving significant bodily injury, illness or death resulting from use of Products within one (1) calendar day of receipt and Distributor must notify STAAR of any such incident prior to issuing any notice required by law in respect of such incident (including those to be issued to governmental or regulatory authorities). Distributor shall forward to STAAR all other Complaints within five (5) calendar days of receipt. If any evaluation of Product involved in a Complaint by STAAR is necessary or appropriate, Distributor will use best efforts to retrieve the affected Product, if available, and return it to STAAR. STAAR will pay for the return shipment of such Product to STAAR. STAAR will be responsible for investigating all Complaints, determining if reporting to regulatory authorities in the Territory is required, and submitting such reports to regulatory authorities when required. The term “Complaints” as used in this Section 10.3 means any report, complaint or other communication received by Distributor (or its employees, contractors, agents or representatives) from end users of Products or their healthcare providers related to the safety or efficacy of the Products.

10.4 STAAR informs Distributor that Sections 10.1, 10.2, and 10.3 above are requirements of the Medical Device Directive (93/42/EEC), and that non-compliance by Distributor of these Sections will constitute grounds for STAAR to immediately cease supply of Products to Distributor and will be deemed a failure by Distributor to perform a material obligation, warranty, duty or responsibility hereunder.

10.5 Distributor acknowledges and agrees that it has full understanding of and shall duly observe and abide by any and all legal and regulatory requirements applicable to the import, commercialization, marketing, distribution or sale of Products in the Territory (collectively, “Regulatory Requirements”). Distributor further acknowledges and agrees that STAAR does not take any, and shall not be responsible for, any legal liability or responsibility for damages, costs or legal consequences that may result from any failure by Distributor to observe or comply with any Regulatory Requirements.

10.6 Distributor shall observe all transport and storage requirements and conditions applicable to the Products as indicated on any Product packaging.

11.

Governmental Approvals and Registrations

11.1 With the exception of the health registrations for the Products provided for in Section 11.2 below, Distributor shall secure (and provide copies thereof to STAAR) all necessary governmental permits, licenses, sponsorships and registrations required in connection with the importation and resale of the Products in the Territory. Upon expiration or termination of this Agreement, Distributor shall transfer to STAAR (or its nominee) all right and title to all sponsorships or import licenses or permits governing the importation and resale of the Products into the Territory.

11.2 STAAR shall provide to Distributor all necessary information and data to obtain appropriate health registrations and applications in the Territory. Distributor shall use its best efforts to obtain all necessary registrations, which registrations shall be obtained in the name of STAAR. Distributor agrees that it will have no right or interest in said registrations and applications; that STAAR is and shall remain the exclusive owner of such registrations and applications free and clear of any claims by Distributor; and that Distributor shall make no claim to the same at any time during or after the term of this Agreement. Distributor shall respect such property rights of STAAR and comply with all local laws and regulations in respect thereof. Distributor shall also assist STAAR, at STAAR’s request, in taking any steps necessary to defend such rights, and any reasonable expenses incurred in this regard by Distributor shall be reimbursed by STAAR.

11.3 Distributor shall at all times keep STAAR apprised of all Regulatory Requirements and any changes thereto and, on an annual basis, shall report to STAAR in writing of any such changes and confirm in such report that there have been no changes in any Regulatory Requirements other than as specified in the annual report.

11.4 Copies of all permits, licenses, sponsorships and registrations referred in Sections 11.1 and 11.2 shall be promptly forwarded to STAAR.

12.

STAAR’s Proprietary Information and Rights

12.1 Distributor recognizes and understands that all information not generally known concerning Company and the Products, including but not limited to Company’s organization and business affairs, customer lists, sales information, operating procedures and practices, technical data, designs, software, know-how, trade secrets, and processes (the “Proprietary information”), whether owned by Company or licensed by Company from third parties, are subject to a valuable proprietary interest of Company, and that Distributor is under an obligation to maintain the confidentiality of such Proprietary Information. Without limiting the generality of the foregoing obligations, Distributor agrees that for the term of this Agreement and thereafter until such time as the Proprietary information is in the public domain, Distributor will (i) not disclose, publish or disseminate any Proprietary Information, (ii) not use any Proprietary Information for its own account, (iii) not authorize any other person to disclose, publish or disseminate the Proprietary information, and (iv) treat all Proprietary Information in a confidential manner, including appropriate marking and secure storage of written Proprietary Information.

12.2 No title or ownership of the software bundled or included with any Product (“Software”) is transferred to Distributor, and such Software remains the proprietary property of Company. The Software is protected by the U.S. Copyright. Act and by international copyright treaties. All Software, including documentation and any subsequent updates provided by Company to Distributor, is licensed only for use on the single Product on which the Software is first installed. Unauthorized copying of the Software is expressly forbidden, and Distributor agrees not to distribute copies of the Software to nonlicensed parties. In no event shall Distributor reverse engineer, decompile, or disassemble the Software.

12.3 Distributor acknowledges that the Company is the owner and/or licensee in the Territory of the trademark(s) indicated on the Product packaging, advertising or promotional material or utilized in the sale of the Products (the “Trademarks”). During the term of this Agreement, Distributor is authorized to use the Trademarks solely in connection with Distributor’s advertisement, promotion and distribution of the Products in the Territory. Whenever the Trademark is used, e.g., on any package, label or advertisement, the right or most prominent use shall always be accompanied by a legend acceptable to Company indicating that the Trademark is licensed to the Distributor by Company.

12.4 Distributor shall neither use nor permit others to use the name “STAAR”, or any abbreviation or modification thereof, or the Trademarks or any other trademark or trade name of Company as part of the Distributor’s firm name or corporate titles, in signs or in letterheads without the prior written consent of Company. Distributor may designate itself as a Distributor of Products in the Territory in such form and manner as Company may approve of in advance in writing. Distributor shall not grant this privilege to any third party or to any affiliates without Company’s prior written consent.

12.5 Distributor acknowledges that Company owns and retains all patents, trademarks, copyrights and other proprietary rights in the Products, and agrees that it will not at any time during or after the termination of this Agreement assert or claim any interest in or take any action which may adversely affect the validity or enforceability of any trademark, trade name, trade secret, copyright, or other proprietary right owned by or licensed to Company. No license, either express or implied, is granted to the Distributor by this Agreement to any patents, trademarks, copyrights, processes, or other proprietary rights of Company or its affiliates, except the right to sell the Products sold to the Distributor hereunder in the Territory, and the license to use the Software and Trademarks in connection therewith.

12.6 Distributor acknowledges that any breach of the provisions of this Section shall result in serious and irreparable injury to STAAR for which STAAR cannot be adequately compensated by monetary damages alone. Thus, Distributor agrees that, in addition to any other remedy it may have, STAAR shall be entitled to enforce the specific performance of the obligations of Distributor under this Section and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without the necessity of proving actual damages. Distributor shall be responsible for any breach of the provisions for this Section by any employee, agent or representative of Distributor.

13.

Indemnification; Infringement; Insurance; and Limitation of Liability

13.1 Distributor shall indemnify, defend with competent and experienced counsel and hold harmless STAAR, and its officers, directors, employees, affiliates and agents (each, a “Indemnities”), from and against any and all claims, demands, suits or actions (including without limitation attorneys’ fees and disbursements) which may be asserted against STAAR for any kind of damages, including without limitation damage or injury to property or persons and incidental and consequential damages, by any third party or any of the Indemnities arising out of, in connection with or resulting from (a) any breach of any representation or performance obligation of Distributor hereunder, or (b) any act or omission of Distributor, its employees, agents or representatives.

13.2 Distributor shall, at its own expense, maintain at a minimum general and product liability coverage in the Territory of at least US$2 million per occurrence, US$5 million in the aggregate. On a separate endorsement, Distributor shall name STAAR as an additional named insured. Such separate endorsement shall indicate that Distributor’s insurance is primary and that STAAR’s coverage as an additional named insured is not contributory. Each such insurance policy and endorsement shall provide that the insurance will not be canceled or reduces without at least thirty (30) days’ prior written notice to STAAR. On request, Distributor shall provide STAAR with copies or certificates of all such insurance policies.

13.3 EXCEPT FOR EACH PARTY’S CONFIDENTIALITY OBLIGATIONS SET FORTH IN SECTION 12 AND INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS SECTION 13, WITHOUT LIMITING ANY RIGHT DISTRIBUTOR MAY HAVE UNDER LOCAL STATUTES THAT CANNOT BE EXCLUDED, RESTRICTED OR MODIFIED, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES, OR FOR DAMAGES DUE TO LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, OR INTERRUPTION OF BUSINESS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

14.

Termination

14.1 STAAR or Distributor shall have the right, at its option, to terminate this Agreement, by giving written notice to the other party, effective immediately on receipt of such notice, on the occurrence of any of the following events:

(a) In the event that the other party becomes or is deemed insolvent; proceedings are instituted by or against it in bankruptcy, insolvency, reorganization or dissolution; or it makes a general assignment for the benefit of creditors;

(b) In the event that the other party fails to observe or perform any obligation, warranty, duty or responsibility under this Agreement and such failure continues unremedied for a period of thirty (30) days following written notice thereof by the non breaching party; or

14.2 STAAR shall have the right to terminate this Agreement by giving written notice to Distributor, effective immediately on receipt of such notice, (a) if Distributor fails to meet the Annual Minimum Volume as set forth in Section 7.2 or (b) pursuant to Section 15, or in the event the parties are unable to agree upon changes in the prices for Products within thirty (30) days following STAAR’s notice thereof.

14.3 Notwithstanding the provisions of Section 3 above, either party shall have the right to terminate this Agreement, without cause, upon no less than ninety (90) days’ prior written notice to the other party.

14.4 Upon any termination or expiration of this Agreement:

(a) All sums due to either party from the other shall be promptly paid;

(b) Distributor orders received and accepted by STAAR prior to the effective date of the termination of this Agreement shall be fulfilled in accordance with their terms;

(d) STAAR shall have the option to repurchase any or all current and resalable Products in Distributor’s inventory at eighty percent (80%) of Distributor’s original net purchase price (reflecting a twenty percent (20%) restocking and administrative fee);

(e) Distributor shall cease all display, advertising and use of STAAR trade names, trademarks (including the Trademarks), logos and designations, except uses on the Products which remain in Distributor’s possession, and shall transfer all registrations and sponsorships for the Products to STAAR or its designee; and

(f) The parties have considered the possibility that one or both parties will incur expenses in preparing for performance of this Agreement and that one or both parties will incur expenses and suffer losses as a result of termination, and the parties have nevertheless agreed that the terminating party shall not incur any liability whatsoever for any damage, loss or expense of any kind suffered or incurred by the other party (or for any compensation to the other party) arising from or incident to any termination or non-renewal of this Agreement by the terminating party pursuant to its terms, whether or not the terminating party is aware of any such damage, loss or expense. Without limiting the generality of the foregoing, upon any termination of this Agreement by either Party in accordance with its terms (or otherwise), in no event shall STAAR be required to pay to Distributor any “good will” or other payment of any nature or kind based on the sales, business development or other activities of Distributor during the term of this Agreement. Distributor, for itself and on behalf of each of its employees, hereby waives any rights which may be granted to it or them under the laws and regulations of the Territory or otherwise which are not granted to it or them by this Agreement. Termination is not the sole remedy under this Agreement, and, whether or not termination is effected, all other remedies shall remain available.

15.

U.S. Laws and Regulations

15.1 Distributor acknowledges and agrees that it shall comply in all respects with all United States and local country laws, regulations and standards applicable to its activities under this Agreement, including but not limited to the exporting and importing requirements (including the prohibition of the re-export of Products and associated technical data) set forth in this Agreement and in applicable governmental regulations.

15.2 Distributor warrants and represents that neither Distributor nor any person acting on Distributor’s behalf shall make, directly or indirectly, any offer or promise or authorization of a bribe, kickback, payoff or any other payment or gift intended to improperly influence an agent, government official, political party or candidate for public office to exercise their discretionary authority or influence in order to assist in the sale, marketing, promotion, importation, licensing or distribution of the Products and shall complete and sign the attached Foreign Corrupt Practices Certification ( Exhibit C ). Specifically, Distributor shall not (a) violate any applicable anti-bribery or anti-corruption laws; or (b) offer, pay or promise to pay, give or promise to give, or authorize the payment or giving of, anything of value to any official representative of any Governmental Entity or authority or any political party or officer thereof or any candidate for office in any jurisdiction (individually and collectively, a “Government Official”), (i) for the purpose of (A) influencing any act or decision of such Government Official in his official capacity, (B) inducing such Government Official to do or omit to do any act in violation of his lawful duty, (C) securing any improper advantage, or (iv) inducing such Government Official to influence or affect any act or decision of any Government Entity, or (ii) in order to assist Distributor in obtaining or retaining business for or with, or directing business to Distributor or any of its affiliates. The term “Governmental Entity” as used in this Section 15.2 means any government or any department, agency or instrumentality thereof, including any entity or enterprise owned or controlled by a government, or a public international organization. Distributor shall maintain for at least two (2) years and make readily available to STAAR or its duly authorized representatives’ books, records and accounts prepared in accordance with generally accepted accounting principles that accurately and completely reflect the nature of every transaction related to the sale of the Products.

16.

Data Protection

16.1 For the purposes of this Section, the following terms shall have the following meanings:

“ Data Protection Laws ” means any applicable data protection or privacy laws. It shall include: (a) the EU Data Protection Directive 95/46/EC and EU ePrivacy Directive 2002/58/EC as implemented by countries within the European Economic Area (“ EEA ”); (b) from 25 May 2018, the EU General Data Protection Regulation (“ GDPR ”) as implemented by countries within the EEA and the UK; and/or (c) other laws that are similar, equivalent to, successors to, or that are intended to or implement the laws that are identified in (a) and (b) above;

“ Shared Personal Data ” shall have the meaning as set out in Section 16.4; and

The terms “ data controller ”, “ data subject ”, “ personal data ”, “ processing ”, and “ sensitive personal data ” shall have the same meanings ascribed to them under Data Protection Laws.

16.2 STAAR and Distributor each acknowledge and agree that where a party processes personal data under or in connection with this Agreement it alone determines the purposes and means of such processing as a data controller.

16.3 Each Party confirms that it has complied, and will continue to comply, with its obligations relating to personal data that apply to it under applicable Data Protection Laws.

16.4 To the extent Distributor discloses, provides or otherwise makes available, personal data to STAAR under or in connection with the Agreement (“ Shared Personal Data ”), Distributor acknowledges that STAAR and/or its service providers or agents may process such Shared Personal Data for any purpose related to this Agreement, including, without limitation, for any purpose necessary for STAAR and/or its service providers or agents to comply with applicable law.

16.5 In connection with the Shared Personal Data, Distributor warrants that it: (a) has provided adequate notices to, and obtained valid consents from, the relevant individuals, in each case, to the extent necessary for STAAR and/or its service providers or agents to process the Shared Personal Data (including any sensitive personal data) in connection with this Agreement which may include the transfer of the Shared Personal Data to STAAR outside of the EEA; and (b) shall not, by act or omission, cause STAAR to violate any Data Protection Laws, notices provided to, or consents obtained from, data subjects as result of processing the Shared Personal Data in connection with this Agreement.

16.6 To the extent of any conflict in relation to personal data between the terms contained in this Section and the rest of the Agreement, then the terms of this Section shall control to the extent of such conflict.

17.

Survival

In addition to Distributor’s obligation to pay STAAR all amounts due hereunder, the provisions under Sections 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 24 and 25 shall survive termination of the Agreement, as well as such other provisions which by their meaning and intent have applicability beyond the terms of this Agreement.

18.

Publicity

Distributor agrees that any publicity or advertising which shall be released by it in which STAAR is identified in connection with the Products shall be in accordance with the terms of this Agreement and with any information or data which STAAR has furnished in connections with this Agreement (or related to the Product). STAAR shall have the right to review and approve all such publicity and advertising prior to dissemination thereof.

19.

Assignment

Neither party may, directly or indirectly (including in connection with a change of control transaction), transfer or assign this Agreement or any of the rights or obligations hereunder without the prior written consent of the other; provided that STAAR may assign any of its rights and delegate any of its obligations hereunder to its subsidiaries and affiliated companies or in connection with a sale or transfer of all or substantially all of its business to which this Agreement relates, whether by merger, sale of assets or otherwise, without Distributor’s prior written consent. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

20.

Integrated Agreement

This Agreement constitutes the entire understanding and agreement between STAAR and Distributor regarding the subject matter hereof and terminates and supersedes all prior formal or informal understandings or agreements relating thereto.

21.

Force Majeure

Performance of the parties hereto of their respective obligations hereunder shall be subject to force majeure and acts of God, including but not limited to insurrections, riots, wars and war-like operations, terrorist acts, explosions, governmental acts, epidemics, failure of contractors to perform, strikes, fires, accidents, acts of any public enemy, inability to obtain required materials, supplies, products or qualified labor, delay in transportation and any applicable law, regulation or restriction of any foreign, federal, state or local governmental entity or instrumentality. However, the parties hereto shall use their commercially reasonable efforts to avoid, remove or cure said circumstances. Any party temporarily excused for performances hereunder by any such circumstance shall resume performance with utmost dispatch when such circumstances are removed or cured. Any party claiming such circumstances as an excuse for delay in performance shall give prompt notice in writing thereof to the other party. Nothing herein and no contrary provisions of any law, regulation, or governmental pronouncement shall, however, relieve Distributor of its obligation to make the payments to STAAR required hereunder at the times and in the manner herein specified.

22.

No Waiver

No waiver by either party of any breach or default of any of the covenants or agreements herein contained shall be deemed a waiver as to any subsequent or similar breach or default. No right or remedy herein conferred upon either party is exclusive of any other right or remedy herein or by law or in equity provided or permitted.

23.

Severability

This Agreement is divisible, and provisions herein held to be violate of any applicable treaties, statutes or regulations of any governmental agency having jurisdiction shall effect only that portion held to be invalid or inoperative, and the remaining portions of this Agreement shall remain in full force and effect.

24.

Notice

Any notice required or permitted to be given hereunder shall be in writing and (a) delivered in person or by internationally-recognized express delivery or courier service (e.g., FedEx, DHL or UPS), (b) sent by facsimile, or (c) deposited in the mail registered or certified first class, postage prepaid and return receipt requested (provided that any notice given pursuant to clause (b) is also confirmed by the means described in clause (a) or (c)), to the address or facsimile number of the party appearing below its signature below or to such other address as such party from time to time may designate in writing in compliance with the terms hereof. Each notice shall be deemed given when so delivered personally, or sent by facsimile transmission, or, if sent by express delivery or courier service four (4) business days after being sent, or if mailed, ten (10) days after date of deposit in the mail.

25.

Governing Law and Dispute Resolution

25.1 This Agreement, which is in English, shall be governed by and construed in accordance with the laws of the State of California without regard to the conflicts of laws principles thereof. The parties hereby expressly disclaim and exclude any applicable provisions of the United Nations Convention for the International Sales of Goods.

25.2 The parties waive their rights to seek remedies in court (except where the relief sought is an injunction or other equitable relief), including any right to a jury trial. Except in a case where the relief sought is an injunction or other equitable relief, the parties agree that any dispute between the parties arising out of, relating to or in connection with this Agreement, whether characterized or sounding in contract or tort or otherwise, shall be resolved exclusively through binding arbitration conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The arbitration shall be held in Los Angeles, California, USA. Judgment upon the award rendered may be entered in any court having jurisdiction. Each party shall bear its own expenses of the arbitration, but the arbitration fees and costs shall be borne equally between the parties participating in the arbitration. Disputes shall not be resolved in any other forum or venue.

26.

Counterparts

This Agreement may be executed in duplicate counterparts, each of which shall be deemed to be an original and all of which counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF, STAAR and Distributor have caused their duly authorized representatives to execute this Distributorship Agreement on this __ day of ____, 20___.

STAAR SURGICAL AG			DISTRIBUTOR


By:			By:
Name:			Name:
Title:			Title:

EXHIBIT A-1

List of Products and Prices

All prices in U.S. dollars, or such other currency as STAAR determines in its sole discretion.

A-1-1

EXHIBIT B

Minimum Product Quantities

B-1

EXHIBIT C

Foreign Corrupt Practices Certification

I, _________, as the [__________] of ___________ hereby certify as follows:

I understand and will comply with the anti-bribery provisions of the U.S Foreign Corrupt Practices Act and the UK Bribery Act. Neither I, nor any person employed by me or my business or representing my business, has or will make, offer, promise or authorize, directly or indirectly, any payment or transfer of anything of value to any official, representative or employee of any government, government agency or instrumentality, for the purpose of influencing a decision by any of them to take actions favorable to STAAR Surgical Company or its subsidiaries (“STAAR”) or represent them on any matter related directly or indirectly to the purchase of any of STAAR’s products.

No officer, director, partner, owner, principle, employee or agent of my business is an official or employee of a governmental agency or instrumentality in a position to influence action or decisions regarding me or my business activities on behalf of STAAR and I will inform STAAR, by written notice, if, and as soon as , any such person assumes such a position as official or employee of a governmental agency or instrumentality while at the same time remaining an officer, director, partner, owner, principle, employee or agent of mine or my business at which time STAAR may elect to terminate this contract without any further liability to me or my business.

I will indemnify an hold harmless STAAR from any and all fines, damages, losses, costs and expenses (including without limitation reasonable attorneys’ fees) incurred by STAAR as a result of any breach of this Certification by me.

I understand and agree that failure to comply with the terms of this Certification will entitle STAAR to terminate any and all if its contractual relationships with me and my business.

DISTRIBUTOR:


By:

Officer Title:

Print Name:

Date:

C-1

Exhibit 10.38

FORM OF

INDEMNITY AGREEMENT

This Indemnity Agreement is made and entered into as of this __ day of _______, 20__ by and between STAAR Surgical Company, a Delaware corporation (the “Company”), and _____________ (“Indemnitee”).

WHEREAS, Indemnitee intends to serve or is currently serving as a director and/or officer of the Company or, at the Company’s request, as a director and/or officer of a subsidiary the Company, and the Company wishes Indemnitee to serve or continue to in such capacity;

WHEREAS, the Certificate of Incorporation of the Company provides that the Company shall indemnify, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, directors and officers of the Company and persons serving at the request of the Company as a director or officer of another corporation;

WHEREAS, Indemnitee has indicated that he or she may not be willing to serve or continue to serve as a director and/or officer of the Company or any of its subsidiaries in the absence of indemnification in addition to that provided in the Certificate of Incorporation of the Company; and

WHEREAS, the Company, in order to induce Indemnitee to serve or continue to serve as a director and/or officer of the Company or its subsidiaries, has agreed to provide Indemnitee with the benefits contemplated by this Indemnity Agreement, and, as a result of the provision of such benefits, Indemnitee has agreed to serve or continue to serve in such capacity.

NOW, THEREFORE, in consideration of the promises, conditions and representations set forth herein, including Indemnitee’s service or continued service as a director and/or officer of the Company or its subsidiaries, the Company and Indemnitee hereby agree as follows:

Section 1. Definitions . The following terms, as used herein, shall have the following meanings:

(a) “Covered Claim” shall mean any claim against Indemnitee based upon or arising out of any past, present or future act, omission, neglect or breach of duty, including any actual or alleged error, misstatement or misleading statement, which Indemnitee may commit, omit or suffer while acting in his or her capacity as a director and/or officer of the Company or its subsidiaries and because of being a director and/or officer of the Company or its subsidiaries; provided, however, that a Covered Claim shall not include any amounts paid or payable by Indemnitee with respect to any claim that:

- 1 -

(i) is based upon and arises out of Indemnitee gaining in fact any personal profit or advantage to which Indemnitee is not legally entitled:

(ii) is for an accounting of profits in fact made from the purchase or sale by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any state law; or

(iii) is based upon any judicial proceeding initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (aa) the Board of Directors of the Company authorized such proceeding prior to its initiation, or (bb) the Board of Directors of the Company determines that this clause (iii) shall not apply; or

(iv) is based upon and arises out of Indemnitee’s knowingly fraudulent, deliberately dishonest or willful misconduct.

A Covered Claim shall include any claim made against the lawful spouse (whether such status is derived by reason of statutory law, common law or otherwise of any applicable jurisdiction in the world) of Indemnitee for claims arising solely out of Indemnitee’s capacity as the spouse of Indemnitee, including such claims that seek damages recoverable from martial community property, property jointly held by Indemnitee and the spouse or property transferred from Indemnitee to the spouse; provided however that a Covered Claim shall not include any claim for any actual or alleged wrongful act of the spouse. To the extent necessary to carry out the terms of this paragraph, the term “Indemnitee” as used in this Indemnity Agreement shall include Indemnitee’s spouse.

(b) “Determination” shall mean a determination, based upon the facts known at the time, made by:

(i) the Board of Directors of the Company, by the vote of a majority of the directors who are not parties to the action, suit or proceeding in question, at a meeting at which there is a quorum consisting solely of such disinterested directors;

(ii) if such quorum is not obtainable, or, even if obtainable, if directed by a majority of such disinterested directors at a meeting of the Board of Directors of the Company at which there is a quorum consisting solely of such disinterested directors, by Independent Legal Counsel in a written opinion;

(iii) the stockholders of the Company; or

(iv) a court of competent jurisdiction in a final, nonappealable adjudication.

(c) “Independent Legal Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and does not under the applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Independent Counsel shall be selected by the Board of Directors of the Company.

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(d) “Payment” shall mean any and all amounts which Indemnitee is or becomes legally obligated to pay in connection with a Covered Claim, including, without limitation, damages, judgments, fines, ERISA excise taxes or penalties, amounts paid in settlement, costs of investigation, attorneys’ fees, costs of threatened, pending or completed, formal or informal investigative, judicial or administrative proceedings or appeals, and costs of attachment or similar bonds.

Section 2. Indemnification . The Company shall indemnify and hold harmless Indemnitee against and from any and all Payments, except to the extent that:

(a) the Company shall have indemnified and held harmless Indemnitee against and from such Payments otherwise than pursuant to this Indemnity Agreement;

(b) Indemnitee shall have received payment on account of such Payments pursuant to one or more valid and collectible insurance policies maintained by the Company; or

The Company shall have no obligation to indemnify Indemnitee under this Indemnity Agreement for any amounts paid in settlement of any action, suit or proceeding effected without the Company’s prior written consent. The Company shall not settle any claim in any manner that would impose any obligation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold their consent to any proposed settlement.

If Indemnitee so requests in writing within ten (10) days following notice given pursuant to Section 3(a) of this Indemnity Agreement, the Company agrees that any Determination pursuant to clause (c) of this Section 2 must be made by Independent Legal Counsel.

Section 3 Indemnification Procedure ; Insurance;

Advancements of Costs and Expenses .

(a) Promptly after receipt by Indemnitee of notice of the commencement or threat of commencement of any action, suit or proceeding, Indemnitee shall, if indemnification with respect thereto may be sought from the Company under this Indemnity Agreement, notify the Company thereof.

(b) If, at the time of receipt of such notice the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such action, suit or proceeding to the insurers in accordance with the procedures set forth in the respective policies in favor of Indemnitee. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all Payments payable as a result of such action, suit or proceeding in accordance with the terms of such policies. To the extent that the Company maintains directors’ and officers’ liability insurance, including any “tail” insurance, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director or officer under such policy or policies.

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(c) All costs and expenses, including attorneys’ fees, incurred by Indemnitee in defending or investigating such action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding

Indemnitee hereby undertakes to and agrees that he or she will repay the Company any costs or expenses advanced by or on behalf of the Company pursuant to this Section 3(c)) if it shall ultimately be determined by a court of competent jurisdiction in a final, nonappealable adjudication that Indemnitee is not entitled to indemnification under this Indemnity Agreement. The Company shall not seek from a court a “bar order” which would have the effect of prohibiting or limiting Indemnitee’s rights to receive advancement of costs and expenses under this Indemnity Agreement.

(d) If the Company shall advance the costs and expenses of any such action, suit or proceeding pursuant to Section 3(c) of this Indemnity Agreement, it shall be entitled to assume the defense of such action, suit or proceeding, if appropriate, with counsel satisfactory to Indemnitee upon delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, the Company shall not be liable to Indemnitee under this Indemnity Agreement for any costs or expenses subsequently incurred by Indemnitee in connection with such defense other than reasonable costs and expenses of investigation; provided, however, that:

(i) Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding provided that the fees and expenses of such counsel incurred after delivery of notice by the Company of its assumption of such defense shall be at Indemnitee’s own expense; and

(ii) the fees and expenses of counsel employed by Indemnitee shall be at the expense of the Company if (aa) the employment of counsel by indemnitee has previously been authorized by the Company, (bb) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (cc) the Company shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding.

(e) All payments on account of the Company’s advancement obligations under Section 3(c) of this Indemnity Agreement shall be made within twenty (20) days of Indemnitee’s written request therefor (subject to the provision contained in said Section 3(c), and all other payments on account of the Company’s obligations under this Indemnity Agreement shall be made within sixty (60) days of Indemnitee’s written request therefor, unless a prior Determination is made that the claims giving rise to Indemnitee’s request are not payable under this Indemnity Agreement.

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Section 4. Enforcement of Indemnification: Burden of Proof . If a claim for indemnification or advancement of costs and expenses under this Indemnity Agreement is not paid in full by or on behalf of the Company within the time period specified in Section 3(e) of this Indemnity Agreement, Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of such claim. In any such action, if a prior Determination has been made that such claim is not payable under this Indemnity Agreement, the burden of proving that indemnification is required under this Indemnity Agreement shall be on Indemnitee. If no such prior Determination shall have been made, the Company shall have the burden of proving that indemnification is not required under this Indemnity Agreement.

Section 5. Rights Not Exclusive . The rights to indemnification and advancement of costs and expenses provide hereunder shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under any charter document, bylaw, agreement, vote of stockholders or disinterested directors of otherwise.

Section 6. Subrogation . In the event of payment under this Indemnity Agreement by or on behalf of the Company, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers that may be required and shall do all things that may be necessary to secure such rights, including, without limitation, the execution of such documents as may be necessary to enable the Company effectively to bring suit to enforce such rights.

Section 7. Choice of Law . This Indemnity Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to any choice or conflict of law provision thereof.

Section 8. Jurisdiction . The Company and Indemnitee hereby irrevocably consent to the courts of the State of Delaware for all purposes in connection with any action, suit or proceeding which arises out of or relates to this Indemnity Agreement and agree that any action instituted under this Indemnity Agreement shall be brought only in the state courts of the State of Delaware.

Section 9. Attorneys’ Fees . If any action, suite or proceeding is commenced in connection with or related to this Indemnity Agreement, the prevailing party shall be entitled to have its costs and expenses, including, without limitation, attorneys’ fees and expenses of investigation, paid by the losing party.

Section 10. Severability . In the event that any provision of this Indemnity Agreement is determined by a court to require the Company to do or to fail to do an act which is in violation of applicable law, such provision shall be limited or modified in its application to the minimum extent necessary to avoid a violation of law, and, as so limited or modified, such provision and the balance of this Indemnity Agreement shall be enforceable in accordance with their terms.

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Section 11. Successors and Assigns . This Indemnity Agreement shall be binding upon all successors and assigns of the Company, including any transferee of all or substantially all of its assets and any successor by merger or otherwise by operation of law, and shall be binding upon and inure to the benefit of the heirs, executors and administrators of Indemnitee.

Section 12. Descriptive Headings . The descriptive headings in this Indemnity Agreement are included for the convenience of the parties only and shall not affect the construction of this Indemnity Agreement.

Section 13. Counterparts . This Indemnity Agreement may be executed in any number of counterparts, all of which taken together shall constitute one document.

Section 14. Amendment. No amendment, modification, termination or cancellation of this Indemnity Agreement shall be effective unless made in writing and signed by each of the parties hereto.

IN WITNESS WHEREOF, the Company and Indemnitee have executed this Indemnity Agreement as of the day and year first above written.

STAAR Surgical Company

By ________________________

Caren Mason

President

Chief Executive Officer

INDEMNITEE

___________________________

Name:______________________

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Exhibit 31.1

Certifications

I, Caren Mason, certify that:

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

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

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

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

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

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

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

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

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

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

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

Dated:August 1, 2018

/s/ CAREN MASON

Caren Mason

President, Chief Executive Officer, and
Director (principal executive officer)

Exhibit 31.2

Certifications

I, Deborah J. Andrews, certify that:

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

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

Dated:August 1, 2018

/s/ DEBORAH J. ANDREWS

Deborah J. Andrews

Chief Financial Officer
(principal financial officer)

Exhibit 32.1

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

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

In connection with the filing of the Quarterly Report on Form 10-Q for the period ended June 29, 2018 (the “Report”) by STAAR Surgical Company (“Registrant”), each of the undersigned hereby certifies that:

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

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

Dated: August 1, 2018		/s/ CAREN MASON
		Caren Mason *President, Chief Executive Officer,* *and Director (principal executive officer)*

Dated: August 1, 2018		/s/ DEBORAH J. ANDREWS
		Deborah J. Andrews *Chief Financial Officer* *(principal financial officer)*

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