STAAR Surgical Company
Annual Report 2016

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K(Mark One)þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2016 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) Delaware95-3797439(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.) 1911 Walker AvenueMonrovia, California 91016(Address of principal executive offices) (626) 303-7902(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: (Title of each class) (Name of each exchange on which registered)Common Stock, $0.01 par value Nasdaq Global Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ 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 1934during 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 filingrequirements 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 Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes þ No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): ¨ Large accelerated filerþ Accelerated filer¨ Non-accelerated filer¨ Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of July 1, 2016, the last business dayof the registrant’s most recently completed second fiscal quarter, was approximately $234,602,669 based on the closing price per share of $5.80 of theregistrant’s Common Stock on that date. The number of shares outstanding of the registrant’s Common Stock as of February 20, 2017 was 40,747,541. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement relating to its 2017 annual meeting of stockholders, which will be filed with the Securities andExchange Commission pursuant to Regulation 14A within 120 days of the close of the registrant’s last fiscal year, are incorporated by reference into Part IIIof this report.   STAAR SURGICAL COMPANY TABLE OF CONTENTS PagePART I ITEM 1. BUSINESS2 ITEM 1A. RISK FACTORS13 ITEM 1B. UNRESOLVED STAFF COMMENTS21 ITEM 2. PROPERTIES21 ITEM 3. LEGAL PROCEEDINGS21 ITEM 4. MINE SAFETY DISCLOSURES21 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUERPURCHASES OF EQUITY SECURITIES22 ITEM 6. SELECTED FINANCIAL DATA23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK34 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE35 ITEM 9A. CONTROLS AND PROCEDURES35 ITEM 9B. OTHER INFORMATION36 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE37 ITEM 11. EXECUTIVE COMPENSATION37 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS37 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE37 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES37 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES38 ITEM 16. FORM 10-K SUMMARY40 SIGNATURES 1  PART I This Annual Report on Form 10-K contains statements that constitute “forward-looking statements” within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Actof 1995, and is subject to the safe harbor created therein. These statements include comments regarding the intent, belief or current expectations of theCompany and its management. 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. STAARSurgical Company cautions investors and prospective investors that any such forward-looking statements are not guarantees of future performance andinvolve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. We caution you not toplace undue reliance on these forward-looking statements and to note they speak only as of the date hereof. Factors that could cause actual results to differmaterially from those set forth in the forward-looking statements are included in the risk factors set forth in Item 1A, “Risk Factors.” We disclaim anyintention or obligation to update or revise any financial projections or forward-looking statements due to new information or other events. Item 1. Business STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and delivery systems used to deliver the lensesinto the eye. We are the leading manufacturer of lenses used worldwide in corrective or “refractive” surgery. Our goal is to position our refractive lensesthroughout the world as primary and premium solutions for patients seeking visual freedom from wearing glasses or contact lenses while achieving excellentvisual acuity through refractive vision correction. We also make lenses for use in surgery that treats cataracts. Originally incorporated in California in 1982, STAAR Surgical Company reincorporated in Delaware in 1986. Unless the context indicatesotherwise, “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries. A glossary explaining many of the technical terms used in this report begins on page 12. The reader may also find it helpful to refer to the discussionof the structure and function of the human eye that begins on page 12. Operations STAAR has significant operations globally. Activities outside the United States (“U.S.”) accounted for 88% of our total sales in fiscal year 2016,primarily due to the pacing of product approvals and commercialization that tend to occur first outside the United States. STAAR sells its products in morethan 60 countries, with direct distribution in Japan, the U.S., Spain, Germany, Canada, and the U.K., and independent distribution in the remainder of theworld. STAAR maintains operational and administrative facilities in the U.S., Switzerland, and Japan. Its current global operations are as follows: ·United States. STAAR operates its global administrative headquarters and principal manufacturing facility in Monrovia, California. TheMonrovia manufacturing facility primarily makes the Visian implantable Collamer lens product family, including the EVO Visian ICL(collectively referred to as ICLs), Collamer intraocular lenses (IOLs), preloaded silicone IOLs, and injector systems. We manufacture the rawmaterial for Collamer lenses (both IOLs and ICLs) and the AquaFLOW Device (for the treatment of glaucoma) in our facility in Aliso Viejo,California. ·Switzerland. STAAR operates an administrative and distribution facility in Nidau, Switzerland under its wholly owned subsidiary, STAARSurgical AG. The Nidau facility also maintains manufacturing capabilities for STAAR’s ICL products and the AquaFLOW Device. ·Japan. STAAR operates administrative and distribution facilities in Japan under its wholly owned subsidiary, STAAR Japan Inc. STAARJapan’s administrative facility is in Shin-Urayasu and its distribution facility is in Ichikawa City. STAAR performs final packaging of itssilicone preloaded IOL injectors and final inspection of its acrylic preloaded IOL injectors at the Ichikawa City facility. Financial Information about Segments and Geographic Areas 100% of the Company’s sales are generated from the ophthalmic surgical product segment and, therefore, the Company operates as one operatingsegment for financial reporting purposes. The Company’s principal products are ICLs used in refractive surgery and IOLs used in cataract surgery. See Note16 to the Consolidated Financial Statements for financial information about product lines and operations in geographic areas. 2  Principal Products In designing our products, we seek to delight patients and surgeons by: ·Improving patient outcomes; ·Minimizing patient risk; and ·Simplifying ophthalmic procedures or post-operative care for the surgeon and the patient. EVO Visian ICL and Visian ICL. Refractive surgery corrects visual disorders that glasses or contact lenses have traditionally treated (myopia,hyperopia, astigmatism, and presbyopia). The field of refractive surgery includes both lens-based procedures, using products like our ICL, and laser-basedprocedures like LASIK. The ICL product line treats a wide range of refractive errors within commonly known vision disorders such as myopia(nearsightedness), hyperopia (farsightedness) and astigmatism. The ICL folds for minimally invasive implantation behind the iris and in front of the natural crystalline lens, using techniques similar to those usedto implant an IOL during cataract surgery, except that the natural lens remains intact in the eye. Lenses of this type are generically called “phakic IOLs” or“phakic implants” because they work along with the patient’s natural lens, or phakos, rather than replacing it. The surgeon typically implants the ICL usingtopical anesthesia on an outpatient basis. The patient usually experiences immediate vision improvement within a day. Our ICL is the only posterior chamber phakic IOL (PIOL) approved by the FDA for marketing and sale in the U.S., and we believe it is the world’slargest selling phakic IOL. Our biocompatible Collamer material belongs to a family of materials known as collagen copolymers. Collagen copolymers arecompounds formed by joining molecules of collagen derived from biological sources with synthetic monomer molecules. The proprietary Collamer materialis exclusive to us. We believe that the biocompatibility of the Collamer material used for the ICL (and Toric ICL – TICL, which also corrects for astigmatism,as well as the EVO+ Visian ICL, which adds an expanded optical zone to the existing features on the ICL and TICL) is a significant factor in the ability toplace this lens safely in the posterior chamber of the eye. The ICL has been implanted into more than 670,000 eyes worldwide. STAAR began selling the ICL for myopia for use outside the U.S. in 1997. U.S.sales commenced in 2006. In September 2011, STAAR launched the ICL with CentraFLOW technology, which uses a port in the center of the ICL optic inmarkets outside the U.S. The port is of a size intended to optimize the flow of fluid within the eye without affecting the quality of vision. The central port alsoeliminates the need for the surgeon to perform a YAG peripheral iridotomy procedure days before the ICL implant. The CentraFLOW technology makes thevisual outcomes of the ICL available through a simpler and more comfortable surgical implantation experience. We are authorized to sell the TICL and theICL with CentraFLOW technology in the following ex-U.S. regions: the 31 countries that require the European Union CE Mark, China, Canada, Korea,Japan, India, Argentina, Singapore, and several countries in the Middle East. STAAR submitted its application for U.S. approval of the TICL to the FDA in2006, and our application remains under review (see “Regulatory Matters – Regulatory Requirements in the United States”). In December 2015, we receivedthe CE Mark for EVO+, an ICL with CentraFLOW technology and an expanded optical zone of up to 20%. We believe the expanded optical zone may furtherimprove certain patients’ visual experience, thus making the ICL increasingly desirable for both patients and ophthalmic surgeons. We are authorized to sellthe EVO+ in the following ex-U.S. regions: the 31 countries that require the European Union CE Mark, Korea, Japan, Hong Kong, Turkey, and severalcountries in the Middle East. The Hyperopic ICL, which treats far-sightedness, is sold primarily in countries that require the European Union CE Mark.Typically, the refractive surgery where an ICL is implanted is an elective procedure paid for or financed by the patient. Globally, the ICL is available for myopia and hyperopia and is available in multiple models, powers and lengths totaling hundreds of different typesof inventoried lenses. This requires us to carry a significant amount of inventory to meet customer preference for rapid delivery. Outside the U.S., the TICL isavailable for myopia in the same powers and lengths and carries additional parameters of cylinder and axis. In 2016, approximately 80% of TICL orders wereavailable for shipment in less than one week from receipt. The remaining approximately 20% of TICL orders were custom-made. According to Market Scope, LLC a publisher of ophthalmic industry data, approximately 3.6 million refractive procedures, primarily laser visionprocedures, were performed worldwide in 2016. The incidence of myopia is growing globally, with high myopia becoming more common according torecently published articles (see, Ophthalmology, The Journal of the American Academy of Ophthalmology, online publication date June 21, 2016). Webelieve this will result in a significantly increased number of patients seeking refractive procedures. We believe that over the past decade negative publicityregarding LASIK has reduced patient interest in the LASIK procedure. The ICL is a non-laser based refractive procedure (unlike LASIK) with many ICLsimplanted to date. Surgeons have published numerous peer-reviewed articles with clinical data regarding the safety, effectiveness, and visual quality of theICL. We believe the ICL provides a safe and effective solution for the growing number of myopic patients who will seek visual freedom from eyeglasses andcontact lenses. As part of our sales and marketing efforts, we attend major ophthalmic conventions around the world and invest in market development, practicebuilding, healthcare professional training and patient outreach. We have started working more closely with leading refractive clinics in the area of training,product awareness and practice development. Our marketing programs seek to position the ICL as a premium and primary option for appropriate patients atthe clinic and via digital and social media. Last year, we rebranded STAAR as we launched Evolution in Visual Freedom websites in our major markets,rolled out new marketing material for surgeons and patients, and introduced our newest ICL, the EVO+. We plan to continue to develop and launchinnovative products to support clinical needs and to address the increasing demands of our customers. 3  Sales of ICLs (including EVO+ and TICLs) accounted for approximately 72% of our total sales in fiscal 2016, 67% of our total sales in fiscal 2015,and 59% of our total sales in fiscal 2014. Minimally Invasive Intraocular Lenses (IOLs). We produce and market a line of foldable IOLs for use in minimally invasive cataract surgicalprocedures. Because these lenses fold, surgeons can implant them into the eye through a small incision less than 3mm in length. Surgeons prefer foldablelenses and small incisions because clinical evidence has shown that larger incisions can induce corneal astigmatism, extend healing times, and increase thepossibility of infection. Once inserted, the IOL unfolds naturally to replace the cataractous lens. In most of the countries where STAAR does business, government agencies reimburse most or all of the cost of cataract surgery and IOLs. Currently, our foldable IOLs are manufactured from both our proprietary Collamer material and silicone. STAAR offers both materials in twodifferently configured styles: the single-piece design where both the optic and haptics are made of the same material and the three-piece design wherePolyimide loop haptics are attached to the optic. We believe that the physical and optical properties of Collamer, which has a high-water content, give itdistinct advantages as a material for prosthetic IOLs used in cataract surgery. The selection of one style over the other is primarily based on the preference ofthe ophthalmologist. STAAR also sells aspheric IOLs made of silicone and Collamer that use optical designs that produce a clearer image than traditionalspherical lenses, especially in low light. For example, the STAAR nanoFLEX IOL is a single piece Collamer aspheric optic that can be delivered through amicro-incision using STAAR’s nanoPOINT Injection System. Also, in Japan and parts of Europe, we sell a “Preloaded Injector” with a silicone or acrylic IOL packaged and shipped in a pre-sterilized, disposableinjector ready for use in cataract surgery. We believe the Preloaded Injector offers surgeons improved convenience and reliability. The acrylic lens-basedPreloaded Injector uses a lens supplied by a third party. The supplier also assembles and sells the acrylic Preloaded Injector under its own brand, usinginjector parts purchased from us. Sales of IOLs accounted for approximately 24% of our total sales in fiscal 2016, 26% of our total sales in fiscal 2015, and 33% of our total sales infiscal 2014. Other Surgical Products We also sell injector parts to our acrylic lens supplier for their preloaded acrylic IOL that they sell under their own brand. Also, we sell other relatedinstruments and devices that we manufacture, or that are manufactured by others. Generally, these products have lower overall gross profit margins relative toour ICLs and IOLs. Sales of other surgical products accounted for approximately 4% of our total sales in fiscal 2016, 7% of our total sales in fiscal 2015, and9% of our total sales in fiscal 2014. Sources and Availability of Raw Materials STAAR uses a wide range of raw materials in the production of its products. STAAR purchases most of the raw materials and components fromexternal suppliers. Some of our raw materials are single-sourced due to regulatory constraints, cost effectiveness, availability, quality, and vendor reliabilityissues. Many of our components are standard parts or materials and are available from a variety of sources. We do not typically pursue regulatory and qualitycertification of multiple sources of supply. Patents, Trademarks, and Licenses We strive to protect our investment in the research, development, manufacturing, and marketing of our products through the use of patents,trademarks, licenses, trade secrets, and copyrights. We own or have rights to a number of patents, licenses, trademarks, copyrights, trade secrets, know-howand other intellectual property directly related and important to our business. As of December 30, 2016, we owned 67 United States and foreign patents andhad 20 patent applications pending. We believe that no particular patent is so important that its loss or expiration would materially adversely affect ouroperations as a whole. Our intellectual property generally relates to the design, production, and manufacture of the Collamer lens material, ICLs, IOLs, and lens deliverysystems for folding intraocular lenses (injectors and cartridges, both stand-alone and preloaded) used with ICLs and IOLs. We believe it would requireextensive time and effort for a competitor to duplicate our intellectual property and processes to develop a product with comparable capabilities to our ICLproduct lines. Worldwide, we sell all our major products under trademarks we consider to be important to our business. STAAR®, EVO Visian ICL™, Evolution inVisual Freedom™, Visian®, Collamer®, CentraFLOW®, AquaPORT®, nanoFLEX® nanoPOINT™, Afinity™, and AquaFLOW™ are trademarks orregistered trademarks of STAAR in the U.S. and other countries. The scope and duration of trademark protection varies widely throughout the world. In somecountries, trademark protection continues only as long as the mark is used. Other countries require registration of trademarks and the payment of registrationfees. Trademark registrations are generally for fixed but renewable terms. 4  We protect our proprietary technology, in part, through confidentiality and nondisclosure agreements with employees, consultants, and otherparties. Our confidentiality agreements with employees and consultants generally contain standard provisions requiring those individuals to assign toSTAAR, without additional consideration, inventions conceived or reduced to practice by them while employed or retained by STAAR, subject to customaryexceptions. We cannot provide any assurance that employees and consultants will abide by the confidentiality or other terms of their agreements. Despitemeasures taken to protect our intellectual property, unauthorized parties may copy aspects of our products or obtain and use information that we regard asproprietary. Seasonality While certain individual markets may be impacted by seasonal trends, in the aggregate, seasonality does not materially affect our sales. Working Capital Requirements There are no special inventory requirements or credit terms extended to customers that have a material adverse effect on our working capital. Distribution and Customers We market our products to a variety of health care providers, including ophthalmic surgeons, vision centers, surgical centers, hospitals, governmentfacilities, and distributors. The primary user of our products is an ophthalmologist. We sell our products directly through our own sales representatives in Japan, the U.S., Spain, Germany, Canada, and the U.K., and, supplemented byindependent distributors, in approximately 60 additional countries worldwide. We maintain a global marketing team, as well as regional marketing personnelto support the promotion and sale of our products. The global marketing department supports selling efforts by developing and providing promotionalmaterials, speakers’ programs, digital and social media sites, participation in trade shows and technical presentations. Where we distribute products directly,we rely on local sales representatives to help generate sales by promoting and demonstrating our products with physicians. In the U.S., we also rely onindependent sales representatives to sell our products under the supervision of directly employed sales managers. Our clinical affairs personnel providetraining and educational courses globally. One customer, Shanghai Langsheng, our China distributor, accounted for more than 19% of our consolidated net sales during fiscal 2016. Net sales to Shanghai Langsheng during each of the last three fiscal years were as follows: Net Sales to Shanghai LangshengFiscal Year Net Sales ($, in thousands) Net Sales asPercentage ofConsolidated Net Sales 2016 $16,025 19.4%2015 $11,851 15.4%2014 $7,990 10.7% Backlog The dollar amount of STAAR’s backlogged orders is not material in relation to total annual sales. We generally keep sufficient inventory on hand toship product immediately or shortly after receipt of an order. Government Contracts No material portion of our business is subject to renegotiation of profits or termination of any particular contract or subcontract at the election of theU.S. Government. Competition Competition in the ophthalmic surgical product market is intense and is primarily driven by technological innovation and the regulatory approvalrequired to commercialize products in the key markets around the world. The development of new or improved products may make existing products lessattractive, reduce them to commodity status or even make them obsolete. To remain competitive, companies such as STAAR must devote continued effortsand significant financial resources to enhance their existing products and to develop new products. 5  In the refractive market, our ICL technology competes with other elective surgical procedures such as laser vision correction (e.g. LASIK) for thoseconsumers who are looking for an alternative to eyeglasses or contact lenses to correct their vision. In the cataract surgery market, our IOLs primarily competebased on our technology’s quality and value. We believe our primary competition in selling the ICL to patients seeking surgery to correct refractive conditions lies not in similar products to theICL, but in laser surgical procedures. Novartis (formerly Alcon), Johnson & Johnson (formerly Advanced Medical Optics or AMO), Valeant (formerly Bausch& Lomb or B&L), and Carl Zeiss Meditec AG, all market lasers for corneal refractive surgery and promote their sales worldwide. Phakic implants that compete with the ICL are also available in the marketplace. The three principal types of phakic IOLs (PIOLs) are (1) posteriorchamber designs like the ICL, (2) iris clip anterior chamber PIOLs like the Artisan® and Artiflex® lenses made by Ophtec (Artisan® has been distributed byAMO under the Verisyse® brand), and (3) angle-supported anterior chamber PIOLs like the Cachet® made by Novartis (formerly Alcon) which has been soldoutside the U.S. We believe the ICL has compelling clinical advantages over the other lenses, which are reflected in our strong market share of the globalphakic IOL market. The ICL is the only foldable, minimally invasive PIOL approved for sale in the U.S. Competitors from Asia are beginning to appear in themarket with their low-cost version of an implantable contact lens, increasing the level of competition. The global cataract market is highly concentrated, with the top three competitors (Alcon, Abbott Medical Optics, and Bausch & Lomb) combinedaccounting for approximately 60% of total market revenue, according to a 2016 report by Market Scope. The Human Eye The following discussion provides background information on the structure, function, and some of the disorders of the human eye to enhance thereader’s understanding of our products described in this report. The human eye is a specialized sensory organ capable of receiving visual images andtransmitting them to the visual center in the brain. The eye has an anterior segment and a posterior segment that are separated by the natural crystalline lens. The anterior segment consists of the cornea, the iris and ciliary body and the trabecular meshwork. It is filled with a water-based fluid called aqueoushumor and is divided, by the iris, into an anterior chamber and a posterior chamber. The cornea is a clear lens at the front of the eye through which light firstpasses and is focused towards the back of the eye. The interior surface of the cornea is lined with a single layer of flat, tile-like endothelial cells, whosefunction is to maintain the transparency of the cornea. The iris is a pigmented muscular curtain located behind the cornea which opens and closes to regulatethe amount of light entering the eye through the pupil, an opening at the center of the iris. The crystalline lens is located behind the iris that completes thefocusing of light and can change shape to focus objects at different distances onto the retina, located in the back of the eye. The trabecular meshwork, adrainage channel located between the iris and the surrounding white portion of the eye, maintains a normal pressure in the anterior chamber of the eye bydraining excess aqueous humor. The posterior segment of the eye that is behind the natural lens is filled with a jelly-like material called the vitreous humor. The retina is a layer ofnerve tissue in the back of the eye consisting of millions of light receptors called rods and cones, which receive the light image and transmit it to the brain viathe optic nerve. Common visual disorders, disease or trauma can affect the eye. One of the most prevalent ocular disorders is cataracts. Cataract formation isgenerally an age-related disorder that involves the hardening and loss of transparency of the natural crystalline lens, impairing visual acuity. Refractive disorders, which generally are not age-related, include myopia, hyperopia, and astigmatism. A normal, well-functioning eye receivesimages of objects at varying distances from the eye and focuses the images on the retina. Refractive errors occur when the eye’s natural optical system doesnot properly focus an image on the retina. Myopia, also known as nearsightedness, occurs when the eye’s lens focuses images in front of the retina.Hyperopia, or farsightedness, occurs when the eye’s lens focuses images behind the plane of the retina. Individuals with myopia or hyperopia may also haveastigmatism. Astigmatism is due to an irregular curvature of the cornea or defects in the natural lens. In an eye with astigmatism, light fails to come to a singlefocus on the retina. Instead, two or more focus points occur that results in blurred vision. Presbyopia is an age-related refractive disorder that limits a person’sability to see in the near and middle distance range as the natural crystalline lens loses its elasticity, reducing the eye’s ability to accommodate or adjust itsfocus for varying distances. Regulatory Matters Nearly all countries where we sell our products have regulations requiring premarket clearance or approval of medical devices by governmental orregulatory authorities. Various federal, state, local and foreign laws also apply to our operations, including, among other things, working conditions,laboratory, clinical, advertising and promotions, and design and manufacturing practices, and the use and disposal of hazardous or potentially hazardoussubstances. 6  The requirements for clearance or approval to market medical products vary widely by country. The requirements range from minimal requirementsto rigorous requirements comparable to those established by the U.S. Food and Drug Administration (FDA). Obtaining clearance or approval to distributemedical products is complex, costly, and time-consuming in virtually all the major markets where we sell medical devices. We cannot give any assurance thatany new medical devices we develop will be cleared or approved in any country where we propose to sell our medical devices or, if approved, whether suchapprovals will be granted in a timely or cost-effective manner, be as broad in scope as we seek, or be conditioned on post-market study requirements orrestrictive labeling. We also cannot give any assurance that if our medical devices are approved for sale in a country, subsequent action will not be taken bythe responsible regulatory authorities in the country with respect to our medical devices that might affect our ability to maintain the required approvals in thecountry or to continue to sell our medical devices in the country. The regulatory requirements in our most important current markets, the U.S., Europe, Japan,China, and Korea are discussed below. Regulatory Requirements in the United States. Under the federal Food, Drug & Cosmetic Act, as amended (the Act), the FDA has the authority to regulate, among other things, the design,development, manufacturing, preclinical and clinical testing, labeling, product safety, marketing, sales, distribution, premarket clearance and approval,recordkeeping, reporting, advertising, promotion, post-market surveillance, and import and export of medical devices. Most of our products are classified as medical devices intended for human use within the meaning of the Act and, therefore, are subject to FDAregulation. Each medical device we seek to commercially distribute in the United States must first receive clearance to market under a notification submittedpursuant to Section 510(k) of the Act, known as the 510(k) premarket notification, or premarket approval (PMA) from the FDA, unless specifically exemptedby the agency or subject to another form of FDA premarket review. The FDA classifies all medical devices into one of three classes. The FDA establishesprocedures for compliance based upon the device’s classification as Class I (general controls, such as establishment registration and device listing with FDA,labeling and record-keeping requirements), Class II (performance standards in addition to general controls) or Class III (premarket approval (PMA) requiredbefore commercial marketing). Devices deemed to pose lower risk are categorized as either Class I (low risk) or II (moderate risk). Manufacturers of Class IIdevices are generally required to submit to the FDA a 510(k) premarket notification requesting clearance of the device for commercial distribution in theUnited States. Most low risk (Class I) devices and some Class II devices are exempt from this requirement. The FDA deems Class III devices to pose thegreatest risk and are the most extensively regulated. These devices include life-supporting, life sustaining, or implantable devices, or devices deemed notsubstantially equivalent to a previously 510(k) cleared device. The effect of assigning a device to Class III is to require each manufacturer to submit to theFDA a PMA that includes information on the safety and effectiveness of the device. The FDA reviews device applications and notifications through its Officeof Device Evaluation (ODE). 510(k) Clearance. Our lens injector systems are Class I devices subject to the 510(k) premarket review and clearance process. A medical device thatis substantially equivalent to either a previously-cleared medical device or a device that was in commercial distribution before May 28, 1976 for which theFDA has not yet called for the submission of a PMA, or is a device that has been reclassified from Class III to either Class II or I may be eligible for the FDA’s510(k) premarket notification process. FDA clearance under Section 510(k) of the Act does not imply that the safety, reliability, and effectiveness of themedical device has been approved or validated by the FDA. The review period and FDA determination as to substantial equivalence generally takes fromthree to twelve months from the date the application is submitted and filed. However, the process may take significantly longer, and clearance is neverassured. Although many 510(k) premarket notifications are cleared without clinical data, in some cases, the FDA requires significant clinical data to supportsubstantial equivalence. In reviewing a premarket notification, the FDA may request additional information including clinical data, which may significantlyprolong the review process. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a majorchange in its intended use, will require a new 510(k) clearance or could require premarket approval. The FDA requires each manufacturer to make its owninitial determination as to whether a change meets this threshold. However, the FDA can review any such decision and can disagree with a manufacturer’sdetermination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing or recall the modifieddevice until 510(k) clearance or a PMA is obtained. Premarket Approval. Our IOLs, ICLs, and AquaFLOW Devices are Class III devices subject to the PMA approval process. When 510(k) clearance isnot available, the more rigorous PMA process requires us to demonstrate independently that the new medical device is safe and effective for its intended use.A PMA must be supported by, among other things, extensive technical, pre-clinical, clinical testing, manufacturing, and labeling data to demonstrate to theFDA’s satisfaction the safety and effectiveness of the device. After a PMA application is submitted and filed, the FDA begins an in-depth review of the submitted information, which typically takes between oneand three years, but may take significantly longer. During the review period, the FDA may request additional information or clarification of informationalready provided. In addition to its own review, the FDA may organize an independent advisory panel of experts to review the PMA whenever a device is thefirst of its kind or the FDA otherwise determines panel review is warranted. The FDA holds panels on a regular basis, but the need to schedule panel reviewusually adds some weeks or months to the review process. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility to ensurecompliance with Quality System Regulation (QSR) which imposes elaborate design development, testing, control, validation, documentation, complainthandling, supplier control, and other quality assurance procedures in the design and manufacturing process. The FDA may approve a PMA application withpost-approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion,sale and distribution and conduct of additional post-approval clinical studies or collection of long-term follow-up from patients in the clinical study thatsupported approval. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including the loss or withdrawalof the approval. 7  If a manufacturer plans to make significant modifications to the manufacturing process, labeling, or design of an approved PMA device, themanufacturer must submit an application called a “PMA Supplement” regarding the change. The FDA generally reviews PMA Supplements on a 180-dayagency timetable, which may be extended if significant questions arise in review of the supplement. A manufacturer may implement limited changes prior tothe FDA’s review of a PMA Supplement. The FDA designates some PMA Supplements as “panel-track” supplements, which means that the agency believesreview by an advisory panel may be warranted. Designation as a panel-track supplement does not necessarily mean that panel review will occur. Clinical or Market Trials. A clinical trial is typically required to support a PMA application and is sometimes required for a 510(k) premarketnotification. Clinical trials conducted to support premarket clearance or approval generally require submission of an application for an InvestigationalDevice Exemption (IDE) to the FDA. Appropriate data must support the IDE application, such as animal and laboratory testing results, showing that it is safeto test the device in humans and that the investigational protocol is scientifically sound. The IDE application must be approved by the FDA for a specifiednumber of patients, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Clinical trials for asignificant risk device may begin once the FDA approves the IDE application. All FDA-regulated clinical studies, whether significant or non-significant risk,must be approved and overseen by the appropriate institutional review boards (IRBs) at the clinical trial sites, and informed consent of the patientsparticipating in the clinical trial must be obtained. After a trial begins, the FDA may place it on hold or terminate it, if, among other reasons, it concludes thatthe clinical subjects are exposed to an unacceptable health risk. Any trials we conduct in the United States must be conducted in accordance with FDAregulations as well as other federal regulations and state laws concerning human subject protection and privacy. Moreover, the results of a clinical trial maynot be sufficient to obtain clearance or approval of the product. Oversight of compliance with quality, medical device reporting, clinical study, and other regulations. Both before and after we receive premarketclearance or approval and release a product commercially, we have ongoing responsibilities under FDA regulations. The FDA reviews design andmanufacturing practices, labeling and record keeping, product complaints and manufacturer’s required reports of adverse experiences, product correctionsand removals, and other information to identify potential problems with marketed medical devices. We are also subject to periodic inspection by the FDA forcompliance with the FDA’s Quality System Regulation (QSR) and other requirements, such as requirements for advertising and promotion. The GoodManufacturing Practice (GMP) regulations for medical devices embodied in the QSR govern the methods used in, and the facilities and controls used for, thedesign, manufacture, packaging, labeling, and servicing of all finished medical devices intended for human use. The FDA’s Bioresearch Monitoring Program (BIMO), reviews our activities as a sponsor of clinical research. BIMO conducts facilities inspections aspart of a program designed to ensure that data and information contained in requests for IDEs, PMA applications and 510(k) submissions are scientificallyvalid, reliable, and accurate. Another objective of the program is to ensure that human subjects are protected from undue hazard or risk during scientificinvestigations. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective orpose an unreasonable health risk, the FDA could require us to notify health professionals and others that the devices present unreasonable risk or substantialharm to public health, order a recall, repair, replacement, or refund of the devices, detain, or seize adulterated or misbranded medical devices, or ban themedical devices. The FDA may also issue warning letters or untitled letters, refuse our request for 510(k) clearance or PMA approval, revoke existing 510(k)clearances or PMA approvals previously granted, impose operating restrictions, enjoin, and restrain certain violations of applicable law pertaining to medicaldevices and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend prosecution to the Department of Justice.In the case of devices subject to pending premarket clearance or approval applications, FDA has broad authority to halt the review of applications and requiresignificant additional data analyses, audits, and other corrective actions where clinical data contained in an application are deemed to be actually orpotentially unreliable, inaccurate, or not in compliance with clinical study or good clinical practice requirements. For example, in 2007 we received a warning letter following a BIMO inspection that identified negative inspectional observations. Prior to theinspection and the warning letter, we submitted a PMA supplement for the TICL to the FDA on April 28, 2006, which the agency designated as a panel-tracksupplement. In August 2007, following negative inspectional observations and the warning letter the FDA Office of Device Evaluation placed an integrityhold on our TICL application. Over a two-year period, we took a number of corrective actions to address BIMO’s concerns and to remove the integrity hold,including engaging an independent third party to conduct a 100% audit of patient records in the TICL clinical study, along with an audit of clinical systemsto ensure accuracy and completeness of data before resubmitting the application. On July 21, 2009, the FDA notified us that because of our corrective actionsthe FDA had removed the integrity hold on the application for approval of the TICL, and would resume its consideration of the application. In February 2010and November 2011, we received letters of deficiency from the FDA outlining additional questions. After several communications with and additional datasubmissions to the FDA, on March 14, 2014 an FDA Ophthalmic Devices Panel of the Medical Devices Advisory Committee, which assessed our PMASupplement submission seeking approval of the TICL, voted favorably in response to the three questions posed to it by the FDA’s Division of Ophthalmic,Neurological and Ear, Nose and Throat Devices regarding the TICL’s safety and effectiveness as well as whether the TICL’s benefits outweigh its risks. On May 27, 2014, we received a warning letter from the FDA (2014 Warning Letter) citing alleged violations of current good manufacturing practice(cGMP) regulations that were identified by the FDA during an inspection of our manufacturing facility in Monrovia, California between February 10, 2014,and March 21, 2014. To summarize, the 2014 Warning Letter observations require remedial action in four general areas: design control documentation;validation of software for an on-line calculator; data collection and trending of ICL vault complaints; and shelf life data on the ICL product. The 2014Warning Letter provides that, until the Company addresses the deficiencies to the FDA’s satisfaction, the FDA will not approve PMAs for the Company’sClass III devices where the applications are reasonably related to the cGMP violations cited in the 2014 Warning Letter. 8  Beginning on November 14, 2014 and continuing through February 4, 2015, the FDA inspected our Monrovia facility. On February 4, 2015, at theconclusion of the inspection, the FDA issued the 2015 FDA-483 with ten inspectional observations (2015 FDA-483). The observations focus primarily on theneed for adherence to and improved procedures, processes and documentation relating to design change, design transfer into specifications and production,verification and validation associated with device design and production, improvement in good documentation practices, and broader environmentalmonitoring. STAAR responded to the 2014 Warning Letter and the 2015 FDA-483 and is concurrently continuing to implement its corrective action plansrelating to the 2014 Warning Letter and the 2015 FDA-483. STAAR has continued to submit monthly updates to FDA regarding its progress on correctiveactions. While the PMA supplement remains pending, we cannot predict when, or if, the FDA will grant approval of the TICL for use in the United States. Healthcare Fraud and Abuse Laws and Regulations. Even though we do not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal andstate healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are applicable to our business. We are subject to healthcare fraud andabuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The regulations that may affect ourability to operate include, without limitation: ·the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving, orproviding remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of agood or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs; ·the federal False Claims Act, which prohibits, among other things, individuals, or entities from knowingly presenting, or causing to be presented,false claims, or knowingly using false statements, to obtain payment from the federal government, and which may apply to entities that providecoding and billing advice to customers; ·federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcarematters; ·the federal physician sunshine requirements under the Patient Protection and Affordable Care Act of 2010, which requires manufacturers of drugs,devices, biologics, and medical supplies to report annually to the Centers for Medicare & Medicaid Services information related to payments andother transfers of value relating to certain drugs, devices, biologics, and medical supplies to physicians, other healthcare providers, and teachinghospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members; ·the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic andClinical Health Act of 2009, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy ofprotected health information; and ·state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursedby any third-party payer, including commercial insurers; state laws that require device companies to comply with the industry’s voluntarycompliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments that may bemade to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related topayments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacyand security of health information in certain circumstances, which may differ from each other and may not have the same effect, thus complicatingcompliance efforts. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of ourbusiness activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened theselaws. For example, the recently enacted Health Care Reform Law, among other things, amends the intent requirement of the Federal Anti-Kickback Statuteand criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition,the Patient Protection Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of theFederal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Regulatory Requirements Outside the United States. CE Marking. In the European Economic Area (EEA), which is comprised of the 28 Member States of the European Union plus Norway, Iceland, andLiechtenstein, medical devices must comply with the essential requirements of the EU Medical Devices Directive (Council Directive 93/42/EEC).Compliance with the essential requirements of the EU Medical Device Directive is a prerequisite to be able to affix a Conformité Européenne Mark (CEMark), without which medical devices cannot be marketed or sold in the EEA. To demonstrate compliance with the essential requirements, medical devicemanufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. 9  The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by themanufacturer and a third-party assessment by a “Notified Body.” Notified Bodies are a group of private quality-monitoring organizations that are accreditedto review medical devices and to monitor quality systems and adverse event reporting. The independent Notified Bodies perform, on a privatized basis,functions similar to the FDA in the U.S. and the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan. Our facilities in the United States andSwitzerland are subject to regular inspection by a designated Notified Body. Other countries, such as Switzerland, have voluntarily adopted laws andregulations that mirror those of the European Union with respect to medical devices, and a number of countries outside of Europe permit importation ofdevices bearing the CE Mark. We have affixed the CE Mark to all our principal products sold in CE Mark jurisdictions including ICLs, IOLs, injector systems and our AquaFLOWDevice. Medical Device Regulation in Japan. The Japanese Ministry of Health, Labor, and Welfare (MHLW) regulates the sale of medical devices underJapan’s Pharmaceutical Affairs Law (PAL). The PMDA, a quasi-governmental organization, performs many of the medical device review functions forMHLW. Medical devices generally must undergo thorough safety examinations and demonstrate medical efficacy before the MHLW grants shonin(premarket device approval) or ninsho (certification). Manufacturers and resellers (referred to as Marketing Authorization Holders or MAHs) must also satisfycertain requirements before the MHLW grants a business license, or kyoka. Requirements for manufacturers and MAHs include compliance with Japaneseregulations covering GQP (good quality control practice) and GVP (good vigilance practice), which largely include conformity to the ISO 13485 standardand are similar to good manufacturing practice and post-market surveillance requirements in the United States, as well as the assignment of internalsupervisors over marketing, quality assurance, and safety control. Approval for a new medical device that lacks a substantial equivalent in the Japanese market will generally require the submission of clinical trialdata. Only a licensed MAH can apply for premarket device approval in Japan, and in most cases, the clinical trial data must include data gathered fromJapanese subjects. For example, STAAR Japan conducted a separate clinical trial in Japan for the shonin application for the ICL. Also, approval for a newmedical device will require the manufacturer to undertake to reexamine the safety and efficacy of the device with a review of post-market data gatheredwithin a certain period - normally four years - after approval. The specific post-market reexamination requirement for a medical device is announced at thetime of approval. STAAR Japan currently holds shonin approval for the ICL products, preloaded injectors, and their associated lenses, and kyoka licensing as amanufacturer and MAH of medical devices. The sponsor of a clinical trial submitted to the MHLW must strictly follow Good Clinical Practice (GCP)standards, and must follow the trial with standard Good Post-market Study Practice (GPSP) reporting and a follow-up program. MHLW and PMDA also assessthe quality management systems of manufacturers and the conformity of products to the requirements of PAL. STAAR is subject to inspection for complianceby these agencies. A company’s failure to comply with PAL can result in severe penalties, including revocation or suspension of a company’s businesslicense and possible criminal sanctions. If the PMDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of ourmedical devices are ineffective or pose an unreasonable health risk, they could take a variety of regulatory or legal actions, similar to the FDA, which couldhave a material and negative impact on the Company. Medical Device Regulation in China and Korea. Sales of our products in China and Korea, as in other countries, are also subject to regulatoryrequirements. In China, medical devices such as our ICLs require testing by a government recognized laboratory qualified as a medical device testing centerin accordance with Chinese standards. Results from the testing center, together with registration documents, are submitted to the Center for Medical DeviceEvaluation (CMDE) of the Chinese FDA (CFDA) for technical evaluation and if accepted, then approval and registration by CFDA. In China, we obtainregistration of our products from CFDA ourselves. In Korea, medical devices such as our ICLs and IOLs require registration and approval from the KoreanMinistry of Food and Drug Safety (MFDS) prior to commercialization. Typically, the MFDS requires similar documentation as required to obtain a CE Mark. Our distributor in Korea is contractually required to obtain, with our assistance, the necessary health registrations, governmental approvals, or clearances toimport, market and sell our products. In Korea, we provide our distributor with information and data to obtain appropriate registrations and approvals, andthe distributor in each country obtains such registrations. If the CFDA or MFDS were to conclude that we are not in compliance with applicable laws orregulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, they could take a variety of regulatory or legal actions intheir respective countries, similar to the FDA, which could have a material and negative impact on the Company. Third Party Coverage and Reimbursement. Health care providers generally rely on third-party payers, including governmental payers such as Medicare and Medicaid, private insurance plansand workers’ compensation plans, to cover and reimburse the cost of medical devices and related services. These third-party payers may deny coverage orreimbursement for a medical device if they determine that the product or procedure using the product was not medically appropriate or necessary and areincreasingly challenging the price of medical devices and services. Our ICL products generally are not covered by third-party payers, and patients incur out-of-pocket costs for these products and related proceduresusing our products. Our IOL products used in cataract procedures generally are covered by third-party payers, including Medicare, in whole or in partdepending upon a variety of factors, including the specific product used and geographic location where the procedure using the covered product isperformed. The market for some of our IOL products therefore is influenced by third-party payers’ policies. 10  In the United States, the Centers for Medicare & Medicaid Services, the agency responsible for administering the Medicare program, or CMS, setscoverage and reimbursement policies for the Medicare program. CMS may modify its coverage and reimbursement policies related to IOLs, including ourIOLs, as well as cataract procedures using IOLs, at any time. Since the enactment of the Patient Protection and Affordable Care Act, as amended by the HealthCare and Education Reconciliation Act, or collectively, the Health Care Reform Law, there have been an increasing number of legislative initiatives in theUnited States to contain health care coverage and reimbursement by governmental and other payers. These new laws, as well as future laws that may beenacted, may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and thus,our financial operations. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted costcontainment initiatives similar to those in the United States. There can be no assurance that third-party coverage and reimbursement will be available oradequate, or that such policies or any future legislation or regulation will not adversely affect the demand for our IOLs or our ability to sell these products atprices we consider adequate. Research and Development We focus on furthering technological advancements in the ophthalmic products industry through the development of innovative premiumophthalmic products (lenses and companion delivery systems), materials and designs. We maintain active internal research and development programs. Toachieve our business objectives, we will continue our investment in research and development. Our research and development expenses were approximately $20.3 million, $14.8 million, and $12.4 million for our 2016, 2015, and 2014 fiscalyears, respectively. During 2016, our research and development expenses increased $5.5 million as compared to 2015, including increases of $2.7 million invalidation and quality assurance related expenses, $1.8 million in clinical activities, $1.0 million in regulatory activities, and $1.3 million in R&D projects,partially offset by a decrease in FDA remediation activities. The Company expects to continue its FDA remediation activities into 2017 and expects to spendapproximately $0.5 million for these activities in 2017 as compared to approximately $1.9 million in 2016. During 2017, we intend to continue our focus on research and development in the following areas: ·Development of presbyopia-correcting ICLs; ·Development of preloaded injector systems for ICLs; ·Development of presbyopia-correcting IOLs; and ·Development of a new generation of ICLs and materials. Environmental Matters We are subject to federal, state, local and foreign environmental laws, and regulations. We believe that our operations comply in all material respectswith applicable environmental laws and regulations in each country where we do business. We do not expect compliance with these laws to affect materiallyour capital expenditures, earnings, or competitive position. We have no plans to invest in material capital expenditures for environmental control facilitiesfor the remainder of our current fiscal year or for the next fiscal year. We are not aware of any pending actions, litigation or significant financial obligationsarising from current or past environmental practices that are likely to have a material adverse impact on our financial position. However, environmentalproblems relating to our properties could develop in the future, and such problems could require significant expenditures. In addition, we cannot predictchanges in environmental legislation or regulations that may be adopted or enacted in the future and that may adversely affect us. Employees As of February 15, 2017, we had approximately 336 full-time equivalent employees. Code of Ethics STAAR has adopted a revised Code of Business Conduct and Ethics that applies to all its directors, officers, and employees. The Code of BusinessConduct and Ethics is posted on our website, www.staar.com — Investor Information: Corporate Governance. Additional Information We make available free of charge through our website, www.staar.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and amendments to any reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as soon asreasonably practicable, after those reports are filed with or furnished to the Securities and Exchange Commission (“SEC”). The public may read any of the items we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Thepublic may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internetsite that contains reports, proxy and information statements, and other information regarding STAAR and other issuers that file electronically with the SEC athttp://www.sec.gov. 11  Glossary The following glossary is intended to help the reader understand some of the terms used in this Report. acrylic – a broadly used family of plastics. Acrylic materials used in IOLs have been both water repelling (hydrophobic) and water-absorbing(hydrophilic). The most popular IOLs in the U.S., Europe and Japan are made of a flexible, water-repellent acrylic material. aspheric – aspheric lenses are lenses that are designed in a shape that creates a more clearly focused image than traditional spheric lenses. Byreducing spherical aberrations, IOLs that feature aspheric optics generally deliver better night vision and contrast sensitivity than spheric IOLs. collagen copolymer - compounds formed by joining molecules of collagen derived from biological sources with synthetic monomer molecules.STAAR’s Collamer® is a collagen copolymer engineered specifically for use in implantable lenses. contrast sensitivity - the ability to visually distinguish an object from its background. crystalline lens – the natural lens that is present in the eye at birth, which is a clear structure, located behind the iris that changes shape to focus lightonto the retina. excimer laser – a specialized ultraviolet laser used in ophthalmology to cut or shape eye tissue. The excimer laser is used during LASIK and PRKsurgery. foldable IOL – an intraocular lens made of flexible material, which can be inserted with an injector system through a small incision in minimallyinvasive cataract surgery. haptic – the part of an IOL that contacts the structures of the eye and holds the IOL in place. IOLs in which the haptic is also a part of the opticmaterial is called a single-piece IOL, while IOLs in which the haptics are attached to the optic is called a three-piece IOL. hyperopia – the refractive disorder commonly known as farsightedness, which occurs when the eye’s lens focuses images behind the plane of theretina rather than on the retinal surface. A person with hyperopia cannot see close objects without glasses or contact lenses. Because presbyopia often resultsin the need for reading glasses, it is sometimes confused with farsightedness. intraocular – within the eye. injector or injector system – a device in the form of a syringe that is used to deliver a foldable IOL into the eye through a slender nozzle inminimally invasive cataract surgery. iridotomy – a small hole created in the iris, usually made with a YAG laser. Prior to implantation of some ICL models a YAG peripheral iridotomy ismade in an unobtrusive area at the periphery of the iris to ensure continued fluid flow in the eye after implantation. The ICL with CentraFLOW technology,marketed with the brand names EVO and EVO+, have a central port for fluid flow, which eliminates the need for an iridotomy or iridectomy. LASIK – an acronym for laser-assisted in-situ keratomileusis, a surgical operation that reshapes the cornea to correct nearsightedness, farsightedness,or astigmatism. LASIK involves first the cutting of a hinged flap to separate the surface layer of the cornea, using a microkeratome (a special blade) or a laser.An excimer laser is then used to burn tissue away and reshape the inner cornea, after which the flap is returned to position. myopia – the refractive disorder also known as nearsightedness, which occurs when the eye’s lens focuses images in front of the retina rather than onthe retinal surface. A person with myopia cannot clearly see distant objects without glasses or contact lenses. ophthalmologist – a surgeon who specializes in the diseases and disorders of the eye and the related visual pathway. ophthalmic – of or related to the eye. optic – the central part of an IOL or ICL, the part that functions as a lens and focuses images on the retina. PRK – an acronym for photorefractive keratectomy, the first type of laser surgical operation to correct nearsightedness, farsightedness, orastigmatism. 12  Preloaded Injector - a silicone or acrylic IOL packaged and shipped in a pre-sterilized, disposable injector. This differs from the conventionalmethod of packaging IOLs, which requires the surgeon or an assistant to manually load each lens into an injector before surgery. presbyopia – an age-related condition in which the crystalline lens loses its ability to focus on both near and far objects. People who have hadnormal vision will typically begin to need glasses for reading or other close tasks at some point after age 40 due to presbyopia. QSR - the FDA’s Quality System Regulation, or current Good Manufacturing Practice (cGMP) regulation, includes requirements related to themethods used in, and the facilities and controls used for, designing, manufacturing, packaging, labeling, storing, installing, and servicing of medical devicesintended for human use. The regulation sets forth the framework for medical device manufacturers to follow in achieving quality requirements, includingrequirements related to complaint handling and control of purchased or supplied services, components, and materials bearing on the quality of medicaldevices. RLE – refractive lens exchange, a refractive surgical procedure in which the natural crystalline lens is removed and replaced with an IOL9essentially the same as cataract surgery but performed primarily to address refractive issues not to remove a cataract). refractive market – as used in this report “refractive market” means the overall market volume for refractive surgical procedures of all kinds,including LASIK, PRK, RLE, the ICL product family and other phakic IOLs. As used in this report, the term does not include sales of non-surgical productslike eyeglasses and contact lenses. silicone – a type of plastic often used in implantable devices that is inert, generally flexible and water-repelling. single-piece IOL – in a single piece IOL the haptics and the optic are fashioned from a single piece of lens material. spheric lenses – a spheric lens has surfaces that are shaped like sections of a sphere. The sphere is not an ideal shape for an optically accurate lens,but spherical surfaces have historically been the simplest lens shape to make. Spheric lenses have spherical aberrations – small errors in focus that becomemore pronounced at the edge of the lens. When a spheric IOL is placed in the human eye, these aberrations can reduce night vision and contrast sensitivity. three-piece IOL – a three-piece IOL has a central, disk-shaped optic and two spring-like haptics attached at either side. The haptics are positionedagainst structures of the eye to hold the IOL in place. toric – refers to the shape of a lens designed to correct astigmatism, which has greater refractive power in some sections of the lens than others. YAG – an acronym for yttrium-aluminum-garnet, a mineral crystal. Lasers using neodymium-doped yttrium aluminium garnet crystals (Nd:YAG)generate a high-energy beam that can be used in a number of ophthalmic procedures, including creating iridotomies before implantation of some models ofthe ICL. Item 1A. Risk Factors Our short and long-term success is subject to many factors that are unpredictable and beyond our control. Investors and prospective investors shouldconsider carefully the following risk factors, in addition to other information contained in this report. This Annual Report on Form 10-K contains forward-looking statements, which are subject to a variety of risks and uncertainties. We have identified below the known, significant risk factors that could affect ourbusiness and affect the expectations reflected in our forward-looking statements. Risks Related to Our Business We have a history of losses that may continue in the future. We have reported losses in four of the past five years. Our near-term profitability is challenged by the competitive nature of our industry, continuedinvestment in our operations, and the other risks to our business detailed herein. For example, 2017 represents the third year of a three-year transformationdesigned to increase growth. There can be no guaranty that we will achieve such growth, or profitability, in the near term. While we believe our capitalresources and funds generated by operations are sufficient to operate our business and satisfy our obligations, if unexpected events increase our expenses orharm the performance of our business we may need to seek additional financing. We may also identify opportunities to expand our business that requireadditional financing. Should we need additional working capital, our ability to raise capital through sales of equity securities depends on general marketconditions and the demand for our common stock. We may be unable to raise adequate capital through sales of equity securities, and if our stock has a lowmarket price at the time of such sales our existing stockholders could experience economic dilution. We may also have difficulty obtaining debt financing onacceptable terms or renewing existing debt facilities. An inability to secure additional financing if it is needed in the future could require us to foregoopportunities for expansion, or could adversely affect our operations. Also, if we cannot continue to generate positive cash flow from operations, we mayhave to reduce our costs which could materially and adversely affect our ability to execute our operations and expand our business. 13  FDA compliance issues, including the 2014 Warning Letter and the 2015 FDA-483, may adversely impact our operations. Quality system deficiencies observed at certain of our facilities during inspections have led to FDA Warning Letters and delays in product approvalsuntil we resolve FDA concerns. On May 21, 2014, we received the 2014 Warning Letter from the FDA citing alleged violations of cGMP requirements of theQuality System Regulation (QSR) that were identified by the FDA during an inspection of the Company’s manufacturing facility in Monrovia, Californiabetween February 10, 2014, and March 21, 2014. The 2014 Warning Letter provides that, until we address the deficiencies to the FDA’s satisfaction, the FDAwill not approve PMAs for the Company’s Class III devices where the applications are reasonably related to the cGMP violations cited in the Warning Letter.Beginning on November 14, 2014 and continuing through February 4, 2015, the FDA inspected our Monrovia facility. On February 4, 2015, at theconclusion of the inspection, the FDA issued a Form FDA-483 with ten inspectional observations. The observations focus primarily on the need for adherenceto and improved procedures, processes and documentation relating to design change, design transfer into specifications and production, verification andvalidation associated with device design and production, improvement in good documentation practices, and broader environmental monitoring. We timely responded to the 2014 Warning Letter and the 2015 FDA-483 and are continuing to implement our corrective action plans related to bothissuances and to update FDA monthly on our corrective actions. There can be no assurance when or if the FDA will be satisfied with our response to the 2014Warning Letter or the 2015 FDA-483 or that FDA will lift the Warning Letter in any specific time frame, if at all. Unless and until STAAR can correctoutstanding issues to the FDA's satisfaction, the FDA may withhold approval of new products, such as the TICL. While the TICL PMA supplement remainspending, we cannot predict when, or if, the FDA will grant approval of the TICL for use in the United States. In addition, we may be subject to additionalregulatory action by the FDA, including fines, injunctions, warning letters, consent decrees, prosecution, civil money penalties, criminal penalties, repairs,replacements, refunds, recalls or seizures of products, total or partial suspension of production and marketing, the FDA’s refusal to grant future premarketapprovals, and/or withdrawals or suspensions of approvals or clearance for current products. Any such further action might, ultimately, have a materialadverse effect on our ongoing business and operations. Our management expects to continue to devote significant resources and attention to our quality systems and compliance with QSR and otherregulatory requirements for the foreseeable future. We cannot ensure that our efforts will be successful and failure to achieve or maintain compliance mayadversely impact our business and operations, as noted above. We rely and depend on independent distributors in international markets. Except for the U.S., Japan, Spain, Germany, Canada, and the U.K. we sell our products through independent distributors who generally control theimportation and marketing of our product within their territories. We generally grant exclusive rights to these distributors and rely on them to understandlocal market conditions, to diligently sell our products and to comply with local laws and regulations. Our agreements with distributors and local laws canmake it difficult for us to quickly change from a distributor who we feel is underperforming. If we do terminate an independent distributor, we may losecustomers who have been dealing with that distributor, and may be required to compensate the distributor for termination. Because these distributors areindependent, it may be difficult for us to detect failures in our distributors’ performance or compliance. Actions by independent distributors that are beyondour control could result in declining sales in that territory, harm to the reputation of our company or our products, or legal liability. For example, if ShanghaiLangsheng, which accounted for 19% of our fiscal 2016 consolidated net sales, ceased to serve as our distributor, or significantly underperform ourexpectations we may experience a substantial reduction in sales. Unfavorable economic conditions or negative publicity concerning complications of laser eye surgery hurt sales of our refractive products. Refractive surgery is an elective procedure generally not covered by health insurance. Patients must pay for the procedure, frequently throughinstallment financing arrangements with third parties. They can defer the choice to have refractive surgery if they lack the disposable income to pay for it ordo not feel their income is secure. Economic stagnation, lack of consumer confidence or new recessions in any of our larger markets could slow ICL salesgrowth or, if severe, cause declines in sales. Because the ICL is our best selling and highest gross margin product, restricted growth or a decline in its salescould materially harm our business. We believe that negative publicity in the past regarding the potential complications of refractive surgery and potential patient dissatisfaction, inparticular because of LASIK and other corneal laser-based procedures, decreased patient interest in LASIK as well as all other refractive procedures.Depending on the nature and severity of any future negative publicity about refractive surgery, the growth of ICL sales could be limited or sales coulddecline due to decreased patient interest in all refractive surgery. Disruptions in our supply chain or failure to adequately forecast product demand could result in significant delays or lost sales. The loss of a material supplier could significantly disrupt our business. In some cases, we obtain components used in certain of our products fromsingle sources. If we experience difficulties acquiring sufficient quantities of required materials or products from our existing suppliers, or if our suppliers arefound to be non-compliant with the FDA's QSR, other applicable laws, or STAAR’s requirements, then qualifying and obtaining the required regulatoryapprovals to use alternative suppliers may be a lengthy and uncertain process during which we could lose sales. Our sources of supply for raw materials may be threatened by shortages and other market forces, by natural disasters, by the supplier’s failure tomaintain adequate quality or a recall initiated by the supplier. Even when substitute suppliers are available, the need to verify the substitute supplier’sregulatory compliance and the quality standards of the replacement material could significantly delay production and materially reduce our sales. 14  In particular, we manufacture the proprietary collagen-based raw material used in our ICLs, IOLs, and the AquaFLOW Device internally. If thesupply of these collagen-based raw materials is disrupted it could result in our inability to manufacture those products and would have a material adverseeffect on STAAR. The loss of our external supply source for silicone material, polymer for injectors or acrylic lenses could also, for example, cause us materialharm. Further, any failure by us to forecast demand for or to maintain an adequate supply of, raw material and finished product could result in aninterruption in the supply of certain products and a decline in the sales of that product. If our suppliers or we are unable or unwilling to meet ourmanufacturing requirements, we may not be able to produce enough materials or products in a timely manner, which could cause a decline in our sales. The global nature of our business may result in fluctuations and declines in our sales and profits due to fluctuations in foreign currency exchangerates and other international risks. Activities outside the U.S. accounted for approximately 88% of our total sales during 2016. Foreign currency fluctuations could result in volatilityof our revenue. The results of operations and the financial position of our Japanese subsidiary are reported in Japanese yen and then translated into U.S.dollars at the applicable exchange rates for inclusion in our consolidated financial statements, exposing us to translation risk. In addition, we are exposed totransaction risk because some of our sales and expenses are incurred in a currency different from the U.S. dollar. Our most significant currency exposures areto the Japanese yen, the euro, and the Swiss franc, and the exchange rates between these currencies and the U.S. dollar may fluctuate substantially. We do notactively hedge our exposure to currency rate fluctuations. Also, we price some of our products in U.S. dollars, and thus changes in exchange rates can makeour products more expensive in some offshore markets and reduce our sales. Inflation in emerging markets could also make our products more expensive andincrease the credit risks to which we are exposed. Future foreign currency fluctuations could favorably or unfavorably impact and increase the volatility ofour revenue, profitability, and stock price. Economic, social, and political conditions, laws, practices, and local customs vary widely among the countries in which we sell our products. Ouroperations outside of the U.S. face a number of risks and potential costs, enjoy less stringent protection of intellectual property, and face economic, political,and social uncertainty in some countries, especially in emerging markets. Our continued success as a global company depends, in part, on our ability todevelop and implement policies and strategies that are effective in anticipating and managing these and other risks in the countries where we do business.These and other risks may have a material adverse effect on our operations in any particular country and on our business as a whole. For example, sales incertain Asian and developing markets may result in lower margins and higher exposure to intellectual property infringement or counterfeits. Further, tradedisputes between the United States and its significant trading partners may adversely affect sales. We may not be able to fully use our recorded tax loss carryforwards. We have accumulated approximately $136.1 million of U.S. federal tax net operating loss carryforwards as of December 30, 2016, which can be usedto offset taxable income in future quarters if our U.S. operations become profitable. If unused, these tax loss carryforwards will begin to expire between 2020and 2036. At this time, we do not believe our U.S. operations will generate sufficient profitability during the near term to enable us to use the totality of ournet operating loss carryforwards before they expire. Also, currently if we generate profits on a consolidated basis, those profits are expected to be primarilygenerated outside the U.S. and subject to income taxes, cannot be offset with U.S. loss carryforwards. If profits occur in the U.S. this will enable us to beginusing our tax loss carryforwards in the U.S., but unexpected changes in tax laws could prevent or hinder us from realizing the benefits of the U.S. losscarryforwards. Moreover, under the current tax laws, if we were to experience a significant change in ownership, Internal Revenue Code Section 382 mayrestrict the future utilization of these tax loss carryforwards even if our U.S. operations generate significant profits. Because we manufacture most of our products from a single manufacturing site, in Monrovia, CA, if we suffer the partial or total loss of that facilitydue to catastrophe, or if one of our manufacturing sites fail to be in compliance with its regulatory approvals, our operations could be seriously harmed. We depend on the continuing operation of our manufacturing facility in Monrovia, California, which is currently our sole manufacturing facility forICLs and IOLs. Our Monrovia facility could suffer catastrophic loss due to fire, flood, earthquake, terrorism or other natural or man-made disasters (includingmanufacturing challenges such as equipment failure) and we would need resources (personnel and equipment) as well as additional regulatory approvals tomanufacture our product at any second manufacturing site. Our California and Japanese facilities are in areas where earthquakes could cause catastrophicloss. Also, in our major markets, regulatory approval to manufacture materials and sell our products is generally limited to the current manufacturing site,and changing the site requires applications to and approval from regulatory bodies prior to commercialization. To satisfy our own quality standards as well asregulations, we must follow strict protocols to confirm that products and materials made at a new site are equivalent to those made at the currently approvedsite. Even minor changes in equipment, supplies or processes require validation. Unanticipated delays or difficulties in manufacturing a transferred process ormaterials could interrupt our supply of products. Any sustained interruption in supply could cause us to lose market share and harm our business. 15  If any of our facilities were to experience a catastrophic loss, or if one of our facilities is found not to be in compliance with regulatory requirements,it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility, as well as lost customersor sales. Our insurance for property damage and business interruption may not be sufficient to cover any particular loss. We do not carry insurance or reservefunds for interruptions or potential losses arising from earthquakes or terrorism. We depend on key employees. We depend on the continued service of our senior management and other key employees. The loss of a key employee could hurt our business. Itcould be particularly detrimental if any key employee or employees went to work for a competitor. Also, our future success depends on our ability to identify,attract, train, motivate and retain other highly skilled personnel. Failure to do so may adversely affect our results. We do not maintain insurance policies tocover the cost of replacing the services of any of our key employees who may unexpectedly die or become disabled. We compete with much larger companies. Our competitors, including Novartis (formerly Alcon), Abbott (formerly Advanced Medical Optics, or AMO) and Valeant (formerly Bausch & Lomb),have much greater financial resources than we do and some of them have large international markets for a full suite of ophthalmic products. Their greaterresources for research, development and marketing, and their greater capacity to offer comprehensive products and equipment to providers, makes for intensecompetition. Over the past several years, we have lost market share in IOL sales to some of our competitors. In addition, start-up competitors from Asia arebeginning to appear in some markets with their low-cost version of an implantable contact lens, which competes with our ICL. Non-compliance with anti-corruption laws could lead to penalties or harm our reputation. We are subject to anti-corruption laws in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act (FCPA). Any failure tocomply with these laws, even if inadvertent, could result in significant penalties or otherwise harm our reputation and business. Our reliance on foreignsubsidiaries and independent distributors demands vigilance in maintaining our policy against participation in corrupt activity. In many of our marketsoutside the U.S., doctors and hospital administrators may be deemed government officials. Other U.S. companies in the medical device and pharmaceuticalfield have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with such individuals. We could experience losses due to product liability claims. We have been subject to product liability claims in the past and may experience such claims in the future. Product liability claims against us mayexceed the coverage limits of our insurance policies or cause us to record a loss in excess of our deductible. A product liability claim that exceeds ourinsurance coverage could materially harm our business, financial condition, and results of operations. Even if an insurance policy covers a product liabilityloss, we must generally pay for losses until they reach the level of the policy’s stated deductible or retention amount after which the insurer begins paying.The payment of retentions or deductibles for a significant number of claims could have a material adverse effect on our business, financial condition, andresults of operations. Any product liability claim would divert managerial and financial resources and could harm our reputation with customers. We cannot assure youthat we will not have product liability claims in the future or that such claims would not have a material adverse effect on our business. Our defined benefit pension plans are currently underfunded and we may be subject to significant increases in pension benefit obligations under thosepension plans. We sponsor two defined benefit pension plans through our wholly owned Swiss and Japanese subsidiaries, which we refer to as the Swiss Plan andthe Japan Plan, respectively. Both plans are underfunded and may require significant cash payments. We determine our pension benefit obligations and funding status using many assumptions. If the investment performance does not meet ourexpectations, or if other actuarial assumptions are modified, or not realized, we may be required to contribute more than we currently expect and increase ourfuture pension benefit obligations to be funded from our operations. Our pension plans taken together are underfunded by approximately $4.0 million ($1.2 million for the Japan Plan and $2.8 million for the SwissPlan) as of December 30, 2016. If our cash flow from operations is insufficient to fund our worldwide pension obligations, we may be materially and adversely harmed and have toseek additional capital. 16  Our activities involve hazardous materials, emissions, and use of an irradiator and may subject us to environmental liability. Our manufacturing, research and development activities involve the use of hazardous materials and equipment. Federal, state and local laws andregulations govern the use, manufacturing, storage, handling and disposal of these materials and certain waste products in the places where we haveoperations. We cannot eliminate the risk of accidental contamination or injury from these materials and equipment. Remedial environmental actions couldrequire us to incur substantial unexpected costs, which could materially and adversely affect our results of operations. If we were involved in anenvironmental accident or found to be in substantial non-compliance with applicable environmental laws, we could be held liable for damages or penalizedwith fines. If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, our operations couldbe disrupted. We depend on information technology networks and our information technology infrastructure for electronic communications among our locationsaround the world and between our personnel and our subsidiaries, customers, and suppliers. The integrity and protection of our customer, vendor, supplier,employee, and other Company data, is an important part of our business. Addressing applicable security and privacy regulations may increase our operatingcosts or adversely affect our business operations. Unauthorized parties may also attempt to gain access to our systems or facilities. Security breaches could disrupt our operations, and result in lost ormisappropriated information. Despite the security measures we have in place, our facilities and systems, and those of our suppliers, distributors and customerswith whom we do business, may be vulnerable to security breaches, cyber-attacks, or other similar events. Any security breach of Company information,could have a material adverse effect on our business, results of operations and financial condition. Also, certain of our information technology systems arenot redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such events could harm ourreputation and financial results. The increased use of social media platforms and mobile technologies presents additional risks and challenges. New technologies are increasingly used to communicate about our products and the health conditions they are intended to treat. The use of thesemedia requires specific attention and monitoring. For example, patients, competitors, or others may use these channels to comment on the safety oreffectiveness of a product and to report an alleged adverse event. Negative posts or comments about us or our business on any social networking web sitecould harm our reputation. In addition, our employees may use social media tools and mobile technologies inappropriately, which may give rise to liability,or which could lead to the exposure of sensitive information. In either case, such uses of social media and mobile technologies could have a material adverseeffect on our business, financial condition, and results of operations. Acquisitions of technologies, products, and businesses could disrupt our operations, involve increased expenses and present risks not contemplated atthe time of the transactions. We may consider and, as appropriate, make acquisitions of technologies, products, and businesses that we believe are complementary to ourbusiness. Acquisitions typically entail many risks and could result in difficulties in integrating the operations, personnel, technologies, and productsacquired, and mitigating the risk of unknown liabilities some of which may result in significant charges to earnings. If we are unable to successfully integrate our acquisitions with our existing business, we may not obtain the advantages that the acquisitions wereintended to create, which may materially adversely affect our business, and our ability to develop and introduce new products. Actual costs and salessynergies, if achieved at all, may be lower than we expect and may take longer to achieve than we anticipate. Furthermore, the products of companies weacquire may overlap with our products or those of our customers, creating conflicts with existing relationships or with other commitments that are detrimentalto the integrated businesses. Risks Related to the Ophthalmic Products Industry If we fail to keep pace with advances in our industry or fail to persuade physicians to adopt the new products we introduce, customers may not buy ourproducts and our sales may decline. Our future growth depends, in part, on our ability to develop products to treat diseases and disorders of the eye that are more effective, safer, orincorporate emerging technologies better than our competitors’ products, and accepted by physicians and patients. Sales of our existing products maydecline rapidly if one of our competitors introduces a superior product, or if we announce a new product of our own. If we focus on technologies that do notlead to better products, more effective or advanced products could surpass our current and planned products. In addition, we must manufacture these productseconomically and market them successfully by demonstrating to enough eye-care professionals the overall benefits of using them. Resources devoted to research and development may not yield new products that achieve regulatory approval or commercial success. Development of new implantable technology, from discovery through testing and registration to initial product launch, is expensive and time-consuming. Because of the complexities and uncertainties of ophthalmic research and development, products we are currently developing may not completethe development process or obtain the regulatory approvals required for us to market the products successfully. Any of the products currently underdevelopment may fail to become commercially successful. 17  We are subject to extensive government regulation worldwide, which increases our costs and could prevent us from selling our products. We are regulated by regional, national, state and local agencies in the U.S. as well as governmental authorities in those international countries inwhich we manufacture or distribute products, such as in Europe and Asia. The countries’ regulations govern the research, development, manufacturing, andcommercial activities relating to medical devices, including their design, pre-clinical and clinical testing, clearance or approval, production, labeling, sale,distribution, import, export, post-market surveillance, advertising, dissemination of information and promotion. Complying with government regulation substantially increases the cost of developing, manufacturing and selling our products. Competing in the ophthalmic products industry requires us to introduce new or improved products and processes continuously, and to submit theseto the FDA and other regulatory bodies for clearance or approval. Obtaining clearance or approval can be a long and expensive process, and clearance orapproval is never certain. For example, the FDA or another country’s regulatory agency, could require us to conduct an additional clinical trial prior togranting clearance or approval of a product and such clinical trial could take a long time and have substantial expense. In addition, our operations are subjectto periodic inspection by the FDA and international regulators. An unfavorable outcome in an FDA inspection may result in the FDA ordering changes in ourbusiness practices or taking other enforcement action, which could be costly and severely harm our business. If a regulatory authority delays approval of a potentially significant product, the potential sales of the product and its value to us can besubstantially reduced. Even if the FDA or another regulatory agency clears or approves a product, the clearance or approval may limit the indicated patientpopulations or uses of the product, or may otherwise limit our ability to promote, sell and distribute the product, or may require post-marketing studies orsurveillance. If we cannot obtain timely regulatory clearance or approval of our new products, or if the clearance or approval is too narrow, we will not be ableto successfully market these products, which would eliminate or reduce our potential sales and earnings. In addition, the FDA and other regulatory authorities may change their clearance and approval policies, adopt additional regulations, or reviseexisting regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability tomodify our currently cleared products on a timely basis. We depend on proprietary technologies, but may not be able to protect our intellectual property rights adequately. We rely on patents, trademarks, trade secrecy laws, contractual provisions and confidentiality procedures and copyright laws to protect theproprietary aspects of our technology. These legal measures afford limited protection and may not prevent our competitors from gaining access to ourintellectual property and proprietary information. Any of our patents may be challenged, invalidated, circumvented or rendered unenforceable. Any of ourpending patent applications may fail to result in an issued patent or fail to provide meaningful protection against competitors or competitive technologies.Litigation may be necessary to enforce our intellectual property rights, and to protect or determine the validity and scope of our proprietary rights. Anylitigation could result in substantial expense, may reduce our profits, and may not adequately protect our intellectual property rights. In addition, we may beexposed to future litigation by third parties based on claims that our products infringe their intellectual property rights. This risk is exacerbated by the factthat the validity and breadth of claims covered by patents in our industry may involve complex legal issues that are open to dispute. Any litigation or claimsagainst us, whether or not successful, could result in substantial costs and harm our reputation. We may not successfully develop and launch replacements for our products, including those that lose patent protection. As our patents expire, some of which expired over the past several years, our competitors may introduce products using the same technology.Because of this possible increase in competition, we may lose sales and/or may need to reduce our prices to maintain sales of our products, which would makethem less profitable. If we fail to develop and successfully launch new products and/or obtain new patents, our sales and profits with respect to our productscould decline significantly. We may not be able to develop and successfully launch more advanced replacement products. Laws pertaining to healthcare fraud and abuse could materially adversely affect our business, financial condition, and results of operations. We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claimslaws. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment, and exclusion from participation inhealthcare programs such as Medicare and Medicaid, and health programs outside the United States. These laws and regulations are wide ranging and subjectto changing interpretation and application, which could restrict our sales or marketing practices. Furthermore, since a number of our customers, particularlyIOL customers, rely on reimbursement from Medicare, Medicaid, and other governmental programs to cover a substantial portion of their expenditures, ourexclusion from such programs because of a violation of these laws could have a material adverse effect on our business, results of operations, financialcondition, and cash flow. 18  If we recall a product, the cost and damage to our reputation could harm our business. We have voluntarily recalled our products in the past and similar recalls could take place again. We may also be subject to recalls initiated bymanufacturers of products we distribute. We cannot eliminate the risk of a material recall in the future. Recalls can result in lost sales of the recalled productsthemselves, and can result in further lost sales while replacement products are manufactured, especially if the replacements must be redesigned and/orapproved by regulatory authorities prior to distribution. If recalled products have already been implanted, we may bear some or all the cost of correctivesurgery. Recalls may also damage our professional reputation and the reputation of our products. The inconvenience caused by recalls and relatedinterruptions in supply, the underlying causal issues, and the damage to our reputation, could cause professionals to discontinue using our products. Companies are required to maintain certain records of actions, even if they determine such actions are not reportable to the FDA. If we determine thatcertain actions do not require notification of the FDA, the FDA may disagree with our determinations and require us to report those actions as recalls. A futurerecall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failingto report the recalls when they were conducted or failing to timely report or initiate a reportable product action. Moreover, depending on the corrective actionwe take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for thedevice before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices ina timely manner. Any changes in FDA or international regulations related to product approval, including those that apply retroactively, could adversely affect ourcompetitive position, and materially affect our business and financial results. FDA and foreign regulations depend heavily on administrative interpretation, and we cannot assure you that future interpretations made by the FDAor other regulatory bodies, with possible retroactive effect, will not adversely affect us. Additionally, any changes, whether in interpretation or substance, inexisting regulations or policies, or any future adoption of new regulations or policies by relevant regulatory bodies, could rescind, prevent or delay approvalof our products, which could materially impact our competitive position, business, and financial results. Further, we or our distributors have obtainedregulatory approvals outside the United States for many of our products. We or our distributors may be unable to maintain regulatory qualifications,clearances or approvals in these countries or obtain qualifications, clearances, or approvals in other countries. If we are not successful in doing so, ourbusiness will be harmed. If our products, or malfunction of our products, cause or contribute to a death or a serious injury, we will be subject to medical device reportingregulations, which can result in voluntary corrective actions, agency enforcement actions and harm to our results. Under the FDA regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death orserious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Inaddition, all manufacturers placing medical devices in international markets, such as European Union and Asian markets, are legally bound to report anyserious or potentially serious incidents involving devices they produce or sell to the relevant authority in whose jurisdiction the incident occurred. In thefuture, we may experience events that would require reporting to the FDA pursuant to the Medical Device Reporting (MDR) regulations. Any adverse eventinvolving our products could result in future voluntary corrective actions, such as product actions or customer notifications, or agency actions, such asinspection, mandatory recall, or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in alawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financialresults. The decision to file an MDR involves a judgment by us as the manufacturer. We have made decisions that certain types of events are not reportableunder the MDR regulations; however, there can be no assurance that the FDA will agree with our decisions. If we fail to report MDRs to the FDA within therequired timeframes, or at all, or if the FDA disagrees with any of our determinations regarding the reportability of certain events, the FDA could takeenforcement actions against us, which could have an adverse impact on our reputation and financial results. Modifications to our products may require new marketing clearances or approvals, or may require us to cease marketing or recall the modifiedproducts until clearances or approvals are obtained. Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, including any significant change in design ormanufacture, or that would constitute a major change in its intended use, requires a new 510(k) clearance or, possibly, approval of a PMA. The FDA requiresevery manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with ourdecisions regarding whether new clearances or approvals are necessary. We have modified some of our 510(k) cleared and PMA approved products, and havedetermined based on our review of the applicable FDA guidance that in certain instances new 510(k) clearances or premarket approvals are not required. If theFDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared products forwhich we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing and/or to recall the modified productuntil we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. Regulatory agencies in other countries similarly require approval or clearance prior to our marketing or selling products in those countries. We relyon our distributors to obtain regulatory clearances or approvals of our products in certain countries outside of the United States. If we or our distributors areunable to obtain additional clearances or approvals needed to market existing or new products in the United States or elsewhere or obtain these clearances orapprovals in a timely fashion or at all, or if our existing clearances or approvals are revoked or restricted, our revenues and profitability may decline. 19  Investigations and allegations, whether or not they lead to enforcement action or litigation, can materially harm our business and our reputation. Failure to comply with the requirements of the FDA or other regulators can result in civil and criminal fines, the recall of products, the total or partialsuspension of manufacturing or distribution, seizure of products, injunctions, lawsuits, failure to obtain approval of pending product applications, withdrawalof existing product approvals, exclusion from participation in government healthcare programs and other sanctions. Any threatened or actual governmentenforcement action can also generate adverse publicity and require us to divert substantial resources from more productive uses in our business. Enforcementactions could affect our ability to distribute our products commercially and could materially harm our business. In addition, negative publicity about investigations or allegations of misconduct, even without a finding of misconduct, could harm our reputationwith professionals and the market for our common stock. Responding to investigations or conducting internal investigations can be costly, time-consuming,and disruptive to our business. Risks Related to Ownership of Our Common Stock The market price of our common stock is likely to be volatile. Our stock price has fluctuated widely. The closing price of our common stock ranged from $5.12 to $11.45 per share during the year endedDecember 30, 2016. Our stock price could continue to experience significant fluctuations in response to factors such as market perceptions, quarterlyvariations in operating results, operating results that vary from the expectations of securities analysts and investors, changes in financial estimates, changes inmarket valuations of competitors, announcements by us or our competitors of a material nature, additions or departures of key personnel, future sales of ourcommon stock and stock volume fluctuations. Also, general political and economic conditions such as recession or interest rate fluctuations may adverselyaffect the market price of our common stock. Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value. We have not paid any cash dividends on our common stock since our inception. We currently expect to retain any earnings for use to furtherdevelop our business, and do not expect to declare cash dividends on our common stock in the foreseeable future. The declaration and payment of any suchdividends in the future depends upon our earnings, financial condition, capital needs, and other factors deemed relevant by the Board of Directors, and maybe restricted by future agreements with lenders. As a result, the success of an investment in our common stock will depend entirely upon any futureappreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased theirshares. Our Certificate of Incorporation and Bylaws, anti-takeover provisions of Delaware law, and contractual provisions could delay or prevent anacquisition or sale of our company. Our Certificate of Incorporation empowers the Board of Directors to issue one or more series of preferred stock, and to determine the rights of eachsuch series as provided in our Certificate of Incorporation. These provisions give the Board of Directors the ability to deter, discourage or make more difficulta change in control of our company, even if such a change in control could be deemed in the interest of our stockholders or if such a change in control wouldprovide our stockholders with a substantial premium for their shares over the then-prevailing market price for the common stock. Our Certificate ofIncorporation and Bylaws contain other provisions that could have an anti-takeover effect, including the following: ·stockholders cannot act by written consent; ·certain limitations on stockholder action can be changed only by a 66-2/3% supermajority vote of stockholders; and ·stockholders must give advance notice to nominate directors or propose other business. ·In addition, we are generally subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulatescorporate acquisitions. These provisions could discourage potential acquisition proposals and could delay or prevent a change in controltransaction. They could also have the effect of discouraging others from making tender offers for our common stock or prevent changes in ourmanagement. Future sales of our common stock could reduce our stock price. Our Board of Directors could issue additional shares of common or preferred stock to raise additional capital or for other corporate purposes withoutstockholder approval. In addition, the Board of Directors could designate and sell a class of preferred stock with preferential rights over the common stockwith respect to dividends or other distributions. Also, we have filed a universal “shelf registration statement” with the Securities and Exchange Commission.The shelf registration statement covers the future public offering and sale of up to $200 million in equity or debt securities or any combination of suchsecurities. Sales of common or preferred stock under the shelf registration or in other transactions could dilute the interest of existing stockholders and reducethe market price of our common stock. Even in the absence of such sales, the perception among investors that additional sales of equity securities may takeplace could reduce the market price of our common stock. 20  Ownership of our common stock is concentrated among a few investors, which may affect the ability of a third party to acquire control of us.Substantial sales by such investors could cause our stock price to decline. Our largest three investors beneficially own more than 50% of our outstanding common stock. The sale of a substantial number of our shares by anysuch investor or our other stockholders within a short period of time could cause our stock price to decline, make it more difficult for us to raise funds throughfuture offerings of our common stock or acquire other businesses using our common stock as consideration. Having such a concentration of ownership mayhave the effect of making it more difficult for a third party to acquire, or of discouraging a third party from seeking to acquire, a majority of our outstandingcommon stock or control of our Board of Directors through a proxy solicitation. Item 1B. Unresolved Staff Comments None. Item 2. Properties Our operations are conducted in leased facilities throughout the world. Our executive offices, manufacturing, warehouse and distribution, are inMonrovia, California. STAAR Surgical AG maintains office, manufacturing capabilities, warehouse and distribution facilities in Nidau, Switzerland. TheCompany leases a research and development facility in Tustin, California and has a facility in Aliso Viejo, California for raw material production andresearch and development activities. STAAR Japan maintains executive offices in Shin-Urayasu, Japan and a final packaging and inspection and distributionfacility in Ichikawa City, Japan. We believe our operating facilities in the U.S., Switzerland and Japan are suitable and adequate for our current and futureplanned requirements. The Company could increase capacity in our Monrovia, California facility by adding additional shifts. Item 3. Legal Proceedings Certain of the legal proceedings in which we are involved are discussed under “Litigation and Claims” in Note 12, “Commitments andContingencies,” to our Consolidated Financial Statements in this Annual Report on Form 10-K, and are hereby incorporated by reference. Item 4. Mine Safety Disclosures None. 21  PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Market (NASDAQ) under the symbol “STAA.” The following table sets forth the high and low pershare sale prices of our common stock as reported by NASDAQ. Period High Low Year ended December 30, 2016 Fourth Quarter $11.45 $8.20 Third Quarter 9.64 5.61 Second Quarter 7.97 5.12 First Quarter 7.60 6.17 Year ended January 1, 2016 Fourth Quarter $8.94 $7.14 Third Quarter 9.61 6.93 Second Quarter 10.63 7.29 First Quarter 9.09 5.71 Holders As of February 22, 2017, there were approximately 365 record holders of our Common Stock. Dividends We have not paid any cash dividends on our Common Stock since our inception. We currently expect to retain any earnings for use to furtherdevelop our business and not to declare cash dividends on our Common Stock in the foreseeable future. The declaration and payment of any such dividendsin the future depends upon the Company’s earnings, financial condition, capital needs, and other factors deemed relevant by the Board of Directors and maybe restricted by future agreements with lenders. Stock Performance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the ExchangeAct), or incorporated by reference into any filing of STAAR Surgical Company under the Securities Act of 1933, as amended, or the Exchange Act, except asshall be expressly set forth by specific reference in such filing. The following graph shows a comparison from December 31, 2011 through December 30, 2016 of the total performance of the following: ·STAAR Surgical Company; ·the Nasdaq Stock Market; ·a peer group we have selected consisting of seven companies within our industry or closely related industries: Anika Therapeutics (ANIK);Cutera Inc. (CUTR); Cynosure Inc. (CYNO); Integra LifeSciences Holdings Corp. (IART); Iridex Corp. (IRIX); Merit Medical Systems, Inc.(MMSI); and Syneron Medical Ltd. (ELOS). Volcano Corporation (VOLC) and Synergetics USA Inc. (SURG) were previously included in thepeer group, but both were acquired and are no longer independent public companies. Returns in the graph below reflect historical results; we do not intend to suggest they predict future performance. The data assumes $100 wasinvested on December 30, 2011 in STAAR common stock and in each of the composite indices, and that dividends (if any) were reinvested. We have neverpaid dividends on our common stock and have no present plans to do so. 22  Prepared by Zacks Investment Research, Inc. Used with Permission. All rights reserved. Total Returns Index for Fiscal Years: 2011 2012 2013 2014 2015 2016 STAAR Surgical Company 100.00 55.48 153.48 86.08 68.06 103.43 The Nasdaq Stock Market (USand Foreign Companies) 100.00 115.20 162.80 187.92 201.40 219.15 Proxy Peer Group 100.00 112.62 153.64 163.55 196.70 244.66 Notes: A.The lines represent monthly index levels derived from compounded daily returns that include all dividends.B.These indexes are reweighted daily, using the market capitalization from the previous trading day.C.If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.D.The index level for all series was set to $100.00 on 12/30/2011. Item 6. Selected Financial Data The following table sets forth selected consolidated financial data with respect to the five most recent fiscal years ended December 30, 2016, January1, 2016, January 2, 2015, January 3, 2014, and December 28, 2012. The selected consolidated statement of operations data set forth below for each of thethree most recent fiscal years, and the selected consolidated balance sheet data set forth below at December 30, 2016 and January 1, 2016 are derived fromour consolidated financial statements, which have been audited by BDO USA, LLP, our independent registered public accounting firm, as indicated in theirreport included in this Annual Report. The selected consolidated statement of operations data set forth below for each of the two fiscal years in the periodsended January 3, 2014 and December 28, 2012 and the consolidated balance sheet data set forth below at January 2, 2015, January 3, 2014 and December 28,2012 are derived from audited consolidated financial statements of the Company not included in this Annual Report. The selected consolidated financialdata should be read in conjunction with the consolidated financial statements of the Company, and the Notes thereto, included in this Annual Report, and“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 23  December 30,2016 January 1,2016 January 2,2015 January 3,2014 December 28,2012 (In thousands except per share data) Statement of Operations Net sales $82,432 $77,123 $74,987 $72,215 $63,783 Cost of sales 24,063 24,400 26,164 21,906 19,492 Gross profit 58,369 52,723 48,823 50,309 44,291 General and administrative 22,252 19,604 18,287 16,771 15,150 Marketing and selling 28,478 23,695 25,879 23,888 21,281 Research and development 20,294 14,761 12,363 6,708 6,444 Other general and administrative expenses — — 321 2,242 2,636 Operating income (loss) (12,655) (5,337) (8,027) 700 (1,220)Total other income (expense), net 211 (268) (618) 414 701 Income (loss) before income taxes (12,444) (5,605) (8,645) 1,114 (519)Income tax provision (benefit) (315) 928 (253) 716 1,244 Net income (loss) $(12,129) $(6,533) $(8,392) $398 $(1,763)Net income (loss) per share – basic and diluted $(0.30) $(0.17) $(0.22) $0.01 $(0.05) Weighted average shares outstanding-basic 40,329 39,260 38,091 36,706 36,253 Weighted average shares outstanding –diluted 40,329 39,260 38,091 38,607 36,253 Balance Sheet Data Working capital $28,841 $31,186 $28,526 $31,663 $26,125 Total assets 65,443 62,954 58,911 61,931 54,759 Long-term obligations 6,471 6,221 5,441 4,667 5,068 Stockholders’ equity 37,905 38,846 37,099 38,852 31,742 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The matters addressed in this Item 7 that are not historical information constitute “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can recognize forward-lookingstatements by the use of words like “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “forecast” and similar expressions inconnection with any discussion of future operating or financial performance. In particular, these include statements about any of the following: anyprojections of or guidance as to earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate remediation expense or capital expense or anyother financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regardingnew, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. orinternational markets or government approval of a new or improved products (including the Toric ICL in the U.S.); or commercialization of new orimproved products; the nature, timing and likelihood of resolving issues cited in the FDA’s 2014 Warning Letter or 2015 FDA-483; future economicconditions or size of market opportunities; expected costs of quality system remediation efforts; statements of belief, including as to achieving 2017 businessplans; 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 torisks 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 ofnumerous factors, many of which are beyond our control. These factors include, without limitation, those described in this Annual Report in “Item 1A. RiskFactors.” We undertake no obligation to update these forward-looking statements after the date of this report to reflect future events or circumstances or toreflect actual outcomes. The following discussion should be read in conjunction with the audited consolidated financial statements of STAAR, including the related notes,provided in this report. 24  Overview STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and companion delivery systems used todeliver the lenses into the eye. We are the world’s leading manufacturer of intraocular lenses for patients seeking refractive vision correction, and we alsomake 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 smallincision during minimally invasive surgery. Refractive surgery is performed to treat the type of visual disorders that have traditionally been corrected usingeyeglasses or contact lenses. We refer to our lenses used in refractive surgery as “implantable Collamer® lenses” or “ICLs.” The field of refractive surgeryincludes both lens-based procedures, using products like our ICL family of products, and laser-based procedures like LASIK. Successful refractive surgery cancorrect common vision disorders such as myopia, hyperopia, and astigmatism. Cataract surgery is a common outpatient procedure where the eye’s natural lensthat has become cloudy with age is removed and replaced with an artificial lens called an intraocular lens (IOL) to restore the patient’s vision. STAARemploys a commercialization strategy that strives for sustainable profitable growth. Our goal is to position our refractive lenses throughout the world asprimary and premium solutions for patients seeking visual freedom from wearing glasses or contact lenses while achieving excellent visual acuity throughrefractive vision correction. We position our IOL lenses used in surgery that treats cataracts based on quality and value. See Item 1. “Business,” for a discussion of: ·Operations ·Principal Products ·Distribution and Sales ·Competition ·Regulatory Matters ·Research and Development 2016 Overview and Strategic Priorities for 2017 In 2016, we devoted significant efforts towards improving our quality system and our remediation efforts. We added several new key employees,particularly in the Research and Development, Clinical and Medical Affairs, and Quality and Operations departments. We finalized nine strategiccooperation agreements with customers intended to enhance future growth. We rebranded STAAR by launching Evolution in Visual Freedom™ websites inour major markets and commencing a new marketing campaign that positions the EVO Visian ICL as a premium and primary solution for patients seekingvisual freedom from eye glasses and contact lenses. We launched the EVO+, the Visian ICL with CentraFLOW and an expanded optical zone in Europe, andobtained regulatory approval to sell the EVO spheric and EVO toric versions in Canada. We acquired and validated a new Quality Management System andcompleted a meta-analysis of global peer-reviewed clinical data regarding the ICL, which was published in the peer-reviewed journal, Ophthalmology June2016. We are in the clinical validation phase of validating an EVO lens with Extended Depth of Field (EDOF). For 2017, our strategic priorities are as follows: 1.Complete Remediation Plan and Quality Systems Overhaul: We expect to complete our internal remediation and quality system rebuildcommitments while also maintaining our global quality certifications; 2.Continue to Build the Visual Freedom Market for Implantable Lenses: We will continue our activities to position the ICL as a primary andpremium refractive procedure with clinical validation, new digital and social media marketing, product branding launched in 2016, andenhanced surgeon training and practice development programs; 3.Build Go-to-Market Strategy to Expand Market Share Globally: We are planning for double digit ICL growth through a refreshed sales strategyand by entering into additional strategic business relationships with growth-oriented refractive surgical providers operating eye hospitals andclinics; 4.Deliver Global Clinical Validation & Clinical Utility Excellence: The expanded Global Clinical and Medical Affairs teams will continue toassist in supporting submissions to and responding to queries from regulatory agencies and will monitor clinical data, conduct and monitorclinical studies and patient registries established in 2016 and enhance our medical communications protocol; and 5.Innovate, Develop and Release to Market Premium Collamer Lenses and Delivery Systems: We plan to complete research and developmentefforts relating to EVO (spherical) with EDOF and IOL EDOF lens design and meet internal commitments regarding other research anddevelopment priorities. We expect double-digit ICL unit growth over the next twelve months driven primarily by increasing market acceptance of the EVO Visian ICL inestablished markets with the exception of the U.S. and Korea. We are working with our Korean distributor to address significant declines in orders anticipatedfor 2017 as a result of various market and economic conditions in Korea. We anticipate gross profit as a percentage of sales for full year 2017 to be higherthan 2016. In addition, we expect continued investment in our operations, including clinical affairs, corporate infrastructure and systems, marketing andresearch and development. We expect IOL sales in 2017 to be similar to IOL sales in 2016 with the exception of the decrease associated with thediscontinuation of the silicone IOL product line in the U.S. Based on the Cataract Care strategy completed in 2016, we are targeting the nanoFLEX Toric IOLfor key middle markets and developing a premium IOL on Collamer material with an EDOF optic. We anticipate 2017 total operating expenses may trendabove 2016 total operating expenses. We will continue our focus on prudently managing our business, while at the same time striving to fortify the businessand prepare for growth. During 2016, we spent approximately $1.9 million on our remediation efforts and expect to spend approximately $0.5 million in2017. 25  Finally, we will continue to evaluate opportunities to acquire new product lines, technologies, and companies. Immediate Vesting of All Unvested Equity Awards On February 11, 2016, a shareholder increased its beneficial ownership of the Company’s common stock to approximately 26% of all sharesoutstanding. This triggered the “Change in Control” provision in the Amended and Restated 2003 Omnibus Equity Incentive Plan (“Plan”). As a result, allunvested equity awards outstanding under the Plan immediately vested. Consequently, we recorded an aggregate $6.9 million non-cash charge to stock-based compensation in the consolidated statements of operations on that date ($4.6 million for stock options and $2.3 million for restricted stock andrestricted stock units). This charge was recorded and included in the following categories of the consolidated statements of operations for the year endedDecember 30, 2016: $2.9 million in general and administrative expenses, $1.5 million in marketing and selling expenses, $1.9 million in research anddevelopment expenses and $0.6 million in manufacturing costs. Approximately $3.3 million of the $6.9 million of accelerated charges would have beenrecognized for stock-based compensation by the Company in fiscal years subsequent to 2016 had the Change in Control provision not been triggered. Results of Operations The following table sets forth the percentage of total sales represented by certain items reflected in the Company’s Consolidated Statement ofOperations for the period indicated. Percentage of Net Sales December 30,2016 January 1, 2016 January 2,2015 Net sales 100.0% 100.0% 100.0%Cost of sales 29.2% 31.6% 34.9%Gross profit 70.8% 68.4% 65.1%General and administrative 27.0% 25.4% 24.4%Marketing and selling 34.5% 30.7% 34.5%Research and development 24.6% 19.1% 16.5%Other general and administrative expenses —% —% 0.4%Operating loss (15.4)% (6.9)% (10.7)%Total other income (expense), net 0.3% (0.3)% (0.8)%Loss before income taxes (15.1)% (7.3)% (11.5)%Provision (benefit) for income taxes (0.4)% 1.2% (0.3)%Net loss (14.7)% (8.5)% (11.2)% * Denotes change is greater than 100% Net Sales The following table presents our net sales, by product, for the fiscal years presented (dollars in thousands): % of Total 2016 % of Total 2015 % of Total 2014 ICL 71.7% $59,111 66.8% $51,543 58.7% $44,047 IOL 23.9% 19,706 25.8% 19,857 32.5% 24,336 Other 4.4% 3,615 7.4% 5,723 8.8% 6,604 Total Sales 100.0% $82,432 100.0% $77,123 100.0% $74,987 Net sales for 2016 were $82.4 million, a 6.9% increase over the $77.1 million reported in fiscal 2015. The increase in net sales was due to an increasein ICL sales of $7.6 million, partially offset by a $2.3 million decrease in IOLs and other product sales. Changes in foreign currency due to translation of theJapanese yen favorably impacted net sales by $1.5 million, principally affecting IOL sales. Net sales for 2015 were $77.1 million, a 2.8% increase over the $75.0 million reported in fiscal 2014. The increase in net sales was due to an increasein ICL sales of $7.5 million, partially offset by a $5.4 million decrease in IOLs and other product sales. Changes in foreign currency negatively impacted netsales by $2.4 million. 26  Total ICL sales for 2016 were $59.1 million, a 14.7% increase from $51.5 million reported for fiscal 2015. The sales increase was driven by theAPAC region, which grew 18% primarily due to a 35% increase in China sales and a 51% increase in Japan sales, partially offset by an 8% decrease in Koreasales, APAC units grew 16%; the EMEA region grew by 13% primarily due to a 46% increase in Germany sales, in part due to the transition to a direct salesmodel, EMEA unit sales grew 4%; and the North American region grew by 7% with unit sales flat. Changes in foreign currency favorably impacted ICL salesby approximately $0.3 million. ICL sales represented 71.7% of our total sales for fiscal year 2016. Total ICL sales for 2015 were $51.5 million, a 17.0% increase from $44.0 million reported for fiscal 2014. The sales increase was driven by theAPAC region, which grew 25% primarily due to a 48% increase in China sales and a 23% increase in Korea sales; followed by the EMEA region, which grewby 11% primarily due to a 73% increase in Germany sales, in part due to the transition to a direct sales model; and then by the NA region, which grew by 9%.Changes in foreign currency negatively impacted ICL sales by approximately $0.2 million. ICL sales represented 66.8% of our total sales for fiscal year 2015. Total IOL sales were $19.7 million for fiscal 2016, a decrease of 0.8% over the $19.9 million reported in fiscal 2015. Decreased silicone IOL sales inthe U.S. due to the discontinuance of the product line, were largely offset by changes in foreign currency which favorably impacted IOL sales byapproximately $1.2 million. Worldwide IOL unit sales decreased 6%. IOL sales represented 23.9% of our total sales for fiscal year 2016. Total IOL sales were $19.9 million for fiscal 2015, a decrease of 18.4% over the $24.3 million reported in fiscal 2014. The decline was due to aplanned hold on sales in Germany due to a distributer-to-direct conversion, a planned phase-out of sales in China, continued softness in the U.S. and theimpact of the weakening yen and euro against the U.S. dollar. Changes in foreign currency negatively impacted IOL sales by approximately $1.6 million. IOLsales represented 25.8% of our total sales for fiscal year 2015. Other product sales for the year ended December 30, 2016 were $3.6 million, a 36.8% decrease compared to the $5.7 million reported for the yearended January 1, 2016. The decrease in other product sales is due to a decrease in preloaded injector part sales to a third-party manufacturer for product theysell to their customers. Other product sales represented 4.4% of our total sales for fiscal year 2016. Other product sales for the year ended January 1, 2016 were $5.7 million, a 13.4% decrease compared to the $6.6 million reported for the year endedJanuary 2, 2015. The decrease in other product sales is due to a decrease in preloaded injector part sales to a third-party manufacturer for product they sell totheir customers. Changes in foreign currency negatively impacted other product sales by approximately $0.6 million. Other product sales represented 7.4% ofour total sales for fiscal year 2015. Gross Profit The following table presents our gross profit and gross profit margin for the fiscal years presented (dollars in thousands): 2016 2015 2014 Gross Profit $58,369 $52,723 $48,823 Gross Profit Margin 70.8% 68.4% 65.1% Gross profit for the year ended December 30, 2016 was $58.4 million, a 10.7% increase compared to the $52.7 million reported for the year endedJanuary 1, 2016. Gross profit margin increased to 70.8% for fiscal year 2016, compared to 68.4% for fiscal year 2015. The increase in gross profit margin isdue to an increase in ICL product mix which has higher gross margins than our IOL and Other products, higher average selling prices, and improved ICL unitcosts due to manufacturing improvements, partially offset by higher IOL unit costs due to lower production volumes and higher other cost of goods sold. Gross profit for the year ended January 1, 2016 was $52.7 million, an 8.0% increase compared to the $48.8 million reported for the year endedJanuary 2, 2015. Gross profit margin increased to 68.4% for fiscal year 2015, compared to 65.1% for fiscal year 2014. The increase in gross profit margin isdue to an increase in ICL product mix which has higher gross margins than our IOL products, improved ICL unit costs, and manufacturing improvements,partially offset by the negative impact of a weakening euro. General and Administrative Expense The following table presents our general and administrative expense for the fiscal years presented (dollars in thousands): 2016 2015 2014 General and Administrative Expense $22,252 $19,604 $18,287 Percentage of Sales 27.0% 25.4% 24.4% General and administrative expense for the year ended December 30, 2016 was $22.3 million, a 13.5% increase compared to the $19.6 millionreported for the year ended January 1, 2016. The increase in general and administrative expense was primarily due to a $2 million increase in stock-basedcompensation related to the immediate vesting of all unvested equity awards because of the triggering of the “Change of Control” provisions of theCompany’s equity incentive plan during the first quarter of 2016. 27  General and administrative expense for the year ended January 1, 2016 was $19.6 million, a 7.2% increase compared to the $18.3 million reportedfor the year ended January 2, 2015. The increase in expense was primarily due to performance based bonuses and stock-based compensation. Marketing and Selling Expense The following table presents our marketing and selling expense for the fiscal years presented (dollars in thousands): 2016 2015 2014 Marketing and Selling Expense $28,478 $23,695 $25,879 Percentage of Sales 34.5% 30.7% 34.5% Marketing and selling expense for the year ended December 30, 2016 was $28.5 million, a 20.2% increase compared to the $23.7 million reportedfor the year ended January 1, 2016. The increase in marketing and selling expense is due to increased stock-based compensation, advertising, promotionalactivities, direct selling costs in Germany and trade show expenses, partially offset by decreased U.S. selling expenses. Marketing and selling expense for the year ended January 1, 2016 was $23.7 million, an 8.4% decrease compared to the $25.9 million reported forthe year ended January 2, 2015. The decrease in marketing and selling expense is due to decreased headcount, travel, and promotional activities in the U.S.and Japan, partially offset by an increase in costs associated with transitioning to direct distribution in Germany. Research and Development Expense The following table presents our research and development expense for the fiscal years presented (dollars in thousands): 2016 2015 2014 Research and Development Expense $20,294 $14,761 $12,363 Percentage of Sales 24.6% 19.1% 16.5% Research and development expense for the year ended December 30, 2016 was $20.3 million, a 37.5% increase compared to the $14.8 millionreported for the year ended January 1, 2016. The increase is primarily due to increased compensation (including stock compensation) and consultingexpenses related to investments in quality system improvements and clinical activity, and higher R&D project costs, partially offset by lower FDAremediation expenses. Research and development expense for the year ended January 1, 2016 was $14.8 million, a 19.4% increase compared to the $12.4 million reportedfor the year ended January 2, 2015. The increase is primarily due to remediation and validation expenses and increased headcount. Research and development expense consists primarily of compensation and related costs for personnel responsible for the research and developmentof new and existing products and the regulatory and clinical activities required to acquire and maintain product approvals globally. These costs are expensedas incurred. Other Income (Expense), Net The following table presents our other income (expense), net for the fiscal years presented (dollars in thousands): 2016 2015 2014 Other Income (Expense), net $211 $(268) $(618)Percentage of Sales 0.3% (0.3)% (0.8)% Other income for the year ended December 30, 2016 was $0.2 million, compared to the $0.3 million of other expense reported for the year endedJanuary 1, 2016, and $0.6 million of other expense for the year ended January 2, 2015. Other income (expense), net generally relates to interest expense on notes payable and capital lease obligations, gains or losses on foreign currencytransactions, and royalty income. The table below summarizes the year over year changes in other income (expense), net (in thousands). Favorable (Unfavorable) 2016 v. 2015 2015 v. 2014 Interest income $(47) $(1)Interest expense 13 26 Exchange losses 802 (53)Royalty income (122) 385 Other (167) (7)Net change in other income (expense), net $479 $350 28  Provision (Benefit) for Income Taxes The following table presents our provision (benefit) for income taxes for the fiscal years presented (in thousands): 2016 2015 2014 Provision (Benefit) for Income Taxes $(315) $928 $(253) The Company recorded a benefit for income taxes in fiscal 2016, primarily due to 1) the Company’s net operating losses reported by its foreignoperations principally due to the acceleration of stock-based compensation during the first quarter of 2016 and 2) a reduction in its foreign withholding taxesin connection with the dissolution of one of its foreign subsidiaries effective April 1, 2016. There are no unrecognized tax benefits related to uncertain taxpositions taken by the Company. The provision for income taxes increased from fiscal 2014 to fiscal 2015, primarily due to income tax expense of $928,000 recorded during thefiscal year 2015 generated from profits in our Swiss and Japan operations. See Critical Accounting Policies included later in this Item 7 for additional information about our provision for income taxes. A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in Note 9 of Notes to the Consolidated FinancialStatements included in Item 8 of this Annual Report on Form 10-K. Liquidity and Capital Resources We have historically financed our operations primarily through operating cash flows, the issuance of common stock and proceeds from stock optionexercises, borrowings under lines of credit and by relying on equipment and other commercial financing. During 2017, and for the foreseeable future, we willbe highly dependent on our operating cash flows to supplement our current liquidity and funding of our operations. We may in the future supplement ourworking capital. We believe our current cash balances coupled with cash flow from operating activities will be sufficient to meet our working capital requirements forthe foreseeable future. Our need for working capital, and the terms on which financing may be available, will depend in part on our degree of success inmaintaining positive cash flow through the strategies described above under the caption “—Overview—.” Our financial condition for each of the years indicated included the following (in millions): 2016 2015 2014 2016 v. 2015 2015 v. 2014 Cash and cash equivalents $14.0 $13.4 $13.0 $0.6 $0.4 Current assets $49.9 $49.1 $44.9 $0.8 $4.2 Current liabilities 21.1 17.9 16.4 3.2 1.5 Working capital $28.8 $31.2 $28.5 $(2.4) $2.7 Overview of changes in cash and cash equivalents and other working capital accounts. Net cash provided by operating activities was $1.0 million for fiscal year 2016 compared to cash used in operating activities of $2.2 million forfiscal year 2015 and cash used in operating activities of $8.0 for fiscal year 2014. For 2016, net cash provided by operating activities consisted of $12.1million net loss, offset by $11.0 million in non-cash items and $2.1 million in working capital changes. For 2015, net cash used in operating activitiesconsisted of $6.5 million net loss, offset by $6.7 million in non-cash items and $2.3 million in working capital changes. Net cash used in investing activities was $3.2 million, $2.0 million, and $4.1 million, for fiscal years 2016, 2015, and 2014, respectively, and relateprimarily to the acquisition of property, plant, and equipment. The increase in investment in property, plant, and equipment during 2016, relative to 2015,was primarily due to the investments made in connection with manufacturing and quality system improvement projects. The decrease in investment inproperty, plant, and equipment during 2015, relative to 2014, was primarily due to the investments made in the relocation of all manufacturing to theCompany’s Monrovia, CA facility which was completed during 2014. 29  Net cash provided by financing activities was $3.0 million, $4.6 million, and $2.5 million for fiscal years 2016, 2015, and 2014, respectively. For2016, net cash provided by financing activities consisted of $2.4 million in proceeds from the exercise of stock options, $1.5 million in proceeds from saleleaseback transactions, partially offset by $0.4 million in repayments of capital lease lines of credit and $0.6 million in the repurchase of common stockshares from employees to satisfy minimum tax withholdings. For 2015, net cash provided by financing activities consisted of $2.2 million of proceeds fromthe exercise of stock options and $2.8 million in proceeds from the exercise of warrants, partially offset by $0.4 million in repayment of capital leaseobligations. For 2014, net cash provided by financing activities consisted of $3.0 million of proceeds from the exercise of stock options, partially offset by$0.5 million in repayment of capital lease obligations. Accounts receivable was $16.3 million as of December 30, 2016, and $15.7 million as of January 1, 2016. Days’ Sales Outstanding (DSO) was 72days in 2016 and 74 days in 2015. Inventories at the end of fiscal 2016 and 2015 were $14.8 million and $15.9 million, respectively. Days’ Inventory on Hand (DOH) was 216 days in2016 and 212 days in 2015 for finished goods, including consignment inventory. Shelf Registration On February 26, 2014, STAAR filed a universal shelf registration statement with the SEC covering the future public offering and sale of up to $200million in equity or debt securities or any combination of such securities. The shelf registration expires on May 12, 2017, and there has been no decisionwhether to file a new shelf registration when it expires. STAAR currently has no plans to issue any securities under the shelf registration statement. Amongthe purposes for which STAAR could use the proceeds of securities sold in the future under the shelf registration statement are working capital, capitalexpenditures, expansion of sales and marketing, and continuing research and development. STAAR could also use a portion of the net proceeds to acquire orinvest in businesses, assets, products, and technologies that are complementary to our own, although we are not currently contemplating or negotiating anysuch acquisitions or investments. The availability of financing in the public capital markets through the shelf registration statement depends on severalfactors in place at the time of financing, including the strength of STAAR’s business performance, general economic conditions and investment climate, andinvestor perceptions of those factors. If STAAR seeks financing under the shelf registration statement in the future, we cannot assure that such financing willbe available on favorable terms, if at all. Credit Facilities, Lease Line of Credit, Contractual Obligations, and Commitments Credit Facilities The Company has credit facilities with different lenders to support operations as detailed below. Line of Credit The Company’s wholly owned Japanese subsidiary, STAAR Japan, has an agreement, as amended on or about November 21, 2016, with MizuhoBank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.12% as ofDecember 30, 2016) plus a 0.50% spread, and may be renewed annually (the current line expires on November 21, 2017). The credit facility is notcollateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of December 30, 2016 and January 1, 2016 (approximately $4.3million and $4.2 million based on the foreign exchange rates on December 30, 2016 and January 1, 2016, respectively), which approximates fair value due tothe 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 December30, 2016, there were no available borrowings under the line. In August 2010, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the Bank).The credit agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) ($1.0 million at the rate of exchange on December 30, 2016), to be usedfor working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will bedetermined by the Bank based on the then prevailing market conditions at the time of borrowing. The credit agreement is automatically renewed on anannual basis based on the same terms assuming there is no default. The credit agreement may be terminated by either party at any time in accordance with itsgeneral terms and conditions. The credit facility is not collateralized and contains certain conditions such as providing the Bank with audited financialstatements annually and notice of significant events or conditions as defined in the credit agreement. The Bank may also declare all amounts outstanding tobe immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. Therewere no borrowings outstanding as of December 30, 2016 and January 1, 2016. Covenant Compliance The Company is in compliance with the covenants of its credit facilities and lines of credit as December 30, 2016. Lease Line of Credit (Capital Leases) On June 7, 2016, the Company entered into lease schedule 009 of an existing master lease agreement with Farnam Street Financial, Inc. (“Farnam”).The line of credit provided for borrowings of up to $2.0 million 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. Approximately $1.5 million of the linewas settled through sale-leaseback transactions. As of December 30, 2016, approximately $1,957,000 of the line had been used and $43,000 was available forborrowing. On January 31, 2017, lease 009 was closed and lease 009R commenced. Under 009R, equipment with a cost of $1,957,000 is financed over aperiod 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 theCompany can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. 30  On June 12, 2014, the Company entered into lease schedule 008R with Farnam. Under the agreement, hardware and non-hardware with a cost of$964,612 was financed over a period of 36 months at a lease rate factor of 2.81% per $1 for hardware equipment and 3.12% per $1 for non-hardwareequipment. 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 purchaseoption. As of December 30, 2016, approximately $124,705 is outstanding and payable in 2017. On January 30, 2017, the Company entered into lease schedule 010 with Farnam. The line of credit provides for borrowings of up to $2.0 million at alease 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 lineis used at which time the lease commences. There are no material obligations outstanding under lease schedule 010 at this time. Contractual Obligations The following table represents the Company’s known contractual obligations as of December 30, 2016 (in thousands): Payments Due by Period Contractual Obligations Total 1 Year 2-3Years 4-5Years MoreThan5 Years Line of credit $4,283 $4,283 $‒ $‒ $‒ Capital lease obligations 2,580 1,220 1,355 5 ‒ Operating lease obligations 5,720 1,849 2,004 1,414 453 Pension benefit payments 1,154 191 217 269 477 Severance 136 136 ‒ ‒ ‒ Open purchase orders 1,478 1,478 ‒ ‒ ‒ Total $15,351 $9,157 $3,576 $1,688 $930 Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requiresmanagement to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. On an on-going basis, weevaluate our estimates, including those related to revenue recognition, allowances for doubtful accounts and sales return, inventory reserves and incometaxes, among others. Our estimates are based on historical experiences, market trends and financial forecasts and projections, and on various otherassumptions that management believes are reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly attimes, from these if actual conditions differ from our assumptions. We believe the following represent our critical accounting policies. ·Revenue Recognition and Accounts Receivable. We recognize revenue when realized or realizable and earned, which is when the following criteriaare met: persuasive evidence of an arrangement exists; delivery has occurred; the sale price is fixed or determinable; and collectability is reasonablyassured. The Company records revenue from non-consignment product sales when title and risk of ownership has been transferred, which istypically at shipping point, except for certain customers and for our STAAR Japan subsidiary, which is typically recognized when the customerreceives the product. We do not have significant deferred revenues as delivery to the customer is generally made within the same or the next day ofshipment. Our products are marketed to ophthalmic surgeons, hospitals, ambulatory surgery centers or vision centers, and distributors. IOLs may beoffered to surgeons and hospitals on a consignment basis. We maintain title and risk of loss on consigned inventory. We recognize revenue forconsignment inventory when we are informed the IOL has been implanted and not upon shipment to the surgeon. We believe our revenuerecognition policies are appropriate. We present sales tax we collect from our customers on a net basis (excluded from our revenues). We ship ICLs to ophthalmic surgeons, hospitals, ambulatory surgery centers, vision centers, and distributors for use by surgeons who have alreadybeen certified in their implantation, or for use in scheduled training surgeries. Beginning in 2016, the Company entered into certain strategic cooperation agreements with customers in which, as consideration for minimumpurchase commitments the customers make, the Company agrees to pay for marketing and support of Company products. The Company accounts forthese arrangements in accordance with ASC 605-50, Revenue Recognition – Customer Payments and Incentives. The provisions in thesearrangements allow for these payments to be made directly to the customer in lieu of marketing and support or, payments can be made for distinctmarketing and support services provided by the customer or another party. 31  For payments the Company makes to the customer for which no distinct service is provided, the Company records these payments as a reduction ofrevenues as incurred. For payments the Company makes to another party, or reimburses the customer, for distinct marketing and support services, theCompany recognizes these payments as a sales and marketing expense as incurred. Since the payments for distinct or non-distinct services occur within the quarter corresponding with the purchases made by the customer and theshipments 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 December 30, 2016. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. TheCompany accounts for these free products in accordance with ASC 605-50 “Revenue Recognition – Customer Payments and Incentives” andrecognizes the cost of the product as part of cost of sales. Free products shipped to the customer are shipped concurrently with the paid products,therefore the Company does not have any undelivered products and no deferred revenues as of December 30, 2016. We sell certain injector parts to an unrelated customer and supplier (collectively referred to as “supplier”) whereby these injector part sales are eithermade as a final sale to the supplier or are sold to be reprocessed by the supplier into finished goods inventory (a preloaded acrylic IOL). Thesefinished goods are then sold back to us at an agreed upon, contractual price. We earn a profit margin on either type of sale with the supplier andeach type of sale is made under separate purchase and sales orders between the two of us resulting in cash settlement for the orders sold orrepurchased. For parts that are sold as a final sale, we recognize a sale consistent with our routine revenue recognition policies as disclosed aboveand those sales are included as part of other sales in total net sales. For the injector parts that are sold to be reprocessed into finished goods, we donot recognize revenue on these sales in accordance with Accounting Standards Codification (ASC) 845-10, Purchases and Sales of Inventory withthe Same Counterparty. Instead, we record the transaction at its carrying value, deferring any profit margin in inventory, until the finished goodsinventory is sold to an end-customer (not the supplier) at which point we record the sale and the related cost of sale, including the release of thedeferred cost of sale in inventory, related to these finished goods. For all sales, we are the principal in the transaction as we, among other factors, are the primary obligor in the arrangement, bear general inventoryrisk and credit risk, have latitude in establishing the sales price and bear authorized sales returns inventory risk. Therefore, sales are recognized grosswith corresponding cost of sales in the consolidated statement of operations instead of a single, net amount. Cost of sales includes cost ofproduction, freight and distribution, royalties, and inventory provisions, net of any purchase discounts. We generally permit returns of product if the product is returned within the time allowed by our return policies, and in good condition. We provideallowances for sales returns based on an analysis of our historical patterns of returns matched against the sales from which they originated. Whilesuch allowances have historically been within our expectations, we cannot guarantee that we will continue to experience the same return rates thatwe have in the past. Measurement of such returns requires consideration of, among other factors, historical returns experience and trends, includingthe need to adjust for current conditions and product lines, the entry of a competitor, and judgments about the probable effects of relevantobservable data. We consider all available information in our quarterly assessments of the adequacy of the allowance for sales returns. Sales arereported net of estimated returns. If the actual sales returns are higher or lower than estimated by management, additional reduction or increase insales may occur. We maintain provisions for uncollectible accounts based on estimated losses resulting from the inability of our customers to remit payments. If thefinancial condition of customers were to deteriorate, thereby resulting in an inability to make payments, additional allowances could be required.We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness,as determined by our review of our customers’ current credit information. We continuously monitor collections and payments from our customersand maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that have beenidentified. We write off amounts determined to be uncollectible against the allowance for doubtful accounts. While such credit losses havehistorically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same creditloss rates that we have in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust forcurrent conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such asdelinquency rates and financial health of specific customers. We consider all available information in our assessments of the adequacy of thereserves for uncollectible accounts. As of December 30, 2016, the Company has accounts receivable of approximately $400,000 with a formerdistributor that has been outstanding for more than one year. While the distributor has not disputed the validity of the receivable, it has raised anunrelated matter as the basis for non-payment. The Company believes the receivable is collectible and will commence formal collection action, ifnecessary. If the Company is unable to collect the outstanding receivable, it would impact the Company’s financial results. ·Stock-Based Compensation. We account for the issuance of stock options to employees and directors by estimating the fair value of options issuedusing the Black-Scholes pricing model. This model’s calculations include the exercise price, the market price of shares on grant date, risk-freeinterest rates, expected term of the option, expected volatility of our stock and expected dividend yield. The amounts recorded in the financialstatements for share-based compensation could vary significantly if we were to use different assumptions. We also issue restricted stock units, orRSUs, which contain a service condition such that they vest if the grantee is still employed with us on a range of measurement dates, which aretypically three years after the grant date. On occasion, we also issue RSUs to certain employees which contain a performance condition such thatthey vest if the internally established target is met or exceeded and the grantee is still employed with us on the measurement date, which is typicallyone year after the grant date. We recognize compensation cost for the RSUs when it is probable that the performance condition will be achieved, netof an estimate of pre-vesting forfeitures, over the requisite service period based on the grant-date fair value of the stock. We reassess the probabilityof vesting at each reporting period and adjust compensation cost based on our probability assessment. On February 11, 2016, a change in controloccurred under the Amended and Restated 2003 Omnibus Equity Plan resulting in the immediate vesting of all unvested equity awards outstandingunder the plan. (See Note 11 to the Consolidated Financial Statements). 32  ·Income Taxes. We account for income taxes, on a jurisdiction-by-jurisdiction basis, under the asset and liability method, whereby deferred taxassets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to applyin the years in which those temporary differences are expected to be recovered or settled in the jurisdictions in which they arise. The effect ondeferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate theneed to establish a valuation allowance for deferred tax assets based on the amount of existing temporary differences, the period in which they areexpected to be recovered and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is morelikely than not that some or all the deferred tax assets will not be realized. We expect to continue to maintain a full valuation allowance in the U.S. on future tax benefits until, and if, an appropriate level of profitability issustained, or we can develop tax strategies that would enable us to conclude that it is more likely than not that a portion of our deferred tax assetswould be realizable. In the normal course of business, we are regularly audited by federal, state and foreign tax authorities, and subject to periodic inquiries from thosetax authorities regarding the amount of taxes due. These inquiries may relate to the timing and amount of deductions and the allocation of incomeamong various tax jurisdictions. We believe that our tax positions comply with applicable tax law and intend to defend our positions, if necessary.Our effective tax rate in each financial statement period could be impacted if we prevailed in matters for which reserves have been established, orwere required to pay amounts more than established reserves. ·Inventories. We provide estimated inventory allowances for excess, slow moving, expiring and obsolete inventory as well as inventory whosecarrying value is more than net realizable value. These reserves are based on current assessments about future demands, market conditions andrelated management initiatives. If market conditions and actual demands are less favorable than those projected by management, additionalinventory write-downs may be required. We value our inventory at the lower of cost or net realizable market values. We regularly review inventoryquantities on hand and record a provision for excess and obsolete inventory based primarily on the expiration of products with a shelf life of lessthan four months, estimated forecasts of product demand and production requirements for the next twelve months. Several factors may influence therealizability of our inventories, including decisions to exit a product line, technological change, and new product development. These factors couldresult in an increase in the amount of obsolete inventory quantities on hand. Additionally, estimates of future product demand may prove to beinaccurate, in which case the provision required for excess and obsolete inventory may be understated or overstated. If in the future, we determinethat our inventory was overvalued, we would be required to recognize such costs in cost of sales at the time of such determination. Likewise, if wedetermine that our inventory was undervalued, cost of sales in previous periods could have been overstated and we would be required to recognizesuch additional operating income at the time of sale. While such inventory losses have historically been within our expectations and the provisionsestablished, we cannot guarantee that we will continue to experience the same loss rates that we have in the past. Therefore, although we make everyeffort to ensure the accuracy of forecasts of future product demand, including the impact of planned future product launches, any significantunanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reportedoperating results. ·Impairment of Long-Lived Assets. Intangible and other long lived-assets are reviewed for impairment whenever events such as productdiscontinuance, plant closures, product dispositions or other changes in circumstances indicate that the carrying amount may not be recoverable.Certain factors which may occur and indicate that an impairment exists include, but are not limited to, the following: significant underperformancerelative to expected historical or projected future operating results; significant changes in the manner of use of the underlying assets; and significantadverse industry or market economic trends. In reviewing for impairment, we compare the carrying value of such assets to the estimatedundiscounted future net cash flows expected from the use of the assets and their eventual disposition. If the carrying value of assets is determined tobe unrecoverable, we would estimate the fair value of the assets and record an impairment charge for the excess of the carrying value over the fairvalue. The estimate of fair value requires management to make several assumptions and projections, which could include, but would not be limitedto, future revenues, earnings and the probability of certain outcomes and scenarios. Our policy is consistent with current accounting guidance asprescribed by ASC 360-10-35, Accounting for the Impairment or Disposal of Long-Lived Assets. ·Goodwill. Goodwill, which has an indefinite life, is not amortized, but instead is subject to periodic testing for impairment. Intangible assetsdetermined to have definite lives are amortized over their remaining useful lives. Goodwill is tested for impairment on an annual basis or betweenannual tests if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. Certain factorswhich may occur and indicate that impairment exists include, but are not limited to the following: significant underperformance relative to expectedhistorical or projected future operating results; significant changes in the manner of our use of the underlying assets; and significant adverseindustry or market economic trends. If the carrying value of assets is determined to be unrecoverable, we would estimate the fair value of thereporting unit and record an impairment charge for the excess of the carrying value over the fair value. The estimate of fair value requiresmanagement to make several assumptions and projections, which could include, but would not be limited to, future revenues, earnings and theprobability of certain outcomes and scenarios, including the use of experts. 33  ·Definite-Lived Intangible Assets. We also have other intangible assets mainly consisting of patents and licenses, certain acquired rights, developedtechnologies, and customer relationships. We capitalize the cost of acquiring patents and licenses. Amortization is computed on the straight-linebasis over the estimated useful lives of the assets, which is our best estimate of the pattern of the economic benefits, which are based on legal,contractual, and other provisions, and range from 3 to 20 years for patents, certain acquired rights and licenses, 10 years for customer relationshipsand 3 to 10 years for developed technology. We review intangible assets for impairment in the assessment discussed above regarding Impairment ofLong-Lived Assets. ·Employee Defined Benefit Plans. We have maintained a passive pension plan (the “Swiss Plan”) covering employees of our Swiss subsidiary. Wedetermined that the features of the Swiss Plan conform to the features of a defined benefit plan. As a result, we adopted the recognition anddisclosure requirements of ASC 715, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. In connection with our acquisition of the remaining interest in STAAR Japan, Inc., we assumed the net pension liability under STAAR Japan’snoncontributory defined benefit pension plan substantially covering all the employees of STAAR Japan. STAAR Japan adopted the recognitionand disclosure requirements of ASC 715 on December 29, 2007, the date of the acquisition. STAAR Japan is not required, and we do not intend toprovide any future contributions to this pension plan to meet benefit obligations and will therefore not have any plan assets. Benefit payments aremade to beneficiaries from operating cash flows as they become due. Defined Benefits Plans - Pension requires recognition of the funded status, or difference between the fair value of plan assets and the projectedbenefit obligations of the pension plan on the statement of financial position with a corresponding adjustment to accumulated other comprehensiveincome or loss. If the projected benefit obligation exceeds the fair value of plan assets, then that difference or unfunded status represents the pensionliability. We record a net periodic pension cost in the consolidated statement of operations. The liabilities and annual income or expense of bothplans are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate, and theexpected long-term rate of asset return. Assumptions of expected asset returns and market-related values of plan assets are applicable to the SwissPlan only. The fair values of plan assets are determined based on prevailing market prices. The amounts recorded in the financial statementspertaining to our employee defined benefit plans could vary significantly if we were to use different assumptions. Foreign Exchange Management does not believe that the fluctuation in the value of the dollar in relation to the currencies of its suppliers or customers in the last threefiscal years has adversely affected our ability to purchase or sell products at agreed upon prices. No assurance can be given, however, that adverse currencyexchange rate fluctuations will not occur in the future, which could significantly affect our operating results. We do not currently hedge transactions to offsetchanges in foreign currency. Inflation Management believes inflation has not had a significant impact on our net sales and revenues and on income from continuing operations during thepast three years. Off Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Recent Accounting Pronouncements See “Part II. Item 8. “Financial Statements and Supplementary Data – Note 1 – Organization and Description of Business and Accounting Policies– Recent Accounting Pronouncements” of this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, our operations are exposed to risks associated with fluctuations in interest rates and foreign currency exchangerates. The Company manages its risks based on management’s judgment of the appropriate trade-off between risks, opportunity, and costs and does notgenerally enter into interest rate or foreign exchange rate hedge instruments. Interest rate risk. As of December 30, 2016, STAAR had $4.3 million of foreign debt. Our $4.3 million of foreign debt bears an interest rate that isequal to the uncollateralized overnight call rate in Japan (approximately 0.12%) plus a 0.50% spread. Thus, our interest expense would fluctuate with anychange in the prime interest rate. If the uncollateralized overnight call rate were to increase or decrease by 1% for the year, our annual interest expense wouldincrease or decrease by approximately $43,000. 34  Foreign currency risk. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies in which we transact business couldadversely affect our financial results. Our international subsidiaries operate in and are net recipients of currencies other than the U.S. dollar and, as a result, our sales benefit from a weakerdollar and are reduced by a stronger dollar relative to major currencies worldwide (primarily, the euro and the Japanese yen). Accordingly, changes inexchange rates, and particularly the strengthening of the U.S. dollar, may negatively affect our consolidated sales and gross profit as expressed in U.S.dollars. Additionally, expenses of our Swiss subsidiary are largely denominated in Swiss francs and a strong Swiss franc negatively impacts our earnings.Fluctuations during any given reporting period result in the re-measurement of our foreign currency denominated cash, receivables, and payables, generatingcurrency transaction gains or losses and are reported in total other expenses, net in our consolidated statements of operations. In the normal course ofbusiness, we also face risks that are either non-financial or non-quantifiable. Such risks include those set forth in “Item 1A. Risk Factors.” Item 8. Financial Statements and Supplementary Data Financial Statements and the Report of Independent Registered Public Accounting Firm are filed with this Annual Report on Form 10-K in aseparate section following Part IV, as shown on the index under Item 15 of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Attached as exhibits to this Annual Report on Form 10-K are certifications of STAAR’s Chief Executive Officer (“CEO”) and Chief Financial Officer(“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls andProcedures” section includes information concerning the controls and controls evaluation referred to in the certifications. The report of BDO USA, LLP, ourindependent registered public accounting firm, regarding its audit of STAAR’s internal control over financial reporting follows below. This section should beread in conjunction with the certifications and the BDO USA, LLP report for a more complete understanding of the topics presented. Evaluation of 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 thatevaluation, our CEO and CFO concluded, as of the end of the period covered by our Form 10-K for the fiscal year ended December 30, 2016, that ourdisclosure controls and procedures were effective. For purposes of this statement, the term “disclosure controls and procedures” means controls and otherprocedures 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 underthe Securities Exchange Act (15 U.S.C. 78a et seq) is recorded, processed, summarized, and reported, within the time periods specified in the Commission'srules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to bedisclosed by the issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including itsprincipal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding requireddisclosure. Changes in Internal Control over Financial Reporting There was no change during the fiscal year ended December 30, 2016 that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting The Company’s management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financialreporting (as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Company. The Company’s internal control system was designed toprovide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of publishedconsolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not preventor detect misstatements. Further, because of changing conditions, effectiveness of internal control over financial reporting may vary over time. TheCompany’s processes contain self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 30, 2016, based on the criteriafor effective internal control described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission. Based on its assessment, management concluded that the Company’s internal control over financial reporting was effective as ofDecember 30, 2016. 35  Report of Independent Registered Public Accounting Firm Board of Directors and StockholdersSTAAR Surgical CompanyMonrovia, CA We have audited STAAR Surgical Company and Subsidiaries’ internal control over financial reporting as of December 30, 2016, based on criteriaestablished in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (theCOSO criteria). STAAR Surgical Company’s management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on InternalControl Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. In our opinion, STAAR Surgical Company and Subsidiaries maintained, in all material respects, effective internal control over financial reporting asof December 30, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of STAAR Surgical Company and Subsidiaries as of December 30, 2016 and January 1, 2016, and the related consolidated statements ofoperations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2016 and our report datedMarch 2, 2017 expressed an unqualified opinion thereon. /s/ BDO USA, LLP Los Angeles, CaliforniaMarch 2, 2017 Item 9B. Other Information On June 7, 2016, the Company entered into lease schedule 009 of an existing master lease agreement with Farnam Street Financial, Inc. (“Farnam”).The line of credit provided for borrowings of up to $2.0 million 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. Approximately $1.5 million of the linewas settled through sale-leaseback transactions. As of December 30, 2016, approximately $1,957,000 of the line had been used and $43,000 was available forborrowing. On January 31, 2017, lease 009 was closed and lease 009R commenced. Under 009R, equipment with a cost of $1,957,000 is financed over aperiod 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 theCompany can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. On January 30, 2017, the Company entered into lease schedule 010 with Farnam Street Financial. The line of credit provides for borrowings of up to$2.0 million 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 fullamount of the line is used at which time the lease term commences. There are no material obligations outstanding under lease schedule 010 at this time. 36  PART III Item 10. Directors, Executive Officers, and Corporate Governance The information required by this item is incorporated herein by reference to the section entitled “Proposal One —Election of Directors” containedin the proxy statement for the 2017 annual meeting of stockholders (the “Proxy Statement”) to be filed with the Securities and Exchange Commission within120 days of the close of the fiscal year ended December 30, 2016. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the section entitled “Proposal One— Election of Directors” containedin the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated herein by reference to the section entitled “General Information—Security Ownership ofCertain Beneficial Owners and Management” and “Proposal One—Election of Directors” contained in the Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated herein by reference to the section entitled “Proposal One— Election of Directors” containedin the Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated herein by reference to the section entitled “Proposal Three— Ratification of the Appointmentof Independent Registered Public Accounting Firm” contained in the Proxy Statement. 37  PART IV Item 15. Exhibits, Financial Statement Schedules We have filed the following documents as part of this Annual Report on Form 10-K: Page(1)Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8(2)Schedules required by Regulation S-X are filed as an exhibit to this report: II. Schedule II — Valuation and Qualifying Accounts and Reserves F-33 All other schedules have been omitted because they are not required, not applicable, or the required information is otherwise included. (3) Exhibits 3.1 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 STAAR Surgical Company Omnibus Equity Incentive Plan.(4)10.1 Indenture of Lease dated September 1, 1993, by and between the Company and FKT Associates and First through Third Additions Thereto.(6)10.2 Second Amendment to Indenture of Lease dated September 21, 1998, between the Company and FKT Associates.(6)10.3 Third Amendment to Indenture of Lease dated October 13, 2003, by and between the Company and FKT Associates.(7)10.4 Fourth Amendment to Indenture of Lease dated September 30, 2006, by and between the Company and FKT Associates.(5)10.5 Indenture of Lease dated October 20, 1983, between the Company and Dale E. Turner and Francis R. Turner and First through FifthAdditions Thereto.(8)10.6 Sixth Lease Addition to Indenture of Lease dated October 13, 2003, by and between the Company and Turner Trust UTD Dale E. TurnerMarch 28, 1984.(7)10.7 Seventh Lease Addition to Indenture of Lease dated September 30, 2006, by and between the Company and Turner Trust UTD Dale E.Turner March 28, 1984.(5)10.8 Amendment No. 1 to Standard Industrial/Commercial Multi-Tenant Lease dated January 3, 2003, by and between the Company andCalifornia Rosen LLC.(7)10.9 Lease Agreement dated July 12, 1994, between STAAR Surgical AG and Calderari and Schwab AG/SA.(9)10.10 Supplement #1 dated July 10, 1995, to the Lease Agreement of July 12, 1994, between STAAR Surgical AG and Calderari and SchwabAG/SA.(9)10.11 Supplement #2 dated August 2, 1999, to the Lease Agreement of July 12, 1994, between STAAR Surgical AG and Calderari and SchwabAG/SA.(9)†10.12 Form of Indemnification Agreement between the Company and certain officers and directors.(9)10.13 Standard Industrial/Commercial Multi-Tenant Lease — Gross dated October 6, 2005, entered into between the Company and Z & M LLC.(11)10.18 Credit Agreement between STAAR Japan Inc. and Mizuho Bank Inc., dated October 31, 2007.(15)10.19 Amended Credit Agreement between STAAR Japan Inc. and Mizuho Bank Ltd., dated June 30, 2009.(15)10.20 Amended Credit Agreement between STAAR Japan Inc. and Mizuho Bank Ltd., dated December 28, 2012. (21)10.21 Basic Agreement on Unsterilized Intraocular Lens Sales Transactions between Canon Staar Co., Inc. and Nidek Co., Ltd., dated May 23,2005.(16)10.22 Basic Agreement on Injector Product Sales Transactions between Canon Staar Co., Inc. and Nidek Co., Ltd., dated May 23, 2005.(16)10.23 Memorandum of Understanding Concerning Basic Agreements for Purchase and Sale between STAAR Japan Inc. and Nidek Co., Ltd.,dated December 25, 2008.(16)10.24 Acrylic Preset supply Warranty Agreement between STAAR Japan Inc. and Nidek Co., Ltd., dated December 25, 2008.(16)10.25 Framework Agreement for Loans between Credit Suisse and STAAR Surgical AG, dated August 12, 2010. (17)†10.26 Form of Executive Severance Agreement.(18)†10.27 Form of Executive Change In Control Agreement.(18)10.28 Standard Industrial/Commercial Single – Tenant Lease – Net dated August 17, 2012, by and between the Company and Pacific EquityPartners, LLC.(19)†10.29 Letter of the Company dated March 27, 2012 to Samuel Gesten, Vice President and General Counsel, regarding compensation.(21) 38  †10.30 Letter of the Company dated August 10, 2012 to James Francese, Vice President, Global Marketing, regarding compensation. (21)†10.31 Letter of the Company dated July 27, 2015 to Keith Holliday, Vice President of Research and Development, regarding compensation. (21)†10.32 Letter of the Company dated August 7, 2013 to Stephen Brown, Vice President of Finance, and Chief Financial Officer, regardingcompensation.(20)10.33 **Amendment Agreement between STAAR Surgical Company and Nidek Co., Ltd., dated March 31, 2016.(23)†10.34 Employment Agreement effective March 1, 2015 by and between the Company and Caren Mason, dated March 1, 2015. (22)10.35 Form of Option Grant and Stock Option Agreement for employees.*10.36 Form of Option Grant and Stock Option Agreement for non-employees directors.*10.37 Form of Restricted Stock Unit Grant and Agreement.*10.38 Form of Restricted Stock Award Grant and Restricted Stock Award Agreement.*10.39 Amendment to Credit Agreement between STAAR Japan Inc. and Mizuho Bank Ltd., dated November 21, 2016.*10.40 Master Lease Agreement dated May 30, 2006 by and between the Company and Farnam Street Financial, Inc.*10.41 Lease Schedule No. 008R dated June 12, 2014, of Master Lease Agreement dated May 30, 2006 by and between the Company and FarnamStreet Financial, Inc.*10.42 Lease Schedule No. 009 and Purchase Option dated June 7, 2016, of Lease Agreement dated May 30, 2006, by and between the Companyand Farnam Street Financial, Inc.*10.43 Lease Schedule No. 009R dated January 31, 2017, of Master Lease Agreement dated May 30, 2006, by and between the Company andFarnam Street Financial, Inc.*10.44 Lease Schedule No. 010 and Purchase Option dated January 30, 2017, of Lease Agreement dated May 30, 2006, by and between theCompany and Farnam Street Financial, Inc.*14.1 Code of Business Conduct and Ethics.(9)21.1 List of Subsidiaries.*23.1 Consent of BDO USA, LLP.*31.1 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.*31.2 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-OxleyAct 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 The following materials from the Company’s Annual Report on Form 10-K for the year ended December 30, 2016 formatted in ExtensibleBusiness Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) theConsolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Stockholder Equity, (v) the ConsolidatedStatements of Cash Flows, and (vi) related notes. *Filed herewith.**Portions of this exhibit were omitted pursuant to an order granting confidential treatment.***Furnished herewith.† Management contract or compensatory plan or arrangement.#All schedules and or exhibits have been omitted. Any omitted schedule or exhibit will be furnished supplementally to the Securities and ExchangeCommission upon request. (1)Incorporated by reference to the Company’s Current Report on Form 8-K as filed on June 11, 2014.(2)Incorporated by reference from the Company’s Current Report on Form 8-K as filed on June 27, 2016.(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 on April 18, 2003.(4)Incorporated by reference to Appendix 1 of the Company’s Proxy Statement on Form DEF 14A, as filed on May 2, 2016.(6)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 29, 2000, as filed on March 10, 2001.(7)Incorporated by reference to the Company’s Annual Report on Form 10-K, for the year ended January 2, 2004, as filed on March 17, 2004.(8)Incorporated by reference from the Company’s Annual Report on Form 10-K, for the year ended January 2, 1998, as filed on April 1, 1998.(9)Incorporated by reference from the Company’s Quarterly Report on Form 10-Q, for the period ended June 29, 2012, as filed on August 8, 2012.(11)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2005, as filed on November 9,2005.(14)Incorporated by reference to the Company’s Current Report on Form 8-K as filed on October 1, 2009.(15)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended October 2, 2009, as filed on November 12, 2009. (16)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended January 1, 2010 as filed on March 11, 2011. 39  (17)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended October 1, 2010, as filed on November 10, 2010.(18)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2011, as filed on November 2,2011.(19)Incorporated by reference to the Company’s Current Report on Form 8-K as filed on August 23, 2012.(20)Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the Commission on September 9, 2013.(21)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended October 2, 2015, as filed on November 4, 2015.(22)Incorporated by reference to the Company’s Current Report on Form 8-K as filed on March 3, 2015.(23)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended April 1, 2016, as filed on May 11, 2016.(24)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended July 1, 2016, as filed on August 3, 2016. Item 16. Form 10-K Summary None. 40  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. STAAR SURGICAL COMPANY Date: March 2, 2017By: /s/ Caren Mason Caren Mason President and Chief Executive Officer (principal executive officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Name Title Date /s/ Caren Mason President, Chief Executive Officer and Director March 2, 2017Caren Mason (principal executive officer) /s/ Stephen P. Brown Vice President, Chief Financial Officer March 2, 2017Stephen P. Brown (principal accounting and financial officer) /s/ Louis E. Silverman Chairman of the Board, Director March 2, 2017Louis E. Silverman /s/ Stephen C. Farrell Director March 2, 2017Stephen C. Farrell /s/ John C. Moore Director March 2, 2017John C. Moore /s/ William P. Wall Director March 2, 2017William P. Wall 41  STAAR SURGICAL COMPANY AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSYears Ended December 30, 2016, January 1, 2016, and January 2, 2015 TABLE OF CONTENTS Report of Independent Registered Public Accounting FirmF-2 Consolidated Balance Sheets at December 30, 2016 and January 1, 2016 F-3 Consolidated Statements of Operations for the years ended December 30, 2016, January 1, 2016, and January 2, 2015F-4 Consolidated Statements of Comprehensive Loss for the years ended December 30, 2016, January 1, 2016, and January 2, 2015F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 30, 2016, January 1, 2016, and January 2, 2015F-6 Consolidated Statements of Cash Flows for the years ended December 30, 2016, January 1, 2016, and January 2, 2015F-7 Notes to Consolidated Financial StatementsF-8 Schedule II Valuation and Qualifying Accounts and ReservesF-33 F-1  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and StockholdersSTAAR Surgical CompanyMonrovia, CA We have audited the accompanying consolidated balance sheets of STAAR Surgical Company and Subsidiaries (the “Company”) as of December30, 2016 and January 1, 2016 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of thethree years in the period ended December 30, 2016. In connection with our audits of the consolidated financial statements, we have also audited theconsolidated financial statement schedule listed in Item 15. These consolidated financial statements and schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and schedule. Webelieve that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position ofSTAAR Surgical Company and Subsidiaries at December 30, 2016 and January 1, 2016, and the results of their operations and their cash flows for each of thethree years in the period ended December 30, 2016, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements takenas a whole, presents fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), STAAR SurgicalCompany and Subsidiaries’ internal control over financial reporting as of December 30, 2016, based on criteria established in Internal Control – IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria) and our report dated March 2,2017 expressed an unqualified opinion thereon. /s/ BDO USA, LLP Los Angeles, California March 2, 2017 F-2  STAAR SURGICAL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETSDecember 30, 2016 and January 1, 2016 2016 2015 (In thousands, except par value amounts) ASSETS Current assets: Cash and cash equivalents $13,999 $13,402 Accounts receivable trade, net 16,344 15,675 Inventories, net 14,825 15,921 Prepayments, deposits, and other current assets 4,349 3,636 Deferred income taxes 391 439 Total current assets 49,908 49,073 Property, plant and equipment, net 11,790 10,095 Intangible assets, net 473 666 Goodwill 1,786 1,786 Deferred income taxes 714 717 Other assets 772 617 Total assets $65,443 $62,954 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Line of credit $4,283 $4,159 Accounts payable 8,311 6,691 Deferred income taxes ‒ 370 Obligations under capital leases 1,198 362 Other current liabilities 7,275 6,305 Total current liabilities 21,067 17,887 Obligations under capital leases 1,339 204 Deferred income taxes 881 1,888 Asset retirement obligations 195 156 Deferred rent 59 87 Pension liability 3,997 3,886 Total liabilities 27,538 24,108 Commitments and contingencies (Note 12) Stockholders’ equity: Common stock, $0.01 par value; 60,000 shares authorized: 40,732 and 39,887 shares issued and outstanding atDecember 30, 2016 and January 1, 2016, respectively 407 399 Additional paid-in capital 197,657 187,007 Accumulated other comprehensive loss (1,050) (1,580)Accumulated deficit (159,109) (146,980)Total stockholders’ equity 37,905 38,846 Total liabilities and stockholders’ equity $65,443 $62,954 The accompanying notes are an integral part of these consolidated financial statements. F-3  STAAR SURGICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONSYears Ended December 30, 2016, January 1, 2016, and January 2, 2015 2016 2015 2014 (In thousands, except per share amounts) Net sales $82,432 $77,123 $74,987 Cost of sales 24,063 24,400 26,164 Gross profit 58,369 52,723 48,823 Selling, general and administrative expenses: General and administrative 22,252 19,604 18,287 Marketing and selling 28,478 23,695 25,879 Research and development 20,294 14,761 12,363 Other general and administrative expenses — — 321 Operating loss (12,655) (5,337) (8,027)Other income (expense), net: Interest income 3 50 51 Interest expense (115) (128) (154)Loss on foreign currency transactions (147) (949) (896)Royalty income 618 740 355 Other income (expense), net (148) 19 26 Other income (expense), net 211 (268) (618)Loss before provision (benefit) for income taxes (12,444) (5,605) (8,645)Provision (benefit) for income taxes (315) 928 (253)Net loss $(12,129) $(6,533) $(8,392) Net loss per share – basic and diluted $(0.30) $(0.17) $(0.22) Weighted average shares outstanding – basic and diluted 40,329 39,260 38,091 The accompanying notes are an integral part of these consolidated financial statements. F-4  STAAR SURGICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSYears Ended December 30, 2016, January 1, 2016, and January 2, 2015 2016 2015 2014 (In thousands) Net loss $(12,129) $(6,533) $(8,392)Other comprehensive income (loss), net of tax: Foreign currency translation adjustment, net of tax 156 31 (955)Pension liability adjustment, net of tax 374 (541) (397)Other comprehensive income (loss) 530 (510) (1,352)Comprehensive loss $(11,599) $(7,043) $(9,744) The accompanying notes are an integral part of these consolidated financial statements. F-5  STAAR SURGICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYYears Ended December 30, 2016, January 1, 2016, and January 2, 2015 (In thousands) CommonStockShares CommonStock ParValue AdditionalPaid-InCapital AccumulatedOtherComprehensiveIncome (Loss)(AOCI) RetainedEarnings(AccumulatedDeficit) Total Balance, at January 3, 2014 37,911 $379 $170,246 $282 $(132,055) $38,852 Net loss — — — — (8,392) (8,392)Other comprehensive loss — — — (1,352) — (1,352)Common stock issued upon exercise of options 584 5 3,017 — — 3,022 Stock-based compensation — — 4,969 — — 4,969 Unvested restricted stock (341) (3) — — — (3)Vested restricted stock 275 3 — — — 3 Balance, at January 2, 2015 38,429 384 178,232 (1,070) (140,447) 37,099 Net loss — — — — (6,533) (6,533)Other comprehensive loss — — — (510) — (510)Common stock issued upon exercise of warrants 700 7 2,793 — — 2,800 Common stock issued upon exercise of options 476 5 2,163 — — 2,168 Stock-based compensation — — 3,820 — — 3,820 Unvested restricted stock 124 1 (1) — — — Vested restricted stock 158 2 — — — 2 Balance, at January 1, 2016 39,887 399 187,007 (1,580) (146,980) 38,846 Net loss — — — — (12,129) (12,129)Other comprehensive income — — — 530 — 530 Common stock issued upon exercise of options 541 5 2,433 — — 2,438 Stock-based compensation — — 8,827 — — 8,827 Repurchase of employee common stock for taxeswithheld (98) — (611) — — (611)Unvested restricted stock 23 — — — — — Vested restricted stock 379 3 1 — — 4 Balance, at December 30, 2016 40,732 $407 $197,657 $(1,050) $(159,109) $37,905 The accompanying notes are an integral part of these consolidated financial statements F-6  STAAR SURGICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 30, 2016, January 1, 2016, and January 2, 2015 2016 2015 2014 (In thousands) Cash flows from operating activities: Net loss $(12,129) $(6,533) $(8,392)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation of property, plant, and equipment 2,664 2,196 2,078 Amortization of intangibles 228 205 382 Deferred income taxes (1,364) 473 (841)Change in net pension liability 491 190 194 Loss on disposal of property and equipment 222 — — Stock-based compensation expense 8,558 3,304 4,663 Accretion of asset retirement obligation — — 3 Provision for sales returns and bad debts 205 345 182 Changes in working capital: Accounts receivable (771) (4,952) (934)Inventories, net 1,823 327 (3,943)Prepayments, deposits, and other current assets (851) 856 (1,062)Accounts payable 1,007 14 972 Other current liabilities 966 1,413 (1,253) Net cash provided by (used in) operating activities 1,049 (2,162) (7,951) Cash flows from investing activities: Acquisition of property and equipment (3,205) (2,045) (4,054)Sale of property and equipment — 2 — Net cash used in investing activities (3,205) (2,043) (4,054) Cash flows from financing activities: Repayment of capital lease obligations (424) (391) (490)Proceeds from sale-leaseback transactions 1,546 — — Repurchase of employee common stock for taxes withheld (611) — — Proceeds from the exercise of stock options 2,438 2,168 3,022 Proceeds from vested restricted stock 4 2 — Proceeds from the exercise of warrants — 2,800 — Net cash provided by financing activities 2,953 4,579 2,532 Effect of exchange rate changes on cash and cash equivalents (200) 15 (468)Increase (decrease) in cash and cash equivalents 597 389 (9,941)Cash and cash equivalents, at beginning of year 13,402 13,013 22,954 Cash and cash equivalents, at end of year $13,999 $13,402 $13,013 The accompanying notes are an integral part of these consolidated financial statements F-7  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Organization and Description of Business and Accounting Policies Organization and Description of Business STAAR Surgical Company and subsidiaries (the “Company”), a Delaware corporation, was first incorporated in 1982 for the purpose of developing,producing, and marketing implantable lenses for the eye and delivery systems used to deliver the lenses into the eye. Principal products are implantableCollamer lenses (“ICLs”) and intraocular lenses (“IOLs”). ICLs, consisting of the Company’s ICL family of products, including the Toric implantableCollamer lenses (“TICL”) and EVO+ Visian ICL, are intraocular lenses used to correct refractive conditions such as myopia (near-sightedness), hyperopia (far-sightedness) and astigmatism. IOLs are prosthetic intraocular lenses used to restore vision that has been adversely affected by cataracts, and include theCompany’s lines of silicone and Collamer IOLs and the Preloaded Injector (a silicone or acrylic IOL preloaded into a single-use disposable injector). As of December 30, 2016, the Company’s significant subsidiaries consisted of: ·STAAR Surgical AG, a wholly owned subsidiary formed in Switzerland that markets and distributes ICLs and Preloaded IOLs. ·STAAR Japan, a wholly owned subsidiary that markets and distributes Preloaded IOLs and ICLs. The Company operates as one operating segment, the ophthalmic surgical market, for financial reporting purposes (see Note 16). Principles of Consolidation The accompanying consolidated financial statements include the accounts of STAAR Surgical Company and its wholly-owned subsidiaries andhave been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompanybalances and transactions have been eliminated. Fiscal Year and Interim Reporting Periods The Company’s fiscal year ends on the Friday nearest December 31 and each of the Company’s quarterly reporting periods generally consists of 13weeks. Fiscal years 2016, 2015, and 2014 are based on a 52-week period. Foreign Currency The functional currency of the Company’s Japanese subsidiary, STAAR Japan, Inc., is the Japanese yen. The functional currency of the Company’sSwiss subsidiary, STAAR Surgical AG, is the U.S. dollar. Assets and liabilities of the Company’s Japanese subsidiary are translated at rates of exchange in effect at the close of the period. Sales and expensesare translated at the weighted average of exchange rates in effect during the period. The resulting translation gains and losses are deferred and are shown as aseparate component in the Consolidated Statements of Comprehensive Loss. During 2016, 2015, and 2014, the net foreign translation gains (losses) were$156,000, $31,000 and $(955,000), respectively, and net foreign currency transaction losses, included in the consolidated statements of operations underother income (expense), net were, $147,000, $949,000, and $896,000, respectively. Revenue Recognition The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of anarrangement exists; delivery has occurred; the sale price is fixed or determinable; and collectability is reasonably assured. The Company records revenuefrom non-consignment product sales when title and risk of ownership have been transferred, which is typically at shipping point, except for certain customersand for the STAAR Japan subsidiary, which is typically recognized when the customer receives the product. The Company does not have significant deferredrevenues as of December 30, 2016, as delivery to the customer is generally made within the same or the next day of shipment. The Company presents salestax it collects from its customers on a net basis (excluded from revenues). The Company’s products are marketed to ophthalmic surgeons, hospitals, ambulatory surgery centers or vision centers, and distributors. IOLs may beoffered to surgeons and hospitals on a consignment basis. The Company maintains title and risk of loss of consigned inventory and recognizes revenue forconsignment inventory when the Company is notified that the IOL has been implanted. F-8  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ICLs are sold only to certified surgeons who have completed requisite training or for use in scheduled training surgeries. As a result, STAARpartially mitigates the risk that the revenue it recognizes on shipment of ICLs would need to be reversed because of a surgeon’s failure to qualify for its use. Beginning in 2016, the Company entered into certain strategic cooperation agreements with customers in which, as consideration for minimumpurchase commitments the customers make, the Company agrees to pay for marketing and support of the Company’s products. The Company accounts forthese arrangements in accordance with ASC 605-50, Revenue Recognition – Customer Payments and Incentives. The provisions in these arrangements allowfor these payments to be made directly to the customer in lieu of marketing and support or, payments can be made for distinct marketing and support servicesprovided by the customer or another party. For payments the Company makes to the customer for which no distinct service is provided, the Company records these payments as a reduction ofrevenues as incurred. For payments the Company makes to another party, or reimburses the customer, for distinct marketing and support services, theCompany recognizes these payments as a sales and marketing expense as incurred. Since the payments for distinct or non-distinct services occur within the quarter corresponding with the purchases made by the customer and theshipments made by the Company to that customer, there is no remaining performance obligation by the Company to the customer. Accordingly, there are nodeferred revenues associated with these types of arrangements as of December 30, 2016. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. TheCompany accounts for these free products in accordance with ASC 605-50 “Revenue Recognition – Customer Payments and Incentives” and recognizes thecost of the product as part of cost of sales. Free products shipped to the customer are shipped concurrently with the paid products, therefore the Companydoes not have any undelivered products and no deferred revenues as of December 30, 2016. The Company sells certain injector parts to an unrelated customer and supplier (collectively referred to as “supplier”) whereby these injector partsales are either made as a final sale to the supplier or, are sold to be reprocessed 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 salewith 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 orderssold or repurchased. For parts that are sold as a final sale, the Company recognizes a sale consistent with its routine revenue recognition policies as disclosedabove and those sales are included as part of other sales in total net sales. For the injector parts that are sold to be reprocessed into finished goods, theCompany does not recognize revenue on these sales in accordance with ASC 845-10, Purchases and Sales of Inventory with the Same Counterparty. Instead,the Company records the transaction at its carrying value, deferring any profit margin as contra-inventory, until the finished goods inventory is sold to anend-customer (not the supplier) at which point the Company records the sale and the related cost of sale, including the release of the deferred cost of sale ininventory, related to these finished goods. For all sales, the Company is considered the principal in the transaction as the Company, among other factors, is the primary obligor in thearrangement, bears general inventory risk, credit risk, has latitude in establishing the sales price, is responsible for authorized and general sales returns riskand therefore, sales and cost of sales are reported separately in the consolidated statement of operations instead of a single, net amount. Cost of sales includescost of production, freight and distribution, royalties, and inventory provisions, net of any purchase discounts. The Company generally permits returns of product if the product is returned within the time allowed by its return policies and records an allowancefor estimated returns at the time revenue is recognized. The Company’s allowance for estimated returns considers historical trends and experience, the impactof new product launches, the entry of a competitor, availability of timely and pertinent information and the various terms and arrangements offered, includingsales with extended credit terms. Sales are reported net of estimated returns. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment history and creditworthiness, as determined by the Company’s review of its customers’ current credit information. The Company continuously monitors collections andpayments from customers and maintains a provision for estimated credit losses and uncollectible accounts based upon its historical experience and anyspecific customer collection issues that have been identified. Amounts determined to be uncollectible are written off against the allowance for doubtfulaccounts. F-9  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Use of Estimates The consolidated financial statements have been prepared in conformity with GAAP and, as such, include amounts based on significant estimatesand judgments of management with consideration given to materiality. Significant estimates used include determining valuation allowances foruncollectible trade receivables, sales returns reserves, obsolete and excess inventory, deferred income taxes, and tax reserves, including valuation allowancesfor deferred tax assets, pension liabilities, evaluation of asset impairment, in determining the useful life of depreciable and definite-lived intangible assets,and in the variables and assumptions used to calculate and record stock-based compensation. Actual results could differ materially from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Companymaintains cash deposits with major banks which from time to time may exceed federally insured limits. The Company periodically assesses the financialcondition of the institutions and believes that the risk of any loss is minimal. Concentration of Credit Risk and Revenues Financial instruments that potentially subject the Company to credit risk principally consist of trade receivables. This risk is limited due to the largenumber of customers comprising the Company’s customer base, and their geographic dispersion. As of December 30, 2016, there were two customers withtrade receivable balances that represented 10% or more of consolidated trade receivables. As of January 1, 2016, there was one customer with a tradereceivable balance that represented 10% or more of consolidated trade receivables. Ongoing credit evaluations of customers’ financial condition areperformed and, generally, no collateral is required. The Company maintains reserves for potential credit losses and such losses, taken together, have notexceeded management’s expectations. There was one customer who accounted for 19% of the Company’s consolidated net sales in fiscal 2016, two customers who accounted for 15% and10% of the Company’s consolidated net sales in fiscal 2015, and one customer that accounted for 11% in fiscal 2014. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuationmethodologies used to measure fair value (ASC 820-10-50): ·Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ·Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that areobservable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. ·Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions marketparticipants would make and significant to the fair value. The carrying values reflected in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, prepayments and othercurrent assets, accounts payable, other current liabilities and line of credit approximate their fair values because of the short maturity of these instruments. Inventories, Net Inventories, net are valued at the lower of cost, determined on a first-in, first-out basis, or market. Inventories include the costs of raw material, labor,and manufacturing overhead, work in process and finished goods. Inventories also include deferred margins for certain injector parts described under therevenue recognition policy. The Company provides estimated inventory allowances for excess, expiring, slow moving and obsolete inventory as well asinventory whose carrying value is in excess of net realizable value to properly reflect inventory at the lower of cost or market. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. Depreciation on property, plant, and equipment is computed using the straight-line method overthe estimated useful lives of the assets as noted below. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or therelated lease term. Major improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. F-10  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The estimated useful lives of assets are as follows: Machinery and equipment 5-10 yearsFurniture and equipment 3-7 yearsComputers, software, and peripherals 2-5 yearsLeasehold improvements (a) (a)The estimated useful life of leasehold improvements is the shorter of the useful life of the asset or the term of the associated leases. Goodwill Goodwill, which has an indefinite life, is not amortized but instead is tested for impairment on an annual basis or between annual tests if an eventoccurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level.Reporting units can be one level below the operating segment level, and can be combined when reporting units within the same operating segment havesimilar economic characteristics. The Company has determined that its reporting units have similar economic characteristics, and therefore, can be combinedinto one reporting unit for the purposes of goodwill impairment testing. The Company performed its annual impairment test and determined that its goodwillwas not impaired. As of December 30, 2016 and January 1, 2016, the carrying value of goodwill was $1.8 million. Long-Lived Assets The Company reviews property, plant, and equipment and intangible assets, excluding goodwill, for impairment whenever events or changes incircumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of these assets by comparing thecarrying value of such assets to the estimated undiscounted future cash flows the assets are expected to generate. When the estimated undiscounted futurecash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value.A review of long lived assets was conducted as of December 30, 2016 and January 1, 2016 and no impairment was identified. Amortization is computed on the straight-line basis, which is the Company’s best estimate of the economic benefits realized over the estimateduseful lives of the assets which range from 3 to 20 years for patents, certain acquired rights and licenses, 10 years for customer relationships, and 3 to 10 yearsfor developed technology. Research and Development Costs Expenditures for research activities relating to product development and improvement are charged to expense as incurred. Advertising Costs Advertising costs, which are included in marketing and selling expenses, are expensed as incurred. Advertising costs were $4.0 million, $2.5 million,and $2.8 million, for fiscal 2016, 2015, and 2014, respectively. Income Taxes The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of theCompany’s assets and liabilities, net operating loss and credit carryforwards, and uncertainty in income taxes, on a jurisdiction-by-jurisdiction basis.Valuation allowances, or reductions to deferred tax assets, are recognized if, based on the weight of available evidence, it is more likely than not that someportion or all the deferred tax asset may not be realized or realizable in the jurisdiction in which they arise. The impact on deferred taxes of changes in taxrates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in theperiod of enactment. The Company recognizes the income tax benefit from an uncertain tax position when it is more likely than not that, based on technical merits, theposition will be sustained upon examination, including resolutions of any related appeals or litigation processes. The amount of tax benefit recorded, if any,is limited to the amount that is greater than 50 percent likely to be realized upon settlement with the taxing authority (that has full knowledge of all relevantinformation). Accrued interest, if any, related to uncertain tax positions is included as a component of income tax expense, and penalties, if incurred, arerecognized as a component of operating income or loss. The Company does not have any uncertain tax positions as of any of the periods presented. TheCompany did not incur significant interest and penalties for any period presented. F-11  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Basic and Diluted Net Income (Loss) Per Share The Company has only one class of common stock and no participating securities which would require the two-class method of calculating basicearnings per share. Basic per share information is calculated by dividing net income (loss) by the weighted average number of shares outstanding, net ofunvested restricted stock and unvested restricted stock units, during the period. Diluted per share information is calculated by dividing net income (loss) bythe weighted average number of shares outstanding, adjusted for the effects of potentially dilutive common stock, which are comprised of outstandingwarrants, stock options, unvested restricted stock, and restricted stock units, during the period, using the treasury-stock method (See Note 15). Employee Defined Benefit Plans The Company maintains a passive pension plan (the “Swiss Plan”) covering employees of its Swiss subsidiary. The Swiss Plan conforms to thefeatures of a defined benefit plan. The Company also maintains a noncontributory defined benefit pension plan which covers substantially all the employees of STAAR Japan. The Company recognizes the funded status, or difference between the fair value of plan assets and the projected benefit obligations of the pensionplan on the consolidated statements of financial position, with a corresponding adjustment to accumulated other comprehensive income (loss). If theprojected benefit obligation exceeds the fair value of plan assets, then that difference or unfunded status represents the pension liability. The Companyrecords a net periodic pension cost in the consolidated statements of operations. The liabilities and annual income or expense of both plans are determinedusing methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of assetreturn (asset returns and fair-value of plan assets are applicable for the Swiss Plan only). The fair values of plan assets are determined based on prevailingmarket prices (see Note 10). Stock-Based Compensation Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value. The Company recognizesthese compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three to fouryears for executives and employees, and one year for members of its Board of Directors (see Notes 11). The Company also, at times, issues restricted stock to its executive officers, employees, and members of its Board of Directors (the Board), which arerestricted and unvested common shares issued at fair market value on the date of grant. For the restricted shares issued to the Board, the restricted stock vestsover a one-year service period, for executives and employees, it is typically a three-year service period, and are subject to forfeiture (or acceleration,depending upon the circumstances) until vested or the service period is completed. Restricted stock compensation expense is recognized on a straight-linebasis over the requisite service period of one to three years, based on the grant-date fair value of the stock. Restricted stock is considered legally issued andoutstanding on the grant date (see Notes 11 and 15). The Company issues restricted stock units (“RSUs”) (see Note 11), which can have only a service condition or a performance contingent restrictedstock award based upon the Company meeting certain internally established performance conditions that vest only if those conditions are met or exceededand the grantee is still employed with the Company. Restricted stock unit compensation expense is recognized on a straight-line basis over the requisiteservice period. The Company recognizes compensation cost for the performance condition RSUs when the Company concludes that it is probable that theperformance condition will be achieved, net of an estimate of pre-vesting forfeitures, over the requisite service period based on the grant-date fair value of thestock. The Company reassesses the probability of vesting at each reporting period and adjusts compensation cost based on its probability assessment. Once the RSUs are vested, equivalent common shares will be issued or issuable to the grantee and therefore the RSUs are not included in totalcommon shares issued and outstanding until vested (see Notes 11 and 15). The Company accounts for options granted to persons other than employees and directors under ASC 505-50, Equity –Based Payments to Non-Employees. The fair value of such options is re-measured each reporting period using the Black-Scholes option-pricing model and income or expense isrecognized over the vesting period for changes to the fair value for the unvested options. As the options vest, no such re-measurement is necessary orperformed. Comprehensive Income (Loss) The Company presents comprehensive income (loss) in the Consolidated Statements of Operations, and the Consolidated Statements ofComprehensive Loss. Total comprehensive income (loss) includes, in addition to net income (loss), changes in equity that are excluded from theconsolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the consolidated balance sheets. Thefollowing table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) attributable tothe Company for the years ended December 30, 2016, January 1, 2016, and January 2, 2015 (in thousands): F-12  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ForeignCurrencyTranslation DefinedBenefitPension Plan-Japan DefinedBenefitPension Plan-Switzerland AccumulatedOtherComprehensiveIncome (Loss) Balance at January 3, 2014 $779 $107 $(604) $282 Other comprehensive income (loss) (1,527) 23 (359) (1,863)Tax effect 572 (9) (52) 511 Balance at January 2, 2015 (176) 121 (1,015) (1.070)Other comprehensive income (loss) 52 (38) (576) (562)Tax effect (21) 12 61 52 Balance at January 1, 2016 (145) 95 (1,530) (1,580)Other comprehensive income (loss) 224 (9) 428 641 Tax effect (68) 2 (47) (111)Balance at December 30, 2016 $11 $88 $(1,149) $(1,050) Recent Accounting Pronouncements Not Yet Adopted In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory” that replaces the existing accounting standards for themeasurement of inventory. ASU 2015-11 requires a company to measure inventory at the lower of cost and net realizable value. Net realizable value isdefined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation”. Theeffective date of ASU 2015-11 is for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reportingperiods. The Company does not expect the adoption of ASU 2015-11 will have a material effect on its consolidated financial statements. In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350)” (ASU 2017-04) which simplifies the test for goodwill impairment. ASU 2017-04 is effective for annual or any interimgoodwill impairment tests in fiscal years beginning after December 15, 2019. The Company does not expect ASU 2017-04 to have a material effect on theconsolidated financial statements. In December 2016, FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”(“ASU 2016-20”) which amends narrow aspects of accounting standard ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” ASU-2016-20is effective for periods after December 15, 2017. The Company is currently evaluating the impact ASU 2016-20 will have on its consolidated financialstatements. In August 2016, the FASB issued 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. ASU 2016-15 iseffective for fiscal years beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the impact ASU 2016-15will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting”, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences,forfeitures, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. The update is effective for fiscalyears beginning after December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2016-09 will have on its consolidatedfinancial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which requires lessees to recognize assets and liabilities for leases withlease terms greater than twelve months in the statement of financial position. Leases will be classified as either finance or operating, with classificationaffecting the pattern of expense recognition in the income statement. ASU 2016-02 also requires improved disclosures to help users of financial statementsbetter 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. The Company is currently evaluating the impact theadoption of ASU 2016-02 will have on its consolidated financial statements. F-13  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”, which changeshow deferred taxes are classified on company’s balance sheets. The ASU eliminates the current requirement to present deferred tax liabilities and assets ascurrent and noncurrent on the balance sheet. Instead, companies will be required to classify all deferred tax assets and liabilities as noncurrent. Theamendments are effective for annual financial statements beginning after December 15, 2016, and interim periods within those annual periods. The Companydoes not expect the adoption of ASU 2015-17 will have a material impact on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes nearly all existing revenuerecognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customersin an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process toachieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required underexisting GAAP. The revised revenue standard is effective for public entities for annual periods beginning after December 15, 2017, and interim periodstherein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reportingperiod with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09recognized at the date of adoption (which includes additional footnote disclosures). In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations andLicensing.” The amendments clarify two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. Theupdate is effective for annual periods beginning after December 15, 2017 including interim reporting periods therein. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and PracticalExpedients” (“ASU 2016-12”). The amendments in ASU 2016-12 provide clarifying guidance in certain narrow areas and add some practical expedients.Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when torecognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for allsales (and other similar) taxes from the transaction price, (3) specify that the measurement date for noncash consideration is contract inception, and clarifiesthat the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practicalexpedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented whenidentifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied andunsatisfied performance obligations, and (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of therevenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenueunder legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modifiedretrospective transition method either to all contracts or only to contracts that are not completed contracts, and clarifies that an entity that retrospectivelyapplies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption.However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transitionrequirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Companybeginning January 1, 2018, although early adoption is permitted beginning January 1, 2017. The Company has completed an initial assessment of ASU 2014-09, ASU 2016-10, and ASU 2016-12 and will be working on an implementationplan and evaluate the disclosure requirements under the new standards. Based on the work performed to date, the Company does not expect adoption of thenew standards to have a material impact on the consolidated financial statements. The Company has not finalized its transition method for adoption. Note 2 — Accounts Receivable Trade, Net Accounts receivable trade, net consisted of the following at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Domestic $1,828 $1,728 Foreign 16,572 15,824 18,400 17,552 Less allowance for doubtful accounts and sales returns 2,056 1,877 $16,344 $15,675 F-14  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3 — Inventories, Net Inventories, net consisted of the following at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Raw materials and purchased parts $2,264 $2,317 Work in process 1,924 1,995 Finished goods 14,268 15,058 18,456 19,370 Less inventory reserves 3,631 3,449 $14,825 $15,921 Note 4 — Prepayments, Deposits, and Other Current Assets Prepayments, deposits, and other current assets consisted of the following at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Prepayments and deposits $1,003 $971 Prepaid insurance 935 874 Income tax receivable 686 597 Consumption tax receivable 573 ‒ Value added tax (VAT) receivable 668 724 Other current assets 484 470 $4,349 $3,636 Note 5 — Property, Plant and Equipment, Net Property, plant and equipment, net consisted of the following at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Machinery and equipment $19,807 $17,094 Furniture and fixtures 8,025 6,980 Leasehold improvements 9,179 8,611 37,011 32,685 Less accumulated depreciation 25,221 22,590 $11,790 $10,095 Depreciation expense for the years ended December 30, 2016, January 1, 2016, and January 2, 2015, was approximately $2.7 million, $2.2 million,and $2.1 million, respectively. Note 6 — Intangible Assets, Net Intangible assets, net, consisted of the following (in thousands): December 30, 2016 January 1, 2016 GrossCarryingAmount AccumulatedAmortization Net GrossCarryingAmount AccumulatedAmortization Net Amortized intangible assets: Patents and licenses $9,224 $(8,930) $294 $9,207 $(8,891) $316 Customer relationships 1,343 (1,209) 134 1,305 (1,044) 261 Developed technology 854 (809) 45 829 (740) 89 Total $11,421 $(10,948) $473 $11,341 $(10,675) $666 Aggregate amortization expense for intangible assets was $228,000, $205,000, and $382,000, for the years ended December 30, 2016, January 1,2016, and January 2, 2015, respectively. F-15  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Future amortization of intangible assets is as follows (in thousands): Fiscal Year Amount 2017 $228 2018 228 2019 17 Total $473 Note 7 — Other Current Liabilities Other current liabilities consisted of the following at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Accrued salaries and wages $2,334 $1,909 Accrued insurance 501 540 Accrued consumption tax 424 157 Accrued income taxes 1,095 217 Accrued bonuses 1,414 2,114 Other (1) 1,507 1,368 $7,275 $6,305 (1) No item in “Other” above exceeds 5% of total other current liabilities. Note 8 — Liabilities Lines of Credit The Company’s wholly owned Japanese subsidiary, STAAR Japan, has an agreement, as amended on December 28, 2012, with Mizuho Bank whichprovides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.12% as of December30, 2016) plus a 0.50% spread, and may be renewed annually (the current line expires on November 21, 2017). The credit facility is not collateralized. TheCompany had 500,000,000 Yen outstanding on the line of credit as of December 30, 2016 and January 1, 2016 (approximately $4.3 million and $4.2 millionbased on the foreign exchange rates on December 30, 2016 and January 1, 2016, respectively), which approximates fair value due to the short-term maturityand market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of December 30, 2016, there were noavailable borrowings under the line. In August 2010, the Company’s wholly-owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the“Bank”). The credit agreement provides for borrowing of up to 1,000,000 CHF (Swiss Francs) ($1.0 million at the rate of exchange on December 30, 2016), tobe used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest ratewill be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The credit agreement is automatically renewed onan annual basis based on the same terms assuming there is no default. The credit agreement may be terminated by either party at any time in accordance withits general terms and conditions. The credit facility is not collateralized and contains certain conditions such as providing the Bank with audited financialstatements annually and notice of significant events or conditions, as defined in the credit agreement. The Bank may also declare all amounts outstanding tobe immediately due and payable upon a change of control or a material qualification as defined in the agreement. There were no borrowings outstanding as ofDecember 30, 2016 and January 1, 2016. Lease Line of Credit (Capital Leases) On June 7, 2016, the Company entered into lease schedule 009 of an existing master lease agreement with Farnam Street Financial, Inc. (“Farnam”).The line of credit provided for borrowings of up to $2.0 million 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. Approximately $1.5 million of the linewas settled through sale-leaseback transactions. As of December 30, 2016, approximately $1,957,000 of the line had been used and $43,000 was available forborrowing. On January 31, 2017, lease 009 was closed and lease 009R commenced. Under 009R, equipment with a cost of $1,957,000 is financed over aperiod 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 theCompany can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. F-16  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On June 12, 2014, the Company entered into lease schedule 008R with Farnam. Under the agreement, equipment with a cost of $964,612 wasfinanced over a period of 36 months at a lease rate factor of 2.81% per $1 for hardware equipment and 3.12% per $1 for non-hardware equipment . At the endof the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. On January 30, 2017, the Company entered into lease schedule 010 with Farnam. The line of credit provides for borrowings of up to $2.0 million at alease 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 lineis used at which time the lease commences. There are no material obligations outstanding under lease schedule 010 at this time. Covenant Compliance The Company is in compliance with covenants of its credit facilities and lines of credit as of December 30, 2016. Asset Retirement Obligation The Company recorded certain Asset Retirement Obligations (“ARO”), in accordance with ASC 410-20 in connection with the Company’sobligation to return its Japan facility to its “original condition”, as defined in the lease agreement. The Company has recorded approximately $195,000 and$156,000, representing the fair value of the ARO liability obligation in noncurrent liabilities at December 30, 2016 and January 1, 2016, respectively. Theobligation is currently expected to be settled upon expiration of the lease in 2018. Note 9 — Income Taxes The provision (benefit) for income taxes consists of the following (in thousands): 2016 2015 2014 Current tax provision: U.S. federal (benefit) $— $— $3 State 18 12 15 Foreign 1,031 443 570 Total current provision 1,049 455 588 Deferred tax provision (benefit): Foreign provision (benefit) (1,364) 473 (841)Total deferred provision (benefit) (1,364) 473 (841)Provision (benefit) for income taxes $(315) $928 $(253) As of December 30, 2016, the Company had federal net operating loss carryforwards of $136.1 million available to reduce future income taxes of itsU.S. operations. The federal net operating loss carryforwards expire in varying amounts between 2020 and 2036. In California, the main state from which theCompany conducts its domestic operations, the Company has state net operating losses of $32.1 million available to reduce future California income taxes.The California net operating loss carryforwards expire in varying amounts between 2017 and 2036 and, approximately $9.1 million of those net operatingloss carryforwards, will expire over the next two years. The Company had accrued net income taxes receivable of $367,000 and $380,000 at December 30, 2016 and January 1, 2016, respectively,primarily due to taxes from foreign jurisdictions. The provision (benefit) for income before taxes differs from the amount computed by applying the statutory federal income tax rate to income beforetaxes as follows (in thousands): F-17  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2016 2015 2014 Computed provision (benefit) for taxes based on income at statutoryrate 34.0% $(4,231) 34.0% $(1,905) 34.0% $(2,939)Increase (decrease) in taxes resulting from: Permanent differences (3.0) 373 (0.6) 33 (0.2) 20 Federal minimum taxes — — — — (0.1) 3 State minimum taxes, net of federal income tax benefit (0.1) 12 (0.1) 8 (0.1) 10 State tax benefit 6.2 (767) (6.6) 370 4.6 (394)Tax rate difference due to foreign statutory rate (8.9) 1,109 1.6 (90) 3.3 (288)Expiration of state net operating tax carryforwards (7.2) 892 (47.3) 2,650 — — Foreign earnings not permanently reinvested 6.5 (809) (9.8) 547 0.1 (11)Foreign dividend withholding 3.8 (478) (3.8) 211 (1.5) 132 Expiration of charitable contribution carryover (0.1) 12 (0.3) 15 (0.2) 18 Other 1.2 (151) 2.5 (140) 1.0 (85)Valuation allowance (29.9) 3,723 13.8 (771) (38.0) 3,281 Effective tax provision (benefit) rate 2.5% $(315) (16.6)% $928 2.9% $(253) The Company recorded an income tax benefit of $315,000 during the fiscal year 2016 due to losses generated in its foreign operations and areduction in foreign withholding taxes in connection with the dissolution of one of its foreign subsidiaries. The Company recorded an income tax provisionof $928,000 during the fiscal year 2015 due to profits generated in its foreign operations. The Company recorded income tax benefits of $253,000 duringfiscal year 2014 principally related to its Swiss operations. The tax benefits were recorded after finalizing ongoing discussions with the Swiss tax authorities,or the STA, about the completion of the Company’s manufacturing consolidation project, which had been in progress since 2012 and completed in June2014. The discussions included, among other things, the approval of a special Swiss tax ruling available to certain qualified companies doing business inSwitzerland as a foreign operator, as defined by the STA. The discussions also included an agreement with the STA to consolidate the financial results of aforeign entity solely for Swiss income tax purposes, previously not taxable by the STA, to become subject to Swiss tax. The Company was informed by theSTA during 2014 that it had met the special ruling qualifications for 2014. Included in the state tax provision is a decrease to the state deferred tax asset and corresponding decrease to the valuation allowance of $125,000and $3,020,000, for 2016 and 2015 respectively, primarily related to the expiration of state net operating loss carryforwards. For 2014 there was an increaseto the state deferred tax asset and corresponding increase to the valuation allowance of $394,000. Included in the foreign deferred tax benefit for 2016 is a decrease in foreign deferred liabilities of $617,000. For 2015, there was an increase inforeign deferred liabilities of $172,000. For 2014, there was a decrease in foreign deferred liabilities of $1,039,000. All earnings from the Company’s subsidiaries are not considered to be permanently reinvested. Accordingly, the Company provides withholdingand U.S. taxes on all unremitted foreign earnings. During 2016, 2015, and 2014 there were no withholding taxes paid to foreign jurisdictions and there wereno earnings repatriated from foreign subsidiaries. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets (liabilities) as of December 30, 2016and January 1, 2016 are as follows (in thousands): F-18  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2016 2015 Current deferred tax assets (liabilities): Allowance for doubtful accounts and sales returns $245 $90 Inventories 662 422 Accrued vacation 437 382 Accrued other expenses 596 176 Other 66 57 Valuation allowance (1,615) (1,058)Total current deferred tax assets (liabilities) $391 $69 Non-current deferred tax assets (liabilities): Net operating loss carryforwards $52,843 $51,005 Stock-based compensation 2,154 1,763 Business, foreign and AMT credit carryforwards 1,665 1,730 Capitalized R&D 249 134 Contributions 10 17 Pensions 625 583 Depreciation and amortization 1,060 695 Foreign tax withholding (881) (1,627)Foreign earnings not permanently reinvested (2,468) (3,209)Other 18 13 Valuation allowance (55,442) (52,275)Total non-current deferred tax liabilities $(167) $(1,171) As of December 30, 2016, the Company had net deferred tax liabilities in Switzerland of $473,000 (which included $881,000 of withholding taxeson unremitted foreign earnings) and net deferred tax assets of $698,000 in Japan included in the Company’s components of deferred income tax assets andliabilities table. As of January 1, 2016, the Company had net deferred tax liabilities in Switzerland of $1,686,000 (which included $1,627,000 ofwithholding taxes on unremitted foreign earnings) and net deferred tax assets of $584,000 in Japan included in the Company’s components of deferredincome tax assets and liabilities table. Valuation allowance ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset may not berealizable. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. In evaluating the Company’s ability to recover thedeferred tax assets within a jurisdiction from which they arise, management considers all available positive and negative evidence, including scheduledreversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxableincome, the Company begins with historical results and incorporates assumptions including overall current and projected business and industry conditions,the amount of future federal, state, and foreign pretax operating income, the reversal of temporary differences and the successful implementation of feasibleand prudent tax-planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with theplans and estimates the Company uses to manage the underlying businesses. In evaluating the objective evidence that historical results provide, theCompany considers three years of cumulative operating results. Valuation allowances, or reductions to deferred tax assets, are recognized if, based on theweight of all the available evidence, it is more likely than not that some portion or all the deferred tax asset may not be realized. U.S. Jurisdiction Due to the Company’s history of losses in the U.S., the valuation allowance fully offsets the value of U.S. deferred tax assets on the Company’s balancesheet as of December 30, 2016 and January 1, 2016. Further, pursuant to the provisions of Internal Revenue Code Section 382, significant changes inownership may restrict the future utilization of these tax loss carry forwards. Foreign Jurisdictions STAAR Surgical AG Due to STAAR Surgical AG’s history of profits, the deferred tax assets are considered fully realizable. Included in deferred tax assets and liabilitiesof STAAR AG is noncurrent deferred tax assets of $407,000 and $312,000 as of December 30, 2016 and January 1, 2016, respectively. F-19  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) STAAR Japan, Inc. Since 2012, STAAR Japan functions as a limited-risk distributor with a guaranteed return from STAAR AG and accordingly, STAAR Japan’sdeferred tax assets are considered fully realizable. Included in deferred tax assets and liabilities of STAAR Japan is noncurrent deferred tax assets of $307,000(as translated using the Japanese Yen exchange rate on December 30, 2016) and $145,000 as of December 30, 2016 and January 1, 2016, respectively. Other Income Tax Disclosures The following tax years remain subject to examination: Significant Jurisdictions Open Years U.S. Federal 2013 – 2015 California 2012 – 2015 Switzerland 2015 Japan 2013 – 2015 Loss from continuing operations before provision (benefit) for income taxes is as follows (in thousands): 2016 2015 2014 Domestic $(10,399) $(7,678) $(8,113)Foreign (2,045) 2,073 (532) $(12,444) $(5,605) $(8,645) Note 10 — Employee Benefit Plans The Company maintains a passive pension plan (the “Swiss Plan”) covering employees of its Swiss subsidiary, which is accounted for as a definedbenefit plan. Defined Benefit Plan-Switzerland In Switzerland employers are required to provide a minimum pension plan for their staff. Contributions of both the employees and employer financethe Swiss Plan. The amount of the contributions is defined by the plan regulations and cannot be decreased without amending the plan regulations. It isrequired that the employer contribute an amount equal to or greater than the employee contribution. The following table shows the changes in the benefit obligation and plan assets and the Swiss Plan’s funded status as of December 30, 2016 andJanuary 1, 2016 (in thousands): F-20  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2016 2015 Change in Projected Benefit Obligation: Projected benefit obligation, beginning of period $6,349 $4,827 Service cost 469 316 Interest cost 65 74 Participant contributions 230 209 Benefits deposited (paid) (340) 340 Actuarial (gain) loss (410) 656 Prior service cost — (73) Projected benefit obligation, end of period $6,363 $6,349 Change in Plan Assets: Plan assets at fair value, beginning of period $3,498 $2,705 Actual return on plan assets (including foreign currency impact) (13) 35 Employer contributions 230 209 Participant contributions 230 209 Benefits deposited (paid) (340) 340 Plan assets at fair value, end of period $3,606 $3,498 Funded status (pension liability), end of year $(2,757) $(2,851)Amount Recognized in Accumulated Other Comprehensive Loss, net of tax: Actuarial loss on plan assets $(822) $(822) Actuarial loss on benefit obligation (1,393) (1,668) Actuarial gain recognized in current year 454 362 Effect of curtailments 606 606 Accumulated other comprehensive loss $(1,155) $(1,522)Accumulated benefit obligation at end of year $(5,980) $(5,932) The underfunded balance of $2.8 million and $2.9 million was included in other long-term liabilities (pension liability) on the consolidated balancesheets as of December 30, 2016 and January 1, 2016, respectively. Net periodic pension cost associated with the Swiss Plan during the years ended December 30, 2016, January 1, 2016 and January 2, 2015 includethe following components (in thousands): 2016 2015 2014 Service cost $469 $316 $297 Interest cost 65 74 114 Expected return on plan assets (89) (93) (97)Actuarial loss recognized in current year 104 64 24 Net periodic pension cost $549 $361 $338 Changes in other comprehensive income (loss), net of tax, associated with the Swiss Plan in the year ended December 30, 2016, January 1, 2016 andJanuary 2, 2015 include the following components (in thousands): 2016 2015 2014 Current year actuarial gain (loss) on plan assets, net of tax $(8) $(61) $(375)Current year actuarial loss on benefit obligation, net of tax (275) (635) (846)Actuarial gain (loss) recorded in current year, net of tax (98) 57 28 Effect of curtailments — — 782 Change in other comprehensive loss $(381) $(517) $(411) The amount in accumulated other comprehensive loss as of December 30, 2016 that is expected to be recognized as a component of the net periodicpension costs during fiscal year 2017 is $73,000. F-21  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net periodic pension cost and projected and accumulated pension obligation for the Company’s Swiss Plan were calculated on December 30, 2016and January 1, 2016 using the following assumptions: 2016 2015 Discount rate 0.8% 1.0%Salary increases 2.0% 2.0%Expected return on plan assets 2.5% 2.5%Expected average remaining working lives in years 10.0 10.4 The discount rates are based on an assumed pension benefit maturity of 10 to 15 years. The rate was estimated using the rate of return for highquality Swiss corporate bonds that mature in eight years. This maturity was used as there are significant numbers of high quality Swiss bonds, but very fewbonds issued with maturities with longer lives. To determine an appropriate discount rate, the eight-year rate of return was then extrapolated along the yieldcurve of Swiss government bonds. The salary increase rate was based on the Company’s best estimate of future increases over time. The expected long-term rate of return on plan assets is based on the expected asset allocation and assumptions concerning long-term interest rates,inflation rates, and risk premiums for equities above the risk-free rates of return. These assumptions take into consideration historical long-term rates of returnfor relevant asset categories Under Swiss law, pension funds are legally independent from the employer and all the contributions are invested with regulated entities. TheCompany has a contract with Allianz Suisse Life Insurance Company’s BVG Collective Foundation (the “Foundation”) to manage its Swiss pension fund.Multiple employers contract with the Foundation to manage the employers’ respective pension plans. The Foundation manages the pension plans of itscontracted employers as a collective entity. The investment strategy is determined by the Foundation and applies to all members of the collectiveFoundation. There are no separate financial statements for each employer contract. The pension plan assets of all the employers that contract with theFoundation are comingled. They are considered multiple-employer plans under ASC 715-30-35-70 and therefore accounted for as single-employer plans. As there are no separate financial statements for each employer contract, there are no individual investments that can be directly attributed to theCompany’s pension plan assets. However, the funds contributed by an employer are specifically earmarked for its employees and the total assets of the planallocable to Company’s employees are separately tracked by the Foundation. The lack of visibility into the specific investments of the plan assets and howthey are valued is a significant unobservable input, therefore, the Company considers the plan assets collectively to be Level 3 assets under the fair valuehierarchy (see Note 1). Plan assets totaled $3.6 million and $3.5 million as of December 30, 2016 and January 1, 2016, respectively. The table below sets forth the fair value of Plan assets at December 30, 2016 and January 1, 2016, and the related activity in fiscal years 2015 and2016, in accordance with ASC 715-20-50-1(d) (in thousands): InsuranceContracts (Level 3) Beginning balance at January 2, 2015 $2,705 Actual return on plan assets 35 Purchases, sales, and settlement 758 Ending balance at January 1, 2016 3,498 Actual return on plan assets (12)Purchases, sales, and settlement 119 Ending balance at December 30, 2016 $3,605 F-22  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During fiscal 2017, the Company expects to make cash contributions totaling approximately $238,000 to the Swiss Plan. The estimated future benefit payments for the Swiss Plan are as follows (in thousands): Fiscal Year Amount 2017 $52 2018 56 2019 59 2020 57 2021 62 Thereafter 410 Total $696 Defined Benefit Plan-Japan STAAR Japan maintains a noncontributory defined benefit pension plan (“Japan Plan”) substantially covering all the employees of STAARJapan. Benefits under the Japan Plan are earned, vested, and accumulated based on a point-system, primarily based on the combination of years of service,actual and expected future grades (management or non-management) and actual and future zone (performance) levels of the employees. Each point earned isworth a fixed monetary value, 1,000 Yen per point, regardless of the level grade or zone of the employee. Gross benefits are calculated based on thecumulative number of points earned over the service period multiplied by 1,000 Yen. The mandatory retirement age limit is 60 years old. STAAR Japan administers the pension plan and funds the obligations of the Japan Plan from STAAR Japan’s operating cash flows. STAAR Japan isnot required, and does not intend, to provide contributions to the Plan to meet benefit obligations and therefore does not have any plan assets. Benefitpayments are made to beneficiaries as they become due. The funded status of the benefit plan at December 30, 2016 and January 1, 2016 is as follows (in thousands): 2016 2015 Change in Projected Benefit Obligation: Projected benefit obligation, beginning of period $1,035 $957 Service cost 148 121 Interest cost 6 6 Actuarial gain 49 32 Benefits paid (17) (83)Foreign exchange adjustment 19 2 Projected benefit obligation, end of period $1,240 $1,035 Changes in Plan Assets: Plan assets at fair value, beginning of period $— $— Actual return on plan assets — — Employer contributions — — Benefits paid — — Distribution of plan assets — — Foreign exchange adjustment — — Plan assets at fair value, end of period $— $— Funded status (pension liability), end of period $(1,240) $(1,035)Amount Recognized in Accumulated Other Comprehensive Income, Net of Tax: Transition obligation $(14) $(20)Actuarial gain (loss) (31) 122 Prior service cost 8 9 Net gain (loss) 125 (10)Accumulated other comprehensive income $88 $101 Accumulated benefit obligation at end of year $(1,078) $(893) F-23  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The underfunded balance of $1,240,000 and $1,035,000, respectively, was included in other long-term liabilities (pension liability) on theconsolidated balance sheets as of December 30, 2016 and January 1, 2016. Net periodic pension cost associated with the Japan Plan for the years ended December 30, 2016, January 1, 2016 and January 2, 2015 includes thefollowing components (in thousands): 2016 2015 2014 Service cost $148 $121 $157 Interest cost 6 6 9 Net amortization of transition obligation 12 11 12 Actuarial loss (13) (15) (10)Prior service credit (1) (2) (1)Net periodic pension cost $152 $121 $167 Changes in other comprehensive income (loss), net of tax, associated with the Japan Plan for the years ended December 30, 2016, January 1, 2016and January 2, 2015 include the following components (in thousands): 2016 2015 2014 Amortization of net transition obligation $8 $7 $12 Amortization of actuarial gain (loss) 25 (21) (9)Actuarial income (loss) recorded in current year (40) (10) 13 Amortization prior service cost — — (2)Change in other comprehensive income (loss) $(7) $(24) $14 The amount in accumulated other comprehensive loss as of December 30, 2016 that is expected to be recognized as a component of the net periodicpension cost in fiscal 2017 is approximately $7,300. Net periodic pension cost and projected and accumulated pension obligation for the Company’s Japan Plan were calculated on December 30, 2016and January 1, 2016 using the following assumptions: 2016 2015 Discount rate 0.3% 0.5%Salary increases 6.0% 6.1%Expected return on plan assets N/A N/A Expected average remaining working lives in years 8.84 8.13 The discount rate of 0.30% as of December 30, 2016 and the discount rate of 0.50% as of January 1, 2016 are based on the approximate Japanesegovernment bond rate with a term of 10 to 20 years. The salary increase average rate was based on the Company’s best estimate of future increases over time. The estimated future benefit payments for the Japan Plan are as follows (in thousands): Fiscal Year Amount 2017 $139 2018 50 2019 52 2020 55 2021 95 Thereafter 67 Total $458 F-24  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Defined Contribution Plan The Company has a 401(k) profit sharing plan (“401(k) Plan”) for the benefit of qualified employees in the U.S. During the fiscal year endedDecember 30, 2016, employees who participate may elect to make salary deferral contributions to the 401(k) Plan up to the $18,000 of the employees’eligible payroll subject to annual Internal Revenue Code maximum limitations (with a $6,000 annual catch-up contribution permitted for those over 50 yearsold). The Company’s contribution percentage is 80% of the employee’s contribution up to the first 6% of the employee’s compensation. In addition, STAARmay make a discretionary contribution to qualified employees, in accordance with the 401(k) Plan. During the years ended December 30, 2016, January 1,2016, and January 2, 2015, the Company made contributions, net of forfeitures, of $703,000, $625,000, and $518,000, respectively, to the 401(k) Plan. Note 11 — Stockholders’ Equity Immediate Vesting of All Unvested Equity Awards On February 11, 2016, a shareholder increased its beneficial ownership of the Company’s common stock to approximately 26% of all sharesoutstanding. This triggered the “Change in Control” provision in the Amended and Restated 2003 Omnibus Equity Incentive Plan (“Plan”). As a result, allunvested equity awards outstanding under the Plan immediately vested. Consequently, we recorded an aggregate $6.9 million non-cash charge to stock-based compensation in the consolidated statements of operations on that date ($4.6 million for stock options and $2.3 million for restricted stock andrestricted stock units). This charge was recorded and included in the following categories of the consolidated statements of operations for the year endedDecember 30, 2016: $2.9 million in general and administrative expenses, $1.5 million in marketing and selling expenses, $1.9 million in research anddevelopment expenses and $0.6 million in manufacturing costs. Approximately $3.3 million of the $6.9 million of accelerated charges would have beenrecognized for stock-based compensation by the Company in fiscal years subsequent to 2016 had the Change in Control provision not been triggered. There was no net income tax benefit recognized in the consolidated statements of operations for stock-based compensation expense for non-qualified stock options, as the Company fully offsets net deferred tax assets with a valuation allowance (see Note 9). The Company does not recognizedeferred income taxes for incentive stock option compensation expense, and records a tax deduction only when a disqualified disposition has occurred (seeNote 9). The following table represents the fair value of stock compensation granted during the year ended December 30, 2016: Fair Value Stock Options $2,946 Restricted Stock Units 2,396 Restricted Stock 150 $5,492 The cost that has been charged against income for stock-based compensation is set forth below (in thousands): Fiscal Year Ended December 30,2016 January 1,2016 January 2, 2015 Employee stock options $5,485 $2,306 $2,842 Restricted stock 298 485 935 Restricted stock units 2,717 452 795 Consultant compensation 58 61 91 Total $8,558 $3,304 $4,663 The Company recorded stock-based compensation expense in the following categories on the accompanying consolidated statements of operations(in thousands): F-25  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fiscal Year Ended December 30,2016 January 1,2016 January 2,2015 Cost of Sales $612 $52 $108 General and administrative 3,809 2,090 2,552 Marketing and selling 1,961 696 1,065 Research and development 2,176 466 938 Total stock-based compensation expense 8,558 3,304 4,663 Amounts capitalized as part of inventory 269 516 306 Total stock-based compensation $8,827 $3,820 $4,969 As of December 30, 2016, there was $3.5 million of total unrecognized compensation cost related to non-vested share-based compensationarrangements granted under the Plan ($1.9 million for stock options and $1.6 million for restricted stock and restricted stock units). That cost was expected tobe recognized over a weighted-average period of approximately two years. Incentive Plan The Amended and Restated 2003 Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of theavailable forms of awards under the Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, and restricted stock units(RSUs). Options under the plan are granted at fair market value on the date of grant, become exercisable generally over a three-year period, or as determinedby the Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for acceleratedvesting if there is a change in control and pre-established financial metrics are met (as defined in the Plan). Grants of restricted stock outstanding under thePlan generally vest over periods of one to three years. Grants of RSUs outstanding under the Plan generally vest based on service, performance, or acombination of both. On June 24, 2016, stockholders approved a proposal to increase the number of shares under the Plan by 1.9 million. As of December 30,2016, there were 2,209,347 shares authorized and 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-averageassumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of optionsgranted is derived from the historical exercises and post-vesting cancellations, and represents the period of time that options granted are expected to beoutstanding. The Company has calculated a 9% 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. Fiscal Year Ended December 30,2016 January 1,2016 January 2,2015 Expected dividend yield 0% 0% 0%Expected volatility 57% 57% 55%Risk-free interest rate 1.34% 1.59% 1.29%Expected term (in years) 5.57 5.57 4.12 A summary of option activity under the Plan for the year ended December 30, 2016 is presented below: Options Shares(000’s) Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm (years) AggregateIntrinsicValue(000’s) Outstanding at January 1, 2016 3,623 $8.02 Granted 781 7.32 Exercised (541) 4.51 Forfeited or expired (361) 9.23 Outstanding at December 30, 2016 3,502 $8.28 6.75 $11,010 Exercisable at December 30, 2016 2,840 $8.47 6.16 $8,765 F-26  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A summary of unvested options activity under the Plan for the year ended December 30, 2016 is presented below: Options Shares(000’s) Weighted-AverageGrant-DateFair Value Unvested at January 1, 2016 1,548 $4.34 Granted during the year 781 3.77 Forfeited or expired during the year (361) 5.10 Vested during the year (1,306) 5.37 Unvested at December 30, 2016 662 $3.84 The weighted-average grant-date fair value of options granted during the fiscal years ended December 30, 2016, January 1, 2016, and January 2,2015, were $3.77, $4.14, and $6.81 per option respectively. The total intrinsic value of options exercised during the fiscal years ended December 30, 2016,January 1, 2016, and January 2, 2015, were $1.7 million, $2.0 million, and $5.5 million, respectively. Restricted stock A summary of restricted stock activity for the year ended December 30, 2016 is presented below: Shares(000’s) WeightedAverageGrant-DateFair Valueper Share Outstanding at January 1, 2016 124 $6.97 Granted 23 6.47 Vested (124) 6.97 Outstanding at December 30, 2016 23 $6.47 Restricted Stock Units A summary of restricted stock units’ activity for the year ended December 30, 2016 is presented below: Units(000’s) WeightedAverageGrant-DateFair Valueper Share Outstanding at January 1, 2016 339 $10.44 Granted 323 7.43 Vested (380) 9.90 Forfeited or expired (8) 12.48 Outstanding at December 30, 2016 274 $7.60 Note 12 — Commitments and Contingencies Lease Obligations The Company leases certain property, plant and equipment under non-cancellable capital and operating lease agreements. These leases vary induration and contain renewal options and/or escalation clauses. Current and long-term obligations under capital leases are included in the Company’sconsolidated balance sheets. F-27  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Estimated future minimum lease payments under leases having initial or remaining non-cancelable lease terms more than one year as of December30, 2016 are as follows (in thousands): Fiscal Year OperatingLeases CapitalLeases 2017 1,849 1,220 2018 1,032 1,180 2019 972 175 2020 879 5 2021 535 — Thereafter 453 — Total minimum lease payments $5,720 $2,580 Less amounts representing interest — 43 $5,720 $2,537 Rent expense was approximately $2.2 million, $1.2 million, and $1.4 million, for the years ended December 30, 2016, January 1, 2016, and January2, 2015, respectively. The Company had the following assets under capital lease at December 30, 2016 and January 1, 2016 (in thousands): 2016 2015 Machinery and equipment $5,650 $1,195 Furniture and fixtures 43 7 Computers, software, and peripherals 445 — Automobiles 216 — Leasehold improvements 124 — 6,478 1,202 Less accumulated depreciation 3,359 329 $3,119 $873 Depreciation expense for assets under capital lease for each of the years ended December 30, 2016, January 1, 2016, and January 2, 2015, wasapproximately $195,000, $176,000, and $330,000, respectively. Indemnification Agreements The Company has entered into indemnification agreements with its directors and officers that may require the Company: (a) to indemnify themagainst liabilities that may arise by reason of their status or service as directors or officers, except as prohibited by applicable law; (b) to advance theirexpenses incurred as a result of any proceeding against them as to which they could be indemnified; and (c) to make a good faith determination whether ornot it is practicable for the Company to obtain directors’ and officers’ insurance. The Company currently has directors’ and officers’ liability insurancethrough a third-party carrier. Also, in connection with the sale of products and entering into business relationships in the ordinary course of business, theCompany may make representations affirming, among other things, that its products do not infringe on the intellectual property rights of others and agrees toindemnify customers against third-party claims for such infringement as well as its negligence. The Company has not been required to make materialpayments under such provisions. Tax Filings The Company’s tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result inassessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company hasadequately provided for taxes; however, final assessments, if any, could be significantly different than the amounts recorded in the consolidated financialstatements. F-28  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Employment Agreements On October 3, 2014, the Company’s former Chief Executive Officer announced his retirement effective March 1, 2015. Effective with his retirement,he became a consultant to the Company through March 31, 2016. In March 2015, the Company accrued approximately $300,000 in benefits due to theformer CEO, such benefits were paid over a one year period beginning on March 1, 2015 and ending on March 31, 2016. As of January 1, 2016, there wasapproximately $60,000 remaining to be paid to the former CEO pursuant to this agreement which was paid by March 31, 2016. There are no furtherobligations remaining under this agreement at December 30, 2016. The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective March 1, 2015. She and certain officershave as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which mayinclude an acquisition of substantially all its assets, or termination “without cause or for good reason” as defined in the employment agreements. Litigation and Claims From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. Theseclaims and legal proceedings may relate to contractual rights and obligations, employment matters, and claims of product liability. The most significant ofthese 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 the matters described below concerning the Company are at very early stages of the legal andadministrative process. As a result, these matters have not yet progressed sufficiently through discovery and/or development of important factual informationand 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 notpossible to accurately predict or determine outcomes of these items, an adverse determination in one or more of these items currently pending could have amaterial adverse effect on the Company’s consolidated results of operations, financial position, or cash flows. Stockholder Securities Litigation: Todd Action On July 8, 2014, a putative securities class action lawsuit was filed by Edward Todd against STAAR and three officers in the U.S. District Court forthe Central District of California. The plaintiff claims that STAAR made misleading statements to and omitted material information from our investorsbetween February 27, 2013 and June 30, 2014 about alleged regulatory violations at STAAR’s Monrovia manufacturing facility. On October 20, 2014,plaintiff amended its complaint, dismissed two Company officers, added one other officer, reduced the alleged Class Period to November 1, 2013 throughJune 30, 2014, and demanded compensatory damages and attorneys’ fees. On January 5, 2017, the court granted plaintiff’s Motion for Class Certification.Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are withoutmerit. The Company intends to vigorously defend itself against this lawsuit. The Company has not recorded any loss or accrual in the accompanyingcondensed consolidated financial statements at December 30, 2016 and January 1, 2016 for this matter as the likelihood and amount of loss, if any, has notbeen determined and is not currently estimable. 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 BarryG. 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, amongother things, allowing STAAR to disseminate misleading statements to investors regarding the condition of the Company’s Quality System, failing toproperly oversee the Company, and unjust enrichment. The complaint seeks damages, restitution and governance reforms, attorneys’ fees, and costs. OnJanuary 31, 2017, the court granted the Company’s Motion to Dismiss. On February 6, 2017, plaintiff filed a Notice of Appeal. Although the ultimateoutcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company hasnot recorded any loss or accrual in the accompanying condensed consolidated financial statements at December 30, 2016 for this matter as the likelihood andamount of loss, if any, has not been determined and is not currently estimable. Note 13 — Related Party Transactions The Company has made various advances to certain non-executive employees. Amounts due from employees included in prepayments, deposits,and other current assets at December 30, 2016 and January 1, 2016 were $37,000 and $20,000, respectively. F-29  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 14 — Supplemental Disclosure of Cash Flow Information Interest paid was $112,000 $121,000, and $139,000, for the years ended December 30, 2016, January 1, 2016, and January 2, 2015, respectively.Income taxes paid, net of refunds amounted to approximately $699,000, $589,000, and $1,089,000 for the years ended December 30, 2016, January 1, 2016,and January 2, 2015, respectively. The Company’s non-cash investing and financing activities were as follows (in thousands): Non-cash investing and financing activities: 2016 2015 2014 Assets obtained by capital lease $2,383 $91 $802 Purchase of property and equipment included in accounts payable $485 $51 $682 Note 15 — 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): 2016 2015 2014 Numerator: Net income (loss) $(12,129) $(6,533) $(8,392)Denominator: Weighted average common shares and denominator for basic calculation: Weighted average common shares outstanding 40,352 39,384 38,342 Less: Unvested restricted stock (23) (124) (251)Denominator for basic calculation 40,329 39,260 38,091 Weighted average effects of potentially dilutive common stock: Stock options — — — Unvested restricted stock — — — Restricted stock units — — — Warrants — — — Denominator for diluted calculation 40,329 39,260 38,091 Net income (loss) per share – basic and diluted $(0.30) $(0.17) $(0.22) 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 which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive. 2016 2015 2014 Options 4,069 2,506 1,988 Warrants — 345 492 Restricted stock and restricted stock units 76 190 227 Total 4,145 3,041 2,707 Note 16 — Geographic and Product Data The Company markets and sells its products in approximately 60 countries and conducts its manufacturing in the United States. Other than theJapan, China, the United States, and Korea, the Company does not conduct business in any country in which its sales in that country exceed 10% ofconsolidated net sales. Sales are attributed to countries based on location of customers. The composition of the Company’s sales to unaffiliated customers isset forth below (in thousands): F-30  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net sales to unaffiliated customers 2016 2015 2014 Japan $17,329 $16,982 $19,107 China 16,019 12,571 9,370 United States 9,859 10,904 11,117 Korea 7,455 8,061 6,563 Others* 31,770 28,605 28,830 Total $82,432 $77,123 $74,987 *No other location individually exceeds 10% of total sales. 100% of the Company’s sales are generated from the ophthalmic surgical product segment and, therefore, the Company operates as one operatingsegment for financial reporting purposes. The Company’s principal products are IOLs used in cataract surgery and ICLs used in refractive surgery. Thecomposition of the Company’s net sales by product line is as follows (in thousands): Net sales by product line 2016 2015 2014 ICLs $59,111 $51,543 $44,047 IOLs 19,706 19,857 24,336 Other surgical products 3,615 5,723 6,604 Total $82,432 $77,123 $74,987 The composition of the Company’s long-lived assets, consisting of property and equipment, net, and intangible assets, net, between those in theUnited States, Switzerland, and Japan is set forth below (in thousands): Long-lived assets 2016 2015 U.S. $10,704 $9,048 Switzerland 737 672 Japan 822 1,041 Total $12,263 $10,761 The Company sells its products internationally, which subjects the Company to several potential risks, including fluctuating exchange rates (to theextent the Company’s transactions are not in U.S. dollars), regulation of fund transfers by foreign governments, United States and foreign export and importduties and tariffs, and political instability. Note 17 — Quarterly Financial Data (Unaudited) Summary unaudited quarterly financial data from continuing operations for fiscal 2016 and 2015 is as follows (in thousands except per share data).The Company has derived this data from the unaudited consolidated interim financial statements that, in the Company’s opinion, have been prepared onsubstantially the same basis as the audited financial statements contained elsewhere in this report and include all normal recurring adjustments necessary fora fair presentation of the financial information for the periods presented. These unaudited quarterly results should be read in conjunction with the financialstatements and notes thereto included elsewhere in this report. The operating results in any quarter are not necessarily indicative of the results that may beexpected for any future period. December 30, 2016 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Net sales $19,269 $20,974 $20,052 $22,137 Gross profit 12,993 14,626 14,872 15,877 Net loss (8,041) (2,143) (1,778) (166)Net loss per share – basic and diluted (0.20) (0.05) (0.04) (0.00) January 1, 2016 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Net sales $18,858 $18,657 $18,750 $20,858 Gross profit 12,899 12,361 12,799 14,664 Net loss (2,340) (1,599) (1,752) (842)Net loss per share – basic and diluted (0.06) (0.04) (0.04) (0.02) F-31  STAAR SURGICAL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Quarterly and year-to-date computations of net income (loss) per share amounts are made independently. Therefore, the sum of the per share amountsfor the quarters may not agree with the per share amounts for the year. Note 18 — Subsequent Event On January 31, 2017, lease 009 entered into with Farnam Street Financial, Inc. was closed and lease 009R commenced. Under 009R, equipment witha cost of $1,957,000 is 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-hardwareequipment. 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 purchaseoption. On January 30, 2017, the Company entered into lease schedule 010 with Farnam Street Financial. The line of credit provides for borrowings of up to$2.0 million 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 fullamount of the line is used at which time the lease term commences. There are no material obligations outstanding under lease schedule 010 at this time. F-32  STAAR SURGICAL COMPANY AND SUBSIDIARIES SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Column A Column B Column C Column D Column E Description Balance atBeginningof Year Additions Deductions Balance atEnd ofYear (In thousands) 2016 Allowance for doubtful accounts and sales returns deducted fromaccounts receivable in the balance sheet $1,877 $206 $27 $2,056 Deferred tax asset valuation allowance 53,333 4,165 441 57,057 $55,210 $4,371 $468 $59,113 2015 Allowance for doubtful accounts and sales returns deducted fromaccounts receivable in the balance sheet $1,589 $345 $57 $1,877 Deferred tax asset valuation allowance 54,104 2,249 3,020 53,333 $55,693 $2,594 $3,077 $55,210 2014 Allowance for doubtful accounts and sales returns deducted fromaccounts receivable in the balance sheet $1,449 $384 $244 $1,589 Deferred tax asset valuation allowance 50,823 3,330 49 54,104 $52,272 $3,714 $293 $55,693 F-33  Exhibit 10.35 STAAR SURGICAL COMPANYAMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE PLANSTOCK OPTION GRANT NOTICE STAAR Surgical Company, a Delaware corporation, (the “Company”), pursuant to its Amended and Restated Omnibus Equity Incentive Plan, asmay be amended from time to time (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of theCompany’s common stock (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein, as well as in thePlan and the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”), each of which are incorporated herein by reference.Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement. AProspectus regarding the Stock is available at https://sites.google.com/a/staar.com/staar-intranet/home. Participant: «Participant» Grant Date: «Grant_Date» Vesting Commencement Date: «VCD» Exercise Price per Share: $[___] Total Number of Shares Subject to the Option: «Shares» shares Expiration Date: «Expiration» Vesting Schedule: «Vesting_Schedule» Type of Option: ¨ Incentive Stock Option¨ Non-Qualified Stock Option By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock OptionAgreement, and this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had anopportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock OptionAgreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon anyquestions arising under the Plan, this Grant Notice or the Stock Option Agreement. STAAR SURGICAL COMPANY:PARTICIPANT: By: By: Print Name: Print Name: «Participant» Title: Address: Address:  EXHIBIT ATO STOCK OPTION GRANT NOTICESTAAR SURGICAL COMPANY STOCK OPTION AGREEMENT Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, STAARSurgical Company, a Delaware corporation (the “Company”), has granted to Participant an Option under the Company’s Amended and Restated OmnibusEquity Incentive Plan, as may be amended from time to time (the “Plan”), to purchase the number of shares of Stock indicated in the Grant Notice. ARTICLE 1. GENERAL 1.1 Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the contextclearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice. 1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. Inthe event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. ARTICLE 2. GRANT OF OPTION 2.1 Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company or any Affiliate and forother good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants toParticipant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditionsset forth in the Plan and this Agreement, subject to adjustments as provided in Section 13.2 of the Plan. Unless designated as a Non-Qualified Stock Option inthe Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law. 2.2 Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission orother charge; provided, however, that the price per share of the shares of Stock subject to the Option shall not be less than 100% of the Fair Market Value of ashare of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and Participant is a Greater Than10% Stockholder as of the Date of Grant, the exercise price per share of the shares of Stock subject to the Option shall not be less than 110% of the FairMarket Value of a share of Stock on the Grant Date. 2.3 Consideration to the Company. In consideration of the grant of the Option by the Company, Participant agrees to render faithful andefficient services to the Company or any Affiliate. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ orservice of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which rights are herebyexpressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extentexpressly provided otherwise in a written agreement between the Company or an Affiliate and Participant. A-1  ARTICLE 3. PERIOD OF EXERCISABILITY 3.1 Commencement of Exercisability. (a) Subject to Sections 3.2, 3.3, 5.11 and 5.17 hereof, the Option shall become vested and exercisable in such amounts and at suchtimes as are set forth in the Grant Notice. (b) No portion of the Option which has not become vested and exercisable at the date of Participant’s Termination of Service shallthereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between theCompany and Participant. (c) Notwithstanding Section 3.1(a) hereof and the Grant Notice, but subject to Section 3.1(b) hereof, in the event of a Change inControl the Option shall be treated pursuant to Section 13.2 of the Plan. 3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each suchinstallment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until itbecomes unexercisable under Section 3.3 hereof. 3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events: (a) The Expiration Date set forth in the Grant Notice, which shall in no event be more than ten (10) years from the Grant Date; (b) The expiration of three (3) months from the date of Participant’s Termination of Service, unless such termination occurs by reasonof Participant’s death or disability; or (c) The expiration of one (1) year from the date of Participant’s Termination of Service by reason of Participant’s death or disability. 3.4 Special Tax Consequences. Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time theOption is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option (if applicable), are exercisable for the first timeby Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary tocomply with the limitations imposed by Section 422(d) of the Code. Participant further acknowledges that the rule set forth in the preceding sentence shall beapplied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) ofthe Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months afterParticipant’s Termination of Employment, other than by reason of death or disability, will be taxed as a Non-Qualified Stock Option. A-2  3.5 Tax Indemnity. (a) Participant agrees to indemnify and keep indemnified the Company, any Affiliate and Participant’s employing company, ifdifferent, from and against any liability for or obligation to pay any Tax Liability (a “Tax Liability” being any liability for income tax, withholding tax andany other employment related taxes or social security contributions in any jurisdiction) that is attributable to (1) the grant or exercise of, or any benefitderived by Participant from, the Option, (2) the acquisition by Participant of the Stock on exercise of the Option or (3) the disposal of any Stock. (b) The Option cannot be exercised until Participant has made such arrangements as the Company may require for the satisfaction ofany Tax Liability that may arise in connection with the exercise of the Option and/or the acquisition of the Stock by Participant. The Company shall not berequired to issue, allot or transfer Stock until Participant has satisfied this obligation. (c) Participant hereby acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of anyTax Liabilities in connection with any aspect of the Option and (ii) does not commit to and is under no obligation to structure the terms of the grant or anyaspect of any Award, including the Option, to reduce or eliminate Participant’s liability for Tax Liabilities or achieve any particular tax result. Furthermore, ifParticipant becomes subject to tax in more than one jurisdiction between the date of grant of an Award, including the Option, and the date of any relevanttaxable event, Participant acknowledges that the Company may be required to withhold or account for Tax Liabilities in more than one jurisdiction. ARTICLE 4. EXERCISE OF OPTION 4.1 Person Eligible to Exercise. Except as provided in Section 5.3 hereof, during the lifetime of Participant, only Participant may exercise theOption or any portion thereof, unless it has been disposed of pursuant to a DRO. After the death of Participant, any exercisable portion of the Option may,prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by the deceased Participant’s personal representative or byany person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution. 4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in partat any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof. However, the Option shall not beexercisable with respect to fractional shares of Stock. 4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (orany third party administrator or other person or entity designated by the Company; for the avoidance of doubt, delivery shall include electronic delivery),during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3hereof: (a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, suchnotice complying with all applicable rules established by the Administrator. The notice shall be signed by Participant or other person then entitled toexercise the Option or such portion of the Option; (b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised,including payment of any applicable withholding tax, which shall be made by deduction from other compensation payable to Participant or in such otherform of consideration permitted under Section 4.4 hereof that is acceptable to the Company; A-3  (c) Any other written representations or documents as may be required in the Administrator’s sole discretion to evidence compliancewith the Securities Act, the Exchange Act or any other applicable law, rule or regulation; and (d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other thanParticipant, appropriate proof of the right of such person or persons to exercise the Option. Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary bycountry and which may be subject to change from time to time. 4.4 Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of Participant: (a) Cash or check; (b) With the consent of the Administrator, surrender of shares of Stock (including, without limitation, shares of Stock otherwiseissuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accountingconsequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or (c) Other legal consideration acceptable to the Administrator (including, without limitation, through the delivery of a notice thatParticipant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has beendirected to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of suchproceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale). 4.5 Conditions to Issuance of Stock. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be eitherpreviously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall befully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portionthereof prior to fulfillment of all of the conditions in Section 11.4 of the Plan and following conditions: (a) The admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed; (b) The completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings orregulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolutediscretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, inits absolute discretion, determine to be necessary or advisable; A-4  (d) The receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, whichmay be in one or more of the forms of consideration permitted under Section 4.4 hereof; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to timeestablish for reasons of administrative convenience. 4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company,including, without limitation, voting rights and rights to dividends, in respect of any shares of Stock purchasable upon the exercise of any part of the Optionunless and until such shares of Stock shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on thebooks of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the recorddate is prior to the date the shares of Stock are issued, except as provided in Section 13.2 of the Plan. ARTICLE 5. OTHER PROVISIONS 5.1 Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for theadministration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken andall interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all otherinterested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faithwith respect to the Plan, this Agreement or the Option. 5.2 Whole Shares. The Option may only be exercised for whole shares of Stock. 5.3 Option Not Transferable. (a) Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or thelaws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until the Option has been exercised and theshares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed. Neither the Option nor anyinterest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject todisposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntaryor involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unlessand until the Option has been exercised, and any attempted disposition thereof prior to exercise shall be null and void and of no effect, except to the extentthat such disposition is permitted by the preceding sentence. (b) During the lifetime of Participant, only Participant may exercise the Option (or any portion thereof), unless it has been disposed ofpursuant to a DRO; after the death of Participant, any exercisable portion of the Option may, prior to the time when such portion becomes unexercisableunder the Plan or this Agreement, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’swill or under the then-applicable laws of descent and distribution. A-5  (c) Notwithstanding any other provision in this Agreement, Participant may, in the manner determined by the Administrator, designatea beneficiary to exercise the rights of Participant and to receive any distribution with respect to the Option upon Participant’s death. A beneficiary, legalguardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and this Agreement,except to the extent the Plan and this Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator.If Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, adesignation of a person other than Participant’s spouse or domestic partner, as applicable, as his or her beneficiary with respect to more than 50% ofParticipant’s interest in the Option shall not be effective without the prior written consent of Participant’s spouse or domestic partner. If no beneficiary hasbeen designated or survives Participant, payment shall be made to the person entitled thereto pursuant to Participant’s will or the laws of descent anddistribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by Participant at any time provided the change or revocation isfiled with the Administrator prior to Participant’s death. 5.4 Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of the grant, vesting and/orexercise of the Option, and/or with the purchase or disposition of the shares of Stock subject to the Option. Participant represents that Participant hasconsulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of such shares of Stock and that Participant isnot relying on the Company for any tax advice. 5.5 Binding Agreement. Subject to the limitation on the transferability of the Option contained herein, this Agreement will be binding upon andinure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto. 5.6 Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the Option in such circumstances as it, in its solediscretion and consistent with the Plan, may determine. In addition, upon the occurrence of certain events relating to the Stock contemplated by Section 13.2of the Plan (including, without limitation, an extraordinary cash dividend on such Stock), the Administrator shall make such adjustments the Administratordeems appropriate in the number of shares of Stock subject to the Option, the exercise price of the Option and the kind of securities that may be issued uponexercise of the Option. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in thisAgreement and Section 13.2 of the Plan. 5.7 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of theSecretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s lastaddress reflected on the Company’s records. By a notice given pursuant to this Section 5.7, either party may hereafter designate a different address for noticesto be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled toexercise his or her Option pursuant to Section 4.1 hereof by written notice under this Section 5.7. Any notice shall be deemed duly given when sent via emailor when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained bythe United States Postal Service. 5.8 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. A-6  5.9 Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance ofthe terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 5.10 Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessarywith all provisions of the Securities Act and the Exchange Act and any and all Applicable Law and regulations and rules promulgated by the Securities andExchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered,and the Option is granted and may be exercised, only in such a manner as to conform to such Applicable Law. To the extent permitted by applicable law, thePlan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law. 5.11 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended orotherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided that, except as may otherwise beprovided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material waywithout the prior written consent of Participant. 5.12 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreementshall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.3 hereof, thisAgreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 5.13 Notification of Disposition. If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Companyof any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years fromthe Grant Date with respect to such shares of Stock or (b) within one (1) year after the transfer of such shares of Stock to Participant. Such notice shall specifythe date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, byParticipant in such disposition or other transfer. 5.14 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject toSection 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptiverule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of suchexemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicableexemptive rule. 5.15 Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serveas an employee or other service provider of the Company or any of its Affiliates or interfere with or restrict in any way with the right of the Company or any ofits Affiliates, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services ofParticipant’s at any time. 5.16 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of theparties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. A-7  5.17 Section 409A. This Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of theCode (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any suchregulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the GrantNotice or this Agreement (or any Exhibits hereto), if at any time the Administrator determines that the Option (or any portion thereof) may be subject toSection 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person forfailure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement (or any Exhibits hereto), or adopt other policies and procedures(including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary orappropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. 5.18 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreementcreates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan norany underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Stock as a general unsecuredcreditor with respect to options, as and when exercised pursuant to the terms hereof. 5.19 Consent to Personal Data Processing and Transfer. By acceptance of this Option, Participant acknowledges and consents to the collection,use, processing and transfer of personal data as described below. The Company, its parents, its Subsidiaries and the Participant’s employer (all together, the“Company Entities”), hold certain personal information, including the Participant’s name, home address and telephone number, date of birth, social securitynumber or other employee tax identification number, employment history and status, salary, nationality, job title, and any equity compensation grants orShares awarded, cancelled, purchased, vested, unvested or outstanding in the Participant’s favor, for the purpose of managing and administering the Plan(“Data”). The Company Entities will transfer Data to any third parties assisting the Company in the implementation, administration and management of thePlan. The Company Entities may also make the Data available to public authorities where required under locally applicable law. These recipients may belocated in the United States, the European Economic Area, the United Kingdom, Asia or elsewhere, which Participant separately and expressly consents to,accepting that outside the Participant’s location, data protection laws may not be as protective as within. The third parties are currently assisting theCompany in the implementation, administration and management of the Plan. However, from time to time and without notice, the Company Entities mayretain additional or different third parties for any of the purposes mentioned. Participant hereby authorizes the Company Entities and all such third parties toreceive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing participation inthe Plan, including any requisite transfer of such Data as may be required for the administration of the Plan on behalf of Participant to a third party with whomParticipant may have elected to have payment made pursuant to the Plan. Participant may, at any time, review Data, require any necessary amendments to itor withdraw the consent herein in writing by contacting the Company through its local H.R. Director; however, withdrawing the consent may affectParticipant’s ability to participate in the Plan and receive the benefits intended by this Option. Data will only be held as long as necessary to implement,administer and manage the Participant’s participation in the Plan and any subsequent claims or rights. A-8  5.20 Rules Particular To Specific Countries. (a) Generally. Participant shall, if required by the Administrator, enter into an election with the Company or an Affiliate (in a formapproved by the Company) under which any liability to the Company’s (or an Affiliate’s) Tax Liability, including, but not limited to, National InsuranceContributions (“NICs”) and the Fringe Benefit Tax (“FBT”), is transferred to and met by Participant. For purposes of this Section 5.20, Tax Liability shallmean any and all liability under applicable non-U.S. laws, rules or regulations from any income tax, the Company’s (or an Affiliate’s) NICs, FBT or similarliability and Participant’s NICs, FBT or similar liability that are attributable to: (A) the grant or exercise of, or any other benefit derived by Participant fromthe Option; (B) the acquisition by Participant of the shares of Stock on exercise of the Option; or (C) the disposal of any shares of Stock acquired uponexercise of the Option. (b) Tax Indemnity. Participant shall indemnify and keep indemnified the Company and any of its Affiliates from and against any TaxLiability. * * * * * A-9  Exhibit 10.36 STAAR SURGICAL COMPANYAMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE PLANSTOCK OPTION GRANT NOTICE STAAR Surgical Company, a Delaware corporation, (the “Company”), pursuant to its Amended and Restated Omnibus Equity Incentive Plan, asmay be amended from time to time (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of theCompany’s common stock (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein, as well as in thePlan and the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”), each of which are incorporated herein by reference.Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement. AProspectus regarding the Stock is available at https://sites.google.com/a/staar.com/staar-intranet/home. Participant: «Participant» Grant Date: «Grant_Date» Vesting Commencement Date: «VCD» Exercise Price per Share: $[___] Total Number of Shares Subject to the Option: «Shares» shares Expiration Date: «Expiration» Vesting Schedule: «Vesting_Schedule» Type of Option:¨ Incentive Stock Option¨ Non-Qualified Stock Option By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock OptionAgreement, and this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had anopportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock OptionAgreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon anyquestions arising under the Plan, this Grant Notice or the Stock Option Agreement. STAAR SURGICAL COMPANY:PARTICIPANT: By: By: Print Name: Print Name: «Participant» Title: Address: Address:  EXHIBIT ATO STOCK OPTION GRANT NOTICESTAAR SURGICAL COMPANY STOCK OPTION AGREEMENT Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, STAARSurgical Company, a Delaware corporation (the “Company”), has granted to Participant an Option under the Company’s Amended and Restated OmnibusEquity Incentive Plan, as may be amended from time to time (the “Plan”), to purchase the number of shares of Stock indicated in the Grant Notice. ARTICLE 1. GENERAL 1.1 Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the contextclearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice. 1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. Inthe event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. ARTICLE 2. GRANT OF OPTION 2.1 Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company or any Affiliate andfor other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants toParticipant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditionsset forth in the Plan and this Agreement, subject to adjustments as provided in Section 13.2 of the Plan. Unless designated as a Non-Qualified Stock Option inthe Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law. 2.2 Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commissionor other charge; provided, however, that the price per share of the shares of Stock subject to the Option shall not be less than 100% of the Fair Market Valueof a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and Participant is a GreaterThan 10% Stockholder as of the Date of Grant, the exercise price per share of the shares of Stock subject to the Option shall not be less than 110% of the FairMarket Value of a share of Stock on the Grant Date. 2.3 Consideration to the Company. In consideration of the grant of the Option by the Company, Participant agrees to render faithful andefficient services to the Company or any Affiliate. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ orservice of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which rights are herebyexpressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extentexpressly provided otherwise in a written agreement between the Company or an Affiliate and Participant. A-1  ARTICLE 3. PERIOD OF EXERCISABILITY 3.1 Commencement of Exercisability. (a) Subject to Sections 3.2, 3.3, 5.11 and 5.17 hereof, the Option shall become vested and exercisable in such amounts and at suchtimes as are set forth in the Grant Notice. (b) No portion of the Option which has not become vested and exercisable at the date of Participant’s Termination of Service shallthereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between theCompany and Participant. (c) Notwithstanding Section 3.1(a) hereof and the Grant Notice, but subject to Section 3.1(b) hereof, in the event of a Change inControl the Option shall be treated pursuant to Section 13.2 of the Plan. 3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each suchinstallment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until itbecomes unexercisable under Section 3.3 hereof. 3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events: (a) The Expiration Date set forth in the Grant Notice, which shall in no event be more than ten (10) years from the Grant Date; (b) The expiration of one (1) year from the date of Participant’s Termination of Service, unless such termination occurs by reason ofParticipant’s death or disability; or (c) The expiration of one (1) year from the date of Participant’s Termination of Service by reason of Participant’s death or disability. 3.4 Special Tax Consequences. Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time theOption is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option (if applicable), are exercisable for the first timeby Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary tocomply with the limitations imposed by Section 422(d) of the Code. Participant further acknowledges that the rule set forth in the preceding sentence shall beapplied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) ofthe Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months afterParticipant’s Termination of Employment, other than by reason of death or disability, will be taxed as a Non-Qualified Stock Option. A-2  3.5 Tax Indemnity. (a) Participant agrees to indemnify and keep indemnified the Company, any Affiliate and Participant’s employing company, ifdifferent, from and against any liability for or obligation to pay any Tax Liability (a “Tax Liability” being any liability for income tax, withholding tax andany other employment related taxes or social security contributions in any jurisdiction) that is attributable to (1) the grant or exercise of, or any benefitderived by Participant from, the Option, (2) the acquisition by Participant of the Stock on exercise of the Option or (3) the disposal of any Stock. (b) The Option cannot be exercised until Participant has made such arrangements as the Company may require for the satisfaction ofany Tax Liability that may arise in connection with the exercise of the Option and/or the acquisition of the Stock by Participant. The Company shall not berequired to issue, allot or transfer Stock until Participant has satisfied this obligation. (c) Participant hereby acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of anyTax Liabilities in connection with any aspect of the Option and (ii) does not commit to and is under no obligation to structure the terms of the grant or anyaspect of any Award, including the Option, to reduce or eliminate Participant’s liability for Tax Liabilities or achieve any particular tax result. Furthermore, ifParticipant becomes subject to tax in more than one jurisdiction between the date of grant of an Award, including the Option, and the date of any relevanttaxable event, Participant acknowledges that the Company may be required to withhold or account for Tax Liabilities in more than one jurisdiction. ARTICLE 4. EXERCISE OF OPTION 4.1 Person Eligible to Exercise. Except as provided in Section 5.3 hereof, during the lifetime of Participant, only Participant may exercise theOption or any portion thereof, unless it has been disposed of pursuant to a DRO. After the death of Participant, any exercisable portion of the Option may,prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by the deceased Participant’s personal representative or byany person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution. 4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in partat any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof. However, the Option shall not beexercisable with respect to fractional shares of Stock. 4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company(or any third party administrator or other person or entity designated by the Company; for the avoidance of doubt, delivery shall include electronic delivery),during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3hereof: (a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, suchnotice complying with all applicable rules established by the Administrator. The notice shall be signed by Participant or other person then entitled toexercise the Option or such portion of the Option; (b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised,including payment of any applicable withholding tax, which shall be made by deduction from other compensation payable to Participant or in such otherform of consideration permitted under Section 4.4 hereof that is acceptable to the Company; A-3  (c) Any other written representations or documents as may be required in the Administrator’s sole discretion to evidence compliancewith the Securities Act, the Exchange Act or any other applicable law, rule or regulation; and (d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other thanParticipant, appropriate proof of the right of such person or persons to exercise the Option. Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary bycountry and which may be subject to change from time to time. 4.4 Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of Participant: (a) Cash or check; (b) With the consent of the Administrator, surrender of shares of Stock (including, without limitation, shares of Stock otherwiseissuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accountingconsequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or (c) Other legal consideration acceptable to the Administrator (including, without limitation, through the delivery of a notice thatParticipant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has beendirected to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of suchproceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale). 4.5 Conditions to Issuance of Stock. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be eitherpreviously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall befully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portionthereof prior to fulfillment of all of the conditions in Section 11.4 of the Plan and following conditions: (a) The admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed; (b) The completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings orregulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolutediscretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, inits absolute discretion, determine to be necessary or advisable; A-4  (d) The receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, whichmay be in one or more of the forms of consideration permitted under Section 4.4 hereof; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to timeestablish for reasons of administrative convenience. 4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company,including, without limitation, voting rights and rights to dividends, in respect of any shares of Stock purchasable upon the exercise of any part of the Optionunless and until such shares of Stock shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on thebooks of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the recorddate is prior to the date the shares of Stock are issued, except as provided in Section 13.2 of the Plan. ARTICLE 5. OTHER PROVISIONS 5.1 Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for theadministration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken andall interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all otherinterested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faithwith respect to the Plan, this Agreement or the Option. 5.2 Whole Shares. The Option may only be exercised for whole shares of Stock. 5.3 Option Not Transferable. (a) Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or thelaws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until the Option has been exercised and theshares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed. Neither the Option nor anyinterest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject todisposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntaryor involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unlessand until the Option has been exercised, and any attempted disposition thereof prior to exercise shall be null and void and of no effect, except to the extentthat such disposition is permitted by the preceding sentence. (b) During the lifetime of Participant, only Participant may exercise the Option (or any portion thereof), unless it has been disposed ofpursuant to a DRO; after the death of Participant, any exercisable portion of the Option may, prior to the time when such portion becomes unexercisableunder the Plan or this Agreement, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’swill or under the then-applicable laws of descent and distribution. A-5  (c) Notwithstanding any other provision in this Agreement, Participant may, in the manner determined by the Administrator, designatea beneficiary to exercise the rights of Participant and to receive any distribution with respect to the Option upon Participant’s death. A beneficiary, legalguardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and this Agreement,except to the extent the Plan and this Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator.If Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, adesignation of a person other than Participant’s spouse or domestic partner, as applicable, as his or her beneficiary with respect to more than 50% ofParticipant’s interest in the Option shall not be effective without the prior written consent of Participant’s spouse or domestic partner. If no beneficiary hasbeen designated or survives Participant, payment shall be made to the person entitled thereto pursuant to Participant’s will or the laws of descent anddistribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by Participant at any time provided the change or revocation isfiled with the Administrator prior to Participant’s death. 5.4 Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of the grant, vesting and/orexercise of the Option, and/or with the purchase or disposition of the shares of Stock subject to the Option. Participant represents that Participant hasconsulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of such shares of Stock and that Participant isnot relying on the Company for any tax advice. 5.5 Binding Agreement. Subject to the limitation on the transferability of the Option contained herein, this Agreement will be binding uponand inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto. 5.6 Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the Option in such circumstances as it, in its solediscretion and consistent with the Plan, may determine. In addition, upon the occurrence of certain events relating to the Stock contemplated by Section 13.2of the Plan (including, without limitation, an extraordinary cash dividend on such Stock), the Administrator shall make such adjustments the Administratordeems appropriate in the number of shares of Stock subject to the Option, the exercise price of the Option and the kind of securities that may be issued uponexercise of the Option. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in thisAgreement and Section 13.2 of the Plan. 5.7 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of theSecretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s lastaddress reflected on the Company’s records. By a notice given pursuant to this Section 5.7, either party may hereafter designate a different address for noticesto be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled toexercise his or her Option pursuant to Section 4.1 hereof by written notice under this Section 5.7. Any notice shall be deemed duly given when sent via emailor when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained bythe United States Postal Service. 5.8 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. A-6  5.9 Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance ofthe terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 5.10 Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessarywith all provisions of the Securities Act and the Exchange Act and any and all Applicable Law and regulations and rules promulgated by the Securities andExchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered,and the Option is granted and may be exercised, only in such a manner as to conform to such Applicable Law. To the extent permitted by applicable law, thePlan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law. 5.11 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended orotherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided that, except as may otherwise beprovided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material waywithout the prior written consent of Participant. 5.12 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and thisAgreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.3 hereof,this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 5.13 Notification of Disposition. If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Companyof any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years fromthe Grant Date with respect to such shares of Stock or (b) within one (1) year after the transfer of such shares of Stock to Participant. Such notice shall specifythe date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, byParticipant in such disposition or other transfer. 5.14 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subjectto Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicableexemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for theapplication of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conformto such applicable exemptive rule. 5.15 Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue toserve as an employee or other service provider of the Company or any of its Affiliates or interfere with or restrict in any way with the right of the Company orany of its Affiliates, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services ofParticipant’s at any time. 5.16 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of theparties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. A-7  5.17 Section 409A. This Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of theCode (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any suchregulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the GrantNotice or this Agreement (or any Exhibits hereto), if at any time the Administrator determines that the Option (or any portion thereof) may be subject toSection 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person forfailure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement (or any Exhibits hereto), or adopt other policies and procedures(including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary orappropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. 5.18 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreementcreates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan norany underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Stock as a general unsecuredcreditor with respect to options, as and when exercised pursuant to the terms hereof. 5.19 Consent to Personal Data Processing and Transfer. By acceptance of this Option, Participant acknowledges and consents to the collection,use, processing and transfer of personal data as described below. The Company, its parents, its Subsidiaries and the Participant’s employer (all together, the“Company Entities”), hold certain personal information, including the Participant’s name, home address and telephone number, date of birth, social securitynumber or other employee tax identification number, employment history and status, salary, nationality, job title, and any equity compensation grants orShares awarded, cancelled, purchased, vested, unvested or outstanding in the Participant’s favor, for the purpose of managing and administering the Plan(“Data”). The Company Entities will transfer Data to any third parties assisting the Company in the implementation, administration and management of thePlan. The Company Entities may also make the Data available to public authorities where required under locally applicable law. These recipients may belocated in the United States, the European Economic Area, the United Kingdom, Asia or elsewhere, which Participant separately and expressly consents to,accepting that outside the Participant’s location, data protection laws may not be as protective as within. The third parties are currently assisting theCompany in the implementation, administration and management of the Plan. However, from time to time and without notice, the Company Entities mayretain additional or different third parties for any of the purposes mentioned. Participant hereby authorizes the Company Entities and all such third parties toreceive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing participation inthe Plan, including any requisite transfer of such Data as may be required for the administration of the Plan on behalf of Participant to a third party with whomParticipant may have elected to have payment made pursuant to the Plan. Participant may, at any time, review Data, require any necessary amendments to itor withdraw the consent herein in writing by contacting the Company through its local H.R. Director; however, withdrawing the consent may affectParticipant’s ability to participate in the Plan and receive the benefits intended by this Option. Data will only be held as long as necessary to implement,administer and manage the Participant’s participation in the Plan and any subsequent claims or rights. A-8  5.20 Rules Particular To Specific Countries. (a) Generally. Participant shall, if required by the Administrator, enter into an election with the Company or an Affiliate (in a formapproved by the Company) under which any liability to the Company’s (or an Affiliate’s) Tax Liability, including, but not limited to, National InsuranceContributions (“NICs”) and the Fringe Benefit Tax (“FBT”), is transferred to and met by Participant. For purposes of this Section 5.20, Tax Liability shallmean any and all liability under applicable non-U.S. laws, rules or regulations from any income tax, the Company’s (or an Affiliate’s) NICs, FBT or similarliability and Participant’s NICs, FBT or similar liability that are attributable to: (A) the grant or exercise of, or any other benefit derived by Participant fromthe Option; (B) the acquisition by Participant of the shares of Stock on exercise of the Option; or (C) the disposal of any shares of Stock acquired uponexercise of the Option. (b) Tax Indemnity. Participant shall indemnify and keep indemnified the Company and any of its Affiliates from and against any TaxLiability. * * * * * A-9  Exhibit 10.37STAAR SURGICAL COMPANYAMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE PLANRESTRICTED STOCK UNIT AWARD GRANT NOTICE Staar Surgical Company, a Delaware corporation, (the “Company”), pursuant to its Amended and Restated Omnibus Equity Incentive Plan, asamended from time to time (the “Plan”), hereby grants to the holder listed below (the “Participant”), an award of restricted stock units (“Restricted StockUnits” or “RSUs”). Each vested Restricted Stock Unit represents the right to receive, in accordance with the Restricted Stock Unit Award Agreement attachedhereto as Exhibit A (the “Agreement”), one share of Common Stock (“Share”). This award of Restricted Stock Units is subject to all of the terms andconditions set forth herein and in the Agreement and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the termsdefined in the Plan shall have the same defined meanings in this Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and the Agreement. AProspectus regarding the Stock is available at https://sites.google.com/a/staar.com/staar-intranet/home. Participant: Grant Date: Total Number of RSUs: Vesting Commencement Date: Vesting Schedule: Termination:If the Participant experiences a Termination of Service prior to the applicable vesting date, all RSUs that havenot become vested on or prior to the date of such Termination of Service (after taking into consideration anyvesting that may occur in connection with such Termination of Service, if any) will thereupon beautomatically forfeited by the Participant without payment of any consideration therefor. By his or her signature and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of the Plan, theAgreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity toobtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. TheParticipant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under thePlan, this Grant Notice or the Agreement. In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy anywithholding obligations in accordance with Section 2.6(b) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participantupon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell shares of Common Stock otherwise issuable to the Participant uponvesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6(b) of the Agreement or thePlan. STAAR SURGICAL COMPANY: PARTICIPANT: By: By: Print Name: Print Name: Title: Address: Address:  EXHIBIT ATO RESTRICTED STOCK UNIT AWARD GRANT NOTICE RESTRICTED STOCK UNIT AWARD AGREEMENT Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Award Agreement (this“Agreement”) is attached, STAAR Surgical Company, a Delaware corporation (the “Company”), has granted to the Participant an award of restricted stockunits (“Restricted Stock Units” or “RSUs”) under the Company’s Amended and Restated Omnibus Equity Incentive Plan, as amended from time to time (the“Plan”). Each vested Restricted Stock Unit represents the right to receive one share of Common Stock (“Share”) to purchase the number of Shares indicatedin the Grant Notice. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Grant Notice. ARTICLE I. GENERAL 1.1 Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference.In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. ARTICLE II. GRANT OF RESTRICTED STOCK UNITS 2.1 Grant of RSUs. Pursuant to the Grant Notice and upon the terms and conditions set forth in the Plan and this Agreement, effective as of theGrant Date set forth in the Grant Notice, the Company hereby grants to the Participant an award of RSUs under the Plan in consideration of theParticipant’s past and/or continued employment with or service to the Company or any Affiliates and for other good and valuable consideration. 2.2 Unsecured Obligation to RSUs. Unless and until the RSUs have vested in the manner set forth in Article 2 hereof, the Participant will haveno right to receive Common Stock under any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation ofthe Company, payable (if at all) only from the general assets of the Company. 2.3 Vesting Schedule. Subject to Section 2.5 hereof, the RSUs shall vest and become nonforfeitable with respect to the applicable portionthereof according to the vesting schedule set forth in the Grant Notice (rounding down to the nearest whole Share). 2.4 Consideration to the Company. In consideration of the grant of the award of RSUs pursuant hereto, the Participant agrees to renderfaithful and efficient services to the Company or any Affiliate. 2.5 Forfeiture, Termination and Cancellation upon Termination of Service. Notwithstanding any contrary provision of this Agreement or thePlan, upon the Participant’s Termination of Service for any or no reason, all Restricted Stock Units which have not vested prior to or in connection withsuch Termination of Service shall thereupon automatically be forfeited, terminated and cancelled as of the applicable termination date without paymentof any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have nofurther rights hereunder. No portion of the RSUs which has not become vested as of the date on which the Participant incurs a termination of Service shallthereafter become vested.  2.6 Issuance of Common Stock upon Vesting. (a) As soon as administratively practicable following the vesting of any Restricted Stock Units pursuant to Section 2.3 hereof, but inno event later than thirty (30) days after such vesting date (for the avoidance of doubt, this deadline is intended to comply with the “short term deferral”exemption from Section 409A of the Code), the Company shall deliver to the Participant (or any transferee permitted under Section 3.2 hereof) a number ofShares (either by delivering one or more certificates for such Shares or by entering such Shares in book entry form, as determined by the Company in itssole discretion) equal to the number of RSUs subject to this Award that vest on the applicable vesting date, unless such RSUs terminate prior to the givenvesting date pursuant to Section 2.5 hereof. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 11.4 of the Plan, theShares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Committee determines that Shares can again beissued in accordance with such Section. (b) As set forth in Section 11.2 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require theParticipant to remit to the Company, an amount sufficient to satisfy all applicable federal, state and local taxes required by law to be withheld with respectto any taxable event arising in connection with the Restricted Stock Units. The Company shall not be obligated to deliver any new certificate representingShares to the Participant or the Participant’s legal representative or enter such Shares in book entry form unless and until the Participant or the Participant’slegal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of theParticipant resulting from the grant or vesting of the Restricted Stock Units or the issuance of Shares. 2.7 Conditions to Delivery of Shares. The Shares deliverable hereunder may be either previously authorized but unissued Shares, treasuryShares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not berequired to issue or deliver any certificates or make any book entries evidencing Shares deliverable hereunder prior to fulfillment of the conditions setforth in Section 11.2 of the Plan. 2.8 Rights as Stockholder. The holder of the RSUs shall not be, nor have any of the rights or privileges of, a stockholder of the Company,including, without limitation, voting rights and rights to dividends, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunderunless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on thebooks of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for a dividend or other right for which therecord date is prior to the date the Shares are issued, except as provided in Section 13.2 of the Plan. ARTICLE III. OTHER PROVISIONS 3.1 Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for theadministration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions takenand all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and allother interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in goodfaith with respect to the Plan, this Agreement or the RSUs.  3.2 Grant is Not Transferable. During the lifetime of the Participant, the RSUs may not be sold, pledged, assigned or transferred in any mannerother than by will or the laws of descent and distribution or, subject to the consent of the Committee, pursuant to a DRO. Neither the RSUs nor any interestor right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to dispositionby transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or byoperation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempteddisposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. 3.3 Tax Consultation. The Participant understands that the Participant may suffer adverse tax consequences in connection with the RSUsgranted pursuant to this Agreement (and the Shares issuable with respect thereto). The Participant represents that the Participant has consulted with anytax consultants the Participant deems advisable in connection with the RSUs and the issuance of Shares with respect thereto and that the Participant is notrelying on the Company for any tax advice. 3.4 Adjustments. The Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided inthis Agreement and Article 13 of the Plan. 3.5 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of theSecretary of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at theParticipant’s last address reflected on the Company’s records. Any notice shall be deemed duly given when sent via email or when sent by reputableovernight courier or by certified mail (return receipt requested) through the United States Postal Service. 3.6 Participant’s Representations. If the Shares issuable hereunder have not been registered under the Securities Act or any applicable statelaws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance,make such written representations as are deemed necessary or appropriate by the Company and/or its counsel. 3.7 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 3.8 Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performanceof the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 3.9 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extentnecessary with all provisions of the Securities Act, and the Exchange Act and any other Applicable Law. Notwithstanding anything herein to the contrary,the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such Applicable Laws. To the extent permitted by suchApplicable Llaws, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Laws.  3.10 Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended orotherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board; provided, however, that, except as mayotherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in anymaterial way without the prior written consent of the Participant. 3.11 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and thisAgreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 3.2hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns. 3.12 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant issubject to Section 16 of the Exchange Act, then the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in anyapplicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements forthe application of such exemptive rule. To the extent permitted by Applicable Laws, this Agreement shall be deemed amended to the extent necessary toconform to such applicable exemptive rule. 3.13 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto, if any) constitute the entire agreementof the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matterhereof. 3.14 Section 409A. Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and theGrant Notice shall be interpreted in accordance with the requirements of Section 409A of the Code. The Committee may, in its discretion, adopt suchamendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures withretroactive effect), or take any other actions, as the Committee determines are necessary or appropriate to comply with the requirements of Section 409A ofthe Code. 3.15 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreementcreates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. The Plan, in and ofitself, has no assets. Participant shall have only the rights of a general unsecured creditor of the Company and its Affiliates with respect to amountscredited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Common Stock as a general unsecuredcreditor with respect to RSUs, as and when payable hereunder. 3.16 Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continueto serve as an Employee or other service provider of the Company or any of its Affiliates or shall interfere with or restrict in any way the rights of theCompany and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reasonwhatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an Affiliate and theParticipant. Exhibit 10.38 STAAR SURGICAL COMPANY AMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE PLAN RESTRICTED STOCK AWARD GRANT NOTICE STAAR Surgical Company, a Delaware corporation, (the “Company”), pursuant to its Amended and Restated Omnibus Equity Incentive Plan, asamended from time to time (the “Plan”), hereby grants to the individual listed below (the “Participant”), in consideration of the mutual agreements set forthherein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the number of shares of the Company’sCommon Stock set forth below (the “Shares”). This Restricted Stock award is subject to all of the terms and conditions as set forth herein and in the RestrictedStock Award Agreement attached hereto as Exhibit A (the “Agreement”) (including without limitation the Restrictions on the Shares set forth in theAgreement) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the samedefined meanings in this Restricted Stock Award Grant Notice (the “Grant Notice”) and the Agreement. A Prospectus regarding the Stock is available athttps://sites.google.com/a/staar.com/staar-intranet/home. Participant: [_________________________________________] Grant Date: [_________________________________________] Total Number of Shares of Restricted Stock: [______________________] Shares Vesting Commencement Date: [_________________________________________] Vesting Schedule: [_________________] By his or her signature and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of the Plan, theAgreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity toobtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. TheParticipant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under thePlan, this Grant Notice or the Agreement. In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy anywithholding obligations in accordance with Section 2.2(c) of the Agreement by withholding shares of Common Stock otherwise issuable to the Participantupon vesting of the shares of Restricted Stock, or using any other method permitted by Section 2.2(c) of the Agreement or the Plan. STAAR SURGICAL COMPANY:PARTICIPANT: By: By: Print Name: Print Name: Title: Address: Address: 1  EXHIBIT ATO RESTRICTED STOCK AWARD GRANT NOTICERESTRICTED STOCK AWARD AGREEMENT Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Award Agreement (this “Agreement”) isattached, STAAR Surgical Company, a Delaware corporation (the “Company”) has granted to the Participant the number of shares of Restricted Stock (the“Shares”) under the Company’s Amended and Restated Omnibus Equity Incentive Plan, as amended from time to time (the “Plan”), as set forth in the GrantNotice. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Grant Notice. ARTICLE I.GENERAL1.1 Incorporation of Terms of Plan. The Award (as defined below) is subject to the terms and conditions of the Plan, which are incorporatedherein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. ARTICLE II.AWARD OF RESTRICTED STOCK2.1 Award of Restricted Stock. (a) Award. Pursuant to the Grant Notice and upon the terms and conditions set forth in the Plan and this Agreement, effective as of theGrant Date set forth in the Grant Notice, the Company has granted to the Participant an award of Restricted Stock (the “Award”) under the Plan inconsideration of the Participant’s past and/or continued employment with or service to the Company or any Affiliate, and for other good and valuableconsideration. The number of Shares subject to the Award is set forth in the Grant Notice. The Participant is an Employee, Director or Consultant of theCompany or one of its Affiliates. (b) Book Entry Form; Certificates. At the sole discretion of the Committee, the Shares will be issued in either (i) uncertificated form,with the Shares recorded in the name of the Participant in the books and records of the Company’s transfer agent with appropriate notations regarding therestrictions on transfer imposed pursuant to this Agreement, and upon vesting and the satisfaction of all conditions set forth in Sections 2.2(b) and (d) hereof,the Company shall remove such notations on any such vested Shares in accordance with Section 2.2(e) below; or (ii) certificated form pursuant to the terms ofSections 2.1(c), (d) and (e) below. (c) Legend. Certificates representing Shares issued pursuant to this Agreement shall, until all Restrictions (as defined below) imposedpursuant to this Agreement lapse or have been removed and the Shares have thereby become vested or the Shares represented thereby have been forfeitedhereunder, bear the following legend (or such other legend as shall be determined by the Committee): “THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BESUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT, BY AND BETWEEN STAAR SURGICALCOMPANY AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY,OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANYCIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.” A-1  (d) Escrow. The Secretary of the Company or such other escrow holder as the Committee may appoint may retain physical custody ofany certificates representing the Shares until all of the Restrictions on transfer imposed pursuant to this Agreement lapse or shall have been removed; in suchevent, the Participant shall not retain physical custody of any certificates representing unvested Shares issued to him or her. The Participant, by acceptance ofthe Award, shall be deemed to appoint, and does so appoint, the Company and each of its authorized representatives as the Participant’s attorney(s)-in-fact toeffect any transfer of unvested forfeited Shares (or Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant tothe Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any suchtransfer. (e) Removal of Notations; Delivery of Certificates Upon Vesting. As soon as administratively practicable after the vesting of anyShares subject to the Award pursuant to Section 2.2(b) hereof, the Company shall, as applicable, either remove the notations on any Shares subject to theAward issued in book entry form which have vested or deliver to the Participant a certificate or certificates evidencing the number of Shares subject to theAward which have vested (or, in either case, such lesser number of Shares as may be permitted pursuant to Section 11.2 of the Plan). The Participant (or thebeneficiary or personal representative of the Participant in the event of the Participant’s death or incapacity, as the case may be) shall deliver to the Companyany representations or other documents or assurances required by the Company. The Shares so delivered shall no longer be subject to the Restrictionshereunder. 2.2 Restrictions. (a) Forfeiture. Notwithstanding any contrary provision of this Agreement, upon the Participant’s Termination of Service for any or noreason, any portion of the Award (and the Shares subject thereto) which has not vested prior to or in connection with such Termination of Service shallthereupon be forfeited immediately and without any further action by the Company, and the Participant’s rights in any Shares and such portion of the Awardshall thereupon lapse and expire. For purposes of this Agreement, “Restrictions” shall mean the restrictions on sale or other transfer set forth in Section 3.3hereof and the exposure to forfeiture set forth in this Section 2.2(a). (b) Vesting and Lapse of Restrictions. Subject to Section 2.2(a) above, the Award shall vest and Restrictions shall lapse in accordancewith the vesting schedule set forth in the Grant Notice (rounding down to the nearest whole Share). (c) Tax Withholding. The Company or its Affiliates shall be entitled to require a cash payment (or to elect, or permit the Participant toelect, such other form of payment determined in accordance with Section 11.2 of the Plan) by or on behalf of the Participant and/or to deduct from othercompensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to the grant or vesting of the Award orthe lapse of the Restrictions hereunder. In satisfaction of the foregoing requirement with respect to the grant or vesting of the Award or the lapse of theRestrictions hereunder, unless otherwise determined by the Company, the Company or its Affiliates shall withhold Shares otherwise issuable under the Awardhaving a fair market value equal to the sums required to be withheld by federal, state and/or local tax law. The number of Shares which shall be so withheld inorder to satisfy such federal, state and/or local withholding tax liabilities shall be limited to the number of shares which have a fair market value on the dateof withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state and/or local tax purposesthat are applicable to such supplemental taxable income. Notwithstanding any other provision of this Agreement (including without limitation Section 2.1(b)hereof), the Company shall not be obligated to deliver any new certificate representing Shares to the Participant or the Participant’s legal representative orenter any such Shares in book entry form unless and until the Participant or the Participant’s legal representative, as applicable, shall have paid or otherwisesatisfied in full the amount of all federal, state and local taxes applicable to the taxable income of the Participant resulting from the grant or vesting of theAward or the issuance of Shares hereunder. A-2  (d) Conditions to Delivery of Shares. Subject to Section 2.1 above, the Shares deliverable under this Award may be either previouslyauthorized but unissued Shares, treasury Shares or Shares purchased on the open market. Such Shares shall be fully paid and nonassessable. The Companyshall not be required to issue or deliver any Shares under this Award prior to fulfillment of the conditions set forth in Section 11.4 of the Plan. Notwithstanding the foregoing, the issuance of such Shares shall not be delayed if and to the extent that such delay would result in a violation ofSection 409A of the Code. In the event that the Company delays the issuance of such Shares because it reasonably determines that the issuance of suchShares will violate Applicable Law, such issuance shall be made at the earliest date at which the Company reasonably determines that issuing such Shareswill not cause such violation, as required by Treasury Regulation Section 1.409A-2(b)(7)(ii). (e) To ensure compliance with the Restrictions, the provisions of the charter documents of the Company, and/or Applicable Law andfor other proper purposes, the Company may issue appropriate “stop transfer” and other instructions to its transfer agent with respect to the Restricted Stock.The Company shall notify the transfer agent as and when the Restrictions lapse. 2.3 Consideration to the Company. In consideration of the grant of the Award pursuant hereto, the Participant agrees to render faithful andefficient services to the Company or any Affiliate. ARTICLE III.OTHER PROVISIONS 3.1 Section 83(b) Election. If the Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stockas of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a)of the Code, the Participant hereby agrees to deliver a copy of such election to the Company promptly after filing such election with the Internal RevenueService. 3.2 Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for theadministration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken andall interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all otherinterested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faithwith respect to the Plan, this Agreement or the Award. A-3  3.3 Restricted Stock Not Transferable. Until the Restrictions hereunder lapse or expire pursuant to this Agreement and the Shares vest, theRestricted Stock (including any Shares received by holders thereof with respect to Restricted Stock as a result of stock dividends, stock splits or any otherform of recapitalization) shall be subject to the restrictions on transferability set forth in Section 11.3 of the Plan. 3.4 Rights as Stockholder. Except as otherwise provided herein, upon the Grant Date, the Participant shall have all the rights of a stockholderof the Company with respect to the Shares, subject to the Restrictions, including, without limitation, voting rights and rights to receive any cash or stockdividends, in respect of the Shares subject to the Award and deliverable hereunder. 3.5 Tax Consultation. The Participant understands that the Participant may suffer adverse tax consequences in connection with the RestrictedStock granted pursuant to this Agreement (and the Shares issuable with respect thereto). The Participant represents that the Participant has consulted with anytax consultants the Participant deems advisable in connection with the Restricted Stock and that the Participant is not relying on the Company for any taxadvice. 3.6 Adjustments Upon Specified Events. The Committee may accelerate the vesting of the Restricted Stock in such circumstances as it, in itssole discretion and consistent with the Plan, may determine. The Participant acknowledges that the Restricted Stock is subject to adjustment, modificationand termination in certain events as provided in this Agreement and Section 13.2 of the Plan. 3.7 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of theSecretary of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at theParticipant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 3.7, either party may hereafter designate a differentaddress for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receiptrequested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 3.8 Participant’s Representations. If the Shares issuable hereunder have not been registered under the Securities Act or any applicable statelaws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance,make such written representations as are deemed necessary or appropriate by the Company and/or its counsel. 3.9 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 3.10 Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance ofthe terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 3.11 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extentnecessary with all provisions of the Securities Act, and the Exchange Act, and any and all Applicable Law. Notwithstanding anything herein to the contrary,the Plan shall be administered, and the Award is granted, only in such a manner as to conform to such Applicable Law. To the extent permitted by ApplicableLaw, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law. A-4  3.12 Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended orotherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board; provided, however, that, except as mayotherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any materialway without the prior written consent of the Participant. 3.13 Successors and Assigns. The Company or any Affiliate may assign any of its rights under this Agreement to single or multiple assignees,and this Agreement shall inure to the benefit of the successors and assigns of the Company and its Affiliates. Subject to the restrictions on transfer set forth inSection 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, Committees, successors and assigns. 3.14 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant issubject to Section 16 of the Exchange Act, then the Plan, the Award and this Agreement shall be subject to any additional limitations set forth in anyapplicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for theapplication of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conformto such applicable exemptive rule. 3.15 Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue toserve as an Employee or other service provider of the Company or any of its Affiliates or shall interfere with or restrict in any way the rights of the Companyand its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever,with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an Affiliate and the Participant. 3.16 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto, if any) constitute the entire agreement ofthe parties and supersede in their entirety all prior undertakings and agreements of the Company and its Affiliates and the Participant with respect to thesubject matter hereof. 3.17 Limitation on the Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreementcreates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan norany underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company and itsAffiliates with respect to amounts credited and benefits payable, if any, with respect to the Shares issuable hereunder. A-5  EXHIBIT 10.39 Loan Application (for Market Rate) Date received November 15, 2016 Mizuho Bank, Ltd. Name: STAAR Surgical AG Representative Member Managing Partner: Toshikazu Kikuchi Address: STAAR Japan Incorporated 1-5-2, Irifune, Urayasu City Chiba 279-0012 I hereby apply for the following transaction, under the terms shown below. Please note that this document does not automatically effect a loan agreement or an advance commitment. Description of Terms Transaction Terms (Please check the appropriate boxes.) Transaction type „Y Loan on note „Ñ Special overdraft Amt. of desired transaction (insert the ¢D symbol in front of the amount) billion million thousand yen ¢D 5 0 0 0 0 0 0 0 0 Scheduled transaction date November 21, 2016 implementation date Scheduled repayment date November 21, 2017 Repayment method „Ñ Lump sum at maturity „Y ¢D____ on the first repayment date of ________(mm/dd/yyyy), then ¢D____ on the ___ day of every ____ month(s). The final payment shall be ¢D____. Interest rate „Y __% per annum „Y ____ month(s) + ____% per annum (initial interest rate: __%) Interest payment method „Ñ Pay in advance on the scheduled transaction date „Y Deferred payment on the scheduled transaction date „Y Pay in advance on the scheduled transaction date and on the __ day every ___ month(s) from _______(mm/dd/yyyy) onward. „Y Deferred payment on the scheduled transaction date on the __ day every ____ month(s) from ________(mm/dd/yyyy) onward. „Y ___________________________________________________________________________ Reset of applicable interest rate „Ñ Same interest rate applicable until the scheduled repayment date „Y Reset on every interest payment date „Y Reset every ____ month(s) from _______________(mm/dd/yyyy) onward. Interest calculation method „Ñ Prorated over 365 days „Y Prorated over 360 days / „Ñ Include beginning and ending dates in calculation „Y Include only beginning or ending date in calculation When the repayment date falls on a non-work day„Ñ Business day immediately preceding „Y Next business day Other terms End (For bank use only) When accepting submission of an agreement when the interest rate has not yet been determined, and concluding the agreement by phone at a later date: ¡E Date/time of call: ________(mm/dd/yyyy) _______________(hr./mm) ¡E Phone call participants: (Borrower) ___________ (Lender) _____________ [Loan transaction seal] STAAR Japan, Inc. CMR Settlement No. Loan No. 1013912 Manager Checked by Rep.  Date: November 21, 2016 Name: STAAR Surgical AG Representative Member Managing Partner: Toshikazu Kikuchi STAAR Japan Incorporated 1-5-2, Irifune, Urayasu City Chiba 279-0012 • Details of phone call: Print number 54T56-CRQDP-PYLD3-PNSGW-URB3V-3 3601Y159 “Loan Application (for Market Rate)” 16.06 Overdraft Repayment Invoice (for Overdrafts Only) Date of implementation Only write inside the bold lines. Section for Bank Use *1 It is not necessary to enter the repayment date for an overdraft (special account). *2 Display the year with four digits. Transaction Code Ringi Number Implementation Category New / Rewrite Next interest date (Business day) Date (mm/dd/yyyy) * A third party other than the operator confirms that there is no discrepancy between the amount on the repayment invoice and the implementation amount to which the seal was imprinted on the implementation entry slip. End of month (EoM) designation code Other than EoM / EoM Interest payment period Lump sum payment / ( ) months Holiday adjustment code Next business day Prior business date Date management category Own branch / Center Interest withdrawal date ___ day Next rate reset date Date (mm/dd/yyyy) / None Base interest rate type Mizuho TIBOR ( ) months / JBA TIBOR ( ) months / ( ) Mizuho Bank, Ltd. 3603C069(5Y)(1 bundle 100 sheets) 15.08 - Stamp #103 Enter only for application to open an account style Overdraft (Special account) Account number Maximum limit Manager Checked by Rep. Payment Number Cat. No. Loan Number (copy from implementation slip) Check the appropriate box. Special account Special account (MML) Payment date *1 *2 Year Month Day 2 0 1 7 1 1 2 1 Loan transaction seal STAAR Japan, Inc. Please insert the ¥ symbol in front of the amount bn 100 mn 10 mn mn 100 th 10 th th 100 10 yen Amount ¥ 5 0 0 0 0 0 0 0 0 Amt. Confirmed* M  Confirmation Letter Concerning Early Repayment of a Market Rate Variable Loan Date to be received Attn: Mizuho Bank, Ltd. November 15, 2016 Name: STAAR Surgical AG Representative Member Managing Partner: Toshikazu Kikuchi Address: STAAR Japan Incorporated 1-5-2, Irifune, Urayasu City Chiba 279-0012 the company) received an explanation of the following information from Mizuho Bank, Ltd. hereafter, ¡§Bank¡¨) regarding the terms on early repayment set forth in „Y Special Agreement on Application of Market Interest Rate Þ Special Overdraft Letter of Agreement „Y Cash Consumption Loan Agreement (with market interest rate) „Y Cash Consumption Loan Agreement (with market interest rate and financial rider) „Y _____________ on November 15, 2016 (date received), and hereby confirm that I fully understand them. also confirm that I have received a copy of the original Confirmation Letter Concerning Early Repayment of a Market Rate Variable Loan. View on penalty for early repayment (1) When a variable rate loan at market rates is repaid early, on a date other than the interest rate reset date, the bank loses the interest that would have been paid up to the rate reset date, and is faced with the need to reinvest the funds from repayment in another third party in the interbank market until the reset date. When the interest rate on reinvestment on the date of early repayment is less than the applicable interest rate under the agreement, this causes the bank to incur a loss. (2) Consequently, prior approval of the bank shall be required for early repayment of a loan by a customer on a date other than the reset date for unavoidable reasons on the part of the customer, and the customer shall pay a penalty in the amount of the lost interest represented by the difference between the amount of interest the bank would have received up to the next reset date and the amount of interest the bank will receive from reinvesting the repaid funds at the new rate or would receive if it reinvested the funds at the new rate. (3) Because commitments on the interbank market are generally entered into two business days before the date of financing (investment), a loss may occur even when the early repayment date falls on the rate reset date in instances where the request is not received at least two business days prior to the early repayment date. (4) Moreover, the bank will have the customer pay the penalty calculated based on the view described above even when the customer forfeits under an acceleration clause pursuant to the rules on banking transaction agreements. The ¡§earlyrepayment date¡¨ shall be read as the ¡§acceleration date¡¨ or ¡§date invoiced by the bank¡¨ in such instances. (5) After the customer has applied for a loan, the loan interest rate has been determined through discussion between the customer and the bank, and the bank approves it, a penalty may be incurred even in instances where the customer withdraws the loan application before it is implemented. Notes: *1 The level of the interest rate on reinvestment cannot be specifically stated at present because is set according to actual market conditions at the time of early repayment. *2 ¡§Set according to actual market conditions¡¨ refers to the rate on the side offering the funds on the short-term yen call market. Penalty calculation method (1) The method for calculating the penalty is as follows: Repayment amt. x (Applicable interest rate ¡V Reinvestment rate) x (Next rate reset date ¡V Early repayment date) ¡Ò No. of days in year = Penalty Notes: *3 When the reinvestment interest is greater than or equal to the applicable interest rate, there will be no penalty. *4 The next rate reset date - Early repayment date is calculated by including the date of one but not the other. *5 When the next rate reset date falls on the loan maturity date, the next rate reset date shall be read as the loan maturity date. [Loan transaction seal] STAAR Japan, Inc.  *6 When the loan application is withdrawn, the period on which the penalty is calculated will from the scheduled date of implementation to the next rate reset date. (2) An example calculation based on the calculation method above is shown below: • Repayment amt.: ¥30,000,000 • Applicable interest rate: 3.000% • Reinvestment rate: 1.000% • Next rate reset date: Sep. 30 • Early repayment date: Jul. 10 • No. of days in the year: 365 ¥30,000,000 x (3.000% - 1.000%) x (Sep. 30 – Jul. 10) ÷ 365 = ¥134,794 *7 Generally speaking, the lower the reinvestment rate is on the early repayment date, the the penalty. *8 This example calculation only represents one example and is not based on the actual transaction terms with the customer. [For bank use only] Branch No. Transaction Code Settlement Code Category Code Document No. 148 1013912 1 <> • Date/Time explained: (mm/dd/yyyy) _____________ (hr./min.) ___________ • Meeting participants: (borrower) _______________ (lender) ____________ • Details explained: Manager Checked by Accepted Print number 38ZYZ-5JU2V-9TN83-696JM-A9DXA-9 3601Y234 “Confirmation Letter Concerning Early Repayment of a Market Rate Variable Loan 14.12   1EXHIBIT 10.40Lease Agreement Number ST053006 LEASE AGREEMENT This Lease Agreement, dated May 30, 2006, by and between FARNAM STREET FINANCIAL, INC. (the "Lessor") with an office located at 240Pondview Plaza, 5850 Opus Parkway, Minnetonka, MN 55343 and STAAR SURGICAL COMPANY (the "Lessee") with an office located at 1911Walker Avenue, Monrovia, CA 91016. Lessor hereby leases or grants to the Lessee the right to use and Lessee hereby rents and accepts the right to use the equipment listed by serial numberand related services, and software and related services on the Lease Schedule(s) attached hereto or incorporated herein by reference from time to time(collectively, the equipment, software and services are the "Equipment"), subject to the terms and conditions hereof, as supplemented with respect toeach item of Equipment by the terms and conditions set forth in the appropriate Lease Schedule. The term "Lease Agreement" shall include this LeaseAgreement and the various Lease Schedule(s) identifying each item of Equipment or the appropriate Lease Schedule(s) identifying one or moreparticular items of Equipment. 1. TERM: This Lease Agreement is effective from the date it is executed by both parties. The term of this Lease Agreement, as to all Equipmentdesignated on any particular Lease Schedule, shall commence on the Installation Date for all Equipment on such Lease Schedule and shall continue for aninitial period ending that number of months from the Commencement Date as set forth in such Lease Schedule (the “Initial Term”) and shall continue fromyear to year thereafter until terminated. The term of this Lease Agreement as to all Equipment designated on any particular Lease Schedule may be terminatedwithout cause at the end of the Initial Term or any year thereafter by either party mailing written notice of its termination to the other party not less than one-hundred twenty (120) days prior to such termination date. 2. COMMENCEMENT DATE: The Installation Date for each item of Equipment shall be the day said item of Equipment is installed at the Location ofInstallation, ready for use, and accepted in writing by the Lessee. The Commencement Date for any Lease Schedule is the first of the month followinginstallation of all the Equipment on the Lease Schedule, unless the latest Installation Date for any Equipment on the Lease Schedule falls on the first day ofthe month, in which case that is the Commencement Date. The Lessee agrees to complete, execute and deliver a Certificate(s) of Acceptance to Lessor uponinstallation of the Equipment. 3. LEASE CHARGE: The lease charges for the Equipment leased pursuant to this Lease Agreement shall be the aggregate “Monthly Lease Charge(s)” asset forth on each and every Lease Schedule executed pursuant hereto (the aggregate “Monthly Lease Charge(s)” are the “Lease Charges”). Lessee agrees topay to Lessor the Lease Charges in accordance with the Lease Schedule(s), and the payments shall be made at Lessor's address indicated thereon. The LeaseCharges shall be paid by Lessee monthly in advance with the first full month's payment due on the Commencement Date. If the Installation Date does not fallon the first day of a month, the Lease Charge for the period from the Installation Date to the Commencement Date shall be an amount equal to the “MonthlyLease Charge” divided by thirty (30) and multiplied by the number of days from and including the Installation Date to the Commencement Date and suchamount shall be due and payable upon receipt of an invoice from Lessor. Charges for taxes made in accordance with Section 4 and charges made under anyother provision of this Lease Agreement and payable by Lessee shall be paid to Lessor at Lessor's address specified on the Lease Schedule(s) on the datespecified in invoices delivered to Lessee. If payment, as specified above, is not received by Lessor on the due date, Lessee agrees to and shall, to the extentpermitted by law, pay on demand, as a late charge, an amount equal to one and one-half percent (1½%), or the maximum percentage allowed by law if less, ofthe amount past due (“Late Charges”). Late Charges shall be charged and added to any past due amount on the date such payment is due and every thirty (30)days thereafter until all past due amounts are paid in full to Lessor. 4. TAXES: In addition to the Lease Charges set forth in Section 3, the Lessee shall reimburse Lessor for all license or registration fees, assessments, salesand use taxes, rental taxes, gross receipts taxes, personal property taxes and other taxes now or hereafter imposed by any government, agency, province orotherwise upon the Equipment, the Lease Charges or upon the ownership, leasing, renting, purchase, possession or use of the Equipment, whether the same beassessed to Lessor or Lessee (the “Taxes”). Lessor shall file all property tax returns and pay all Taxes when due. Lessee, upon notice to Lessor, may, inLessee's own name, contest or protest any Taxes, and Lessor shall honor any such notice except when in Lessor's sole opinion such contest is futile or willcause a levy or lien to arise on the Equipment or cloud Lessor's title thereto. Lessee shall, in addition, be responsible to Lessor for the payment and dischargeof any penalties or interest as a result of Lessee’s actions or inactions. Nothing herein shall be construed to require Lessee to be responsible for any federal orstate taxes or payments in lieu thereof, imposed upon or measured by the net income of Lessor, or state franchise taxes of Lessor, or except as providedhereinabove, any penalties or interest resulting from Lessor's failure to timely remit such tax payments. 5. DELIVERY AND FREIGHT COSTS: Lessee shall accept delivery of the Equipment and allow the Equipment to be installed within seven (7) daysafter delivery.All transportation charges upon the Equipment for delivery to Lessee's designated Location of Installation are to be paid by Lessee. All rigging, drayagecharges, structural alterations, rental of heavy equipment and/or other expense necessary to place the Equipment at the Location of Installation are to bepromptly paid by Lessee. 6. INSTALLATION: Lessee agrees to pay for the actual installation of the Equipment at Lessee's site. Lessee shall make available and agrees to pay forall costs associated with providing a suitable place of installation and necessary electrical power, outlets and air conditioning required for operating theEquipment as defined in the Equipment manufacturer's installation manual or instructions. All supplies consumed or required by the Equipment shall befurnished and paid for by Lessee.  7. RETURN TO LESSOR: On the day following the last day of the lease term associated with a Lease Schedule (the “Return Date”), Lessee shall causeand pay for all the Equipment (by serial number where serialized) on that Lease Schedule to be deinstalled, packed using the manufacturer’s original packingmaterials and shipped to a location designated in writing by Lessor (the “Return Location”). If all the Equipment on the applicable Lease Schedule is not atthe Return Location within ten (10) days of the Return Date, or Lessee fails to deinstall and ship all the Equipment on the Return Date, then any writtennotice of termination delivered by Lessee shall become void, and the Lease Schedule shall continue in accordance with this Lease Agreement. Irrespective ofany other provision hereof, Lessee will bear the risk of damage from fire, the elements or otherwise until delivery of the Equipment to the Return Location. Atsuch time as the Equipment is delivered to the Lessor at the Return Location, the Equipment will be at the risk of Lessor. 8. MAINTENANCE: Lessee, at its sole expense, shall maintain the Equipment in good working order and condition. Lessee shall enter into, pay for andmaintain in force during the entire term of any Lease Schedule, a maintenance agreement, if reasonably available, with the original manufacturer of theEquipment, or an equivalent supplier of maintenance services, providing for continuous uninterrupted maintenance of the Equipment (the “MaintenanceAgreement”). Lessee will cause the manufacturer or equivalent supplier to keep the Equipment in good working order in accordance with the provisions ofthe Maintenance Agreement and make all necessary adjustments and repairs to the Equipment. The manufacturer or equivalent supplier is hereby authorizedto accept the directions of Lessee with respect thereto. Lessee agrees to allow the manufacturer or equivalent supplier full and free access to the Equipment.All maintenance and service charges, whether under the Maintenance Agreement or otherwise, and all expenses, if any, of the manufacturer's or equivalentsupplier’s customer engineers incurred in connection with maintenance and repair services, shall be promptly paid by Lessee. Lessee warrants that all of theEquipment shall be in good working order operating according to manufacturer’s specification and eligible for the manufacturer's standard maintenanceagreement, if reasonably available, upon delivery to and inspection and testing by the Lessor. If the Equipment is not operating according to manufacturer’sspecification, in good working order and/or certified by the manufacturer as eligible for the manufacturer's standard maintenance agreement, Lessee agrees toreimburse Lessor for all costs, losses, expenses and fees associated with such equipment and the repair or replacement thereof. 9. LOCATION, OWNERSHIP AND USE: The Equipment shall, at all times, be the sole and exclusive property of Lessor. Lessee shall have no right orproperty interest therein, except for the right to use the Equipment in the normal operation of its business at the Location of Installation, or as otherwiseprovided herein. The Equipment is and shall remain personal property even if installed in or attached to real property. Lessor shall be permitted to displaynotice of its ownership on the Equipment by means of a suitable stencil, label or plaque affixed thereto. Lessee shall keep the Equipment at all times free and clear from all claims, levies, encumbrances and process. Lessee shall give Lessor immediate noticeof any such attachment or other judicial process affecting any of the Equipment. Without Lessor’s written permission, Lessee shall not attempt to or actually:(i) pledge, lend, create a security interest in, sublet, exchange, trade, assign, swap, use for an allowance or credit or otherwise; (ii) allow another to use; (iii)part with possession; (iv) dispose of; or (v) remove from the Location of Installation, any item of Equipment. If any item of Equipment is exchanged,assigned, traded, swapped, used for an allowance or credit or otherwise to acquire new or different equipment (the “New Equipment”) without Lessor’s priorwritten consent, then all of the New Equipment shall become Equipment owned by Lessor subject to this Lease Agreement and the applicable LeaseSchedule. Any feature(s) installed on the Equipment at the time of delivery that are not specified on the Lease Schedule(s) are and shall remain the sole property ofthe Lessor. Lessee shall cause the Equipment to be operated in accordance with the applicable vendor's or manufacturer's manual of instructions by competent andqualified personnel. 10. FINANCING STATEMENT: Lessor is hereby authorized by Lessee to cause this Lease Agreement or other instruments, including UniformCommercial Code Financing Statements, to be filed or recorded for the purposes of showing Lessor's interest in the Equipment. Lessee agrees to execute anysuch instruments as Lessor may request from time to time. 11. ALTERATIONS AND ATTACHMENTS: Upon prior written notice to Lessor, Lessee may, at its own expense, make minor alterations in or addattachments to the Equipment, provided such alterations and attachments shall not interfere with the normal operation of the Equipment and do not otherwiseinvolve the pledge, assignment, exchange, trade or substitution of the Equipment or any component or part thereof. All such alterations and attachments tothe Equipment shall become part of the Equipment leased to Lessee and owned by Lessor. If, in Lessor’s sole determination, the alteration or attachmentreduces the value of the Equipment or interferes with the normal and satisfactory operation or maintenance of any of the Equipment, or creates a safetyhazard, Lessee shall, upon notice from Lessor to that effect, promptly remove the alteration or attachment at Lessee's expense and restore the Equipment tothe condition the Equipment was in just prior to the alteration or attachment. 12. LOSS AND DAMAGE: Lessee shall assume and bear the risk of loss, theft and damage (including any governmental requisition, condemnation orconfiscation) to the Equipment and all component parts thereof from any and every cause whatsoever, whether or not covered by insurance. No loss ordamage to the Equipment or any component part thereof shall impair any obligation of Lessee under this Lease Agreement, which shall continue in full forceand effect except as hereinafter expressly provided. Lessee shall repair or cause to be repaired all damage to the Equipment. In the event that all or part of theEquipment shall, as a result of any cause whatsoever, become lost, stolen, destroyed or otherwise rendered irreparably unusable or damaged (collectively, the“Loss”) then Lessee shall, within ten (10) days after the Loss, fully inform Lessor in writing of such a Loss and shall pay to Lessor the following amounts: (i)the Monthly Lease Charges (and other amounts) due and owing under this Lease Agreement, plus (ii) one-hundred (100%) percent of the original cost of theEquipment subject to the Loss if the loss occurs in the first nine months of the Initial Term, and, thereafter, the original cost of the Equipment amortized bythe subsequent Monthly Lease Charges received by Lessor during the Initial Term using an amortization rate of eight hundred and ninety (890) basis pointsover the interest rate of the three (3) year United States Treasury Note as reported by the Federal Reserve on the Commencement Date (collectively, the sum of(i) plus (ii) shall be the “Casualty Loss Value”). Notwithstanding the proceeding, if Lessee has provided notice to terminate the applicable Lease Scheduleprior to informing Lessor in writing of a Loss and such Loss is not covered by insurance proceeds pursuant to Section 13 hereof, then Lessee shall pay two (2)times the Casualty Loss Value on the Equipment subject to such Loss. Upon receipt by Lessor of the Casualty Loss Value: (i) the applicable Equipment shallbe removed from the Lease Schedule; and (ii) Lessee’s obligation to pay Lease Charges associated with the applicable Equipment shall cease. Lessor mayrequest, and Lessee shall complete, an affidavit(s) that swears out the facts supporting the Loss of any item of Equipment. Page Number 2 of 6 13. INSURANCE: Until the Equipment is returned to Lessor or as otherwise herein provided, whether or not this Lease Agreement has terminated as to theEquipment, Lessee, at its expense, shall maintain: (i) property and casualty insurance insuring the Equipment for its Casualty Loss Value naming Lessor or itsassigns as sole loss payee; and (ii) comprehensive public liability and third-party property insurance naming Lessor and its assigns as additional loss payees.The insurance shall cover the interest of both the Lessor and Lessee in the Equipment, or as the case may be, shall protect both the Lessor and Lessee inrespect to all risks arising out of the condition, delivery, installation, maintenance, use or operation of the Equipment. All such insurance shall provide forthirty (30) days prior written notice to Lessor of cancellation, restriction, or reduction of coverage. Lessee hereby irrevocably appoints Lessor as Lessee'sattorney-in-fact to make claim for, receive payment of and execute and endorse all documents, checks or drafts for loss or damage or return premium underany insurance policy issued on the Equipment. Prior to installation of the Equipment, all policies or certificates of insurance shall be delivered to Lessor byLessee. Lessee agrees to keep the Equipment insured with an insurance company which is at least “A” rated by A.M. Best. The proceeds of any loss or damageinsurance shall be payable to Lessor, but Lessor shall remit all such insurance proceeds to Lessee at such time as Lessee either (i) provides Lessor satisfactoryproof that the damage has been repaired and the Equipment has been restored to good working order and condition or (ii) pays to Lessor the Casualty LossValue. It is understood and agreed that any payments made by Lessee or its insurance carrier for loss or damage of any kind whatsoever to the Equipment arenot made as accelerated rental payments or adjustments of rental, but are made solely as indemnity to Lessor for loss or damage of its Equipment. 14. ENFORCEMENT OF WARRANTIES: Upon receipt of a written request from Lessee, Lessor shall, so long as this Lease Agreement is in force, takeall reasonable action requested by Lessee to enforce the Equipment manufacturer's warranties, expressed or implied, issued on or applicable to theEquipment, which are enforceable by Lessor in its own name. Lessor shall obtain for Lessee all service furnished by manufacturer in connection therewith;provided, however, that Lessor shall not be required to commence any suit or action or resort to litigation to enforce any such warranty unless Lessee shallfirst pay to Lessor in advance all expenses in connection therewith, including attorney's’ fees. If any such warranty shall be enforceable by Lessee in its own name, Lessee shall, upon receipt of written request from Lessor, so long as this LeaseAgreement is in force, take all reasonable action requested by Lessor to enforce any such warranty, which is enforceable by Lessee in its own name; provided,however, that Lessee shall not be obligated to commence any suit or action or resort to litigation to enforce any such warranty unless Lessor shall pay allexpenses in connection therewith. 15. WARRANTIES, DISCLAIMERS AND INDEMNITY: THE LESSOR DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, INCLUDINGTHE WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. LESSEE ACKNOWLEDGES THAT IT IS NOT RELYINGON LESSOR'S SKILL OR JUDGEMENT TO SELECT OR FURNISH GOODS SUITABLE FOR ANY PARTICULAR PURPOSE AND THAT THERE ARE NOWARRANTIES CONTAINED IN THIS LEASE AGREEMENT. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR HAS NOT MADE ANYSTATEMENT, REPRESENTATION OR WARRANTY RELATIVE TO THE ACCOUNTING OR TAX ENTRIES, TREATMENT, BENEFIT, USE ORCLASSIFICATION OF THE LEASE AGREEMENT OR ASSOCIATED LEASE SCHEDULES. LESSEE ACKNOWLEDGES THAT IT AND/OR ITSINDEPENDENT ACCOUNTANTS ARE SOLELY RESPONSIBLE FOR (i) ANY AND ALL OF LESSEE'S ACCOUNTING AND TAX ENTRIES ASSOCIATEDWITH THE LEASE AGREEMENT AND/OR THE LEASE SCHEDULES AND (ii) THE ACCOUNTING AND TAX TREATMENT, BENEFITS, USES ANDCLASSIFICATION OF THE LEASE AGREEMENT OR ANY LEASE SCHEDULE. LESSOR SHALL NOT BE LIABLE FOR DAMAGES, INCLUDINGSPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE PERFORMANCE OF THE EQUIPMENTOR ITS USE BY LESSEE, AND SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR INCONNECTION WITH LESSOR'S FAILURE TO PERFORM ITS OBLIGATION HEREUNDER. THIS LEASE AGREEMENT IS A “FINANCE LEASE” ASTHAT TERM IS DEFINED AND USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE. NO RIGHTS OR REMEDIES REFERRED TO INARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE CONFERRED ON LESSEE. Lessee agrees that Lessor shall not be liable to Lessee for, and Lessee shall indemnify, defend and hold Lessor harmless with respect to, any claim from athird party for any liability, claim, loss, damage or expense of any kind or nature, whether based upon a theory of strict liability or otherwise, caused, directlyor indirectly, by: (i) the inadequacy of any item of Equipment, including software, for any purpose; (ii) any deficiency or any latent or other defects in anyEquipment, including software, whether or not detectable by Lessee; (iii) the selection, manufacture, rejection, ownership, lease, possession, maintenance,operation, use or performance of any item of Equipment, including software; (iv) any interruption or loss of service, use or performance of any item ofEquipment, including software; (v) patent, trademark or copyright infringement; or (vi) any loss of business or other special, incidental or consequentialdamages whether or not resulting from any of the foregoing. Lessee’s duty to defend and indemnify Lessor shall survive the expiration, termination,cancellation or assignment of this Lease Agreement or a Lease Schedule and shall be binding upon Lessee’s successors and permitted assigns. 16. EVENT OF DEFAULT: The occurrence of any of the following events shall constitute an Event of Default under this Lease Agreement and/or anyLease Schedule:(1)the nonpayment by Lessee of any Lease Charges when due, or the nonpayment by Lessee of any other sum required hereunder to be paid by Lesseewhich non-payment continues for a period of ten (10) days from the date when due;(2)the failure of Lessee to perform any other term, covenant or condition of this Lease Agreement, any Lease Schedule or any other document, agreementor instrument executed pursuant hereto or in connection herewith, which is not cured within ten (10) days;(3)Lessee attempts to or does remove, transfer, sell, swap, assign, sublease, trade, exchange, encumber, receive an allowance or credit for, or part withpossession of, any item of Equipment;(4)Lessee or any guarantor of this Lease Agreement ceases doing business as a going concern, is insolvent, makes an assignment for the benefit ofcreditors, fails to pay its debts as they become due, offers a settlement to creditors or calls a meeting of creditors for any such purpose, files a voluntarypetition in bankruptcy, is subject to an involuntary petition in bankruptcy, is adjudicated bankrupt or insolvent, files or has filed against it a petitionseeking any reorganization, arrangement or composition, under any present or future statute, law or regulation;(5)without Lessor's consent, (i) Lessee or any guarantor of this Lease Agreement sells, conveys, leases, exchanges or transfers all or substantially all of itsassets, (ii) Lessee or any guarantor of this Lease Agreement merges, consolidates, liquidates, dissolves or combines its assets with any other entity, or(iii) if Lessee or any guarantor of this Lease Agreement is a corporation, partnership, limited liability company or other entity, more than 35% of theoutstanding equity interests of Lessee or such guarantor are owned directly or indirectly at any time during the Term of this Lease Agreement by aperson or group of persons other than the person(s) who held all of the outstanding equity interests on the date of this Lease Agreement; Page Number 3 of 6 (6)any representations or warranties made at any time by Lessee or any guarantor in this Lease Agreement or in any agreement, statement, certificate,financial or credit information provided in connection herewith shall be false or misleading when made;(7)Lessee or any guarantor of this Lease Agreement defaults under or otherwise has accelerated any material obligation, credit agreement, loan agreement,conditional sales contract, lease, indenture or debenture; or Lessee or any guarantor of this Lease Agreement defaults under any other agreement nowexisting or hereafter made with Lessor, including an Equipment Purchase Agreement; or(8)the breach or repudiation by any party thereto of any guaranty, subordination agreement or other agreement running in favor of Lessor obtained inconnection with this Lease Agreement. 17. REMEDIES: Should any Event of Default occur and be continuing, Lessor may, in order to protect its interests and reasonably expected profits, withor without notice or demand upon Lessee, pursue and enforce, alternatively, successively and/or concurrently, any one or more of the following remedies:(1)recover from Lessee all accrued and unpaid Lease Charges and other amounts due and owing on the date of the default;(2)recover from Lessee from time to time all Lease Charges and other amounts as and when becoming due hereunder;(3)accelerate, cause to become immediately due and recover the present value of all Lease Charges and other amounts due and/or likely to become duehereunder from the date of the default to the end of the lease term using a discount rate of six (6%) percent;(4)cause to become immediately due and payable and recover from Lessee the Casualty Loss Value of the Equipment;(5)terminate any or all of the Lessee’s rights, but not its obligations, associated with the lease of Equipment under this Lease Agreement;(6)retake (by Lessor, independent contractor, or by requiring Lessee to assemble and surrender the Equipment in accordance with the provisions ofSection 7 hereinabove) possession of the Equipment without terminating the Lease Schedule or the Lease Agreement free from claims by Lessee whichclaims are hereby expressly waived by Lessee;(7)require Lessee to deliver the Equipment to a location designated by Lessor;(8)proceed by court action to enforce performance by Lessee of its obligations associated with any Lease Schedule and/or this Lease Agreement; and/or(9)pursue any other remedy Lessor may otherwise have, at law, equity or under any statute, and recover damages and expenses (including attorneys’ fees)incurred by Lessor by reason of the Event of Default. Upon repossession of the Equipment, Lessor shall have the right to lease, sell or otherwise dispose of such Equipment in a commercially reasonablemanner, with or without notice, at a public or private sale. Lessor's pursuit and enforcement of any one or more remedies shall not be deemed an election orwaiver by Lessor of any other remedy. Lessor shall not be obligated to sell or re-lease the Equipment. Any sale or re-lease may be held at such place or placesas are selected by Lessor, with or without having the Equipment present. Any such sale or re-lease, may be at wholesale or retail, in bulk or in parcels. Timeand exactitude of each of the terms and conditions of this Lease Agreement are hereby declared to be of the essence. Lessor may accept past due payments inany amount without modifying the terms of this Lease Agreement and without waiving any rights of Lessor hereunder. 18. COSTS AND ATTORNEYS’ FEES: In the event of any default, claim, proceeding, including a bankruptcy proceeding, arbitration, mediation,counter-claim, action (whether legal or equitable), appeal or otherwise, whether initiated by Lessor or Lessee (or a debtor-in-possession or bankruptcytrustee), which arises out of, under, or is related in any way to this Lease Agreement, any Lease Schedule, or any other document, agreement or instrumentexecuted pursuant hereto or in connection herewith, or any governmental examination or investigation of Lessee, which requires Lessor's participation(individually and collectively, the “Claim”), Lessee, in addition to all other sums which Lessee may be called upon to pay under the provisions of this LeaseAgreement, shall pay to Lessor, on demand, all costs, expenses and fees paid or payable in connection with the Claim, including, but not limited to,attorneys’ fees and out-of-pocket costs, including travel and related expenses incurred by Lessor or its attorneys. 19. LESSOR'S PERFORMANCE OPTION: Should Lessee fail to make any payment or to do any act as provided by this Lease Agreement, then Lessorshall have the right (but not the obligation), without notice to Lessee of its intention to do so and without releasing Lessee from any obligation hereunder tomake or to do the same, to make advances to preserve the Equipment or Lessor's title thereto, and to pay, purchase, contest or compromise any insurancepremium, encumbrance, charge, tax, lien or other sum which in the judgment of Lessor appears to affect the Equipment, and in exercising any such rights,Lessor may incur any liability and expend whatever amounts in its absolute discretion it may deem necessary therefor. All sums so incurred or expended byLessor shall be due and payable by Lessee within ten (10) days of notice thereof. 20. QUIET POSSESSION AND INSPECTION: Lessor hereby covenants with Lessee that Lessee shall quietly possess the Equipment subject to and inaccordance with the provisions hereof so long as Lessee is not in default hereunder; provided, however, that Lessor or its designated agent may, at any and allreasonable times during business hours, enter Lessee's premises for the purposes of inspecting the Equipment and the manner in which it is being used. 21. ASSIGNMENTS: This Lease Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors andassigns. Lessee, however, shall not assign this Lease Agreement or sublet any of the Equipment without first obtaining the prior written consent of Lessor andits assigns, if any. Lessee acknowledges that the terms and conditions of this Lease Agreement have been fixed in anticipation of the possible assignment ofLessor's rights under this Lease Agreement and in and to the Equipment as collateral security to a third party ("Assignee" herein) which will rely upon and beentitled to the benefit of the provisions of this Lease Agreement. Lessee agrees to provide Lessor or its potential assigns with Lessee's most recent audited andits most current financial statements. Lessee agrees with Lessor and such Assignee to recognize in writing any such assignment within fifteen (15) days afterreceipt of written notice thereof and to pay thereafter all sums due to Lessor hereunder directly to such Assignee if directed by Lessor, notwithstanding anydefense, set-off or counterclaim whatsoever (whether arising from a breach of this Lease Agreement or not) that Lessee may from time to time have againstLessor. Upon such assignment, the Lessor shall remain obligated to perform any obligations it may have under this Lease Agreement and the Assignee shall(unless otherwise expressly agreed to in writing by the Assignee) have no obligation to perform such obligations. Any such assignment shall be subject toLessee's rights to use and possess the Equipment so long as Lessee is not in default hereunder. Page Number 4 of 6 22. SURVIVAL OF OBLIGATIONS: All covenants, agreements, representations, and warranties contained in this Lease Agreement, any Lease Schedule,or in any document attached thereto, shall be for the benefit of Lessor and Lessee and their successors, any assignee or secured party. Further, all covenants,agreements, representations, and warranties contained in this Lease Agreement, any Lease Schedule, or in any document attached thereto, shall survive theexecution and delivery of this Lease Agreement and the expiration or other termination of this Lease Agreement. 23. CORPORATE AUTHORITY: The parties hereto covenant and warrant that the persons executing this Lease Agreement and each Lease Schedule ontheir behalf have been duly authorized to do so, and this Lease Agreement and any Lease Schedule constitute a valid and binding obligation of the partieshereto. The Lessee will, if requested by Lessor, provide to Lessor, Certificates of Authority naming the officers of the Lessee who have the authority toexecute this Lease Agreement and any Lease Schedules attached thereto. 24. LANDLORDS’ AND MORTGAGEES’ WAIVER: If requested, Lessee shall furnish waivers, in form and substance satisfactory to Lessor, from alllandlords and mortgagees of any premises upon which any Equipment is located. 25. MISCELLANEOUS: This Lease Agreement, the Lease Schedule(s), attached riders and any documents or instruments issued or executed pursuanthereto will have been made, executed and delivered in, and shall be governed by the internal laws (as opposed to conflicts of law provisions) and decisionsof, the State of Minnesota. Lessee and Lessor consent to jurisdiction of any local, state or federal court located within Minnesota. Venue shall be inMinnesota and Lessee hereby waives local venue and any objection relating to Minnesota being an improper venue to conduct any proceeding relating tothis Lease Agreement. At Lessor’s sole election and determination, Lessor may select an alternative forum, including arbitration or mediation, to adjudicateany dispute arising out of this Lease Agreement. THE PARTIES HERETO, AFTER CONSULTING (OR HAVING HAD AN OPPORTUNITY TO CONSULT)WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDINGRELATING TO THIS LEASE, INCLUDING ANY LITIGATION REGARDING THE ENFORCEMENT OF THIS LEASE OR ANY RELATED AGREEMENT. This Lease Agreement was jointly drafted by the parties, and the parties hereby agree that neither should be favored in the construction, interpretation orapplication of any provision or any ambiguity. There are no unwritten or oral agreements between the parties. This Lease Agreement and associated LeaseSchedule(s) constitute the entire understanding and agreement between Lessor and Lessee with respect to the lease of the Equipment superseding all prioragreements, understandings, negotiations, discussions, proposals, representations, promises, commitments and offers between the parties, whether oral orwritten. No provision of this Lease Agreement or any Lease Schedule shall be deemed waived, amended, discharged or modified orally or by custom, usage orcourse of conduct unless such waiver, amendment or modification is in writing and signed by an officer of each of the parties hereto. If any one or more of theprovisions of this Lease Agreement or any Lease Schedule is for any reason held invalid, illegal or unenforceable, the remaining provisions of this LeaseAgreement and any such Lease Schedule will be unimpaired, and the invalid, illegal or unenforceable provisions shall be replaced by a mutually acceptablevalid, legal and enforceable provision that is closest to the original intention of the parties. Lessee agrees that neither the manufacturer, nor the supplier, norany of their salespersons, employees or agents are agents of Lessor. Any notice provided for herein shall be in writing and sent by certified or registered mail to the parties at the addresses stated on page1 of this LeaseAgreement. This Lease Agreement shall not become effective until delivered to Lessor at its offices at Minnetonka, Minnesota and executed by Lessor. If thisLease Agreement shall be executed by Lessor prior to being executed by Lessee, it shall become void at Lessor's option five (5) days after the date of Lessor'sexecution hereof, unless Lessor shall have received by such date a copy hereof executed by a duly authorized representative of Lessee. This Lease Agreement is made subject to the terms and conditions included herein and Lessee's acceptance is effective only to the extent that such termsand conditions are consistent with the terms and conditions herein. Any acceptance which contains terms and conditions which are in addition to orinconsistent with the terms and conditions herein will be a counter-offer and will not be binding unless agreed to in writing by Lessor. The terms used in this Lease Agreement, unless otherwise defined, shall have the meanings ascribed to them in the Lease Schedule(s). 26. REPOSSESSION: LESSEE ACKNOWLEDGES THAT, PURSUANT TO SECTION 17 HEREOF, LESSOR HAS BEEN GIVEN THE RIGHT TOREPOSSESS THE EQUIPMENT SHOULD LESSEE BECOME IN DEFAULT OF ITS OBLIGATIONS HEREUNDER. LESSEE HEREBY WAIVES THERIGHT, IF ANY, TO REQUIRE LESSOR TO GIVE LESSEE NOTICE AND A JUDICIAL HEARING PRIOR TO EXERCISING SUCH RIGHT OFREPOSSESSION. 27. NET LEASE: This Lease Agreement is a net lease and Lessee's obligations to pay all Lease Charges and other amounts payable hereunder shall beabsolute and unconditional and, except as expressly provided herein, shall not be subject to any: (i) delay, abatement, reduction, defense, counterclaim, set-off, or recoupment; (ii) discontinuance or termination of any license; (iii) Equipment failure, defect or deficiency; (iv) damage to or destruction of theEquipment; or (v) dissatisfaction with the Equipment or otherwise, including any present or future claim against Lessor or the manufacturer, supplier, reselleror vendor of the Equipment. To the extent that the Equipment includes intangible (or intellectual) property, Lessee understands and agrees that: (i) Lessor isnot a party to and does not have any responsibility under any software license and/or other agreement with respect to any software; and (ii) Lessee will beresponsible to pay all of the Lease Charges and perform all its other obligations under this Lease Agreement despite any defect, deficiency, failure,termination, dissatisfaction, damage or destruction of any software or software license. Except as expressly provided herein, this Lease Agreement shall notterminate for any reason, including any defect in the Equipment or Lessor's title thereto or any destruction or loss of use of any item of Equipment. 28. HEADINGS: Section headings herein are used for convenience only and shall not otherwise affect the provisions of this Lease Agreement. Page Number 5 of 6 IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be signed by their respective duly authorized representative. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY By:/s/ Steven C. Morgan By:/s/ Deborah Andrews Print Print Name:Steven C. Morgan Name:Deborah Andrews Title:President Title:Chief Financial Officer Date:June 1, 2006 Date:May 30, 2006 Page Number 6 of 6EXHIBIT 10.41 LEASE SCHEDULE NO. 008R“This Lease Schedule No. 008R replaces Lease Schedule No. 008.” This Lease Schedule is issued pursuant to the Lease Agreement Number ST053006 dated May 30, 2006. The terms of the Lease Agreement and serialnumbers contained on Certificate of Acceptance Numbers ST053006-005-001 thru ST053006-005-020 and ST053006-008-001 thru ST053006-008-003 area part hereof and are incorporated by reference herein. LESSORLESSEEFarnam Street Financial, Inc.Staar Surgical Company5850 Opus Parkway, Suite 2401911 Walker AvenueMinnetonka, MN 55343Monrovia, CA 91016 SUPPLIER OF EQUIPMENTLOCATION OF EQUIPMENTVariousSame as above Initial Term of Lease from Commencement Date: 36 monthsMonthly Lease Charge: $24,941.00Delivery and Installation: August 2013 – May 2014Commencement Date: June 1, 2014Security Deposit: $24,941.00. Provided that there has been no event of default and Lessee has returned all of the Equipment under this Lease Schedule perthe terms of the Lease Agreement, this security deposit will be returned to Lessee. EQUIPMENT MANUFACTURER QTY MACHINE/MODELEQUIPMENT DESCRIPTION (including features)See Attachment A The total Equipment cost on this Lease Schedule is $964,611.80. The Monthly Lease Charge will be prorated and charged as interim rent between theInstallation Date of each item of Equipment, as Lessee indicates on the Certificate(s) of Acceptance, and the Commencement Date. Interim rent billed prior tothe Commencement date shall not reduce or offset Lessee’s post-Commencement Monthly Lease Charge obligations hereunder. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By: /s/ Deborah Andrews Print Print Name:Steven C. Morgan Name:Deborah Andrews Title: President Title:Chief Accounting Officer Date: June 17, 2014 Date:May 29, 2014  Rider Number:006 Lease Agreement Number:ST053006 Lease Schedule Number:008 Lessee Name:STAAR SURGICAL COMPANY Lease Dated:MAY 30, 2006 PURCHASE OPTION Lessee shall have the option to purchase the Equipment in its physical possession and on this Lease Schedule at the end of the initial term, in whole and notin part, on an as-is, where-is, retail, in-place basis, for the then determined mutually-agreed purchase price (plus applicable taxes) provided that (i) an Event ofDefault has not occurred, (ii) Lessor has received all of the Lease Charges due under the Lease Schedule prior to Lessee exercising this option to purchase(including all late fees whether billed or unbilled), (iii) Lessor has received payment for all unpaid late fees and estimated property taxes, if any, and (iv)Lessor has received written notice of Lessee's election to exercise said purchase option not less than one hundred twenty (120) days prior to the last date ofthe initial term of this Lease Schedule. Lessee will receive title to the Equipment free and clear of all known liens only after Lessee has performed all of its obligations associated with the LeaseAgreement and Lessor has been paid all sums due or becoming due under both this purchase option and the Lease Agreement, including, whether billed ornot, all lease charges, taxes, and late fees. Lessor shall retain all monies received in association with the Lease Schedule including all rent, taxes, securitydeposits and other monthly lease charges and Lessee hereby waives any right to offset these monies against the costs associated with the exercise of thispurchase option. Any sales or use tax due and not paid on these monies shall be added to the purchase price above. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By: /s/ Deborah Andrews Print Print Name:Steven C. Morgan Name:Deborah Andrews Title: President Title:Chief Accounting Officer Date: August 13, 2013 Date:August 9, 2013  EXHIBIT 10.42LEASE SCHEDULE NO. 009 This Lease Schedule is issued pursuant to the Lease Agreement Number ST053006 dated May 30, 2006. The terms of the Lease Agreement and serialnumbers contained on Certificate(s) of Acceptance are a part hereof and are incorporated by reference herein. LESSORLESSEEFarnam Street Financial, Inc.Staar Surgical Company240 Pondview Plaza1911 Walker Avenue5850 Opus ParkwayMonrovia, CA 91016Minnetonka, MN 55343 SUPPLIER OF EQUIPMENTLOCATION OF EQUIPMENTTBDTBD Initial Term of Lease from Commencement Date: 24 monthsMonthly Lease Charge: $78,782.00Anticipated Delivery and Installation: June 2016 – September 2016Projected Commencement Date: October 1, 2016Security Deposit: Upon Lessee's execution of this Lease Schedule, Lessee shall deliver a security deposit in the amount of $157,564.00. Provided that therehas been no event of default and Lessee has returned all of the Equipment under this Lease Schedule per the terms of the Lease Agreement, this securitydeposit will be returned to Lessee.EQUIPMENT MANUFACTURER QTY MACHINE/MODELEQUIPMENT DESCRIPTION (including features)VariousR&D Equipment and Buildout, Sterilizer, Assorted Equipment The cost of all the Equipment on this Lease Schedule shall total $2,000,000.00. The Monthly Lease Charge listed above is calculated based on the agreementthat this cost will be comprised of $2,000,000.00 of hardware at a lease rate factor of 0.039391 per $1.00 and $0.00 of non-hardware costs at a lease rate factorof 0.047459 per $1.00. Should the total cost of the Equipment exceed that indicated above, Lessor and Lessee agree that the Monthly Lease Charge abovewill be increased to reflect this additional cost at the Installation Date of the additional Equipment. If the total cost of non-hardware exceeds that indicatedabove, the hardware portion of the commitment above will be increased dollar for dollar by the amount of the additional non-hardware. This Lease ScheduleNo. 009 will Commence on the first of the month following the later of (i) the date the Lessee has satisfied its commitment to install all of the Equipment, asdescribed above; or (ii) Lessor’s receipt of Lessee’s executed commencing Lease Schedule; however, Lessor may, at its sole discretion, close and Commencethis Lease Schedule at an earlier date. A revised Lease Schedule No. 009R to replace this Lease Schedule No. 009 shall be executed by both parties to reflectthe actual Equipment cost accepted and the commensurate Monthly Lease Charge, including any adjustments required under the Monthly Lease ChargeAdjustment Rider. The Monthly Lease Charge will be prorated and charged as interim rent between the Installation Date of each item of equipment, as Lesseeindicates on the Certificate(s) of Acceptance, and the Commencement Date. Interim rent due prior to the Commencement Date shall not reduce or offsetLessee’s post-Commencement Monthly Lease Charge obligations hereunder. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By: /s/ Stephen P. Brown Print Print Name:Steven C. Morgan Name:Stephen P. Brown Title: President Title:Chief Financial Officer Date: June 7, 2016 Date:June 6, 2016  Rider Number:007 Lease Agreement Number:ST053006 Lease Schedule Number:009 Lessee Name:STAAR SURGICAL COMPANY Lease Dated:MAY 30, 2006 PURCHASE OPTION Lessee shall have the option to purchase the Equipment in its physical possession and on Lease Schedule No. 009 on the last day of the initial term, in wholeand not in part, on an in-place basis and operating according to the manufactures specifications, for the then determined mutually-agreed purchase price (plusapplicable taxes) provided that (i) an Event of Default has not occurred, (ii) Lessor has received all of the Lease Charges due under the Lease Schedule priorto Lessee exercising this option to purchase (including all late fees whether billed or unbilled), (iii) Lessor has received payment for all unpaid late fees andestimated property taxes, if any, and (iv) Lessor has received written notice of Lessee's election to exercise said purchase option not less than one hundredtwenty (120) days prior to the last date of the initial term of this Lease Schedule. If a sale is not consummated, the notice provided to exercise this optionshall be accepted as a notice to terminate and return all of the Equipment, and Lessee will return all of the Equipment on this Lease Schedule in accordancewith the Lease Agreement. If Lessee does not return all of the Equipment, Lease Schedule No. 009 will continue in accordance with the Lease Agreement. Lessee will receive title to the Equipment free and clear of all known liens only after Lessee has performed all of its obligations associated with the LeaseAgreement and Lessor has been paid all sums due or becoming due under both this purchase option and the Lease Agreement, including, whether billed ornot, all lease charges, taxes, and late fees. Lessor shall retain all monies received in association with the Lease Schedule including all rent, taxes, securitydeposits and other monthly lease charges and Lessee hereby waives any right to offset these monies against the costs associated with the exercise of thispurchase option. Any sales or use tax due and not paid on these monies shall be added to the purchase price above. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By: /s/ Stephen P. Brown Print Print Name:Steven C. Morgan Name:Stephen P. Brown Title: President Title:Chief Financial Officer Date: June 7, 2016 Date:June 6, 2016  EXHIBIT 10.43 LEASE SCHEDULE NO. 009R“This Lease Schedule No. 009R replaces Lease Schedule No. 009.” This Lease Schedule is issued pursuant to the Lease Agreement Number ST053006 dated May 30, 2006. The terms of the Lease Agreement and serialnumbers contained on Certificate of Acceptance Numbers ST053006-009-001 thru ST053006-009-015 are a part hereof and are incorporated by referenceherein. LESSORLESSEEFarnam Street Financial, Inc.Staar Surgical Company240 Pondview Plaza1911 Walker Avenue5850 Opus ParkwayMonrovia, CA 91016Minnetonka, MN 55343 SUPPLIER OF EQUIPMENTLOCATION OF EQUIPMENTVariousVarious Initial Term of Lease from Commencement Date: 24 MonthsMonthly Lease Charge: $82,710.00Delivery and Installation: June 2016 – January 2017Commencement Date: February 1, 2017Security Deposit: $157,564.00. Provided that there has been no event of default and Lessee has returned all of the Equipment under this Lease Schedule perthe terms of the Lease Agreement, this security deposit will be returned to Lessee. EQUIPMENT MANUFACTURER QTY MACHINE/MODELEQUIPMENT DESCRIPTION (including features)See Attachment A The total Equipment cost on this Lease Schedule is $1,956,998.90. Interim rent billed prior to the Commencement date shall not reduce or offset Lessee’spost-Commencement Monthly Lease Charge obligations hereunder. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By:Deborah Andrews Print Print Name:Steven C. Morgan Name: Deborah Andrews Title: President Title: Chief Accounting Officer Date: January 31, 2017 Date: January 27, 2017  EXHIBIT 10.44LEASE SCHEDULE NO. 010 This Lease Schedule is issued pursuant to the Lease Agreement Number ST053006 dated May 30, 2006. The terms of the Lease Agreement and serialnumbers contained on Certificate(s) of Acceptance are a part hereof and are incorporated by reference herein. LESSORLESSEEFarnam Street Financial, Inc.Staar Surgical Company240 Pondview Plaza1911 Walker Avenue5850 Opus ParkwayMonrovia, CA 91016Minnetonka, MN 55343 SUPPLIER OF EQUIPMENTLOCATION OF EQUIPMENTTBDTBD Initial Term of Lease from Commencement Date: 24 monthsMonthly Lease Charge: $78,782.00Anticipated Delivery and Installation: January 2017 – May 2017Projected Commencement Date: June 1, 2017Security Deposit: Upon Lessee's execution of this Lease Schedule, Lessee shall deliver a security deposit in the amount of $157,564.00. Provided that therehas been no event of default and Lessee has returned all of the Equipment under this Lease Schedule per the terms of the Lease Agreement, this securitydeposit will be returned to Lessee.EQUIPMENT MANUFACTURER QTY MACHINE/MODELEQUIPMENT DESCRIPTION (including features)VariousR&D Equipment and Buildout, Sterilizer, Assorted Equipment The cost of all the Equipment on this Lease Schedule shall total $2,000,000.00. The Monthly Lease Charge listed above is calculated based on the agreementthat this cost will be comprised of $2,000,000.00 of hardware at a lease rate factor of 0.039391 per $1.00 and $0.00 of non-hardware costs at a lease rate factorof 0.047459 per $1.00. Should the total cost of the Equipment exceed that indicated above, Lessor and Lessee agree that the Monthly Lease Charge abovewill be increased to reflect this additional cost at the Installation Date of the additional Equipment. If the total cost of non-hardware exceeds that indicatedabove, the hardware portion of the commitment above will be increased dollar for dollar by the amount of the additional non-hardware. This Lease ScheduleNo. 010 will Commence on the first of the month following the later of (i) the date the Lessee has satisfied its commitment to install all of the Equipment, asdescribed above; or (ii) Lessor’s receipt of Lessee’s executed commencing Lease Schedule; however, Lessor may, at its sole discretion, close and Commencethis Lease Schedule at an earlier date. A revised Lease Schedule No. 010R to replace this Lease Schedule No. 010 shall be executed by both parties to reflectthe actual Equipment cost accepted and the commensurate Monthly Lease Charge, including any adjustments required under the Monthly Lease ChargeAdjustment Rider. The Monthly Lease Charge will be prorated and charged as interim rent between the Installation Date of each item of equipment, as Lesseeindicates on the Certificate(s) of Acceptance, and the Commencement Date. Interim rent due prior to the Commencement Date shall not reduce or offsetLessee’s post-Commencement Monthly Lease Charge obligations hereunder. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By:/s/ Stephen P. Brown Print Print Name:Steven C. Morgan Name:Stephen P. Brown Title:President Title:Chief Financial Officer Date:January 31, 2017 Date:  Rider Number:008 Lease Agreement Number:ST053006 Lease Schedule Number:010 Lessee Name:STAAR SURGICAL COMPANY Lease Dated:MAY 30, 2006 PURCHASE OPTION Lessee shall have the option to purchase the Equipment in its physical possession and on Lease Schedule No. 010 on the last day of the initial term, in wholeand not in part, on an in-place basis and operating according to the manufactures specifications, for the then determined mutually-agreed purchase price (plusapplicable taxes) provided that (i) an Event of Default has not occurred, (ii) Lessor has received all of the Lease Charges due under the Lease Schedule priorto Lessee exercising this option to purchase (including all late fees whether billed or unbilled), (iii) Lessor has received payment for all unpaid late fees andestimated property taxes, if any, and (iv) Lessor has received written notice of Lessee's election to exercise said purchase option not less than one hundredtwenty (120) days prior to the last date of the initial term of this Lease Schedule. If a sale is not consummated, the notice provided to exercise this optionshall be accepted as a notice to terminate and return all of the Equipment, and Lessee will return all of the Equipment on this Lease Schedule in accordancewith the Lease Agreement. If Lessee does not return all of the Equipment, Lease Schedule No. 010 will continue in accordance with the Lease Agreement. Lessee will receive title to the Equipment free and clear of all known liens only after Lessee has performed all of its obligations associated with the LeaseAgreement and Lessor has been paid all sums due or becoming due under both this purchase option and the Lease Agreement, including, whether billed ornot, all lease charges, taxes, and late fees. Lessor shall retain all monies received in association with the Lease Schedule including all rent, taxes, securitydeposits and other monthly lease charges and Lessee hereby waives any right to offset these monies against the costs associated with the exercise of thispurchase option. Any sales or use tax due and not paid on these monies shall be added to the purchase price above. Every Term is Agreed to and Accepted: Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. STAAR SURGICAL COMPANY“LESSOR” “LESSEE” By:/s/ Steven C. Morgan By:/s/ Stephen P. Brown Print Print Name:Steven C. Morgan Name:Stephen P. Brown Title:President Title:Chief Financial Officer Date:January 31, 2017 Date:January 26, 2017  Exhibit 21.1 Subsidiaries of STAAR Surgical Company Name of Subsidiary Other Names UnderWhich it Does Business State or OtherJurisdiction of IncorporationSTAAR Surgical AG None SwitzerlandSTAAR Japan Inc. STAAR Japan Godo Kaisha JapanSTAAR Surgical PTE. LTD None SingaporeSTAAR Optical Equipment Technology (Shanghai)Co., LTD None ChinaSTAAR Surgical AG, Sucursal en España None SpainSTAAR Surgical AG Niederlassung Germany None GermanyCircuit Tree Medical, Inc. None California  Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM STAAR Surgical CompanyMonrovia, CA We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-194147, No. 333-175980, No. 333-148902, No.333-143131, No. 333-124022 and No. 333-116901) and Form S-8 (No. 333-213046, No. 333-201232, No. 333-167595 and No. 333-111154) of STAARSurgical Company and Subsidiaries of our reports dated March 2, 2017, relating to the consolidated financial statements and financial statement schedule,and the effectiveness of STAAR Surgical Company and Subsidiaries’ internal control over financial reporting, which appear in this Form 10-K. /s/ BDO USA, LLP Los Angeles, CaliforniaMarch 2, 2017  Exhibit 31.1 CERTIFICATIONS I, Caren Mason certify that: 1. I have reviewed this annual report on Form 10-K 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 thestatements 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 thefinancial 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 inExchange 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 theregistrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 theeffectiveness 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 arereasonably 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 internalcontrol over financial reporting. Date: March 2, 2017 /s/ Caren Mason Caren MasonPresident, Chief Executive Officer andDirector (principal executive officer)  Exhibit 31.2 CERTIFICATIONS I, Stephen P. Brown certify that: 1. I have reviewed this annual report on Form 10-K 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 thestatements 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 thefinancial 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 inExchange 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 theregistrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 theeffectiveness 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 arereasonably 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 internalcontrol over financial reporting. Date: March 2, 2017 /s/ Stephen P. Brown Stephen P. BrownChief Financial Officer(principal accounting and 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 Annual Report on Form 10-K for the year ended December 30, 2016 (the “Report”) by STAAR Surgical Company(“the Company”), 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 theCompany as of and for the periods presented in the Report. Dated: March 2, 2017 /s/ Caren Mason Caren MasonPresident, Chief Executive Officerand Director(principal executive officer) Dated: March 2, 2017 /s/ Stephen P. Brown Stephen P. BrownChief Financial Officer(principal financial officer) A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities andExchange Commission or its staff upon request. 

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