<SUBMISSION>
<ACCESSION-NUMBER>0000950129-05-003017
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>35
<PERIOD>20041231
<FILING-DATE>20050330
<DATE-OF-FILING-DATE-CHANGE>20050330
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>STAAR SURGICAL CO
<CIK>0000718937
<ASSIGNED-SIC>3851
<IRS-NUMBER>953797439
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0101
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-11634
<FILM-NUMBER>05712829
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1911 WALKER AVE
<CITY>MONROVIA
<STATE>CA
<ZIP>91016
<PHONE>6263037902
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1911 WALKER AVE
<CITY>MONROVIA
<STATE>CA
<ZIP>91016
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>STAAR SURGICAL COMPANY
<DATE-CHANGED>19920703
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a06720e10vk.htm
<DESCRIPTION>STAAR SURGICAL  COMPANY - DECEMBER 31, 2004
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
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<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 2pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form 10-K</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 12pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Mark One)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="wingdings">&#254;
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>ANNUAL REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the fiscal year ended December&nbsp;31, 2004</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B>or</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#111;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commission file number: 0-11634</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Delaware</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>95-3797439</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>1911 Walker Avenue<BR>
    Monrovia, California<BR>
     </B><I>(Address of principal executive offices)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>91016<BR>
     </B><I>(Zip Code)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(626)303-7902</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Registrant&#146;s telephone number, including area code)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(b) of the
Act:</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>None</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(g) of the
Act:</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Common Stock, $.01&nbsp;par value</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Title of class)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant (1)&nbsp;has filed
all reports required to be filed by Section&nbsp;13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12&nbsp;months (or for such shorter period that the registrant
was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark if disclosure of delinquent filers
pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is not
contained herein, and will not be contained, to the best of
registrant&#146;s knowledge, in definitive proxy or information
statements incorporated by reference in Part&nbsp;III of this
Form&nbsp;10-K or any amendment to this
Form&nbsp;10-K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#254;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule&nbsp;12b-2 of the
Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant as of
July&nbsp;2, 2004, the last business day of the
registrant&#146;s most recently completed second fiscal quarter,
was approximately $153,394,326 based on the closing price per
share of $7.51 of the registrant&#146;s Common Stock on that
date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of shares outstanding of the registrant&#146;s Common
Stock as of March&nbsp;25, 2005 was 20,690,638.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Portions of the registrant&#146;s definitive proxy statement
relating to its 2005 annual meeting of stockholders, which will
be filed with the Securities and Exchange Commission pursuant to
Regulation&nbsp;14A within 120&nbsp;days of the close of the
registrant&#146;s last fiscal year, are incorporated by
reference into Part&nbsp;III of this report.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B>&nbsp;<A HREF='#101'>PART&nbsp;I</A></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Item&nbsp;1.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#102'>Business</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Item&nbsp;2.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#103'>Properties</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Item&nbsp;3.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#104'>Legal Proceedings</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Item&nbsp;4.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#105'>Submission of Matters to a Vote of Security
    Holders</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B>&nbsp;<A HREF='#106'>PART&nbsp;II</A></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Item&nbsp;5.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#107'>Market for Registrant&#146;s Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Item&nbsp;6.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#108'>Selected Financial Data</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Item&nbsp;7.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#109'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Item&nbsp;7A.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#110'>Quantitative and Qualitative Disclosures
    About Market Risk</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Item&nbsp;8.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#111'>Financial Statements and Supplementary
    Data</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Item&nbsp;9.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#112'>Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Item&nbsp;9A.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#113'>Controls and Procedures</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Item&nbsp;9B.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#114'>Other Information</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B>&nbsp;<A HREF='#115'>PART&nbsp;III</A></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Item&nbsp;10.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#116'>Directors and Executive Officers of the
    Registrant</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Item&nbsp;11.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#117'>Executive Compensation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Item&nbsp;12.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#118'>Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Item&nbsp;13.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#119'>Certain Relationships and Related
    Transactions</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Item&nbsp;14.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#120'>Principal Accountant Fees and Services</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B>&nbsp;<A HREF='#121'>PART&nbsp;IV</A></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Item&nbsp;15.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#122'>Exhibits and Financial Statement
    Schedules</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    &nbsp;<A HREF='#123'>Signatures</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w10.txt">EX-10.10</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w11.txt">EX-10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w12.txt">EX-10.12</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w13.txt">EX-10.13</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w20.txt">EX-10.20</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w21.txt">EX-10.21</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w24.txt">EX-10.24</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w25.txt">EX-10.25</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w26.txt">EX-10.26</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w27.txt">EX-10.27</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w28.txt">EX-10.28</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w29.txt">EX-10.29</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w30.txt">EX-10.30</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w32.txt">EX-10.32</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w34.txt">EX-10.34</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w35.txt">EX-10.35</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w36.txt">EX-10.36</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w37.txt">EX-10.37</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w38.txt">EX-10.38</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w39.txt">EX-10.39</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w40.htm">EX-10.40</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w41.htm">EX-10.41</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w42.txt">EX-10.42</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w43.txt">EX-10.43</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w44.txt">EX-10.44</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w45.txt">EX-10.45</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w46.txt">EX-10.46</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv10w56.txt">EX-10.56</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv14w1.txt">EX-14.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv21w1.txt">EX-21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv23w1.txt">EX-23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv31w1.htm">EX-31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv31w2.htm">EX-31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a06720exv32w1.htm">EX-32.1</A></FONT></TD></TR>
</TABLE>
</CENTER>

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</DIV>

<P align="center" style="font-size: 10pt;">1

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<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PART I" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;I</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This Annual Report on Form&nbsp;10-K contains statements
which constitute &#147;forward-looking statements&#148; within
the meaning of Section&nbsp;27A of the Securities Act of 1933,
as amended, and Section&nbsp;21E of the Securities Exchange Act
of 1934, as amended. These statements include comments regarding
the intent, belief or current expectations of the Company and
its management. Prospective investors are cautioned that any
such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the
forward-looking statements. See &#147;Item&nbsp;7.
Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations&nbsp;&#151; Risk Factors.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1.</B></TD>
    <TD>
    <B><I>Business</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
STAAR Surgical Company develops, manufactures and distributes
worldwide products used by ophthalmologists and other eye care
professionals to improve or correct vision in patients with
cataracts, refractive conditions, and glaucoma. Originally
incorporated in California in 1982, STAAR Surgical Company
reincorporated in Delaware in 1986. Unless the context indicates
otherwise &#147;we,&#148; &#147;us,&#148; &#147;the
Company,&#148; and &#147;STAAR&#148; refer to STAAR Surgical
Company and its consolidated subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cataract Surgery.</I> Our main products are foldable silicone
and Collamer&#174; intraocular lenses (&#147;IOLs&#148;) used
after minimally invasive small incision cataract extraction.
Over the years, we have expanded our range of products for use
in cataract surgery to include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Preloaded Injector, a three-piece silicone IOL preloaded
    into a single-use disposable injector,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    toric silicone IOLs to treat astigmatic abnormalities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    STAARVISC<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>&nbsp;II,
    a viscoelastic material which is used as a tissue protective
    lubricant and to maintain the shape of the eye during surgery,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    STAAR
    SonicWAVE<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
    Phacoemulsification System, which is used to remove a cataract
    patient&#146;s cloudy lens and has low energy and high vacuum
    characteristics,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Cruise Control, a disposable filter which allows for a
    significantly faster, cleaner phacoemulsification procedure and
    is compatible with all phacoemulsification equipment utilizing
    Venturi and peristaltic pump technologies.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Currently, the majority of our revenues are generated from these
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Refractive Surgery.</I> In the area of refractive surgery, we
have used our biocompatible Collamer material to develop and
manufacture the
Visian<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
ICL (&#147;ICL&#148;) and the
Visian<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
TICL (&#147;TICL&#148;) to treat refractive disorders such as
myopia (near-sightedness), hyperopia (far-sightedness) and
astigmatism. These disorders of vision affect a large proportion
of the population. Unlike the intraocular lens
(&#147;IOL&#148;), which replaces a cataract patient&#146;s
cloudy lens, these products are designed to work with the
patient&#146;s natural lens to correct refractive errors. The
Company&#146;s goal is to establish the ICL and TICL as the next
paradigm shift in refractive surgery, making the products
significant revenue generators for the Company over the next
four to five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ICL and TICL have not yet been approved for use in the
United States. If approved, we believe that the ICL will have a
significant market as an alternative to LASIK and other
available refractive surgical procedures and could replace
cataract surgery products as STAAR&#146;s largest source of
revenue. The ICL is approved for use in the European Union and
in Korea and Canada. The TICL is approved for use in the
European Union. For a discussion of the status of the FDA review
of the ICL, see &#147;&#151;&nbsp;Regulatory Matters&nbsp;&#151;
FDA Review of the ICL.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Glaucoma Surgery.</I> We have also developed the
AquaFlow<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Collagen Glaucoma Drainage Device (the &#147;Aqua Flow
Device&#148;), as an alternative to current methods of treating
open-angle glaucoma. The
</DIV>

<P align="center" style="font-size: 10pt;">2

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<DIV align="left" style="font-size: 10pt;">
AquaFlow Device is implanted in the sclera (the white of the
eye), using a minimally invasive procedure, for the purpose of
reducing intraocular pressure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within each of these segments, we also sell other instruments,
devices and equipment that we manufacture or that are
manufactured by others in the ophthalmic industry. In general,
these products complement STAAR&#146;s proprietary product range
and allow us to compete more effectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a description of financial and other recent developments,
see &#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Overview.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our mission is to develop, manufacture and distribute worldwide
visual implants and other ophthalmic products that improve the
vision of patients with cataracts, refractive conditions and
glaucoma. The key elements of the Company&#146;s strategy are as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Expanding the market for the ICL.</I> We are seeking to
expand the market for our ICL and TICL by the following means:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    obtaining the approval of the FDA to market the ICL and the TICL
    in the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    obtaining the approval of the ICL and the TICL in new
    international markets;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    expanding the market share of the ICL and the TICL in existing
    international markets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revitalizing our IOL business.</I> We are seeking to rebuild
the market share of our IOLs in the United States by the
following means:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    increasing the awareness of ophthalmologists of the advantages
    of our proprietary Collamer material as an alternative to either
    silicone or acrylic for the manufacture of IOLs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    improving the injector systems for our lenses;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    obtaining U.S.&nbsp;approval for our preloaded injector
    technology and expanding it to all of our lenses.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Improving regulatory compliance.</I> We are seeking to
improve our quality systems to correct any deficiencies
identified in the FDA&#146;s December&nbsp;22, 2003 Warning
Letter and the 483 Observations. For a description of these
regulatory issues, see &#147;&#151;&nbsp;Regulatory
Matters&nbsp;&#151; Warning Letters and the 483
Observations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reducing operating expenses and seeking additional
financing.</I> During late 2004 and early 2005, we took steps to
reduce our operating expenses by, among other things, reducing
our use of independent consultants and reducing our direct sales
force. In addition, we are seeking additional financing. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Risk
Factors&nbsp;&#151; We have only limited working capital&#148;
and &#147;&#151;&nbsp;We have only limited access to
financing.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financial Information about Segments and Geographic Areas</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has expanded its marketing focus beyond the cataract
surgery market to include the refractive surgery and glaucoma
markets. However, during 2004 the cataract segment accounted for
90.4% the majority of the Company&#146;s revenues and, thus, the
Company operates as one business segment for financial reporting
purposes. See Note&nbsp;17 to the Consolidated Financial
Statements for financial information about product lines and
operations in geographic areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Background</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The human eye is a specialized sensory organ capable of
receiving visual images that are transmitted to the visual
center in the brain. The main parts of the eye are the cornea,
the iris, the lens, the retina, and the
</DIV>

<P align="center" style="font-size: 10pt;">3

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<DIV align="left" style="font-size: 10pt;">
trabecular meshwork. The cornea is the clear window in the front
of the eye through which light first passes. The iris is a
muscular curtain located behind the cornea which opens and
closes to regulate the amount of light entering the eye through
the pupil, an opening at the center of the iris. The lens is a
clear structure located behind the iris that changes shape to
better focus light to the retina, located in the back of the
eye. The retina is a layer of nerve tissue consisting of
millions of light receptors called rods and cones, which receive
the light image and transmit it to the brain via the optic
nerve. The anterior chamber of the eye, located in front of the
iris, is filled with a watery fluid called the aqueous humour,
while the portion of the eye behind the lens is filled with a
jelly-like material called the vitreous humour. The trabecular
meshwork, a drainage channel located between the iris and the
surrounding white portion of the eye, maintains a normal
pressure in the anterior chamber of the eye by draining excess
aqueous humour.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The eye can be affected by common visual disorders, disease or
trauma. The most prevalent ocular disorders or diseases are
cataracts and glaucoma. Cataract formation is generally an age
related situation that involves the hardening and loss of
transparency of the natural crystalline lens, impairing visual
acuity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Glaucoma is a progressive ocular disease that manifests itself
through increased intraocular pressure. This, in turn, may
result in damage to the optic disc and a decrease of the visual
field. Untreated, progressive glaucoma can result in blindness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Refractive disorders include myopia, hyperopia, astigmatism and
presbyopia. Myopia and hyperopia are caused by either overly
curved or flat corneas which result in improper focusing of
light on the retina. They are also known as near-sightedness and
far-sightedness, respectively. Astigmatism is characterized by
an irregularly shaped cornea resulting in blurred vision.
Presbyopia is an age related condition caused by the loss of
elasticity of the natural crystalline lens, reducing the
eye&#146;s ability to accommodate or adjust for varying
distances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Principal Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our products are designed to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Improve patient outcomes,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Minimize patient risk and discomfort,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Simplify ophthalmic procedures or post-operative care for the
    surgeon and the patient.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Intraocular Lenses (IOLs) and Related Cataract Treatment
Products.</I> We produce and market a line of foldable IOLs for
use in minimally invasive cataract surgical procedures. Our IOLs
can be folded, and therefore can be implanted into the eye
through an incision as small as 2.8 mm. Once inserted, the IOL
unfolds naturally to replace the cataractous lens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In late 2003, we introduced, through our joint venture company,
Canon Staar, the first preloaded lens injector system in
international markets. We believe the Preloaded Injector offers
surgeons improved convenience and reliability. The Preloaded
Injector is not yet available in the U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, our foldable IOLs are manufactured from both our
proprietary Collamer material and silicone. Both materials are
offered in two differently configured styles, the single-piece
plate haptic design and the three-piece design where the optic
is combined with polyimide loop haptics. The selection of one
style over the other is primarily based on the preference of the
ophthalmologist. The Collamer IOL is offered in a single-piece
design. A redesign of the three-piece version of the lens has
been completed along with a dedicated injection system which is
in the final stages of development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have developed and currently market globally the Toric IOL, a
toric version of our single-piece silicone IOL, which is
specifically designed for patients with pre-existing
astigmatism. The Toric IOL is the first refractive product we
offered in the U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales of foldable IOLs accounted for approximately 56% of our
total revenues for the 2004 fiscal year, 61% of total revenues
for the 2003 fiscal year and 65% of total revenues for the 2002
fiscal year.
</DIV>

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As part of our approach to providing complementary products for
use in minimally invasive cataract surgery, we also market
STAARVISC&nbsp;II, a viscoelastic material which is used as a
protective lubricant and to maintain the shape of the eye during
surgery, the STAAR SonicWAVE Phacoemulsification System, which
is used to remove a cataract patient&#146;s cloudy lens and has
low energy and high vacuum characteristics, and Cruise Control,
a single-use disposable filter which allows for a significantly
faster, cleaner phacoemulsification procedure and is compatible
with all phacoemulsification equipment utilizing Venturi and
peristaltic pump technologies. We also sell other related
instruments, devices, surgical packs and equipment that we
manufacture or that are manufactured by others. Sales of other
cataract products accounted for approximately 32% of our total
revenues for the 2004 fiscal year, 29% of total revenues for the
2003 fiscal year and 26% of total revenues for the 2002 fiscal
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>AquaFlow Collagen Glaucoma Drainage Device.</I> Our AquaFlow
Device is surgically implanted in the outer tissues of the eye
to maintain a space that allows increased drainage of
intraocular fluid so as to reduce intraocular pressure. It is
made of collagen, a porous material that is compatible with
human tissue and facilitates drainage of excess eye fluid. The
AquaFlow Device is specifically designed for patients with
open-angled glaucoma, which is the most prevalent type of
glaucoma. In contrast to conventional and laser glaucoma
surgeries, implantation of the AquaFlow Device does not require
penetration of the anterior chamber of the eye. Instead, a small
flap of the outer eye is folded back and a portion of the sclera
and trabecular meshwork is removed. The AquaFlow Device is
placed above the remaining trabecular meshwork and
Schlemm&#146;s canal and the outer flap is refolded into place.
The device swells, creating a space as the eye heals. It is
absorbed into the surrounding tissue within six months to nine
months after implantation, leaving the open space and possibly
creating new fluid collector channels. The 15 to 45 minute
surgical procedure to implant the AquaFlow Device is performed
under local or topical anesthesia, typically on an outpatient
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we believe the glaucoma market is very conservative, there
is a continuing interest in learning the surgical procedure to
implant the AquaFlow Device. Adoption by ophthalmic surgeons,
however, will be dependent upon the rate at which they learn to
perform the surgical procedure or the development of
instrumentation to simplify the procedure. Sales of AquaFlow
Devices accounted for approximately 2% of our total revenues in
each of the 2004, 2003, and 2002 fiscal years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Refractive Correction&nbsp;&#151; Visian
ICL</I><SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
<I>(ICLs).</I> ICLs are implanted into the eye in order to
correct refractive disorders such as myopia, hyperopia and
astigmatism. Lenses of this type are generically called
&#147;phakic IOLs&#148; or &#147;phakic implants&#148; because
they work along with the patient&#146;s natural lens, or
<I>phakos</I>, rather than replacing it. The ICL is capable of
correcting a wide range of refractive disorders from low to
severe conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ICL is folded and implanted into the eye behind the iris and
in front of the natural crystalline lens using minimally
invasive surgical techniques similar to implanting an IOL during
cataract surgery, except that the human lens is not removed. The
surgical procedure to implant the ICL is typically performed
with topical anesthesia on an outpatient basis. Visual recovery
is within one to 24&nbsp;hours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe the ICL will complement current refractive
technologies and allow refractive surgeons to expand their
treatment range and customer base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ICL and TICL have not yet been approved for use in the
United States. The ICL for myopia is approved for use in the
European Union and in Korea and Canada, and applications are
pending in Australia. The TICL is approved for use in the
European Union, and applications are pending in Australia, Korea
and Canada. The Company has completed enrollment in the
U.S.&nbsp;clinical trials for the TICL and expects to file its
submission with the FDA in late 2005. For a discussion of the
status of the FDA review of the ICL, see
&#147;&#151;&nbsp;Regulatory Matters&nbsp;&#151; FDA Review of
the ICL.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Hyperopic ICL is approved for use in the European Union and
in Canada, and is currently in clinical trials in the United
States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ICL is available internationally for myopia in five lengths,
with 41 powers for each length, and for hyperopia in five
lengths, with 38 powers for each length, which equates to
approximately 400 inventoried parts. This requires the Company
to carry a significant amount of inventory to meet the customer
demand for
</DIV>

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<DIV align="left" style="font-size: 10pt;">
rapid delivery. The Toric ICL is available for myopia in the
same powers and lengths but carries additional parameters of
cylinder and axis with 11 and 180 possibilities, respectively.
As such, the Toric ICL is made to order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales of ICLs accounted for approximately 8% of our total
revenues for the 2004 fiscal year, 6% of total revenues for the
2003 fiscal year and 5% of total revenues for the 2002 fiscal
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sources and Availability of Raw Materials</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company uses a wide range of raw materials in the production
of our products. Most of the raw materials and components are
purchased from external suppliers. Some of our raw materials are
single-sourced due to regulatory constraints, cost
effectiveness, availability, quality, and vendor reliability
issues. Many of our components are standard parts and are
available from a variety of sources although we do not typically
pursue regulatory and quality certification of multiple sources
of supply. With the exception of our silicone material, we do
not believe that the loss of any existing external supply source
would have material adverse effect on us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proprietary collagen-based raw material used to manufacture
our IOLs, ICLs and the AquaFlow Device is internally
sole-sourced from one of our facilities in California. If the
supply of these collagen-based raw materials is disrupted we
know of no alternative supplier, and therefore, any such
disruption could result in our inability to manufacture the
products and would have a material adverse effect on the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Patents, Trademarks and Licenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We strive to protect our investment in the research,
development, manufacturing and marketing of our products through
the use of patents, licenses, trademarks, and copyrights. We own
or have rights to a number of patents, licenses, trademarks,
copyrights, trade secrets and other intellectual property
directly related and important to our business. As of
December&nbsp;31, 2004, we owned approximately 84 United States
and foreign patents and had approximately 66 patent applications
pending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our patents are important to our business. Of
significant importance to the Company are the patents, licenses,
and technology rights surrounding our Visian ICL
(&#147;ICL&#148;) and Collamer material. In 1996, we were
granted an exclusive royalty- bearing license to manufacture,
use, and sell ICLs in the United States, Europe, Latin America,
Africa, and Asia using the uniquely biocompatible Collamer
material. The Collamer material is also used in certain of our
IOLs. We have also acquired or applied for various patents and
licenses related to our Aqua Flow Device, our
phacoemulsification system, our insertion devices, and other
technologies of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Patents for individual products extend for varying periods of
time according to the date a patent application is filed or a
patent is granted and the term of patent protection available in
the jurisdiction granting the patent. The scope of protection
provided by a patent can vary significantly from country to
country.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our strategy is to develop patent portfolios for our research
and development projects in order to obtain market exclusivity
for our products in our major markets. Although the expiration
of a patent for a product normally results in the loss of market
exclusivity, we may continue to derive commercial benefits from
these products. We routinely monitor the activities of our
competitors and other third parties with respect to their use of
intellectual property, including considering whether or not to
assert our patents where we believe they are being infringed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Worldwide, all of our major products are sold under trademarks
we consider to be important to our business. The scope and
duration of trademark protection varies widely throughout the
world. In some countries, trademark protection continues only as
long as the mark is used. Other countries require registration
of trademarks and the payment of registration fees. Trademark
registrations are generally for fixed but renewable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We protect our proprietary technology, in part, through
confidentiality and nondisclosure agreements with employees,
consultants and other parties. Our confidentiality agreements
with employees and consultants
</DIV>

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<DIV align="left" style="font-size: 10pt;">
generally contain standard provisions requiring those
individuals to assign to STAAR, without additional
consideration, inventions conceived or reduced to practice by
them while employed or retained by STAAR, subject to customary
exceptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Seasonality</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We experience some seasonality in demand for our products with
sales in the third quarter generally being the lowest due to the
impact of summer vacations on elective surgeries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Distribution and Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We market our products to a variety of health care providers,
including surgical centers, hospitals, managed care providers,
health maintenance organizations, group purchasing organizations
and government facilities. The primary user of our products is
the ophthalmologist. No material part of our business, taken as
a whole, is dependant upon a single or a few customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain direct distribution to the physician or facility in
the United States, Canada, Germany and Australia. Sales efforts
in Germany and Australia are primarily supported through a
direct sales force. Sales efforts in the United States and
Canada are primarily supported through a network of independent
manufacturers&#146; representatives. The independent
representatives are compensated through the payment of
commissions based on sales and may represent manufacturers other
than STAAR, although not in competing products. In all other
countries where we do business, we sell principally through
independent distributors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We support the sales efforts of our agents, employees and
distributors through the activities of our internal marketing
department. Sales efforts are supplemented through the use of
promotional materials, educational courses, speakers programs,
participation in trade shows and technical presentations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The dollar amount of the Company&#146;s backlog orders is not
significant in relation to total annual sales. The Company
generally keeps sufficient inventory on hand to ship product
when ordered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Conditions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competition in the ophthalmic medical device field is intense
and characterized by extensive research and development and
rapid technological change. Development by competitors of new or
improved products, processes or technologies may make our
products obsolete or less competitive. We will be required to
devote continued efforts and significant financial resources to
enhance our existing products and to develop new products for
the ophthalmic industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our primary competition in the development and sale
of products used to surgically correct cataracts, namely
foldable IOLs and phacoemulsification machines, includes Alcon
Laboratories, Advanced Medical Optics (&#147;AMO&#148;), and
Bausch&nbsp;&#38; Lomb. Currently, Alcon holds 48.2% of the
U.S.&nbsp;IOL market, followed by AMO with 30.4% and
Bausch&nbsp;&#38; Lomb with 10.7%. We hold approximately 6.1% of
the U.S.&nbsp;IOL market. Our competitors have been established
for longer periods of time than we have and have significantly
greater resources than we have, including greater name
recognition, larger sales operations, greater ability to finance
research and development and proceedings for regulatory
approval, and more developed regulatory compliance and quality
control systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the U.S.&nbsp;market, physicians prefer IOLs made out of
acrylic. Acrylic IOLs currently account for a 53.8% share of the
U.S.&nbsp;IOL market. We believe that we are positioned to
compete effectively in this market segment with the Collamer
IOL, and that the introduction of the three-piece Collamer IOL
will strengthen our position and allow for a gain in overall IOL
market share. Silicone IOLs, which currently account for 42% of
the U.S.&nbsp;market, also provide an opportunity for us as we
introduce improvements in silicone IOL technology and Collamer
IOL injection systems to facilitate delivery of the IOL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our primary competition in the development and sale of products
used to treat glaucoma is from pharmaceutical companies,
primarily because drug therapy is, and for years has been, the
accepted treatment for glaucoma. The portion of this market held
by medical devices used to treat glaucoma is insignificant at
</DIV>

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present. We believe that Merck&nbsp;&#38; Company, Pfizer,
Novartis, Alcon, Allergan and Bausch&nbsp;&#38; Lomb are the
largest providers of drugs used to treat glaucoma. There are
also devices under development by others to be used in
conjunction with a non-penetrating deep sclerectomy for the
surgical management of glaucoma.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ICL will face significant competition in the marketplace
from products that improve or correct refractive conditions,
such as corrective eyeglasses, external contact lenses, and
conventional and laser refractive surgical procedures. These are
products long established in the marketplace and familiar to
patients in need of refractive correction. Furthermore,
corrective eyeglasses and external contact lenses are more
easily obtained, in that a prescription is usually written
following a routine eye examination in a doctor&#146;s office,
without admitting the patient to a hospital or surgery center.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the following providers of laser surgical
procedures comprise our primary competition in the marketplace
for patients requiring refractive corrections: Alcon,
Bausch&nbsp;&#38; Lomb, VISX, Nidek and Wave Light all market
Excimer lasers for corneal refractive surgery. Approval of
custom ablation, along with the addition of wavefront
technology, has increased awareness of corneal refractive
surgery by patients and practitioners. Conductive Keratoplasty
(CK)&nbsp;by Refractec competes for the hyperopic market for
+1.0 to +3.0 diopters. In the phakic IOL market, the ICL faces
the Ophtec Verisyse or Artisan IOL, distributed in the United
States by AMO, IOLTech&#146;s PRL, as well as phakic IOLs under
investigation by Ophthalmic Innovations International, Tekia,
Alcon, Vision Membrane and ThinOptX.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regulatory Matters</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Regulatory Requirements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our products are subject to regulatory approval in the United
States and in foreign countries. We are also subject to various
federal, state, local and foreign laws applicable to our
operations including, among other things, working conditions,
laboratory and manufacturing practices, and the use and disposal
of hazardous or potentially hazardous substances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion outlines the various kinds of reviews
to which our products or production facilities may be subject.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Regulatory Requirements in the United States.</I> Under the
federal Food, Drug&nbsp;&#38; Cosmetic Act as amended by the
Food and Drug Administration Modernization Act of 1997 (the
&#147;Act&#148;), the FDA has the authority to adopt regulations
that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    set standards for medical devices,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    require proof of safety and effectiveness prior to marketing
    devices which the FDA believes require pre-market clearance,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    require test data approval prior to clinical evaluation of human
    use,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    permit detailed inspections of device manufacturing facilities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish &#147;good manufacturing practices&#148; that must be
    followed in device manufacture,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    require reporting of serious product defects to the FDA,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prohibit device exports that do not comply with the Act unless
    they comply with established foreign regulations, do not
    conflict with foreign laws, and the FDA and the health agency of
    the importing country determine export is not contrary to public
    health.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Most of our products are medical devices intended for human use
within the meaning of the Act and, therefore, are subject to FDA
regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA establishes procedures for compliance based upon
regulations that designate devices as Class&nbsp;I (general
controls, such as labeling and record-keeping requirements),
Class&nbsp;II (performance standards in addition to general
controls) or Class&nbsp;III (pre-market approval
(&#147;PMA&#148;) before commercial marketing). Class&nbsp;III
devices are the most extensively regulated because the FDA has
determined they are life-supporting,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
are of substantial importance in preventing impairment of
health, or present a potential unreasonable risk of illness or
injury. The effect of assigning a device to Class&nbsp;III is to
require each manufacturer to submit to the FDA a PMA that
includes information on the safety and effectiveness of the
device.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A medical device that is substantially equivalent to a directly
related medical device previously in commerce may be eligible
for the FDA&#146;s pre-market notification &#147;510(k)
review&#148; process. FDA 510(k) clearance is a
&#147;grandfather&#148; process. As such, FDA clearance does not
imply that the safety, reliability and effectiveness of the
medical device has been approved or validated by the FDA, but
merely means that the medical device is substantially equivalent
to a previously cleared commercial medical device. The review
period and FDA determination as to substantial equivalence
generally is made within 90&nbsp;days of submission of a 510(k)
application, unless additional information or clarification or
clinical studies are requested or required by the FDA. As a
practical matter, the review process and FDA determination may
take longer than 90&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our IOLs and ICLs are Class&nbsp;III devices, our AquaFlow
Devices, phacoemulsification equipment, ultrasonic cutting tips
and surgical packs are Class&nbsp;II devices, and our lens
injectors are Class&nbsp;I devices. We have received FDA
pre-market approval for our IOLs (including the toric and the
Collamer IOLs) and AquaFlow Device and 510(k) clearance for our
phacoemulsification equipment, lens injectors, and ultrasonic
cutting tips.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a manufacturer of medical devices, our manufacturing
processes and facilities are subject to continuing review by the
FDA and various state agencies to ensure compliance with quality
system regulations. These agencies inspect our facilities from
time to time to determine whether we are in compliance with
various regulations relating to manufacturing practices,
validation, testing, quality control and product labeling.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Regulatory Requirements in Foreign Countries.</I> There is a
wide variation in the approval or clearance requirements
necessary to market medical products in foreign countries. The
requirements range from minimal requirements to requirements
comparable to those established by the FDA. For example, many
countries in South America have minimal regulatory requirements,
while many developed countries, such as Japan, have requirements
at least as stringent as those of the FDA. Foreign governments
do not always accept FDA approval as a substitute for their own
approval or clearance procedures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June 1998, the member countries of the European Union (the
&#147;Union&#148;) require that all medical products sold within
their borders carry a Conformite&#146; Europeane Mark (&#147;CE
Mark&#148;). The CE Mark denotes that the applicable medical
device has been found to be in compliance with guidelines
concerning manufacturing and quality control, technical
specifications and biological or chemical and clinical safety.
The CE Mark supersedes all current medical device regulatory
requirements for Union countries. We have obtained the CE Mark
for all of our principal products including our ICL and TICL,
IOLs (including the Toric IOL and Collamer IOL), SonicWAVE
Phacoemulsification System and our AquaFlow Device.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Warning Letters and the 483 Observations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company received a Warning Letter issued by the FDA, dated
December&nbsp;22, 2003 which outlined deficiencies related to
the manufacturing and quality assurance systems of its Monrovia,
California facility. To assist it in correcting the issues
raised in the Warning Letter, the Company engaged the services
of Quintiles Consulting (&#147;Quintiles&#148;), a well regarded
consulting organization that specializes in FDA related
compliance matters. The Company, with Quintiles&#146; help,
assessed the state of its quality system in light of the
FDA&#146;s concerns, developed an improvement plan, and took
corrective actions to improve the Company&#146;s processes,
procedures, and controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company received a second Warning Letter from the FDA dated
April&nbsp;26, 2004, which outlined deficiencies noted in an
audit by the FDA in December 2003. The Company provided the FDA
with its planned corrective actions to the issues raised, and in
a letter dated July&nbsp;1, 2004, the FDA responded that they
found the corrective and preventative action plans described in
the Company&#146;s response &#147;adequate.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;17, 2004, the FDA completed an audit of the
Company&#146;s Nidau, Switzerland manufacturing facility. The
FDA did not observe any violations of quality system
requirements during this audit.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;23, 2004, as a follow-up to the
December&nbsp;22, 2003 Warning Letter, the FDA completed a
re-audit of the Company&#146;s Monrovia, California
manufacturing facility. At the conclusion of the audit, the FDA
issued a form &#147;FDA 483 Inspectional Observations&#148;
described more fully in the Company&#146;s Current Report on
Form&nbsp;8-K filed with the Securities and Exchange Commission
on September&nbsp;29, 2004 (the &#147;483 Observations&#148;).
The Company delivered its response to the FDA on
November&nbsp;5, 2004. On January&nbsp;27, 2005, the Company and
its representatives met with the FDA to update them on the
corrective actions taken by the Company in response to the 483
Observations. During the meeting, the FDA gave no indication of
the status of their review of the response or the nature or
timing of future communications to the Company. However,
subsequent to the meeting the FDA confirmed with the
Company&#146;s regulatory counsel, with respect to issues
relating to the Collamer material addressed in the 483
Observations, that &#147;materials issues with regard to
stability have been addressed to the FDA&#146;s
satisfaction.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until the FDA is satisfied with the adequacy of the
Company&#146;s corrective actions, it may take further actions
which could include conducting another inspection, seizure of
the Company&#146;s products, injunction of the Monrovia facility
to compel compliance (which may include suspension of production
operations and/or recall of products), or other actions. Such
actions could have a material adverse effect on the
Company&#146;s established lines of business, results of
operations and liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is not able to predict whether the FDA will conclude
that the Company&#146;s corrective actions to date or those
included in its response to the 483 Observations satisfactorily
resolve its concerns. Nor can the Company predict the
likelihood, nature of, or timing of any additional action by the
FDA or the impact of any other FDA action on the Company&#146;s
established lines of business, results of the operations or
liquidity or the approval of the ICL for the United States
market.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>FDA Review of the ICL</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;3, 2003, the FDA Ophthalmic Devices Panel
recommended that, with certain conditions, the FDA approve the
ICL for use in correcting myopia in the range of -3 to -15
diopters and reducing myopia in the range of - 15 to -20
diopters. However, until the FDA is satisfied with the
Company&#146;s corrective actions to the deficiencies identified
in the December&nbsp;22, 2003 Warning Letter and the 483
Observations, it is unlikely to grant the Company approval to
market the ICL in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;16, 2004, the Company submitted to the FDA a
supplement to the Company&#146;s investigational device
exemptions application for the ICL. The supplement requested
permission for each of the active clinical centers to continue
enrollment of eyes in the ICL clinical investigation while the
pre-market approval is pending with the FDA so that the
physicians may continue to expand on their clinical experience
with implantation of the ICL. On January&nbsp;14, 2005, the FDA
approved the supplement allowing 18 investigational sites to
enroll a combined total of 75 additional eyes each month.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Research and Development</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are focused on furthering technological advancements in the
ophthalmic products industry through the development of
innovative ophthalmic products and materials and related
surgical techniques. We maintain an active internal research and
development program which includes research and development,
clinical activities, and regulatory affairs and is comprised of
23 employees. In order to achieve our business objectives, we
will continue the investment in research and development. Over
the past year, we have principally focused our research and
development efforts on:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    improving regulatory and compliance systems and procedures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    obtaining approval for the ICL,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    completing enrollment in the U.S.&nbsp;clinical trials for the
    TICL,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    redesigning the three-piece Collamer IOL,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    designing an insertion system for the three-piece Collamer IOL,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    improving insertion and delivery systems for our other foldable
    products,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">10

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    improving manufacturing systems and procedures for all products
    to reduce manufacturing costs and improve yields,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developing products and extending foreign registrations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses were approximately $6,246,000,
$5,120,000, and $4,016,000 for our 2004, 2003 and 2002 fiscal
years, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Environmental Matters</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is subject to federal, state, local and foreign
environmental laws and regulations. We believe that our
operations comply in all material respects with applicable
environmental laws and regulations in each country where we do
business. We do not anticipate that compliance with these laws
will have any material impact on our capital expenditures,
earnings or competitive position. We currently have no plans to
invest in material capital expenditures for environmental
control facilities for 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 obligations arising
from current or past environmental practices that are likely to
have a material adverse impact on our financial position.
However, environmental problems relating to our properties could
develop in the future, and such problems could require
significant expenditures. Additionally, we are unable to predict
changes in legislation or regulations that may be adopted or
enacted in the future and that may adversely affect us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Significant Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s only significant subsidiary is STAAR Surgical
AG, a wholly owned entity incorporated in Switzerland. This
subsidiary develops, manufactures and distributes products
worldwide including Collamer IOLs, ICLs, TICLs, and the AquaFlow
Device. STAAR Surgical AG also controls 100% of Domilens GmbH, a
European sales subsidiary that distributes both STAAR products
and products from other ophthalmic manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Canon Staar Joint Venture</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1988, the Company entered into a joint venture with Canon
Inc. and Canon Sales Co., Inc. for the principal purpose of
designing, manufacturing, and selling in Japan intraocular
lenses and other ophthalmic products. The joint venture will
market its products worldwide through Canon, Canon Sales or
STAAR or such other distributors as the Board of Directors of
the joint venture may approve. The terms of any distribution
arrangement will require the unanimous approval of the Board of
Directors of the joint venture. Each joint venture party is
entitled to appoint one member of the Board of Directors of the
joint venture. Certain matters require the unanimous approval of
the directors. Upon the occurrence of certain events, including
the merger, sale of substantially all of the assets or change in
the management of one of the parties, any of the other parties
may have the right to acquire the first party&#146;s interest in
the joint venture at book-value. The Company also granted to the
joint venture a perpetual exclusive license under the Licensed
Technology (as defined in the license agreement) to make and
sell any products in Japan, and a perpetual non-exclusive
license to do so in the rest of the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2001, the parties entered into a settlement agreement whereby
(i)&nbsp;they reconfirmed the joint venture agreement and the
license agreement, (ii)&nbsp;they agreed that the Company would
promptly commence the transfer of the Licensed Technology to the
joint venture, (iii)&nbsp;the Company granted the joint venture
an exclusive license to make any products in China and sell such
products in Japan and China (subject to the existing rights of
third parties), (iv)&nbsp;the Company agreed to provide the
joint venture with raw materials, (v)&nbsp;the joint venture
granted Canon Sales Co., Inc. the right to distribute its
products in Japan on specified terms, and (iv)&nbsp;the parties
settled certain patent disputes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing description of the joint venture agreement,
technical assistance and license agreement and settlement
agreement is qualified in its entirety by the full text of such
agreements, which have been filed as exhibits or incorporated by
reference to this report. See &#147;Management&#146;s Discussion
and Analysis of Financial
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Condition and Results of Operations&nbsp;&#151; Risk
Factors&nbsp;&#151; We have licensed our technology to our joint
venture company and have granted certain rights to the partners
that could be exercised in the event of a change in control of
the Company.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of February&nbsp;25, 2005, we employed approximately 247
persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Additional Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company makes available free of charge through our website,
<I>www.staar.com,</I> our Annual Report on Form&nbsp;10-K,
Quarterly Reports on Form&nbsp;10-Q and Current Reports on
Form&nbsp;8-K and amendments to those reports filed or furnished
pursuant to Section&nbsp;13(a) of the Securities Exchange Act of
1934, as soon as reasonably practicable after those reports are
filed with or furnished to the Securities and Exchange
Commission (&#147;SEC&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The public may read any of the items we file with the SEC at the
SEC&#146;s Public Reference Room at 450&nbsp;Fifth Street, NW,
Washington, DC 20549. The public 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 Internet site that
contains reports, proxy and information statements, and other
information regarding the Company and other issuers that file
electronically with the SEC at http://www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "Item 2. Properties" -->

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<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.</B></TD>
    <TD>
    <B><I>Properties</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations are conducted in leased facilities throughout the
world. Our executive offices, manufacturing, warehouse and
distribution, and primary research facilities are located in
Monrovia, California. STAAR Surgical AG maintains office,
manufacturing, and warehouse and distribution facilities in
Nidau, Switzerland. The Company has one additional facility in
Aliso Viejo, California for raw material production and research
and development activities. The Company leases additional sales
and distribution facilities in Germany and Australia. We believe
our manufacturing facilities in the U.S. and Switzerland are
suitable and adequate for our current and future planned
requirements. The Company could increase capacity by adding
additional shifts at our existing facilities. However, the
Company is at capacity in the U.S. and Switzerland in the area
of administration. The Company would require additional space to
support growth in those areas, although this is not anticipated
for 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "Item 3. Legal Proceedings" -->

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<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;3.</B></TD>
    <TD>
    <B><I>Legal Proceedings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are currently party to various claims and legal proceedings
arising out of the normal course of our business. These claims
and legal proceedings relate to contractual rights and
obligations, employment matters, and claims of product
liability. We do not believe that any of the claims known to us
is likely to have a material adverse effect on our financial
condition or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;1, 2004, multiple class action lawsuits
have been filed in the United States District Courts for the
Central District of California and the District of New Mexico
against the Company and its Chief Executive Officer on behalf of
all persons who acquired the Company&#146;s securities during
various periods between April&nbsp;3, 2003 and
September&nbsp;28, 2004. On December&nbsp;15, 2004, the Court
ordered consolidation of the complaints that had been filed in
the United States District Court for the Central District of
California and directed that the plaintiffs file a consolidated
complaint as soon as practicable. The plaintiffs have proposed a
stipulation pursuant to which they would file a consolidated
amended complaint on or about April&nbsp;29, 2005. The New
Mexico action was voluntarily dismissed on January&nbsp;28,
2005. The lawsuits generally allege that the defendants violated
Sections&nbsp;10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule&nbsp;10b-5 promulgated thereunder, by
issuing false and misleading statements regarding intraocular
lenses and implantable lenses, and failing timely to disclose
significant problems with the lenses, as well as the existence
of serious injuries and/or malfunctions attributable to the
lenses, thereby artificially inflating the price of the
Company&#146;s Common Stock. The plaintiffs generally seek to
recover compensatory damages, including interest. The Company
intends to vigorously defend the consolidated lawsuits.
</DIV>

<P align="center" style="font-size: 10pt;">12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "Item 4. Submission of Matters to a Vote of Security Holders" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;4.</B></TD>
    <TD>
    <B><I>Submission of Matters to a Vote of Security Holders</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no matters submitted to a vote of security holders
during the quarter ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "PART II" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "Item 5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;5.</B></TD>
    <TD>
    <B><I>Market for Registrant&#146;s Common Equity, Related
    Stockholder Matters, and Issuer Purchases of Equity
    Securities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Common Stock is quoted on the Nasdaq National Market under
the symbol &#147;STAA.&#148; The following table sets forth the
reported high and low bid prices of the Common Stock as reported
by Nasdaq for the calendar periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter (through March&nbsp;25, 2005)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.050</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;25, 2005, the closing price of the Company&#146;s
Common Stock was $3.95. Stockholders are urged to obtain current
market quotations for the Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;25, 2005, there were approximately 565 record
holders of our Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not paid any cash dividends on our Common Stock since
our inception. We currently expect to retain any earnings for
use to further develop our business and not to declare cash
dividends on our Common Stock in the foreseeable future. The
declaration and payment of any such dividends in the future
depends upon the Company&#146;s earnings, financial condition,
capital needs and other factors deemed relevant by the Board of
Directors and may be restricted by future agreements with
lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;25, 2005, options to
purchase&nbsp;2,719,379&nbsp;shares of Common Stock were
exercisable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Sales of Unregistered Securites</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;10, 2004, the Company sold 2,000,000&nbsp;shares of
Common Stock at a price per share of $6.25. The Company sold the
shares of Common Stock directly, without the services of an
underwriter, in a private placement made in reliance on
Rule&nbsp;506 of Regulation&nbsp;D under the Securities Act of
1933. The purchasers were all &#147;accredited investors&#148;
within the meaning of Regulation&nbsp;D. The Company received
proceeds, net of placement agent fees and other expenses, of
approximately $11,646,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also entered into a Registration Rights Agreement with the
purchasers, in which we agreed to file a &#147;shelf&#148;
registration statement under the Securities Act of 1933
providing for the public resale of their shares, and to keep the
registration statement effective for up to two years. After the
expiration of that two-year period, to the extent any of the
investors have shares purchased in the 2004 private placement
that are not eligible for public sale under Rule&nbsp;144 or
Regulation&nbsp;S, the investors may have a right under the
Registration Rights Agreement to &#147;piggyback&#148; on other
registered offerings of the Company to resell those shares.
</DIV>

<P align="center" style="font-size: 10pt;">13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "Item 6. Selected Financial Data" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;6.</B></TD>
    <TD>
    <B><I>Selected Financial Data</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth selected consolidated financial
data with respect to the five most recent fiscal years ended
December&nbsp;31, 2004, January&nbsp;2, 2004, January&nbsp;3,
2003, December&nbsp;28, 2001, and December&nbsp;29, 2000. The
selected consolidated statement of income data set forth below
for each of the three most recent fiscal years, and the selected
consolidated balance sheet data set forth below at
December&nbsp;31, 2004 and January&nbsp;2, 2004, are derived
from the consolidated financial statements which have been
audited by BDO Seidman, LLP, independent certified public
accountants, as indicated in their report which is included
elsewhere in this Annual Report. The selected consolidated
statement of income data set forth below for each of the two
fiscal years in the periods ended December&nbsp;28, 2001, and
December&nbsp;29, 2000, and the consolidated balance sheet data
set forth below at January&nbsp;3, 2003, December&nbsp;28, 2001
and December&nbsp;29, 2000 are derived from the Company&#146;s
audited consolidated financial statements not included in this
Annual Report. The selected consolidated financial data should
be read in conjunction with the consolidated financial
statements of the Company, and the Notes thereto, included
elsewhere in this Annual Report, and &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; in Item&nbsp;7.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Fiscal Year Ended</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;2,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;28,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;29,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty and other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>448</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,434</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Selling, general and administrative expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,593</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marketing and selling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,254</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,215</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,276</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,338</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,158</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,113</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,786</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(637</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(724</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss before income taxes and minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,162</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,510</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,863</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax provision (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,649</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,758</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(19,192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic net loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted net loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average number of basic shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average number of diluted shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,745</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable and current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,944</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,060</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;7.</B></TD>
    <TD>
    <B><I>Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Except for the historical information contained in this
Annual Report, the matters discussed in &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; are forward-looking statements, the accuracy of
which is necessarily subject to risks and uncertainties. Actual
results may differ significantly from the discussion of such
matters in the forward-looking statements. See &#147;Risk
Factors.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>In the discussion of the material changes in our financial
condition and results of operations between the reporting
periods in the consolidated financial statements, management has
sought to identify and, in some cases, quantify, the factors
that contributed to such material changes. However, quantifying
these factors may involve the presentation of numerical measures
that exclude amounts that are included in the most directly
comparable measure calculated and presented in accordance with
accounting principles generally accepted in the United States
(&#147;GAAP&#148;). Management uses this information to assess
material changes in our financial condition and results of
operations and is providing it to assist investors and potential
investors to understand these assessments. In each instance,
such information is presented immediately following (and in
connection with an explanation of) the most directly comparable
financial measure calculated in accordance with GAAP, and
includes other material information necessary to reconcile the
information with the comparable GAAP financial measure.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
STAAR Surgical Company develops, manufactures and distributes
worldwide visual implants and other ophthalmic products to
improve or correct the vision of patients with cataracts,
refractive conditions, and glaucoma. Originally incorporated in
California in 1982, STAAR Surgical Company reincorporated in
Delaware in 1986. Unless the context indicates otherwise
&#147;we,&#148; &#147;us,&#148; the &#147;Company,&#148; and
&#147;STAAR&#148; refer to STAAR Surgical Company and its
consolidated subsidiaries.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>History</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    STAAR developed, patented, and licensed the first foldable
    intraocular lens, or IOL, for cataract surgery. Made of pliable
    material, the foldable IOL permitted surgeons for the first time
    to replace a cataract patient&#146;s natural lens with minimally
    invasive surgery. The foldable IOL quickly became the standard
    of care for cataract surgery throughout the world. STAAR
    introduced its first versions of the lens, made of silicone, in
    1991.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1996, STAAR commenced commercial sales of its
    VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
    ICL (&#147;ICL&#148;) in certain foreign countries, and in 1997,
    the ICL received CE Marking which allowed STAAR to market the
    product in the European Union. Using the unique biocompatible
    properties of the Collamer material, the ICL is implanted in
    front of the patient&#146;s natural lens to treat refractive
    errors, such as myopia (nearsightedness)&nbsp;and hyperopia
    (farsightedness). In 2003, the ICL became the first phakic IOL
    to receive an &#147;approvable&#148; recommendation from the
    FDA&#146;s Ophthalmic Devices Panel. Currently, the ICL is
    approved for sale in 38 countries and has been implanted in
    approximately 40,000 eyes worldwide.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 1998, STAAR introduced the Toric IOL, the only implantable
    lens approved for the treatment of astigmatism. The Toric IOL
    was STAAR&#146;s first venture into the refractive market in the
    United States.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 2000, STAAR introduced an IOL made of our proprietary
    Collamer&#174; lens material, a unique biocompatible polymerized
    collagen. Collamer mimics the clarity and refractive qualities
    of the natural human lens better than acrylic lens materials,
    and is better tolerated by the eye than either silicone or
    acrylic.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 2001, STAAR commenced commercial sales of its
    VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
    Toric ICL (&#147;TICL&#148;) on a limited basis in certain
    foreign countries, and in 2002, the TICL received CE Marking
    which allowed STAAR to market the product in the European Union.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In 2004, STAAR, through its joint venture company, Canon Staar,
    introduced the first preloaded lens injector system in
    international markets. The Preloaded Injector offers surgeons
    improved convenience and reliability. The Preloaded Injector is
    not yet available in the U.S.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Principal Products</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cataract Surgery.</I> The production and sale of IOLs for use
in cataract surgery remains our core business. Our products for
cataract surgery include the following:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Silicone IOLs, in both three-piece and one-piece designs;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Silicone Toric IOLs, used in cataract surgery to treat
    astigmatism;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Collamer&#174; IOLs, in a one-piece design, with a three-piece
    redesigned lens scheduled for introduction in the second quarter
    of 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Preloaded Injector, a three-piece silicone IOL preloaded
    into a single-use disposable injector;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    STAARVISC<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>&nbsp;II,
    a viscoelastic material, which is used as a tissue protective
    lubricant and to maintain the shape of the eye during surgery;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    SonicWAVE<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
    Phacoemulsification System, which is used to remove a cataract
    patient&#146;s cloudy lens and has low energy and high vacuum
    characteristics;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Cruise Control, a disposable filter used to increase safety and
    control during phacoemulsification;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Other auxiliary products for cataract surgery, manufactured by
    others, which strengthen our ability to offer an expanded range
    of procedural products.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales of cataract surgery products accounted for approximately
90% of our total revenues for the year ended December&nbsp;31,
2004 and 92% for the 2003 fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Refractive Surgery.</I> We have used our unique biocompatible
Collamer material to develop and manufacture lenses to treat
refractive disorders such as myopia (near-sightedness),
hyperopia (far-sightedness) and astigmatism. These include the
VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
ICL, or ICL&#174;, and the Toric
VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
TICL, or TICL&#174;. Lenses of this type are generically called
&#147;phakic IOLs&#148; or &#147;phakic implants&#148; because
they work along with the patient&#146;s natural lens, or
<I>phakos</I>, rather than replacing it.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ICL and TICL have not yet been approved for use in the
United States. The ICL is approved for use in the European Union
and in Korea and Canada. The TICL completed enrollment in
clinical trials in the United States in early 2005, and is
approved for use in the European Union.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Glaucoma Surgery.</I> We have developed the
AquaFlow<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Collagen Glaucoma Drainage Device, also referred to as the
AquaFlow Device, as an alternative to current methods of
treating open angle glaucoma. The AquaFlow Device is implanted
in the sclera (the white of the eye), using a minimally invasive
procedure, for the purpose of reducing intraocular pressure.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Significant Factors Affecting Our Business and Recent
    Highlights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Changing Focus of Research and Development.</I> STAAR&#146;s
executive management was completely replaced commencing in 2001.
The new management team assumed control of a company with a long
record of innovation in ophthalmology, but one that had failing
financial results and was expending cash at a significant rate.
STAAR was also embroiled in several legal actions which affected
our cash reserves. The new management implemented significant
restructuring and other cost-cutting measures in 2001 to
conserve our cash resources. Despite these cutbacks, STAAR has
continued to devote a significant amount of its resources to
developing and introducing the ICL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of its significant investment in ICL technology, STAAR
had limited resources for further developing its mature and well
accepted IOL products for cataract treatment. Nevertheless, in
the fourth quarter of 2003, the Company introduced the first
preloaded injector system which was developed by its joint
venture company in Japan, Canon Staar. Management believes,
however, that during the long process of developing and seeking
approval for the ICL, STAAR overall failed to match some of its
competitors&#146; improvements to IOL technology and standard
delivery systems resulting in a loss of U.S.&nbsp;market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As U.S.&nbsp;approval of the ICL appeared more likely in late
2003, and the focus of the ICL project shifted from development
to marketing, management began to devote research and
development resources to making STAAR&#146;s IOL delivery
systems more competitive. In an effort to strengthen the areas
of research and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
development, we separated our research and development function
from our regulatory and compliance function and hired Tom Paul,
PhD as Vice President, Research and Development and James
Farnworth as Vice President, Regulatory and Quality Assurance.
The resources for these efforts were made available by
STAAR&#146;s 2003 private sale of Common Stock, the proceeds of
which were intended to fund the launching and marketing of the
ICL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Warning Letter received from the FDA on December&nbsp;29,
2003 caused STAAR to accelerate its efforts to improve its
quality and regulatory compliance systems. The delay in the
approval of the ICL until compliance issues were resolved
further accelerated the need to invest in improvements to its
IOL delivery systems in order to maintain its core cataract
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the above factors and the receipt of a second
Warning Letter, 2004 saw significant new investments in the
restructuring of STAAR&#146;s quality assurance and regulatory
compliance functions, and in improving IOL technology,
particularly lens delivery systems. While some R&#38;D expense
is directly attributable to the response to the FDA&#146;s
Warning Letters and related audits of STAAR&#146;s facilities,
the bulk of the expense results from systemic changes intended
to produce a permanent improvement in the areas of research and
development and quality assurance and regulatory compliance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described below, the initiative to improve IOL delivery
technology resulted in progress towards the completion of an
improved one-piece Collamer IOL injector, continuous improvement
efforts to cartridge injector components for all lenses and a
redesigned three-piece Collamer IOL injector. The continuous
effort to improve cartridges resulted in supply problems,
particularly in the second quarter of 2004. The timing of this
interruption in supply, which coincided with increased R&#38;D
expenditures and a decline in sales of silicone IOLs,
contributed to the drop in earnings in the second quarter. The
decision to upgrade our three-piece Collamer lens design to
coincide with the introduction of the first dedicated injector
for this lens, coupled with a revised quality system, have
resulted in the combined introduction being delayed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Contraction of Silicone IOL Market.</I> Our market share for
silicone IOLs has steadily decreased over the last several
years, as many surgeons now choose lenses made of acrylic
material rather than silicone for their patients. Management
believes that Collamer lens material will ultimately be
competitive with acrylic, but to date sales of Collamer IOLs
have only partially offset declining sales of silicone IOLs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Redesign of Injectors and Three-Piece Collamer IOL.</I> In an
effort to improve the competitiveness of our lens injection
systems for Collamer IOLs, during 2004 we devoted significant
resources to improving the injector for the one-piece Collamer
IOL and redesigning the three-piece Collamer injector. The
redesign of the three-piece Collamer injector resulted in a
hiatus in three-piece Collamer lens production, which STAAR took
as an opportunity to make minor improvements and enhancements to
the lens design. As a result of these efforts, three-piece
Collamer IOLs had limited availability during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Decline in U.S.&nbsp;Sales of IOLs.</I> During the year ended
December&nbsp;31, 2004, decreasing sales of silicone IOLs were
further intensified by the negative perception in the
marketplace caused by the Warning Letters and recalls described
below, resulting in a 14% decline in U.S.&nbsp;silicone IOL
sales compared to fiscal 2003. The market&#146;s reaction to the
compliance issues, along with an interruption in the supply of
cartridges, also resulted in a decline in sales of Collamer
IOLs. In contrast to recent periods in which improving sales of
Collamer IOLs partially offset declining sales of silicone IOLs,
sales of Collamer IOLs declined 8% in 2004 compared to fiscal
2003, worsening overall results for the U.S.&nbsp;cataract
business and resulting in an overall decline of 7.8% in
U.S.&nbsp;sales in 2004 compared to fiscal 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Growth in International Sales of VISIAN ICLs and Preloaded
Silicone IOLs.</I> The decline in the U.S.&nbsp;cataract
business during 2004 was offset in part by a 37.6% increase in
international sales of the VISIAN ICL and TICL. In addition, our
preloaded silicone lens injector system, newly launched in
international markets, experienced strong sales. This growth in
the business resulted in an increase in international sales of
11.5% in 2004 compared to 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>FDA Warning Letters and the 483 Observations.</I> In 2004, we
received Warning Letters and 483 Observations issued by the FDA,
which outlined deficiencies related to our manufacturing and
quality assurance systems in our Monrovia, California facility.
For a discussion of the Warning Letters and 483
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Observations, see &#147;Business&nbsp;&#151; Regulatory
Matters&nbsp;&#151; Warning Letters and the 483
Observations.&#148; Costs associated with the preparation for
these FDA inspections, and the improvements made to the quality
assurance and regulatory compliance functions, contributed to
the 22% increase in our research and development expenses (which
included regulatory and quality assurance expenses) for fiscal
2004, compared to fiscal 2003. Additionally, the Warning Letters
and 483 Observations have affected the Company&#146;s reputation
in the ophthalmic market and have adversely affected product
sales for fiscal 2004. Until the FDA is satisfied with the
Company&#146;s response, it is unlikely to grant the Company
approval to market the ICL in the United States. See &#147;Risk
Factors&nbsp;&#151; We have received 483 Inspectional
Observations and Warning Letters from the FDA, which until
resolved to the satisfaction of the FDA will continue to delay
approval of the ICL and could limit our existing business in the
United States.&#148; and &#147;&#151;&nbsp;Our success depends
on the ICL, which has not been approved for use in the United
States.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Foreign Currency Fluctuations.</I> Our products are sold in
more than 45 countries. For the year ended December&nbsp;31,
2004, revenues from international operations were 58% of total
revenues. The results of operations and the financial position
of certain of our offshore operations are reported in the
relevant local currencies and then translated into
U.S.&nbsp;dollars at the applicable exchange rates for inclusion
in our consolidated financial statements, exposing us to
currency translation risk. For the year ended December&nbsp;31,
2004, currency exchange rates had a favorable impact on product
sales of approximately $2.2&nbsp;million, and an adverse impact
on our marketing and selling expenses of approximately $777,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Product Recalls.</I> During 2004, we initiated several
voluntary recalls of STAAR manufactured product including 33
lots of IOL cartridges, three lots of injectors, and 529 lenses.
In an action considered a recall, but with no requirement for
product to be returned to us, we issued letters to healthcare
professionals advising them of the potential for a change in
manifest refraction over time in rare cases involving the
single-piece Collamer IOL. Although the direct costs associated
with recalls have not been material, we believe recalls have
adversely affected our revenues from product sales, although the
amount of the impact cannot be determined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross Profit.</I> Our gross profit margin decreased to 50.6%
in fiscal 2004 from 55.2% in fiscal 2003. Among the factors
contributing to the decline in our gross profit margin were
increased expenses associated with manufacturing engineering and
quality control and assurance, an increase in inventory
provisions, higher unit costs due to process changes and reduced
volumes, and a shift in geographical and product mix.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and Development.</I> We spent 12.1% of our revenue
on research and development (which includes regulatory and
quality assurance expenses) for the year ended December&nbsp;31,
2004, and we expect to spend approximately 10% of our revenue on
an annual basis in the future. For the year ended
December&nbsp;31, 2004, research and development expenses
increased 22% compared to 2003. This was primarily due to our
increased investment in injection systems, the redesign of the
Collamer three-piece IOL and injector and preparation for the
FDA audit of our facilities in Nidau, Switzerland and Monrovia,
California, described above. Increases in research and
development expense were partially offset by decreased expenses
at subsidiaries, as all research and development efforts were
consolidated into one location.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Private Placement.</I> Due to the issues raised the
FDA&#146;s Warning Letters and the delay in the FDA approval of
the ICL, we sought additional cash to invest in research and
development, regulatory and compliance, and manufacturing
engineering and to support other operating activities. This was
accomplished through the private placement of
2,000,000&nbsp;shares of our Common Stock on June&nbsp;10, 2004
generating net proceeds of $11.6&nbsp;million during the second
quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cash Flow and the Need for Further Financing.</I> During
fiscal 2004, we used $8.8&nbsp;million in cash for operating
activities and $1.7&nbsp;million for property plant and
equipment, ending fiscal 2004 with $9.3&nbsp;million in cash and
cash equivalents and short-term investments compared to
$7.3&nbsp;million in cash and cash equivalents at the end of
fiscal 2003. We used $2.5&nbsp;million in cash in the fourth
quarter of 2004 and expect to use $3.5&nbsp;million in the first
quarter of 2005. During the fourth quarter of 2004, we took
steps to reduce operating expenses by reducing our reliance on
outside consultants. This reduction in spending is expected to
result in savings of approximately $1.0&nbsp;million annually.
In early February 2005, we implemented additional cost reduction
strategies, including the reduction in size of our direct sales
force, which are expected to result in
</DIV>

<P align="center" style="font-size: 10pt;">18

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<DIV align="left" style="font-size: 10pt;">
another $1.0&nbsp;million in annualized cost savings. We will
continue to pursue other cost savings opportunities with the
goal of realizing a total of $3.0&nbsp;million in annual cost
savings. We do not expect to realize significant benefits from
the cost reductions in the first quarter of 2005 and while the
benefit of the cost reductions will be fully implemented in the
second quarter, a continued decline in U.S.&nbsp;sales could
offset some of the savings for future periods. As a result of
the level of cash available to the Company to fund ongoing
operations as well as new product initiatives, we are exploring
opportunities to raise additional financing. The Company expects
operating losses and negative cash flows to continue until such
time as the issues presented in the FDA Warning Letter dated
December&nbsp;22, 2003 and the 483 Observations are resolved and
the ICL is approved for sale in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Going Concern.</I> Our recurring losses from operations,
negative cash flows, and accumulated deficit raise substantial
doubt about our ability to continue as a going concern. As a
result, we have received a report from our independent
registered public accounting firm regarding our financial
statements for the year ended December&nbsp;31, 2004 that
included an explanatory paragraph stating that there is
substantial doubt about our ability to continue as a going
concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Retention of Morgan Stanley.</I> In December 2004, we engaged
Morgan Stanley to assist our Board of Directors in a review of
the strategic and financial options available to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Litigation.</I> During 2004, multiple class action lawsuits,
which were subsequently consolidated, were filed against the
Company and its Chief Executive Officer on behalf of all persons
who acquired the Company&#146;s securities during various
periods between April&nbsp;3, 2003 and September&nbsp;28, 2004.
See &#147;Item&nbsp;3. Legal Proceedings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Purchase of Minority Interest.</I> In May 2004, we entered
into an agreement for the purchase of the 20% minority interest
of an 80% owned subsidiary, ConceptVision Australia Pty Limited,
in exchange for cash of $768,000 and a long-term note in the
amount of $542,000 due on November&nbsp;1, 2007. The transaction
resulted in the recording of goodwill of $1.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the percentage of total revenues
represented by certain items reflected in the Company&#146;s
income statement for the period indicated and the percentage
increase or decrease in such items over the prior period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Percentage of Total Revenues</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Percentage Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;2,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;3,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004 vs.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003 vs.</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.6</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs and expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.0</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marketing and selling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19.8</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16.4</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax provision (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(87.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57.4</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16.5</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34.8</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">19

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2004 Fiscal Year Compared to 2003 Fiscal Year</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Product sales for the years ended
December&nbsp;31, 2004 (&#147;fiscal 2004&#148;) and
January&nbsp;2, 2004 (&#147;fiscal 2003&#148;) were
$51.7&nbsp;million and $50.4&nbsp;million, respectively. Changes
in currency exchange rates had a favorable impact on product
sales of approximately $2.2&nbsp;million for fiscal 2004. The
primary reason for the decrease in product sales, excluding the
impact of exchange rates, was a decrease in U.S.&nbsp;IOL sales
due to (i)&nbsp;the decline in the silicone IOL market as many
surgeons now choose lenses made of acrylic material,
(ii)&nbsp;the Company&#146;s failure to match competitors&#146;
improvements to IOL technology, (iii)&nbsp;the market response
to the Company&#146;s compliance issues with the FDA and
(iv)&nbsp;the lack of competitive lens delivery systems. The
Company also experienced decreased sales of distributed products
as it concentrates on the distribution of its higher margin
proprietary products. The decreases in U.S.&nbsp;IOL sales and
sales of distributed products were partially offset by increased
sales of the Company&#146;s
Visian<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
ICL (&#147;ICL&#148;) and
Visian<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
TICL (&#147;TICL&#148;) in international markets, sales of the
newly launched preloaded IOLs in international markets, and
increased sales of Cruise Control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total revenues for 2003 included $49,000 in royalties from
technology licenses that terminated in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit margin decreased to 50.6% of
revenues for fiscal 2004, from 55.2% of revenues for fiscal
2003. The most significant impact on gross margins resulted from
increased expenses associated with manufacturing engineering and
quality control and assurance, an increase in inventory
provisions, higher unit costs due to process changes and reduced
volumes, and a shift in geographical and product mix.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Marketing and selling expenses.</I> Marketing and selling
expenses for fiscal 2004 increased $793,000, or 4%, over fiscal
2003. The increase is principally due to fluctuations in foreign
exchange rates which negatively impacted marketing and selling
expenses by $777,000. International sales and marketing expenses
increased due to increased salaries, travel, and commissions.
Headcount in the U.S.&nbsp;increased due to the addition of
direct sales representatives for a newly established sales
territory in the Pacific Northwest Region and as a result of the
addition of proctors-trainers used principally to train
physicians in the ICL implantation technique. These increases
were offset by decreased promotional activities, primarily in
response to the delay in the launch of the
Visian<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
ICL in the U.S. and the cost savings realized from the closure
of a subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and development expenses.</I> Research and
development expenses for the fiscal 2004, increased $1,127,000,
or 22%, compared to fiscal 2003. This was primarily due to our
increased investment in insertion systems, the redesign of the
Collamer three-piece IOL and injector and preparation for the
FDA audit of our facilities in Nidau, Switzerland and Monrovia,
California. Increases in research and development expense were
partially offset by decreased research and development expenses
of subsidiaries, as all research and development efforts were
consolidated into one location.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other charges.</I> Other charges for fiscal 2004 were
$500,000 compared to $390,000 in fiscal 2003. During fiscal
2004, the Company recorded a $500,000 reserve against the notes
of a former director of the Company which total
$1.8&nbsp;million including accrued interest. The notes are
collateralized by 120,000&nbsp;shares of the Company&#146;s
Common Stock and a second mortgage on a home in Florida. The
current value of the collateral is approximately
$1.3&nbsp;million. The amount of the reserve is based on the
difference between the note amount and the collateral value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other expense, net.</I> Other expense for fiscal 2004
decreased $549,000 over fiscal 2003. Included in other expense
for fiscal 2003 was the write-off of a note receivable in the
amount of $430,000. During fiscal 2004, the Company recovered
$200,000 of the note and recorded the cash received as other
income. These increases in other income were partially offset by
losses recorded in 2004 by the Company&#146;s joint venture,
Canon Staar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Income taxes.</I> For each of fiscal 2004 and fiscal 2003,
the Company recorded income taxes of $1.1&nbsp;million primarily
based on the income of the Company&#146;s German subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1995, a subsidiary of the Company obtained retroactively to
1993, a ten-year tax holiday for the payment of federal,
cantonal and municipal income taxes in Switzerland. As such,
Swiss income taxes were not due on the operations of this
subsidiary for the ten-year period that ended on
December&nbsp;31, 2002. For 2004
</DIV>

<P align="center" style="font-size: 10pt;">20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
and 2003, as the tax holiday from Swiss taxes has expired, the
appropriate federal, cantonal and municipal income taxes have
been included in the foreign tax provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Negotiations to extend the Swiss tax holiday are ongoing. The
Swiss tax authorities are considering granting an extension of
the tax holiday with respect to &#147;new&#148; products
including the ICL, the Toric ICL and the AquaFlow Device. If the
tax holiday is extended, it will likely be applied prospectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2003 Fiscal Year Compared to 2002 Fiscal Year</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues for fiscal 2003 increased over the
year ended January&nbsp;3, 2003 (&#147;fiscal 2002&#148;) by
4.6% or $2,210,000 due to the favorable impact of foreign
exchange on sales of other ophthalmic products distributed in
international markets. Excluding the favorable impact of foreign
exchange, sales decreased 2%. The decrease in sales is due
primarily to a decrease in unit volume of the Company&#146;s
single and three-piece silicone IOL, primarily in the
U.S.&nbsp;market, due to a decline in competitiveness of the
Company&#146;s lens delivery systems and believed contraction of
this market segment. The decrease in sales of silicone IOLs was
partially offset by increased sales in the U.S.&nbsp;of Collamer
IOLs (28% increase in volume partially offset by a 6% decrease
in average selling price &#147;ASP&#148;). As a result of the
decreased silicone IOL sales in the U.S., overall sales in that
market declined 3%. Sales of the AquaFlow Device decreased 19%
(15% decrease in volume and a 5% decrease in ASP) over 2002.
This sales decrease was also realized in the U.S. and was the
result of sales and marketing resources which have been diverted
from AquaFlow proctoring and training to surgical evaluations of
silicone lens injection systems and preparation for possible FDA
approval of the ICL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The decreases in single and three-piece silicone IOL and
AquaFlow sales were further offset by increased sales of ICLs,
Toric IOLs, STAARVisc, and Cruise Control. Sales of ICLs in
international markets increased 31% due to a 26% increase in
units and a 4% increase in ASP. Sales of STAARVisc increased 17%
on a 25% increase in volume partially offset by a 7% decrease in
ASP. Sales of Toric IOLs increased 3% due to a 10% increase in
volume partially offset by a 6% decline in ASP. Sales in
international markets decreased 2% (excluding the impact of
exchange) due to a decrease in equipment sales in Australia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit for fiscal 2003 was 55.2% of
revenues compared to fiscal 2002 when it was 50.1% of revenues.
The improvement in gross profit margin is the result of
successfully increasing standard margins across all of our
primary product lines through reduced cost structures resulting
from better yields, efficiencies and volume, and reducing other
costs of sales through better management of excess and obsolete
inventories. Additionally, the Company streamlined its
phacoemulsification manufacturing and repair division, during
the year, resulting in lower costs and improved gross profit for
this product line.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Marketing and selling expenses.</I> Marketing and selling
expenses for fiscal 2003 increased $2.7&nbsp;million, or 16%,
over fiscal 2002. Marketing and selling expense in the
U.S.&nbsp;increased by $1.7&nbsp;million as a result of
marketing and promotional costs which increased, as planned, in
preparation for the launch of the ICL and increased headcount
and associated recruiting costs in preparation for launch of the
ICL in the U.S., the addition of direct sales representatives
for a newly established Pacific Northwest Region, increased
travel expenses and increased salaries. Marketing and selling
expense increased internationally by $1.0&nbsp;million primarily
due to the unfavorable impact of exchange rates partially offset
by reduced expenses of subsidiaries which were closed in 2002
and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other charges.</I> Other charges for fiscal 2003 were
$390,000 compared to fiscal 2002 when they were
$1.5&nbsp;million. The charges in 2003 related to the write-down
of $2.1&nbsp;million (net book value) in capitalized patent
costs in connection with the Company&#146;s routine evaluation
of such costs in accordance with Statement of Financial
Accounting Standards No.&nbsp;144
(&#147;SFAS&nbsp;144&#148;)&nbsp;&#151; &#147;Accounting for the
Impairment of Long-Lived Assets.&#148; The write-down related to
patents acquired in 1999 in the purchase of the Company&#146;s
majority interest in Circuit Tree Medical, a developer and
manufacturer of phacoemulsification equipment, whose ongoing
operations were moved to the Company&#146;s Monrovia, California
facility. The $2.1&nbsp;million charge was partially offset by
the reversal of $1.7&nbsp;million of reserves against former
officers&#146; notes which were paid during the year.
</DIV>

<P align="center" style="font-size: 10pt;">21

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other expense, net.</I> Other expense for fiscal 2003
decreased $148,000 over fiscal 2002. The decreased expense is
due to decreased interest expense and foreign exchange losses
partially offset by decreased interest income from
officers&#146; notes that were paid in full and a $430,000
reserve on a note receivable the Company recorded during the
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Income taxes.</I> Income taxes for fiscal 2003 decreased
$7.7&nbsp;million over the fiscal 2002. The high provision for
income taxes in 2002 was the result of a valuation allowance of
$9.0&nbsp;million recorded against the Company&#146;s deferred
tax assets, partially offset by an income tax benefit of
approximately $1.0&nbsp;million related to a federal carryback
claim filed in 2002. The tax refund from the carryback claim was
received in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1995, a subsidiary of the Company obtained retroactively to
1993, a ten-year tax holiday for the payment of federal,
cantonal and municipal income taxes in Switzerland. As such,
Swiss income taxes were not due on the operations of this
subsidiary for the ten-year period that ended on
December&nbsp;31, 2002. For 2003, as the tax holiday from Swiss
taxes has expired, the appropriate federal, cantonal and
municipal income taxes have been included in the foreign tax
provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Negotiations to extend the Swiss tax holiday are ongoing. The
Swiss tax authorities are considering granting an extension of
the tax holiday with respect to &#147;new&#148; products
including the ICL, the Toric ICL and the AquaFlow Device. If the
tax holiday is extended, it will likely be applied prospectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has funded its activities over the past several
years principally from cash flow generated from operations,
credit facilities provided by institutional domestic and foreign
lenders, the private placement of Common Stock, the repayment of
former officers&#146; notes, and the exercise of stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by (used in) operating activities was
($8.8)&nbsp;million, ($4.1)&nbsp;million, and $0.6&nbsp;million
for fiscal 2004, 2003, and 2002, respectively. For fiscal 2004,
cash used in operations was the result of the net loss, adjusted
for depreciation, amortization, and other non-cash charges, and
increases in working capital&nbsp;&#151; primarily accounts
receivable, inventory, accounts payable and other current
liabilities. For fiscal 2003, cash used in operations was the
result of the net loss, adjusted for depreciation, amortization,
the write-off of patents, and other non-cash charges. For fiscal
2002, cash provided by operations was the result of the net
loss, adjusted for depreciation, amortization, deferred income
taxes, and other non-cash charges, and decreases in working
capital&nbsp;&#151; primarily accounts receivable, inventory,
and accounts payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable was $6.2&nbsp;million in 2004,
$5.7&nbsp;million in 2003, and $6.0&nbsp;million in 2002. The
increase in accounts receivable is due to increased sales, the
write-off of a receivable, reserved in the previous year, of a
distributor that discontinued its operations and a slight
increase in day&#146;s sales outstanding (&#147;DSO&#148;).
Although DSO improved from 45&nbsp;days in 2002 to 39&nbsp;days
in 2003 it increased slightly, as expected, to 41&nbsp;days in
2004. The Company expects DSO to continue in the 40-43&nbsp;day
range for 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventory at year-end 2004, 2003, and 2002 was
$15.1&nbsp;million, $12.8&nbsp;million, and $11.8&nbsp;million,
respectively. Day&#146;s inventory on hand increased from
176&nbsp;days in 2002 to 204&nbsp;days in 2003, and decreased to
186&nbsp;days in 2004. Although inventory units have decreased
overall from 2003 to 2004, the decrease was more than offset by
higher cost inventory that was produced during the year as a
result of lower than planned production volume resulting in an
increase in inventory of $2.3&nbsp;million in 2004 over 2003.
Inventory, at the end of 2003, increased $1.0&nbsp;million over
2002 levels due to the build-up of ICL inventory in preparation
of the launch of the product in the U.S. and increased collamer
IOL inventory based on increased demand for the product. High
cost inventory, built in 2001, was sold during 2002 and replaced
with lower cost inventory resulting in an overall decrease in
inventory at the end of 2002 of $3.5&nbsp;million over 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by (used in) investing activities was
approximately ($7,294,000), $2,151,000, and ($406,000) for
fiscal 2004, 2003, and 2002, respectively. During 2004, the
Company invested $8.0&nbsp;million of the proceeds of a private
placement in taxable auction-rate securities which are
classified as available for sale investments and sold
$2.9&nbsp;million of the investment during the year to provide
cash for operations. Also during 2004, the Company purchased the
20% minority interest in an 80% owned subsidiary in exchange for
cash of $768,000 and a long-term note in the amount of $542,000
due on November&nbsp;1, 2007. The transaction resulted
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt;">
in the recording of goodwill of $1.1&nbsp;million. Proceeds from
the payment of notes of former officers were the primary source
of cash provided by investing activities in 2003. The principal
investments of the Company are in property and equipment.
Investments in property and equipment were $1.7&nbsp;million,
$1.3&nbsp;million, and $874,000 for fiscal 2004, 2003, and 2002,
respectively. The investments are generally made to upgrade and
improve existing production equipment and processes. The Company
expects to spend approximately $1.0&nbsp;million on property and
equipment in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by (used in) financing activities were
approximately $12,547,000, $7,589,000, and ($592,000) for fiscal
2004, 2003, and 2002, respectively. In 2004, cash provided by
financing activities resulted from the receipt of net proceeds
of $11.6&nbsp;million from a private placement of
2.0&nbsp;million shares of the Company&#146;s Common Stock and
$829,000 received from the exercise of stock options. In 2003,
cash provided by financing activities is primarily the result of
net proceeds of $8.9&nbsp;million from a private placement of
the Company&#146;s Common Stock and $1.6&nbsp;million received
from the exercise of stock options. The Company used
approximately $2.1&nbsp;million of the proceeds to pay off the
note to its domestic lender and $812,000 to pay down other notes
payable. In 2002, the Company used $592,000 in cash to pay down
notes payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsidiaries of the Company have foreign credit facilities with
different banks to support operations in Switzerland and Germany.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Swiss credit agreement, as amended on August&nbsp;2, 2004,
provides for borrowings of up to 3.75&nbsp;million Swiss Francs
&#147;CHF&#148; (approximately $3.3&nbsp;million based on the
rate of exchange on December&nbsp;31, 2004), and permits either
fixed-term or current advances. The interest rate on current
advances was 6.0%&nbsp;per annum at both December&nbsp;31, 2004
and January&nbsp;2, 2004, plus a commission rate of 0.25%
payable quarterly. There were no current advances outstanding at
December&nbsp;31, 2004 or January&nbsp;2, 2004. The base
interest rate for fixed-term advances follows Euromarket
conditions for loans of a corresponding term and currency, plus
an individual margin (4.5% at December&nbsp;31, 2004 and 4.2% at
January&nbsp;2, 2004). Borrowings outstanding under the facility
were CHF 3.4&nbsp;million at December&nbsp;31, 2004
(approximately $3.0&nbsp;million based on the rate of exchange
at December&nbsp;31, 2004) and CHF 3.7&nbsp;million at
January&nbsp;2, 2004 (approximately $3.0&nbsp;million based on
the rate of exchange on January&nbsp;2, 2004). The credit
facility is secured by a general assignment of claims and
includes positive and negative covenants which, among other
things, require the maintenance of a minimum level of equity of
at least $12.0&nbsp;million and prevents the Swiss subsidiary
from entering into other secured obligations or guaranteeing the
obligations of others. The agreement also prohibits the sale or
transfer of patents or licenses without the prior consent of the
lender and the terms of intercompany receivables may not exceed
90&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Swiss credit facility is divided into two parts. Part&nbsp;A
provides for borrowings of up to CHF 3.0&nbsp;million
($2.7&nbsp;million based on the exchange rate on
December&nbsp;31, 2004) and does not have a termination date.
Part&nbsp;B presently provides for borrowings of up to CHF
750,000 ($662,000 based on the exchange rate on
December&nbsp;31, 2004). The loan amount under Part&nbsp;B of
the agreement is reduced by CHF 250,000 ($220,000 based on the
exchange rate on December&nbsp;31, 2004) semi-annually.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The German credit agreement, entered into during fiscal 2003,
provides for borrowings of up to 210,000 EUR ($286,000 based on
the exchange rate on December&nbsp;31, 2004), at a rate of
8.5%&nbsp;per annum and renews automatically each November. The
agreement prohibits our German subsidiary from paying dividends
and is personally guaranteed by the president of the subsidiary.
There were no borrowings outstanding as of December&nbsp;31,
2004 or January&nbsp;2, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company was in compliance with the covenants of these credit
facilities as of December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">23

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents the Company&#146;s known
contractual obligations included in the Company&#146;s balance
sheet as of December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>Payments Due by Period</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Less</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>More</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1-3</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3-5</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Than</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>5&nbsp;Years</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>(In thousands)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open purchase orders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table presented above excludes the following information:
(a)&nbsp;interest due on notes payable under the Swiss credit
agreement and (b)&nbsp;employment agreements for the two
previous minority owners of our Australian subsidiary. See
Note&nbsp;9 to the Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to a continued decline in U.S.&nbsp;sales, lower gross
profit, and increased operating expenses the Company sustained
significant losses and negative cash flows from operations for
the year ended December&nbsp;31, 2004. Our current sources of
working capital are not sufficient to satisfy our anticipated
working capital requirements for fiscal 2005. The Company
expects operating losses and negative cash flows to continue
until such time as the issues presented in the FDA Warning
Letter dated December&nbsp;22, 2003 and the
483&nbsp;Observations are resolved and the ICL is approved for
sale in the U.S.&nbsp;To enhance its ability to continue as a
going concern through the year ended December&nbsp;30, 2005, the
Company expects to take the following actions: (1)&nbsp;continue
to aggressively address the issues presented in the FDA Warning
Letter of December&nbsp;22, 2003 and the 483 Observations;
(2)&nbsp;work closely with the independent sales force and
ophthalmic community to reverse the negative perceptions and
sales trends of the Company&#146;s existing lines of business;
(3)&nbsp;further reduce discretionary spending; (4)&nbsp;seek
other sources of funding; and (5)&nbsp;explore other strategic
and financial options. However, there can be no assurance as to
the availability or terms upon which capital might be obtained,
or that the Company will be successful in executing its other
strategies. Accordingly, the Company&#146;s independent
registered public accounting firm has issued an opinion that
substantial doubt exists as to the Company&#146;s ability to
continue as a going concern. The accompanying financial
statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s liquidity requirements arise from the funding
of its working capital needs, primarily inventory,
work-in-process and accounts receivable. The Company&#146;s
primary sources for working capital and capital expenditures are
cash flow from operations, proceeds from the private placement
of Common Stock, proceeds from option exercises, debt repayments
by former officers, and borrowings under the Company&#146;s
foreign bank credit facilities. Any withdrawal of support from
its banks could have serious consequences on the Company&#146;s
liquidity. The Company&#146;s liquidity is dependent, in part,
on customers paying within credit terms, and any extended delays
in payments or changes in credit terms given to major customers
may have an impact on the Company&#146;s cash flow. In addition,
any abnormal product returns or pricing adjustments may also
affect the Company&#146;s short-term funding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The business of the Company is subject to numerous risks and
uncertainties that are beyond its control, including, but not
limited to, those set forth above and in the other reports filed
by the Company with the Securities and Exchange Commission. Such
risks and uncertainties could have a material adverse effect on
the Company&#146;s business, financial condition, operating
results and cash flows. See &#147;Risk Factors.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">24

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. On an on-going basis,
we evaluate our estimates, including those related to revenue
recognition, allowance for doubtful accounts, inventory reserves
and income taxes, among others. Our estimates are based upon
historical experiences, market trends and financial forecasts
and projections, and upon various other assumptions that
management believes to be reasonable under the circumstances and
at that certain point in time. Actual results may differ,
significantly at times, from these estimates under different
assumptions or conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company believes the following represent its critical
accounting policies.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Revenue Recognition and Accounts Receivable.</I> The Company
    recognizes revenue when realized or realizable and earned, which
    is when the following criteria are met: persuasive evidence of
    an arrangement exists; delivery has occurred; the sale price is
    fixed and determinable; and collectibility is reasonably
    assured. We record revenue from product sales when title and
    risk of ownership has been transferred to the customer, which is
    typically upon delivery to the customer. The exception to this
    recognition policy is revenue from IOLs distributed on a
    consignment basis, which is recognized upon notification of
    implantation in a patient.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The Company may bundle the sale of phacoemulsification equipment
    to customers with multi-year agreements to purchase minimum
    quantities of foldable IOLs. The Company recognizes the revenue
    from the equipment based on monthly purchases of minimum
    quantities of IOLs over the life of the agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Revenue from license and technology agreements is recorded as
    income, when earned, according to the terms of the respective
    agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The Company generally permits returns of product if such product
    is returned within the time allowed by the Company, and in good
    condition. Allowances for returns are provided for based upon an
    analysis of our historical patterns of returns matched against
    the sales from which they originated. To date, historical
    product returns have been within the Company&#146;s estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The Company maintains provisions for uncollectible accounts for
    estimated losses resulting from the inability of its customers
    to remit payments. The Company continuously monitors collections
    and payments from its customers and maintains a provision for
    estimated credit losses based upon its historical experience and
    any specific customer collection issues that have been
    identified.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Stock-Based Compensation.</I> We measure stock-based
    compensation for option grants to employees and members of the
    Board of Directors using the intrinsic value method. The fair
    value of each option grant for determining the pro forma impact
    of stock-based compensation expense is estimated on the date of
    grant using the Black-Scholes option-pricing model with weighted
    average assumptions. These assumptions consist of expected
    dividend yield, expected volatility, expected life, and
    risk-free interest rate. If the assumptions used to calculate
    the value of each option grant do not properly reflect future
    activity, the weighted average fair value of our grants could be
    impacted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Income Taxes.</I> We account for income taxes under the asset
    and liability method, whereby deferred tax assets and
    liabilities are recognized for the future tax consequences
    attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their
    respective tax bases. Deferred tax assets and liabilities are
    measured using enacted tax rates expected to apply in the years
    in which those temporary differences are expected to be
    recovered or settled. The effect on deferred tax assets and
    liabilities of a change in tax rates is recognized in income in
    the period that includes the enactment date. We evaluate the
    need to establish a valuation allowance for deferred tax assets
    based upon the amount of existing temporary differences, the
    period in which they are expected to be recovered and expected
    levels of taxable income. A valuation allowance to reduce
    deferred tax</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">25

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    assets is established when it is &#147;more likely than
    not&#148; that some or all of the deferred tax assets will not
    be realized. As of the years ended December&nbsp;31, 2004 and
    January&nbsp;2, 2004, the valuation allowance fully offsets the
    value of deferred tax assets on the Company&#146;s balance sheet.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    We expect to continue to maintain a full valuation allowance on
    future tax benefits until an appropriate level of profitability
    is sustained, or we are able to develop tax strategies that
    would enable us to conclude that it is more likely than not that
    a portion of our deferred tax assets would be realizable.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Inventories.</I> Inventories are valued at the lower of
    first-in, first-out cost or market. On a regular basis, we
    evaluate inventory balances for excess quantities and
    obsolescence by analyzing estimated demand, inventory on hand,
    sales levels and other information. Based on these evaluations,
    inventory balances are reduced, if necessary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Impairment of Long-Lived Assets.</I> Intangible and other
    long lived-assets are reviewed for impairment whenever events
    such as product discontinuance, plant closures, product
    dispositions or other changes in circumstances indicate that the
    carrying amount may not be recoverable. In reviewing for
    impairment, the Company compares the carrying value of such
    assets to the estimated undiscounted future cash flows expected
    from the use of the assets and their eventual disposition. When
    the estimated undiscounted future cash flows are less than their
    carrying amount, an impairment loss is recognized equal to the
    difference between the assets&#146; fair value and their
    carrying value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Goodwill.</I> Goodwill, which has an indefinite life and was
    previously amortized on a straight-line basis over the periods
    benefited, is no longer amortized to earnings, but instead is
    subject to periodic testing for impairment. Intangible assets
    determined to have definite lives are amortized over their
    remaining useful lives. Goodwill of a reporting unit is tested
    for impairment on an annual basis or between annual tests if an
    event occurs or circumstances change that would reduce the fair
    value of a reporting unit below its carrying amount. As provided
    under SFAS&nbsp;No.&nbsp;142, an annual assessment was completed
    during 2004, and no impairment was identified. As of
    December&nbsp;31, 2004, the carrying value of goodwill was
    $7.5&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Patents and Licenses.</I> The Company also has other
    intangible assets consisting of patents and licenses, with a
    gross book value of $11.5&nbsp;million and accumulated
    amortization of $6.1&nbsp;million as of December&nbsp;31, 2004.
    Amortization is computed on the straight-line basis over the
    estimated useful lives, which are based on legal and contractual
    provisions, and range from 10 to 20&nbsp;years.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risk Factors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our short and long-term success is subject to many factors that
are beyond our control. Stockholders and prospective
stockholders in the Company should consider carefully the
following risk factors, in addition to other information
contained in this report. This Annual Report on Form l0-K
contains forward-looking statements, which are subject to a
variety of risks and uncertainties. Our actual results could
differ materially from those anticipated in these
forward-looking statements as a result of various factors,
including those set forth below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risks Related to Our
Business</B>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have a history of losses and anticipate future
    losses.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have reported losses in each of the last three fiscal years
and have an accumulated deficit of $60.5&nbsp;million as of
December&nbsp;31, 2004. There can be no assurance that we will
report net income in any future period.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have only limited working capital.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our current sources of working capital are not sufficient to
satisfy our anticipated working capital requirements for fiscal
2005.
</DIV>

<P align="center" style="font-size: 10pt;">26

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have limited access to credit and could default on the
    terms of our loan agreement.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, we have outstanding balances on
the credit facility of a European subsidiary of approximately
$3.0&nbsp;million, based on exchange rates on that date. If our
losses continue, we risk defaulting on the terms of our credit
facility, particularly as it relates to the maintenance of
minimum levels of equity and the payment of intercompany
receivables.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have only limited access to financing.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of our history of losses, there is substantial doubt
about our ability to obtain adequate financing on satisfactory
terms or at all. Any such financing may involve substantial
dilution to existing shareholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have received a &#147;going concern&#148; opinion from
    our registered public accounting firm, which may negatively
    impact our business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have received a report from our independent registered public
accounting firm regarding our financial statements for the year
ended December&nbsp;31, 2004 stating that there is substantial
doubt about our ability to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to continue to experience negative cash
flows, similar to those of fiscal 2004, until such time as the
issues presented in the FDA Warning Letter of December&nbsp;22,
2003 and the 483 Observations are resolved and the ICL is
approved for sale in the United States. To enhance its ability
to continue as a going concern through the year ended
December&nbsp;30, 2005, the Company expects to take the
following actions: (1)&nbsp;continue to aggressively address the
issues presented in the Warning Letter of December&nbsp;22, 2003
and the 483 Observations; (2)&nbsp;work closely with the
independent sales force and ophthalmic community to reverse the
negative perceptions and sales trends of the Company&#146;s
existing lines of business; (3)&nbsp;further reduce
discretionary spending; (4)&nbsp;seek other sources of funding;
and (5)&nbsp;explore other strategic and financial options.
However, there can be no assurance as to the availability or
terms upon which capital might be obtained or that the Company
will be successful in executing its other strategies. In
addition, doubt about our ability to continue as a going concern
could adversely affect our ability to enter into collaborative
relationships with strategic partners and our ability to sell
our products and could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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    <B><I>We have received 483 Inspectional Observations and Warning
    Letters from the FDA, which until resolved to the satisfaction
    of the FDA will continue to delay approval of the ICL and could
    limit our existing business in the United States.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;29, 2003 and April&nbsp;26, 2004, we received
Warning Letters issued by the FDA. A copy of the first Warning
Letter is attached as Exhibit&nbsp;99.1 to our Current Report on
Form&nbsp;8-K filed with the Securities and Exchange Commission
on January&nbsp;9, 2004, and a copy of the second Warning Letter
is attached as Exhibit&nbsp;99.1 to our Current Report on
Form&nbsp;8-K filed with the Securities and Exchange Commission
on May&nbsp;6, 2004.
</DIV>

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On September&nbsp;23, 2004, the FDA completed a re-audit of our
Monrovia, California manufacturing facility. At the conclusion
of the audit, the FDA issued a form &#147;FDA 483 Inspectional
Observations&#148; described more fully in our Current Report on
Form&nbsp;8-K filed with the Securities and Exchange Commission
on September&nbsp;29, 2004.
</DIV>

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The Warning Letters and 483 Observations have adversely affected
our reputation in the ophthalmic industry and our product sales.
Until the FDA is satisfied with our response, it is unlikely to
grant us approval to market the ICL and the TICL in the United
States and may place restrictions on our domestic lines of
business. See &#147;Business&nbsp;&#151; Regulatory
Matters&nbsp;&#151; Warning Letters and the 483
Observations.&#148;
</DIV>

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    <B><I>Our success depends on the ICL, which has not been
    approved for use in the United States.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have devoted significant resources and management attention
to the development and introduction of our ICL and TICL.
Management believes that the future success of STAAR depends on
the approval of the
</DIV>

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ICL for sale in the United States by the FDA. The ICL is already
approved for use in the European Union and Canada and in parts
of Asia. The TICL is approved for use in the European Union. In
October 2003, the FDA Ophthalmic Devices Panel recommended that
the FDA approve, with conditions, specified uses of the ICL. The
FDA has not yet acted on this recommendation, and it could
decide to reject the Ophthalmic Devices Panel recommendations.
Until the FDA is satisfied with our response to its Warning
Letter dated December&nbsp;22, 2003 and its 483 Observations
issued on September&nbsp;23, 2004, it is unlikely to grant us
approval to market the ICL and the TICL in the United States. If
the FDA does not grant approval of the ICL, or significantly
delays its approval, whether because of the issues contained in
the Warning Letter, the 483 Observations or otherwise, our
prospects for success will be severely diminished.
</DIV>

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    <TD>
    <B><I>Our future success depends on the successful marketing of
    the ICL in the United States market.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Even if it is approved by the FDA for sale in the United States,
the ICL will not reach its full sales potential unless we
successfully plan and execute its launch and marketing in the
United States. This will present new challenges to our sales and
marketing staff and to our independent manufacturers&#146;
representatives. In countries where the ICL has been approved to
date, our sales have grown steadily, but slowly. In the United
States in particular, patients who might benefit from the ICL
have already been exposed to a great deal of advertising and
publicity about laser refractive surgery, but have little if any
awareness of the ICL. As a result, we expect to make extensive
use of advertising and promotion targeted to potential patients
through providers, and to carefully manage the introduction of
the ICL. We do not have significant resources and we cannot
predict whether the particular marketing, advertising and
promotion strategies we pursue will be as successful as we
intend. If we do not successfully market the ICL in the United
States, we will not achieve our planned profitability and growth.
</DIV>

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    <TD>
    <B><I>Our core domestic business has suffered declining sales,
    which sales of new products have only partially offset.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
STAAR pioneered the foldable IOL for use in cataract surgery,
and the foldable silicone IOL is one of our largest sources of
revenue. Since we introduced the product, however, competitors
have introduced IOLs employing a variety of designs and
materials. Over the years these products have gradually taken a
larger share of the IOL market, while the market share for our
IOLs has decreased. In particular, many surgeons now choose
lenses made of acrylic material rather than silicone for their
typical patients. In an effort to maintain our competitive
position we have introduced a new biocompatible lens material,
Collamer, to our line of IOLs. We have also introduced new IOL
designs, such as the Toric IOL, and have continued to improve
and refine the silicone IOL. Sales of these new products,
however, have only partially offset declining sales of our
silicone IOLs.
</DIV>

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    <TD>
    <B><I>We depend on independent manufacturers&#146;
    representatives.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In an effort to manage costs and bring our products to a wider
market, we have entered into long-term agreements with certain
independent regional manufacturers&#146; representatives, who
introduce our products to eye surgeons and provide the training
needed to begin using some of our products. Under our agreements
with these representatives, each receives a commission on all of
our sales within a specified region, including sales on products
we sell into their territories without their assistance. Because
they are independent contractors, we have a limited ability to
manage these representatives or their employees. In addition, a
representative may represent manufacturers other than STAAR,
although not in competing products. We have been relying on the
independent representatives to introduce our new products like
Collamer IOLs, Toric IOLs and the AquaFlow Device, and we will
rely on them, in part, to help introduce the ICL if it is
approved. If our independent manufacturers&#146; representatives
do not devote sufficient resources to marketing our products, or
if they lack the skills or resources to market our new products,
our new products will fail to reach their full sales potential
and sales of our established products could decline.
</DIV>

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    <TD>
    <B><I>Product recalls have been costly and may be so in the
    future.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Medical devices must be manufactured to the highest standards
and tolerances, and often incorporate newly developed
technology. Despite all efforts to achieve the highest level of
quality control and advance testing, from time to time defects
or technical flaws in our products may not come to light until
after the products are sold or consigned. In those
circumstances, we have previously made voluntary recalls of our
products. During 2004, we initiated several voluntary recalls of
STAAR manufactured product including 33 lots of IOL cartridges,
three lots of injectors, and 529 lenses, and in February 2004,
in an action considered a recall but with no requirement for
product to be returned to us, we issued a letter to healthcare
professionals advising them of the potential for a change in
manifest refraction over time in rare cases involving the
single-piece Collamer IOL. Similar recalls could take place
again. Courts or regulators can also impose mandatory recalls on
us, even if we believe our products are safe and effective.
Recalls can result in lost sales of the recalled products
themselves, and can result in further lost sales while
replacement products are manufactured, especially if the
replacements must be redesigned. If recalled products have
already been implanted, we may bear some or all of the cost of
corrective surgery. Recalls may also damage our professional
reputation and the reputation of our products. The inconvenience
caused by recalls and related interruptions in supply, and the
damage to our reputation, could cause some professionals to
discontinue using our products.
</DIV>

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    <TD>
    <B><I>We could experience losses due to product liability
    claims.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have in the past been, and continue to be, subject to product
liability claims. As part of our risk management policy, we have
obtained third-party product liability insurance coverage.
Product liability claims against us may exceed the coverage
limits of our insurance policies or cause us to record a
self-insured loss. A product liability claim in excess of
applicable insurance could have a material adverse effect on our
business, financial condition and results of operations. Even if
any product liability loss is covered by an insurance policy,
these policies have retentions or deductibles that provide that
we will not receive insurance proceeds until the losses incurred
exceed the amount of those retentions or deductibles. To the
extent that any losses are below these retentions or
deductibles, we will be responsible for paying these losses. The
payment of retentions or deductibles for a significant amount of
claims could have a material adverse effect on our business,
financial condition, and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any product liability claim would divert managerial and
financial resources and could harm our reputation with
customers. We cannot assure you that we will not have product
liability claims in the future or that such claims would not
have a material adverse effect on our business.
</DIV>

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    <TD>
    <B><I>We compete with much larger companies.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our competitors, including Alcon, Advanced Medical Optics, and
Bausch&nbsp;&#38; 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 greater resources for
research, development and marketing, and their greater capacity
to offer comprehensive products and equipment to providers, make
it difficult for us to compete. We have lost significant market
share to some of our competitors.
</DIV>

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    <TD>
    <B><I>Most of our products have single-site manufacturing
    approvals, exposing us to risks of business interruption.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We manufacture all of our products either at one of our
facilities in California or at our facility in Switzerland. Most
of our products are approved for manufacturing only at one of
these sites. Before we can use a second manufacturing site for
an implantable device we must obtain the approval of regulatory
authorities. Because this process is expensive we have generally
not sought approvals needed to manufacture at an additional
site. If a natural disaster, fire, or other serious business
interruption struck one of our manufacturing facilities, it
could take a significant amount of time to validate a second
site and replace lost product. We could lose customers to
competitors, thereby reducing sales, profitability and market
share.
</DIV>

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    <TD>
    <B><I>The global nature of our business may result in
    fluctuations and declines in our sales and profits.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our products are sold in more than 45 countries. Revenues from
international operations make up a significant portion of our
total revenue. For the year ended December&nbsp;31, 2004
revenues from international operations were 58% of total
revenues. The results of operations and the financial position
of certain of our offshore operations are reported in the
relevant local currencies and then translated into United States
dollars at the applicable exchange rates for inclusion in our
consolidated financial statements, exposing us to translation
risk. In addition, we are exposed to transaction risk because
some of our expenses are incurred in a different currency from
the currency in which our revenues are received. Our most
significant currency exposures are to the Euro, the Swiss Franc,
and the Australian dollar. The exchange rates between these and
other local currencies and the United States dollar may
fluctuate substantially. We have not attempted to offset our
exposure to these risks by investing in derivatives or engaging
in other hedging transactions. Fluctuations in the value of the
United States dollar against other currencies have not had a
material adverse effect on our operating margins and
profitability in the past.
</DIV>

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Economic, social and political conditions, laws, practices and
local customs vary widely among the countries in which we sell
our products. Our operations outside of the United States are
subject to a number of risks and potential costs, including
lower profit margins, less stringent protection of intellectual
property and 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 to develop
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. We price some of our products in
U.S.&nbsp;dollars, and as a result changes in exchange rates can
make our products more expensive in some offshore markets and
reduce our revenues. Inflation in emerging markets also makes
our products more expensive there and increases the credit risks
to which we are exposed.
</DIV>

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    <TD>
    <B><I>We obtain some of the components of our products from a
    single source, and an interruption in the supply of those
    components could reduce our revenue.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We obtain some of the components for our products from a single
source. For example, only one supplier produces our viscoelastic
product. Although we believe we could find alternate supplies
for any of these components, the loss or interruption of any of
these suppliers could increase costs, reducing our revenue and
profitability, or harm our customer relations by delaying
product deliveries.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Our activities involve hazardous materials and emissions
    and may subject us to environmental liability.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our manufacturing, research and development practices involve
the controlled use of hazardous materials. We are subject to
federal, state, local and foreign laws and regulations in the
various jurisdictions in which we have operations governing the
use, manufacturing, storage, handling and disposal of these
materials and certain waste products. Although we believe that
our safety and environmental procedures for handling and
disposing of these materials comply with legally prescribed
standards, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. Remedial
environmental actions could require us to incur substantial
unexpected costs, which would materially and adversely affect
our results of operations. If we were involved in a major
environmental accident or found to be in substantial
non-compliance with applicable environmental laws, we could be
held liable for damages or penalized with fines.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We risk losses through litigation.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;1, 2004, multiple class action lawsuits
have been filed in the United States District Courts for the
Central District of California and the District of New Mexico
against the Company and its Chief Executive Officer on behalf of
all persons who acquired the Company&#146;s securities during
various periods between April&nbsp;3, 2003 and
September&nbsp;28, 2004. On December&nbsp;15, 2004, the Court
ordered consolidation of the complaints that had been filed in
the United States District Court for the Central District of
California and directed that the plaintiffs file a consolidated
complaint as soon as practicable. The plaintiffs have proposed a
</DIV>

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stipulation pursuant to which they would file a consolidated
amended complaint on or about April&nbsp;29, 2005. The New
Mexico action was voluntarily dismissed on January&nbsp;28,
2005. The lawsuits generally allege that the defendants violated
Sections&nbsp;10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule&nbsp;10b-5 promulgated thereunder, by
issuing false and misleading statements regarding intraocular
lenses and implantable lenses, and failing timely to disclose
significant problems with the lenses, as well as the existence
of serious injuries and/or malfunctions attributable to the
lenses, thereby artificially inflating the price of the
Company&#146;s Common Stock. The plaintiffs generally seek to
recover compensatory damages, including interest. While we
intend to vigorously defend the consolidated lawsuit, the
lawsuit will require significant attention of management and
could result in substantial costs and harm our reputation.
</DIV>

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We are currently party to various claims and legal proceedings
arising out of the normal course of our business. These claims
and legal proceedings relate to contractual rights and
obligations, employment matters, and claims of product
liability. While we do not believe that any of the claims known
to us is likely to have a material adverse effect on our
financial condition or results of operations, new claims or
unexpected results of existing claims could lead to significant
financial harm.
</DIV>

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    <TD>
    <B><I>We depend on key employees.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend on the continued service of our senior management and
other key employees. The loss of a key employee could hurt our
business. We could be particularly hurt if any key employee or
employees went to work for competitors. Our future success
depends on our ability to identify, attract, train and motivate
other highly skilled personnel. Failure to do so may adversely
affect future results.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>We have licensed our technology to our joint venture
    company and have granted certain rights to the partners that
    could be exercised in the event of a change in control of the
    Company.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted to the Canon Staar joint venture, a perpetual
exclusive license under the Licensed Technology (as defined in
the license agreement) to make and sell our products in Japan,
and to make our products in China and to sell such products in
Japan and China. In addition, we have granted Canon Staar a
perpetual non-exclusive license under the Licensed Technology to
make and sell our products in the rest of the world. Subject to
the approval of the Board of Directors of the joint venture,
such licenses may allow the Canon Staar joint venture to sell
products in the rest of the world or grant others the right to
do so. The term &#147;Licensed Technology&#148; includes any
intellectual property owned or controlled by STAAR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the occurrence of certain events, including the merger,
sale of substantially all of the assets or change in the
management of any party to the Canon Staar joint venture, any
joint venture partner may have the right to acquire the first
party&#146;s interest in the joint venture at book value,
without terminating the licenses under the Licensed Technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The joint venture agreement, license agreement and settlement
agreement relating to Canon Staar have been filed or
incorporated by reference to this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risks Related to the Ophthalmic
Products Industry</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>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 our products and our revenue
    may decline.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Constant development of new technologies and techniques,
frequent new product introductions and strong price competition
characterize the ophthalmic industry. The first company to
introduce a new product or technique to market usually gains a
significant competitive advantage. 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, or
incorporate emerging technologies better than our
competitors&#146; products. Sales of our existing products may
decline rapidly if one of our competitors introduces a
substantially superior product, or if we announce a new product
of our own. Similarly, if we fail to make sufficient investments
in research and development or if we focus on technologies that
do not lead to better products, our current and planned products
could be surpassed by more effective or advanced products.
</DIV>

<P align="center" style="font-size: 10pt;">31

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we must manufacture these products economically and
market them successfully by persuading a sufficient number of
eye care professionals to use them. For example, glaucoma
requires ongoing treatment over a long period of time; thus,
many doctors are reluctant to switch a patient to a new
treatment if the patient&#146;s current treatment for glaucoma
remains effective. This has been a challenge in selling our
AquaFlow Device.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Resources devoted to research and development may not
    yield new products that achieve commercial success.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We spent 12.1% of our revenue on research and development
(including regulatory and quality assurance expenses) for the
year ended December&nbsp;31, 2004, and we expect to spend
between 10-11% of our revenue on an annual basis in the future.
Development of new implantable technology, from discovery
through testing and registration to initial product launch, is
expensive and typically takes from three to seven years. Because
of the complexities and uncertainties of ophthalmic research and
development, products we are currently developing may not
complete the development process or obtain the regulatory
approvals required for us to market the products successfully.
It is possible that few or none of the products currently under
development will become commercially successful.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Failure of users of our products to obtain adequate
    reimbursement from third-party payors could limit market
    acceptance of our products, which could affect our sales and
    profits.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of our products, in particular IOLs and products related to
the treatment of glaucoma, are used in procedures that are
typically covered by health insurance, HMO plans, Medicare or
Medicaid. These third-party payors have recently been trying to
contain costs by restricting the types of procedures they
reimburse to those viewed as most cost-effective and capping or
reducing reimbursement rates. These policies could adversely
affect sales and prices of our products. Physicians, hospitals
and other health care providers may be reluctant to purchase our
products if third-party payors do not adequately reimburse them
for the cost of our products and the use of our surgical
equipment. For example:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Major third-party payors for hospital services, including
    government insurance plans, Medicare, Medicaid and private
    health care insurers, have substantially revised their payment
    methodologies during the last few years, resulting in stricter
    standards for reimbursement of hospital and outpatient charges
    for some medical procedures, including cataract procedures and
    IOLs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Numerous legislative proposals have been considered that, if
    enacted, would result in major reforms in the United
    States&#146; health care system, which could have an adverse
    effect on our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Our competitors may reduce the prices of their products, which
    could result in third-party payors favoring our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    There are proposed and existing laws and regulations governing
    maximum product prices and the profitability of companies in the
    health care industry;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    There have been recent initiatives by third-party payors to
    challenge the prices charged for medical products. Reductions in
    the prices for our products in response to these trends could
    reduce our revenues. Moreover, our products may not be covered
    in the future by third-party payors, which would also reduce our
    revenues.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We are subject to extensive government regulation, which
    increases our costs and could prevent us from selling our
    products.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Government regulations and agency oversight apply to every
aspect of our business, including testing, manufacturing, safety
and environmental controls, efficacy, labeling, advertising,
promotion, record keeping, the sale and distribution of products
and samples. We are also subject to government regulation over
the prices we charge and the rebates we offer to customers.
Complying with government regulation substantially increases the
cost of developing, manufacturing and selling our products.
</DIV>

<P align="center" style="font-size: 10pt;">32

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the United States, we must obtain approval from the FDA for
each product that we market. Competing in the ophthalmic
products industry requires us to continuously introduce new or
improved products and processes, and to submit these to the FDA
for approval. Obtaining FDA approval is a long and expensive
process, and approval is never certain. In addition, our
operations in the United States are subject to periodic
inspection by the FDA. Such inspection may result in the FDA
ordering changes in our business practices, which changes could
be costly and have a material adverse effect on our business and
results of operations. In particular, we received Warning
Letters from the FDA on December&nbsp;29, 2003 and
April&nbsp;26, 2004, and FDA 483 Inspectional Observations on
September&nbsp;23, 2004, requiring us to take corrective action
as discussed elsewhere in this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Products distributed outside of the United States are also
subject to government regulation, which may be equally or more
demanding. Our new products could take a significantly longer
time than we expect to gain regulatory approval and may never
gain approval. If a regulatory authority delays approval of a
potentially significant product, the potential sales of the
product and its value to us can be substantially reduced. Even
if the FDA or another regulatory agency approves a product, the
approval may limit the indicated uses of the product, or may
otherwise limit our ability to promote, sell and distribute the
product, or may require post-marketing studies. If we cannot
obtain regulatory approval of our new products, or if the
approval is too narrow, we will not be able to market these
products, which would eliminate or reduce our potential sales
and earnings.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We depend on proprietary technologies, but may not be able
    to protect our intellectual property rights adequately.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have numerous patents and pending patent applications. We
rely on a combination of contractual provisions, confidentiality
procedures and patent, trademark, copyright and trade secrecy
laws to protect the proprietary aspects of our technology. These
legal measures afford limited protection and may not prevent our
competitors from gaining access to our intellectual property and
proprietary information. Any of our patents may be challenged,
invalidated, circumvented or rendered unenforceable.
Furthermore, we cannot be certain that any pending patent
application held by us will result in an issued patent or that
if patents are issued to us, the patents will provide meaningful
protection against competitors or competitive technologies.
Litigation may be necessary to enforce our intellectual property
rights, to protect our trade secrets and to determine the
validity and scope of our proprietary rights. Any litigation
could result in substantial expense, may reduce our profits and
may not adequately protect our intellectual property rights. In
addition, we may be exposed to future litigation by third
parties based on claims that our products infringe their
intellectual property rights. This risk is exacerbated by the
fact that the validity and breadth of claims covered by patents
in our industry may involve complex legal issues that are not
fully resolved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any litigation or claims against us, whether or not successful,
could result in substantial costs and harm our reputation. In
addition, intellectual property litigation or claims could force
us to do one or more of the following: to cease selling or using
any of our products that incorporate the challenged intellectual
property, which would adversely affect our revenue; to negotiate
a license from the holder of the intellectual property right
alleged to have been infringed, which license may not be
available on reasonable terms, if at all; or to redesign our
products to avoid infringing the intellectual property rights of
a third party, which may be costly and time-consuming or
impossible to accomplish.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may not successfully develop and launch replacements
    for our products that lose patent protection.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our products are covered by patents that give us a
degree of market exclusivity during the term of the patent. We
have also earned revenue in the past by licensing some of our
patented technology to other ophthalmic companies. The legal
life of a patent is 20&nbsp;years from application. Patents
covering our products will expire from this year through the
next 20&nbsp;years. Upon patent expiration, our competitors may
introduce products using the same technology. As a result of
this possible increase in competition, we may need to charge a
lower price in order to maintain sales of our products, which
could make these products less profitable. If we fail to develop
and successfully launch new products prior to the expiration of
patents for our existing products, our sales and profits with
respect to those products could decline significantly. We may not
</DIV>

<P align="center" style="font-size: 10pt;">33

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<DIV align="left" style="font-size: 10pt;">
be able to develop and successfully launch more advanced
replacement products before these and other patents expire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risks Related to Ownership of
Our Common Stock</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Certificate of Incorporation could delay or prevent an
    acquisition or sale of our company.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Certificate of Incorporation empowers the Board of Directors
to establish and issue a class of preferred stock, and to
determine the rights, preferences and privileges of the
preferred stock. We also have a Stockholders&#146; Rights Plan,
which could discourage a third party from making an offer to
acquire us. These provisions give the Board of Directors the
ability to deter, discourage or make more difficult a change in
control of our company, even if such a change in control would
be in the interest of a significant number of our stockholders
or if such a change in control would provide our stockholders
with a substantial premium for their shares over the
then-prevailing market price for the common stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our bylaws contain other provisions that could have an
    anti-takeover effect, including the following:</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    only one of the three classes of directors is elected each year;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stockholders have limited ability to remove directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stockholders cannot call a special meeting of
    stockholders;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stockholders must give advance notice to nominate directors.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Anti-takeover provisions of Delaware law could delay or
    prevent an acquisition of our company.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to the anti-takeover provisions of
Section&nbsp;203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. These provisions could
discourage potential acquisition proposals and could delay or
prevent a change in control transaction. They could also have
the effect of discouraging others from making tender offers for
our Common Stock or preventing changes in our management.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Future sales of our Common Stock could reduce our stock
    price.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Board of Directors could issue shares of common or preferred
stock, to raise additional capital or for other corporate
purposes without stockholder approval. In addition, the Board of
Directors could designate and sell a class of preferred stock
with preferential rights over the Common Stock with respect to
dividends or other distributions. Sales of common or preferred
stock could dilute the interest of existing stockholders and
reduce the market price of our Common Stock. Even in the absence
of such sales, the perception among investors that additional
sales of equity securities may take place could reduce the
market price of our Common Stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The market price of our Common Stock is likely to be
    volatile.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our stock price has fluctuated widely, ranging from $2.88 to
$11.26 during the year ended December&nbsp;31, 2004. Our stock
price could continue to experience significant fluctuations in
response to factors such as quarterly variations in operating
results, operating results that vary from the expectations of
securities analysts and investors, changes in financial
estimates, changes in regulatory status, changes in market
valuations of competitors, announcements by us or our
competitors of a material nature, additions or departures of key
personnel, future sales of Common Stock and stock volume
fluctuations. Also, general political and economic conditions
such as recession or interest rate fluctuations may adversely
affect the market price of our stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign Exchange</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 three fiscal years has adversely affected
the Company&#146;s ability to purchase or sell products at
agreed upon prices. No assurance can be given, however, that
adverse currency exchange rate fluctuations will not occur in
the future, which would affect the Company&#146;s operating
results.
</DIV>

<P align="center" style="font-size: 10pt;">34

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inflation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management believes inflation has not had a significant impact
on the Company&#146;s operations during the past three years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, the American Jobs Creation Act of 2004
(&#147;Act&#148;) became effective in the U.S.&nbsp;Two
provisions of the Act may impact the Company&#146;s provision
(benefit) for income taxes in future periods, namely those
related to the qualified production activities deduction
(&#147;QPA&#148;) and foreign earnings repatriation
(&#147;FER&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The QPA will be effective for the Company&#146;s
U.S.&nbsp;federal tax return year beginning after
December&nbsp;31, 2004. In summary, the Act provides for a
percentage deduction of earnings from qualified production
activities, as defined, commencing with an initial deduction of
3&nbsp;percent for tax years beginning after 2009, with the
result that the statutory federal tax rate currently applicable
to the Company&#146;s qualified production activities of
35&nbsp;percent could be reduced initially to 33.95&nbsp;percent
and ultimately to 31.85&nbsp;percent. However, the Act also
provides for the phased elimination of the extraterritorial
income exclusion provision of the Internal Revenue Code, which
have previously resulted in tax benefits to the Company. Due to
the interaction of the law provisions noted above as well as the
particulars of the Company&#146;s tax position, the ultimate
effect of the QPA on the Company&#146;s future provision
(benefit) for income taxes has not been determined at this time.
The Financial Accounting Standards Board (&#147;FASB&#148;)
issued FASB Staff Position FAS&nbsp;109-1, &#147;Application of
FASB Statement No.&nbsp;109, Accounting for Income Taxes, to the
Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004&#148; (&#147;FSP
109-1&#148;), in December 2004. FSP 109-1 requires that tax
benefits resulting from the QPA should be recognized no earlier
than the year in which they are reported in the entity&#146;s
tax return, and that there is to be no revaluation of recorded
deferred tax assets and liabilities as would be the case had
there been a change in an applicable statutory rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FER provision of the Act provides generally for a one-time
85&nbsp;percent dividends received deduction for qualifying
repatriations of foreign earnings to the U.S.&nbsp;Qualified
repatriated funds must be reinvested in the U.S.&nbsp;in certain
qualifying activities and expenditures, as defined by the Act.
In December 2004, the FASB issued FASB Staff Position
FAS&nbsp;109-2, &#147;Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004&#148; (&#147;FSP 109-2&#148;). FSP 109-2
allows additional time for entities potentially impacted by the
FER provision to determine whether any foreign earnings will be
repatriated under this provision. At this time, the Company has
not undertaken an evaluation of the application of the FER
provision and any potential benefits of effecting such
repatriations under this provision. Numerous factors, including
previous actual and deemed repatriations under federal tax law
provisions, are factors impacting the availability of the FER
provision to the Company and its potential benefit to the
Company, if any. The Company intends to examine the issue and
will provide updates in subsequent periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;151,
&#147;Inventory Costs.&#148; This statement amends the guidance
in ARB No.&nbsp;43, Chapter&nbsp;4, &#147;Inventory
Pricing,&#148; to clarify the accounting for abnormal amounts of
idle facility expense, freight, handling costs, and wasted
materials (spoilage). SFAS&nbsp;No.&nbsp;151 requires that those
items be recognized as current-period charges. In addition, this
statement requires that allocation of fixed production overheads
to costs of conversions be based upon the normal capacity of the
production facilities. The provisions of SFAS&nbsp;No.&nbsp;151
are effective for inventory cost incurred in fiscal years
beginning after June&nbsp;15, 2005. As such, the Company is
required to adopt these provisions at the beginning of fiscal
2006. The adoption of this pronouncement is not expected to have
a material effect on the Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123R,
&#147;Share-Based Payment.&#148; This statement is a revision of
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; and supersedes APB Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees,&#148; and its
related implementation guidance. SFAS&nbsp;No.&nbsp;123R
addresses all forms of share-based payment (&#147;SBP&#148;)
awards including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation
rights. Under
</DIV>

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<DIV align="left" style="font-size: 10pt;">
SFAS&nbsp;No.&nbsp;123R, SBP awards result in a cost that will
be measured at fair value on the awards&#146; grant date, based
on the estimated number of awards that are expected to vest.
This statement is effective for public entities as of the first
interim or annual reporting period that begins after
June&nbsp;15, 2005. The Company has not quantified the potential
effect of adoption of SFAS&nbsp;No.&nbsp;123R, but believes that
the adoption of this statement will result in a decrease to
earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchange of Nonmonetary Assets.&#148; This statement
amends Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
The provisions of this statement are effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after
June&nbsp;15, 2005. Earlier application is permitted for
nonmonetary asset exchanges occurring in fiscal periods
beginning after December&nbsp;16, 2004. The provisions of this
statement should be applied prospectively. The adoption of this
pronouncement is not expected to have a material effect on the
Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

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    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;7A.</B></TD>
    <TD>
    <B><I>Quantitative and Qualitative Disclosures About Market
    Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, our operations are exposed to
risks associated with fluctuations in interest rates and foreign
currency exchange rates. The Company manages its risks based on
management&#146;s judgment of the appropriate trade-off between
risk, opportunity and costs. Management does not believe that
these market risks are material to the results of operations or
cash flows of the Company, and, accordingly, does not generally
enter into interest rate or foreign exchange rate hedge
instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest rate risk.</I> Our $3.0&nbsp;million of debt is
based on the borrowings of our international subsidiaries. The
majority of our international borrowings bear an interest rate
that is linked to Euro market conditions and, thus, our interest
rate expense will fluctuate with changes in those conditions. If
interest rates were to increase or decrease by 1% for the year,
our annual interest rate expense would increase or decrease by
approximately $30,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Foreign currency risk.</I> Our international subsidiaries
operate in and are net recipients of currencies other than the
U.S.&nbsp;dollar and, as such, our revenues benefit from a
weaker dollar and are adversely affected by a stronger dollar
relative to major currencies worldwide (primarily, the Euro and
Australian dollar). Accordingly, changes in exchange rates, and
particularly the strengthening of the US dollar, may negatively
affect our consolidated sales and gross profit as expressed in
U.S.&nbsp;dollars. Additionally, as of December&nbsp;31, 2004,
all of our debt is denominated in Swiss Francs and as such, we
are subject to fluctuations of the Swiss Franc as compared to
the U.S.&nbsp;dollar in converting the value of the debt to
U.S.&nbsp;dollars. The U.S.&nbsp;dollar value of the debt is
increased by a weaker dollar and decreased by a stronger dollar
relative to the Swiss Franc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, we also face risks that are
either non-financial or non-quantifiable. Such risks include
those set forth in &#147;Item&nbsp;7. Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Risk Factors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

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<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;8.</B></TD>
    <TD>
    <B><I>Financial Statements and Supplementary Data</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Statements and the Report of Independent Registered
Public Accounting Firm are filed with this Annual Report on
Form&nbsp;10-K in a separate section following Part&nbsp;IV, as
shown on the index under Item&nbsp;15 of this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

<!-- link1 "Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure" -->

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<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9.</B></TD>
    <TD>
    <B><I>Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "Item 9A. Controls and Procedures" -->

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9A.</B></TD>
    <TD>
    <B><I>Controls and Procedures</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Attached as exhibits to this Form&nbsp;10-K are certifications
of STAAR&#146;s Chief Executive Officer (&#147;CEO&#148;) and
Chief Financial Officer (&#147;CFO&#148;), which are required in
accordance with Rule&nbsp;13a-14(a) of the
</DIV>

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Securities Exchange Act of 1934, as amended (the &#147;Exchange
Act&#148;). This &#147;Controls and Procedures&#148; section
includes information concerning the controls and controls
evaluation referred to in the certifications. The section
following Part&nbsp;IV of this Form&nbsp;10-K sets forth the
report of BDO Seidman LLP, our independent registered public
accounting firm, regarding its audit of STAAR&#146;s
consolidated financial statements included in this
Form&nbsp;10-K and its attestation of management&#146;s
assessment of internal control over financial reporting set
forth below in this section. This section should be read in
conjunction with the certifications and the BDO Seidman report
for a more complete understanding of the topics presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Evaluation of Disclosure Controls and Procedures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Chief Executive Officer, David Bailey, and
Chief Financial Officer, John Bily, with the participation of
the Company&#146;s management, carried out an evaluation of the
effectiveness of the Company&#146;s disclosure controls and
procedures pursuant to Exchange Act Rule&nbsp;13a-15(b). Based
upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer believe that, as of the end of the period
covered by this report, the Company&#146;s disclosure controls
and procedures are effective in making known to them material
information relating to the Company (including its consolidated
subsidiaries) required to be included in this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in Internal Control over Financial Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There was no change during the fiscal quarter ended
December&nbsp;31, 2004, known to the Chief Executive Officer or
the Chief Financial Officer, that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management Report on Internal Control Over Financial
Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Exchange Act Rule&nbsp;13a-15(f).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management assessed the effectiveness of our internal control
over financial reporting as of December&nbsp;31, 2004, the end
of our fiscal year. Management based its assessment on criteria
established in Internal Control&#150;Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on this assessment, management has concluded that our
internal control over financial reporting was effective as of
the end of the fiscal year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BDO Seidman LLP, the independent registered public accounting
firm that audited and reported on the consolidated financial
statements of the Company contained in this report, has issued
an attestation report on management&#146;s assessment of our
internal control over financial reporting, which follows
Part&nbsp;IV of this Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inherent Limitations on Effectiveness of Controls</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s management, including the CEO and CFO, does
not expect that our Disclosure Controls or our internal control
over financial reporting will prevent or detect all error and
all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that the control system&#146;s objectives will be met. The
design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that misstatements due
to error or fraud will not occur or that all control issues and
instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Controls can also
be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in
part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed
</DIV>

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<DIV align="left" style="font-size: 10pt;">
in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with policies or
procedures.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

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    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9B.</B></TD>
    <TD>
    <B><I>Other Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

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<B>PART&nbsp;III</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;10.</B></TD>
    <TD>
    <B><I>Directors and Executive Officers of the Registrant</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in Item&nbsp;10 is incorporated herein by
reference to the section entitled
&#147;Proposal&nbsp;One&nbsp;&#151; Election of Directors&#148;
contained in the proxy statement (the &#147;Proxy
Statement&#148;) for the 2005 annual meeting of stockholders to
be filed with the Securities and Exchange Commission within
120&nbsp;days of the close of the fiscal year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "Item 11. Executive Compensation" -->

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;11.</B></TD>
    <TD>
    <B><I>Executive Compensation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in Item&nbsp;11 is incorporated herein by
reference to the section entitled
&#147;Proposal&nbsp;One&nbsp;&#151; Election of Directors&#148;
contained in the Proxy Statement.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" -->

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;12.</B></TD>
    <TD>
    <B><I>Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in Item&nbsp;12 is incorporated herein by
reference to the section entitled &#147;General
Information&nbsp;&#151; Security Ownership of Certain Beneficial
Owners and Management&#148; and
&#147;Proposal&nbsp;One&nbsp;&#151; Election of Directors&#148;
contained in the Proxy Statement.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "Item 13. Certain Relationships and Related Transactions" -->

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Certain Relationships and Related Transactions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in Item&nbsp;13 is incorporated herein by
reference to the section entitled
&#147;Proposal&nbsp;One&nbsp;&#151; Election of Directors&#148;
contained in the Proxy Statement.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Principal Accountant Fees and Services</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in Item&nbsp;14 is incorporated herein by
reference to the section entitled
&#147;Proposal&nbsp;Two&nbsp;&#151; Ratification of the
Appointment of Independent Registered Public Accounting
Firm&#148; contained in the Proxy Statement.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

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<B>PART&nbsp;IV</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "Item 15. Exhibits and Financial Statement Schedules" -->

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    <TD width="91%"></TD>
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<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules</I></B></TD>
</TR>

</TABLE>

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    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Page</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
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<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Financial statements required by Item&nbsp;15 of this form are
    filed as a separate part of this report following Part&nbsp;IV</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#301'>Report of Independent Registered Public
    Accounting Firm</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-2</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Report of Independent Registered Public Accounting Firm</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-3</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#302'>Consolidated Balance Sheets at
    December&nbsp;31, 2004 and January&nbsp;2, 2004</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-4</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#303'>Consolidated Statements of Operations for
    the years ended December&nbsp;31, 2004, January&nbsp;2, 2004,
    and January&nbsp;3, 2003</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-5</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#304'>Consolidated Statements of Changes in
    Stockholders&#146; Equity for the years ended December&nbsp;31,
    2004, January&nbsp;2, 2004, and January&nbsp;3, 2003</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-6</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#305'>Consolidated Statements of Cash Flows for
    the years ended December&nbsp;31, 2004, January&nbsp;2, 2004,
    and January&nbsp;3, 2003</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-7</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#306'>Notes to Consolidated Financial
    Statements</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-8</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Schedules required by Regulation&nbsp;S-X are filed as an
    exhibit to this report:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A HREF='#307'>I.
    Independent Registered Public Accounting Firm Report on
    Schedule</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-31</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A HREF='#308'>II.
    Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying Accounts
    and Reserves</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-32</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Schedules not listed above have been omitted because the
information required to be set forth therein is not applicable
or is shown in the financial statements and the notes thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(3)&nbsp;<I>Exhibits</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation, as amended(8)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    By-laws, as amended(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1991 Stock Option Plan of STAAR Surgical Company(2)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1995 STAAR Surgical Company Consultant Stock Plan(3)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1996 STAAR Surgical Company Non-Qualified Stock Plan(4)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stockholders&#146; Rights Plan, dated effective April&nbsp;20,
    1995(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1998 STAAR Surgical Company Stock Plan, adopted April&nbsp;17,
    1998(5)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Certificate for Common Stock, par value $0.01&nbsp;per
    share(14)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2003 Omnibus Equity Incentive Plan and form of Option Grant and
    Stock Option Agreement(13)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Stockholders&#146; Rights Plan, dated
    April&nbsp;21, 2003(15)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated June&nbsp;4, 2004(19)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Joint Venture Agreement, dated May&nbsp;23, 1988, among the
    Company, Canon Sales Co, Inc. and Canon, Inc., and
    Exhibit&nbsp;B, Technical Assistance and License Agreement,
    dated September&nbsp;6, 1988, between the Company and Canon
    Staar Co., Inc.(7)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Settlement Agreement among the Company, Canon, Inc., Canon Sales
    Co., Inc., and Canon Staar Company, Inc. dated
    September&nbsp;28, 2001(10)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Lease dated September&nbsp;1, 1993, between the
    Company and FKT Associates and First through Third Additions
    Thereto(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Indenture of Lease dated September&nbsp;21,
    1998, between the Company and FKT Associates(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Indenture of Lease dated October&nbsp;13,
    2003, by and between the Company and FKT Associates(17)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Lease dated October&nbsp;20, 1983, between the
    Company and Dale E. Turner and Francis R. Turner and First
    through Fifth Additions Thereto(6)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Sixth Lease Addition to Indenture of Lease dated
    October&nbsp;13, 2003, by and between the Company and Turner
    Trust&nbsp;UTD Dale E. Turner March&nbsp;28, 1984(17)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Standard Industrial/ Commercial Multi-Tenant Lease-Gross dated
    April&nbsp;5, 2000, entered into between the Company and Kilroy
    Realty, L.P.(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to Standard Industrial/ Commercial
    Multi-Tenant Lease dated January&nbsp;3, 2003, by and between
    the Company and California Rosen(17)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement dated July&nbsp;12, 1994, between STAAR Surgical
    AG and Calderari and Schwab AG/ SA**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplement #1 dated July&nbsp;10, 1995, to the Lease Agreement
    of July&nbsp;12, 1994, between STAAR Surgical AG and Calderari
    and Schwab AG/SA**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplement #2 dated August&nbsp;2, 1999, to the Lease Agreement
    of July&nbsp;12, 1994, between STAAR Surgical AG and Calderari
    and Schwab AG/SA**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Commercial Lease Agreement dated November&nbsp;29, 2000, between
    Domilens GmbH and DePfa Deutsche Pfandbriefbank&nbsp;AG**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated May&nbsp;24, 1995, with Eye
    Microsurgery Intersectoral Research and Technology Complex(16)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated January&nbsp;1, 1996, with Eye
    Microsurgery Intersectoral Research and Technology Complex(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note dated June&nbsp;16, 1999, from Peter J. Utrata
    to the Company(8)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Pledge Agreement dated June&nbsp;16, 1999, by Peter J.
    Utrata in favor of the Company(8)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note dated June&nbsp;2, 2000, from Peter J. Utrata to
    the Company(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Pledge Agreement dated June&nbsp;2, 2000, between the
    Company and Peter J. Utrata(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mortgage dated July&nbsp;16, 2004, between the Company and Peter
    J. Utrata**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Forbearance Agreement dated July&nbsp;22, 2004, between the
    Company and Peter J. Utrata**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated December&nbsp;19, 2000, between the
    Company and David Bailey(9)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Plan and Agreement for Chief Executive Officer
    dated November&nbsp;13, 2001, between the Company and David
    Bailey(10)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated August&nbsp;9, 2001, between the
    Company and David Bailey**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated January&nbsp;2, 2002, between the
    Company and David Bailey**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated February&nbsp;14, 2003, between
    the Company and David Bailey**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Stock Option Certificate dated
    February&nbsp;12, 2003, between the Company and David Bailey**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated May&nbsp;9, 2000, between the
    Company and Volker Anhaeusser**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated May&nbsp;31 2000, between the
    Company and Volker Anhaeusser**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated May&nbsp;30, 2002, between the
    Company and Volker Anhaeusser**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Agreement dated November&nbsp;13, 2001, between the
    Company and David R. Morrison(10)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated February&nbsp;13, 2003, between
    the Company and Donald Duffy**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated January&nbsp;3, 2002, between the
    Company and John Bily(11)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated January&nbsp;18, 2002, between
    the Company and John C. Bily**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Stock Option Certificate dated
    February&nbsp;12, 2003, between the Company and John C. Bily**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Offer of Employment dated July&nbsp;12, 2002, from the Company
    to Nick Curtis**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Offer of Employment dated February&nbsp;14, 2003
    from the Company to Nick Curtis**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Certificate dated February&nbsp;14, 2003, between
    the Company and Nicholas Curtis**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Stock Option Certificate dated
    February&nbsp;12, 2003, between the Company and Nicholas Curtis**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated March&nbsp;18, 2005, between the
    Company and Tom Paul**</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated March&nbsp;18, 2005, between the
    Company and James Farnworth**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Indemnification Agreement between the Company and
    certain officers and directors**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Managing Director&#146;s Contract of Employment, dated
    June&nbsp;22, 1993, between Domilens and Guenther Roepstorff**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplementary Agreement&nbsp;#1 to the Managing Director&#146;s
    Contract of Employment, dated November&nbsp;25, 1997, between
    STAAR Surgical AG and Guenther Roepstorff**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplementary Agreement&nbsp;#2 to the Managing Director&#146;s
    Contract of Employment dated January&nbsp;1, 1998, between
    Domilens and Guenther Roepstorff**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplementary Agreement&nbsp;#3 to the Managing Director&#146;s
    Contract of Employment dated January&nbsp;1, 2003, between
    Domilens and Guenther Roepstorff**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated May&nbsp;5, 2004, between the
    ConceptVision Australia Pty Limited ACN 006 391 928 and Philip
    Butler Stoney(18)&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated May&nbsp;5, 2004, between the
    ConceptVision Australia Pty Limited ACN 006 391 928 and Robert
    William Mitchell(18)&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>#10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Assignment Agreement of the Share Capital of Domilens Vertrieb
    fuer medizinische Produkte GmbH dated January&nbsp;3, 2003,
    between STAAR Surgical AG and Guenther Roepstorff(12)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Assignment Agreement of the Share Capital of ConceptVision
    Australia Pty Limited ACN 006 391 928, dated May&nbsp;5, 2004,
    between the Company and Philip Butler Stoney and Robert William
    Mitchell(18)&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Addendum to the Assignment Agreement of the Share Capital of
    ConceptVision Australia Pty Limited ACN 006 391 928, dated
    May&nbsp;5, 2004, between the Company and Philip Butler Stoney
    and Robert William Mitchell(18)&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Purchase Agreement dated June&nbsp;11, 2003, entered
    into between the Company and Crestwood Capital Partners, LP;
    Crestwood Capital International, Ltd; Crestwood Capital Partners
    II, LP; RS Emerging Growth Pacific Partners Master Fund Unit
    Trust; RS Emerging Growth Pacific Partners LP, Prism Partners I,
    LP; Prism Partners II Offshore Fund; Prism Partners Offshore
    Fund; Vertical Ventures Investments, LLC; Smithfield Fiduciary,
    LLC, individually(21)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Purchase Agreement dated June&nbsp;4, 2004, between the
    Company and Andesite Management, L.P., Colonial Fund&nbsp;LLC,
    Domain Public Equity Partners, L.P., Fortis L Fund&nbsp;Equity
    Pharma World, Fortis L Fund&nbsp;Opportunity World, Heartland
    Group, Inc., ProMed Offshore Fund, Ltd., ProMed Partners, L.P.,
    ProMed Partners&nbsp;II, L.P., Sagitta Asset Management Ltd., SF
    Capital Partners, Ltd., Special Situations Cayman
    Fund&nbsp;L.P., Special Situations Fund&nbsp;III, L.P., Special
    Situations Private Equity Fund, L.P., Ursus Capital, L.P., Ursus
    Offshore, Ltd., Zeke, LP(19)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.54</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Credit Agreement dated August&nbsp;2, 2004, between STAAR
    Surgical AG and UBS AG(20)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.55</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement effective January&nbsp;13, 2003, between
    Domilens Gmbh and Postbank(12)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10</TD>
    <TD align="left" valign="top" nowrap>.56</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note dated March&nbsp;29, 2002, between the Company
    and Pollet&nbsp;&#38; Richardson**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;#10</TD>
    <TD align="left" valign="top" nowrap>.57</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Agreement dated March&nbsp;29, 2002, between the
    Company and Pollet&nbsp;&#38; Richardson(12)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Code of Ethics**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Significant Subsidiaries**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of BDO Seidman, LLP**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification Pursuant to Rule&nbsp;13a-14(a) of the Securities
    Exchange Act of 1934, Adopted Pursuant to Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification Pursuant to Rule&nbsp;13a-14(a) of the Securities
    Exchange Act of 1934, Adopted Pursuant to Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification Pursuant to 18&nbsp;U.S.C. Section&nbsp;1350,
    Adopted Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
    of 2002**</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="5%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>**</TD>
    <TD align="left">
    Filed herewith</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="3%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#134;</TD>
    <TD align="left">
    Management contract or compensatory plan or arrangement</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>#</TD>
    <TD align="left">
    All schedules and or exhibits have been omitted. Any omitted
    schedule or exhibit will be furnished supplementally to the
    Securities and Exchange Commission upon request</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Registration
    Statement on Form&nbsp;S-8, File No.&nbsp;033-76404, as filed on
    March&nbsp;11, 1994.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Registration
    Statement on Form&nbsp;S-8, File No.&nbsp;033-60241, as filed on
    June&nbsp;15, 1995.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K, for the year ended January&nbsp;3, 1997, as
    filed on April&nbsp;2, 1997.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Proxy
    Statement, for its Annual Meeting of Stockholders held on
    May&nbsp;29, 1998, as filed on May&nbsp;1, 1998.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K, for the year ended January&nbsp;2, 1998, as
    filed on April&nbsp;1, 1998.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K, for the year ended January&nbsp;1, 1999, as
    filed on April&nbsp;1, 1999.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K, for the year ended December&nbsp;31, 1999, as
    filed on March&nbsp;30, 2000.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K, for the year ended December&nbsp;29, 2000, as
    filed on March&nbsp;29, 2001.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Annual Report on
    Form&nbsp;10-K, for the year ended December&nbsp;28, 2001, as
    filed on March&nbsp;28, 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Quarterly
    Report, for the period ended June&nbsp;28, 2002, as filed on
    August&nbsp;12, 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Annual Report on
    Form&nbsp;10-K, for the year ended January&nbsp;3, 2003, as
    filed on April&nbsp;3, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Proxy
    Statement, for its Annual Meeting of Stockholders held on
    June&nbsp;18, 2003, as filed on May&nbsp;19, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to Exhibit&nbsp;4.1 to Amendment
    No.&nbsp;1 to the Company&#146;s Registration Statement on
    Form&nbsp;8-A/ A, as filed on April&nbsp;18, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Quarterly
    Report, for the period ended April&nbsp;4, 2003, as filed on
    May&nbsp;19, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference from the Company&#146;s Annual Report
    on Form&nbsp;10-K/ A, for the year ended December&nbsp;29, 2000,
    as filed on May&nbsp;9, 2001.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(17)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Annual Report on
    Form&nbsp;10-K, for the year ended January&nbsp;2, 2004, as
    filed on March&nbsp;17, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(18)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Quarterly
    Report, for the period ended April&nbsp;2, 2004, as filed on
    May&nbsp;12, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(19)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Current Report
    on Form&nbsp;8-K, as filed on June&nbsp;9, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(20)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Quarterly
    Report, for the period ended October&nbsp;1, 2004, as filed on
    November&nbsp;10, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(21)&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Company&#146;s Current Report
    on Form&nbsp;8-K, as filed on June&nbsp;13, 2003.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">42

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<DIV align="left" style="font-size: 10pt;">
<A name='123'></A>
</DIV>

<!-- link1 "SIGNATURES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Annual Report on Form&nbsp;&nbsp;10-K to be signed on its
behalf by the undersigned, thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>STAAR SURGICAL COMPANY</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Bailey
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    David Bailey</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>President and Chief Executive Officer</I></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>(principal executive officer)</I></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Date: March&nbsp;30, 2005</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Bailey<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>David
    Bailey</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President, Chief Executive Officer, Chairman and Director
    (principal executive officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">John Bily<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>John
    Bily</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chief Financial Officer (principal accounting and financial
    officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Schlotterbeck<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>David
    Schlotterbeck</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Donald Duffy<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Donald
    Duffy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Morrison<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>David
    Morrison</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Volker Anhaeusser<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Volker
    Anhaeusser</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    March&nbsp;30, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">43

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<DIV align="center" style="font-size: 10pt; margin-top: 27pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>YEARS ENDED DECEMBER&nbsp;31, 2004,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>JANUARY&nbsp;2, 2004 AND JANUARY&nbsp;3, 2003</B>
</DIV>

<P align="center" style="font-size: 10pt;">F-1

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='301'></A>
</DIV>

<!-- link1 "STAAR SURGICAL COMPANY AND SUBSIDIARIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
STAAR Surgical Company
</DIV>

<DIV align="left" style="font-size: 10pt;">
Monrovia, CA
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
STAAR Surgical Company and subsidiaries as of December&nbsp;31,
2004 and January&nbsp;2, 2004, and the related consolidated
statements of operations, stockholders&#146; equity, and cash
flows for each of the three years in the period ended
December&nbsp;31, 2004. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of STAAR Surgical Company and
subsidiaries as of December&nbsp;31, 2004 and January&nbsp;2,
2004, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
December&nbsp;31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note&nbsp;1 to the financial statements, the
Company&#146;s recurring losses from operations, negative cash
flows, and accumulated deficit raise substantial doubt about its
ability to continue as a going concern. Management&#146;s plans
concerning these matters are also described in Note&nbsp;1. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have audited, in accordance with standards of the Public
Company Accounting Oversight Board (United States), the
effectiveness of the Company&#146;s internal control over
financial reporting as of December&nbsp;31, 2004, based on
criteria established in Internal Control&nbsp;&#151; Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March&nbsp;16, 2005
expressed an unqualified opinion thereon.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">BDO Seidman,
    LLP</FONT> </TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Los Angeles, California
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;16, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-2

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
STAAR Surgical Company
</DIV>

<DIV align="left" style="font-size: 10pt;">
Monrovia, CA
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited management&#146;s assessment, included in the
accompanying Management&#146;s Report on Internal Control over
Financial Reporting included in Item&nbsp;9A,<I> </I>that STAAR
Surgical Company maintained effective internal control over
financial reporting as of December&nbsp;31, 2004, based on
criteria established in Internal Control&nbsp;&#151; Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). STAAR Surgical Company&#146;s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management&#146;s
assessment and an opinion on the effectiveness of the
company&#146;s internal control over financial reporting based
on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management&#146;s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A company&#146;s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company&#146;s
internal control over financial reporting includes those
policies and procedures that (1)&nbsp;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)&nbsp;provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3)&nbsp;provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, management&#146;s assessment that STAAR Surgical
Company maintained effective internal control over financial
reporting as of December&nbsp;31, 2004, is fairly stated, in all
material respects, based on criteria established in COSO. Also
in our opinion, STAAR Surgical Company maintained, in all
material respects, effective internal control over financial
reporting as of December&nbsp;31, 2004, based on criteria
established in COSO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of STAAR Surgical Company as of
December&nbsp;31, 2004 and January&nbsp;2, 2004 and the related
consolidated statements of income, changes in stockholders&#146;
equity, and cash flows for each of the three years in the period
ended December&nbsp;31, 2004, and our report dated
March&nbsp;16, 2005 expressed substantial doubt about the
Company&#146;s ability to continue as a going concern.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">BDO Seidman,
    LLP</FONT> </TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Los Angeles, California
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;16, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-3

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='302'></A>
</DIV>

<!-- link1 "CONSOLIDATED BALANCE SHEETS" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004 and January&nbsp;2, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands, except</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>par value amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,286</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, less allowance for doubtful accounts and
    sales returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,675</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,802</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaids, deposits and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,001</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,638</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patents and licenses, net of accumulated amortization of $6,089
    and $5,583</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,059</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, $.01&nbsp;par value, 10,000&nbsp;shares
    authorized, none issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01&nbsp;par value; 30,000&nbsp;shares
    authorized; issued and outstanding 20,664 and 18,403&nbsp;shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60,478</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,146</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable from officers and directors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='303'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty and other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,959</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marketing and selling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,262</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,158</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,113</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity in earnings of joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(322</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(579</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(603</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(637</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss before income taxes and minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,162</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='304'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; EQUITY" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146;
EQUITY</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock Par</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-In</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Deficit)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Receivable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, at December&nbsp;28, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,728</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24,011</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued upon exercise of options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued as payment for services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued pursuant to employment contract</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based consultant expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock acquired in satisfaction of note receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(243</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(970</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reversal of notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, at January&nbsp;3, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,789</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,695</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued upon exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued as payment for services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based consultant expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net proceeds from private placement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reversal of notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,796</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,796</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>683</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, at January&nbsp;2, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,146</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued upon exercise of options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued as payment for services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based consultant expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>231</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net proceeds from private placement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,646</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest on notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>98,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(60,478</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 21pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of intangibles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of patents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity in earnings of joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based consultant expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock issued for services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash restructuring and inventory write-down</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net change in notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,364</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(124</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in working capital:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(542</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,041</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaids, deposits and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(232</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,804</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,146</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,705</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,309</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of patents and licenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sale of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of minority interest in subsidiary</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(768</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes receivable and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(91</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends received from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(406</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net borrowings (payments)&nbsp;under notes payable and long-term
    debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,912</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the exercise of stock options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net proceeds from private placement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes on cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,099</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>853</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-7

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='306'></A>
</DIV>

<!-- link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004 and January&nbsp;2,
2004</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;1&nbsp;&#151;</B></TD>
    <TD>
    <B>Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Organization and Description of Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
STAAR Surgical Company (the &#147;Company&#148;), a Delaware
corporation, was incorporated in 1982 for the purpose of
developing, producing, and marketing intraocular lenses
(&#147;IOLs&#148;) and other products for minimally invasive
ophthalmic surgery. The Company has evolved to become a
developer, manufacturer and global distributor of products used
by ophthalmologists and other eye care professionals to improve
or correct vision in patients with cataracts, refractive
conditions and glaucoma. Products sold by the Company for use in
restoring vision adversely affected by cataracts include its
line of silicone and Collamer IOLs, the Preloaded Injector, a
three-piece silicone IOL preloaded into a single-use disposable
injector, the
SonicWAVE<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Phacoemulsification System,
STAARVISC<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>&nbsp;II,
a viscoelastic material, and Cruise Control, a disposable filter
which allows for a significantly faster, cleaner
phacoemulsification procedure and is compatible with all
phacoemulsification equipment utilizing Venturi and peristaltic
pump technologies. Products sold by the Company for use in
correcting refractive conditions such as myopia
(near-sightedness), hyperopia (far-sightedness) and astigmatism
include the
VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
ICL (&#147;ICL&#148;) and the
VISIAN<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
TICL (&#147;TICL&#148;). The Company&#146;s
AquaFlow<SUP style="font-size: 85%; vertical-align: text-top"><FONT style="font-variant:SMALL-CAPS">tm</FONT></SUP>
Collagen Glaucoma Drainage Device is surgically implanted in the
outer tissues of the eye to maintain a space that allows
increased drainage of intraocular fluid thereby reducing
intraocular pressure, which otherwise may lead to deterioration
of vision in patients with glaucoma. The Company also sells
other instruments, devices and equipment that are manufactured
either by the Company or by others in the ophthalmic products
industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s only subsidiary is STAAR Surgical AG, a
wholly owned subsidiary formed in Switzerland to develop,
manufacture and distribute certain of the Company&#146;s
products worldwide, including the ICL and the AquaFlow device.
STAAR Surgical AG also controls a major European sales
subsidiary that distributes both the Company&#146;s products and
products from various other manufacturers. Investment in the
subsidiary was increased from 80% to 100% during the fourth
quarter of 2002, when STAAR Surgical AG purchased the remaining
shares of the subsidiary (see Note&nbsp;9).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Canon Staar Joint Venture</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1988, the Company entered into a joint venture with Canon
Inc. and Canon Sales Co., Inc. for the principal purpose of
designing, manufacturing, and selling in Japan intraocular
lenses and other ophthalmic products. The joint venture will
market its products worldwide through Canon, Canon Sales or
STAAR or such other distributors as the Board of Directors of
the joint venture may approve. The terms of any distribution
arrangement will require the unanimous approval of the Board of
Directors of the joint venture. Each joint venture party is
entitled to appoint one member of the Board of Directors of the
joint venture. Certain matters require the unanimous approval of
the directors. Upon the occurrence of certain events, including
the merger, sale of substantially all of the assets or change in
the management of one of the parties, any of the other parties
may have the right to acquire the first party&#146;s interest in
the joint venture at book-value. The Company also granted to the
joint venture a perpetual exclusive license under the Licensed
Technology (as defined in the license agreement) to make and
sell any products in Japan, and a perpetual non-exclusive
license to do so in the rest of the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2001, the parties entered into a settlement agreement whereby
(i)&nbsp;they reconfirmed the joint venture agreement and the
license agreement, (ii)&nbsp;they agreed that the Company would
promptly commence the transfer of the Licensed Technology to the
joint venture, (iii)&nbsp;the Company granted the joint venture
an exclusive license to make any products in China and sell such
products in Japan and China (subject to the existing rights of
third parties), (iv)&nbsp;the Company agreed to provide the
joint venture with raw materials, (v)&nbsp;the joint venture
granted Canon Sales Co., Inc. the right to distribute its
products in Japan on specified terms, and (iv)&nbsp;the parties
settled certain patent disputes.
</DIV>

<P align="center" style="font-size: 10pt;">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements include the
accounts of the Company, its wholly owned and its majority owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Assets and
liabilities of foreign subsidiaries are translated at rates of
exchange in effect at the close of the year. Revenues and
expenses are translated at the weighted average of exchange
rates in effect during the year. The resulting translation gains
and losses are deferred and are shown as a separate component of
stockholders&#146; equity as accumulated other comprehensive
income (loss). During 2004, 2003 and 2002, the net foreign
translation gain was $452,000, $683,000 and $585,000,
respectively, and net foreign currency transaction loss was
$190,000, $107,000 and $458,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investment in the Company&#146;s joint venture, Canon Staar Co.,
Inc., is accounted for using the equity method of accounting
(see Note&nbsp;6).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s fiscal year ends on the Friday nearest
December&nbsp;31 and each of the Company&#146;s quarterly
reporting periods generally consists of 13&nbsp;weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Going Concern</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company had $4.2&nbsp;million
of cash and cash equivalents and $5.1&nbsp;million of short-term
investments. However, due to a continued decline in
U.S.&nbsp;sales, lower gross profit, and increased operating
expenses the Company sustained significant losses and negative
cash flows from operations for the year ended December&nbsp;31,
2004. These matters raise substantial doubt about the
Company&#146;s ability to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA Warning Letters and 483 Observations (see Note&nbsp;11)
were significant contributors to the negative impact on
operations. Sales were impacted because of the negative
perception of the FDA issues in the ophthalmic community.
Quality assurance consultants retained to assist the Company in
preparing for re-audit by the FDA, accelerated investments in
manufacturing engineering, and lower production volumes were
among the significant factors impacting gross profit. Research
and development and regulatory expenses increased as the Company
took action to strengthen those areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is not able to predict whether the FDA will conclude
that the Company&#146;s corrective actions to date or those
included in its response to the 483 Observations satisfactorily
resolve its concerns. Nor can the Company predict the
likelihood, nature of, or timing of any additional action by the
FDA or the impact of the 483 Observations or any other FDA
action on the Company&#146;s established lines of business,
results of the operations or liquidity or the approval of the
ICL for the United States market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to continue to experience negative cash
flows, similar to those of fiscal 2004, until such time as the
issues presented in the FDA Warning Letter dated
December&nbsp;22, 2003 and the 483 Observations are resolved and
the ICL is approved for sale in the U.S.&nbsp;To enhance its
ability to continue as a going concern through the year ended
December&nbsp;30, 2005, the Company expects to take the
following actions: (1)&nbsp;continue to aggressively address FDA
issues; (2)&nbsp;work closely with the independent sales force
and ophthalmic community to reverse the negative perceptions and
sales trends of the Company&#146;s existing lines of business;
(3)&nbsp;further reduce discretionary spending; (4)&nbsp;seek
other sources of funding; and (5)&nbsp;explore other strategic
and financial options. However, there can be no assurance as to
the availability or terms upon which capital might be obtained
or that the Company will be successful in executing its other
strategies. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable
to continue as a going concern.
</DIV>

<P align="center" style="font-size: 10pt;">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue Recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes revenue when realized or realizable and
earned, which is when the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred; the
sale price is fixed and determinable; and collectibility is
reasonably assured. We record revenue from product sales when
title and risk of ownership has been transferred to the
customer, which is typically upon delivery to the customer. The
exception to this recognition policy is revenue from intraocular
lenses distributed on a consignment basis, which is recognized
upon notification of implantation in a patient.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company may bundle the sale of phacoemulsification equipment
to customers with multi-year agreements to purchase minimum
quantities of foldable IOLs. The Company recognizes the revenue
from the equipment based on monthly purchases of minimum
quantities of IOLs over the life of the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenue from license and technology agreements is recorded as
income, when earned, according to the terms of the respective
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company generally permits returns of product if such product
is returned within the time allowed by the Company, and in good
condition. Allowances for returns are provided for based upon an
analysis of our historical patterns of returns matched against
the sales from which they originated. To date, historical
product returns have been within the Company&#146;s estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains provisions for uncollectible accounts for
estimated losses resulting from the inability of its customers
to remit payments. The Company continuously monitors collections
and payments from its customers and maintains a provision for
estimated credit losses based upon its historical experience and
any specific customer collection issues that have been
identified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Concentration of Credit Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial instruments that potentially subject the Company to
credit risk principally consist of trade receivables. This risk
is limited due to the large number of customers comprising the
Company&#146;s customer base, and their geographic dispersion.
Ongoing credit evaluations of customers&#146; financial
condition are performed and, generally, no collateral is
required. The Company maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded
management&#146;s expectations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes deferred tax assets and liabilities for
temporary differences between the financial reporting basis and
the tax basis of the Company&#146;s assets and liabilities along
with net operating loss and credit carryforwards. A valuation
allowance is recognized if, based on the weight of available
evidence, it is more likely than not that some portion or all of
the deferred tax asset may not be realized. The impact on
deferred taxes of changes in tax rates 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 the period of enactment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash, Cash Equivalents, and Restricted Cash</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Short-Term Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Short-term investments are classified as available for sale and
are reported at fair value. Unrealized holding gains and losses,
if any, net of the related income tax effect, are excluded from
income and are reported in other comprehensive income. Realized
gains and losses are included in income on the specific
identification method.
</DIV>

<P align="center" style="font-size: 10pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are stated at the lower of cost, determined on a
first-in, first-out basis, or market. Inventory costs are
comprised of material, direct labor, and overhead. The Company
records inventory provisions, based on a review of forecasted
demand and inventory levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property, Plant and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are recorded at cost. Depreciation
on property, plant, and equipment is computed using the
straight-line method over the estimated useful lives of the
assets, generally ranging from 3 to 10&nbsp;years. Major
improvements are capitalized and minor replacements, maintenance
and repairs are charged to expense as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Demonstration Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, the Company maintains
demonstration and bundled equipment, primarily
phacoemulsification surgical equipment, for the purpose and
intent of selling similar equipment or related products to the
customer in the future. Demonstration equipment is not held for
sale and is recorded as property, plant and equipment. The
assets are amortized utilizing the straight-line method over
their estimated economic life not to exceed three years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Goodwill and Other Intangible Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill represents the excess of the purchase price over the
fair value of identifiable net assets acquired in business
combinations accounted for as purchases. The Company adopted
Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;141, &#147;Business Combinations,&#148; and
No.&nbsp;142, &#147;Goodwill and Other Intangible Assets,&#148;
on December&nbsp;29, 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill, which has an indefinite life and was previously
amortized on a straight-line basis over the periods benefited,
is no longer amortized to earnings but instead is subject to
periodic testing for impairment. Intangible assets determined to
have definite lives are amortized over their remaining useful
lives. Goodwill of a reporting unit is tested for impairment on
an annual basis or between annual tests if an event occurs or
circumstances change that would reduce the fair value of a
reporting unit below its carrying amount. As provided under
SFAS&nbsp;No.&nbsp;142, an annual assessment was completed
during fiscal year 2004 and no impairment was identified. As of
December&nbsp;31, 2004, the carrying value of goodwill was
$7.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also has other intangible assets consisting of
patents and licenses, with a gross book value of
$11.5&nbsp;million and accumulated amortization of
$6.1&nbsp;million as of December&nbsp;31, 2004. The Company
capitalizes the costs of acquiring patents and licenses.
Amortization is computed on the straight-line basis over the
estimated useful lives, which are based on legal and contractual
provisions, and range from 10 to 20&nbsp;years. Aggregate
amortization expense for amortized other intangible assets was
$688,000, $952,000 and $933,000 for the years ended
December&nbsp;31, 2004, January&nbsp;2, 2004 and January&nbsp;3,
2003, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the estimated amortization expense for
these assets for each of the five succeeding years (in
thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>481</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,396</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impairment of Long-Lived Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SFAS&nbsp;No.&nbsp;144, &#147;Accounting for
the Impairment of Long-Lived Assets,&#148; intangible and other
long lived-assets are reviewed for impairment whenever events
such as product discontinuance, plant closures, product
dispositions or other changes in circumstances indicate that the
carrying amount may not be recoverable. In reviewing for
impairment, the Company compares the carrying value of such
assets to the estimated undiscounted future cash flows expected
from the use of the assets and their eventual disposition. When
the estimated undiscounted future cash flows are less than their
carrying amount, an impairment loss is recognized equal to the
difference between the assets&#146; fair value and their
carrying value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended January&nbsp;2, 2004, the Company wrote
down $2.1&nbsp;million (net book value) in capitalized patent
costs in connection with its routine evaluation of patent costs.
The write-down related to patents acquired in the purchase of
its majority interest in Circuit Tree Medical, a developer and
manufacturer of phacoemulsification equipment, whose ongoing
operations were moved to the Company&#146;s Monrovia, CA
facility during the quarter. The Company believes the write-down
was necessary based upon the subsidiary&#146;s historical losses
and management&#146;s uncertainty about whether the Company will
be able to recover the cost. There were no impairments of
long-lived assets identified during the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounting Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
footnotes thereto. Actual results may materially differ from
those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fair Value of Financial Instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying values reflected in the consolidated balance sheets
for cash and cash equivalents, accounts receivable, accounts
payable, and notes payable approximate their fair values because
of the short maturity of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Loss Per Share</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company presents loss per share data in accordance with the
provision of SFAS&nbsp;No.&nbsp;128, &#147;Earnings per
Share,&#148; which provides for the calculation of basic and
diluted earnings per share. Loss per share of common stock is
computed by using the weighted average number of common shares
outstanding during the period. Common stock equivalents are not
included in the determination of the weighted average number of
shares outstanding, as they would be antidilutive. For the years
ended December&nbsp;31, 2004, January&nbsp;2, 2004, and
January&nbsp;3, 2003, 3.1&nbsp;million, 3.2&nbsp;million, and
3.1&nbsp;million options to purchase shares of the
Company&#146;s common stock, respectively, were excluded from
the computation.
</DIV>

<P align="center" style="font-size: 10pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Based Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for stock-based compensation in accordance
with Accounting Principles Board (&#147;APB&#148;) Opinion
No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB&nbsp;25&#148;), and has adopted the
disclosure provisions of SFAS&nbsp;No.&nbsp;123,
&#147;Accounting for Stock Based Compensation&#148;
(&#147;SFAS&nbsp;123&#148;). SFAS&nbsp;123 defines a fair value
based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by
APB&nbsp;25. If the APB&nbsp;25 intrinsic value method of
accounting is used, SFAS&nbsp;123 requires pro forma disclosures
of net income and earnings per share as if the fair value based
method of accounting for stock based compensation had been
applied. The Company records expense in an amount equal to the
excess of the quoted market price on the grant date over the
option price. Such expense is recognized at the grant date for
options fully vested. For options with a vesting period, the
expense is recognized over the vesting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; requires the Company to provide pro forma
information regarding net income and earnings per share as if
compensation expense for the Company&#146;s stock option plans
had been determined in accordance with the fair value based
method. The fair value of each stock option grant is estimated
on the grant date using the Black-Scholes option-pricing model
with the following assumptions:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.22</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.37</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected holding period (in years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average fair value of options granted during the
year ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003 was $2.14 to $4.55, $1.91 to $7.10 and
$1.27 to $2.44, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pro forma net loss and loss per share for fiscal years 2004,
2003 and 2002, had the Company accounted for stock options
issued to employees and others in accordance with the fair value
method of SFAS&nbsp;123, are as follows (in thousands, except
per share data):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add: Stock-based employee compensation expense included in
    reported net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(739</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,679</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,920</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(18,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.08</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comprehensive Loss</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company presents comprehensive losses in its Consolidated
Statement of Changes in Stockholders&#146; Equity in accordance
with SFAS&nbsp;No.&nbsp;130, &#147;Reporting Comprehensive
Income&#148; (&#147;SFAS&nbsp;130&#148;). Total comprehensive
loss includes, in addition to net loss, changes in equity that
are excluded from the consolidated
</DIV>

<P align="center" style="font-size: 10pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
statements of operations and are recorded directly into a
separate section of stockholders&#146; equity on the
consolidated balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive loss and its components consist of the following
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,357</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,880</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,674</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Segments of an Enterprise</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company reports segment information in accordance with
SFAS&nbsp;No.&nbsp;131, &#147;Disclosures about Segments of an
Enterprise and Related Information&#148;
(&#147;SFAS&nbsp;131&#148;). Under SFAS&nbsp;131 all publicly
traded companies are required to report certain information
about the operating segments, products, services and
geographical areas in which they operate and their major
customers. While the Company has expanded its marketing focus
beyond the cataract market to include the refractive and
glaucoma markets, the cataract market remains its primary source
of revenues and, accordingly, the Company operates as one
business segment (Note&nbsp;17).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Research and Development Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenditures for research activities relating to product
development and improvement are charged to expense as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reclassifications</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the prior year
consolidated financial statements to conform to the 2004
presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, the American Jobs Creation Act of 2004
(&#147;Act&#148;) became effective in the U.S.&nbsp;Two
provisions of the Act may impact the Company&#146;s provision
(benefit) for income taxes in future periods, namely those
related to the qualified production activities deduction
(&#147;QPA&#148;) and foreign earnings repatriation
(&#147;FER&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The QPA will be effective for the Company&#146;s
U.S.&nbsp;federal tax return year beginning after
December&nbsp;31, 2004. In summary, the Act provides for a
percentage deduction of earnings from qualified production
activities, as defined, commencing with an initial deduction of
3&nbsp;percent for tax years beginning after 2009, with the
result that the statutory federal tax rate currently applicable
to the Company&#146;s qualified production activities of
35&nbsp;percent could be reduced initially to 33.95&nbsp;percent
and ultimately to 31.85&nbsp;percent. However, the Act also
provides for the phased elimination of the extraterritorial
income exclusion provision of the Internal Revenue Code, which
have previously resulted in tax benefits to the Company. Due to
the interaction of the law provisions noted above as well as the
particulars of the Company&#146;s tax position, the ultimate
effect of the QPA on the Company&#146;s future provision
(benefit) for income taxes has not been determined at this time.
The Financial Accounting Standards Board (&#147;FASB&#148;)
issued FASB Staff Position FAS&nbsp;109-1, &#147;Application of
FASB Statement No.&nbsp;109, Accounting for Income Taxes, to the
Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004&#148; (&#147;FSP
109-1&#148;), in December 2004. FSP 109-1 requires that tax
benefits resulting from the QPA should be recognized no earlier
than the year in which they are reported in the entity&#146;s
tax return, and that there is to be no revaluation of recorded
deferred tax assets and liabilities as would be the case had
there been a change in an applicable statutory rate.
</DIV>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FER provision of the Act provides generally for a one-time
85&nbsp;percent dividends received deduction for qualifying
repatriations of foreign earnings to the U.S.&nbsp;Qualified
repatriated funds must be reinvested in the U.S.&nbsp;in certain
qualifying activities and expenditures, as defined by the Act.
In December 2004, the FASB issued FASB Staff Position
FAS&nbsp;109-2, &#147;Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004&#148; (&#147;FSP 109-2&#148;). FSP 109-2
allows additional time for entities potentially impacted by the
FER provision to determine whether any foreign earnings will be
repatriated under this provision. At this time, the Company has
not undertaken an evaluation of the application of the FER
provision and any potential benefits of effecting such
repatriations under this provision. Numerous factors, including
previous actual and deemed repatriations under federal tax law
provisions, are factors impacting the availability of the FER
provision to the Company and its potential benefit to the
Company, if any. The Company intends to examine the issue and
will provide updates in subsequent periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;151,
&#147;Inventory Costs.&#148; This statement amends the guidance
in ARB No.&nbsp;43, Chapter&nbsp;4, &#147;Inventory
Pricing,&#148; to clarify the accounting for abnormal amounts of
idle facility expense, freight, handling costs, and wasted
materials (spoilage). SFAS&nbsp;No.&nbsp;151 requires that those
items be recognized as current-period charges. In addition, this
statement requires that allocation of fixed production overheads
to costs of conversions be based upon the normal capacity of the
production facilities. The provisions of SFAS&nbsp;No.&nbsp;151
are effective for inventory cost incurred in fiscal years
beginning after June&nbsp;15, 2005. As such, the Company is
required to adopt these provisions at the beginning of fiscal
2006. The adoption of this pronouncement is not expected to have
a material effect on the Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123R,
&#147;Share-Based Payment.&#148; This statement is a revision of
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; and supersedes APB Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees,&#148; and its
related implementation guidance. SFAS&nbsp;No.&nbsp;123R
addresses all forms of share-based payment (&#147;SBP&#148;)
awards including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation
rights. Under SFAS&nbsp;No.&nbsp;123R, SBP awards result in a
cost that will be measured at fair value on the awards&#146;
grant date, based on the estimated number of awards that are
expected to vest. This statement is effective for public
entities as of the first interim or annual reporting period that
begins after June&nbsp;15, 2005. The Company has not quantified
the potential effect of adoption of SFAS&nbsp;No.&nbsp;123R, but
believes that the adoption of this statement will result in a
decrease to earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchange of Nonmonetary Assets.&#148; This statement
amends Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
The provisions of this statement are effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after
June&nbsp;15, 2005. Earlier application is permitted for
nonmonetary asset exchanges occurring in fiscal periods
beginning after December&nbsp;16, 2004. The provisions of this
statement should be applied prospectively. The adoption of this
pronouncement is not expected to have a material effect on the
Company&#146;s financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;2&nbsp;&#151;</B></TD>
    <TD>
    <B>Short-Term Investments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Short-term investments consisted of the following at
December&nbsp;31, 2004 and January&nbsp;2, 2004 (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Market</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Market</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Value</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Auction rate securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The short-term investments are comprised solely of taxable
auction-rate securities within a closed-end fund with no stated
maturity date. Due to the fact that these investments have
frequent interest rate resets, the Company did not have any
gross unrealized gains or losses at December&nbsp;31, 2004 or
January&nbsp;2, 2004. The Company classifies the securities as
available for sale investments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;3&nbsp;&#151;</B></TD>
    <TD>
    <B>Accounts Receivable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable consisted of the following at
December&nbsp;31, 2004 and January&nbsp;2, 2004 (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,409</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less allowance for doubtful accounts and sales returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>734</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,675</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;4&nbsp;&#151;</B></TD>
    <TD>
    <B>Inventories</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories consisted of the following at December&nbsp;31, 2004
and January&nbsp;2, 2004 (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Raw materials and purchased parts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finished goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,802</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;5&nbsp;&#151;</B></TD>
    <TD>
    <B>Property, Plant and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment consisted of the following at
December&nbsp;31, 2004 and January&nbsp;2, 2004 (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture and fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,808</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,608</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,638</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation expense for the years ended December&nbsp;31, 2004,
January&nbsp;2, 2004, and January&nbsp;3, 2003 was
$2.0&nbsp;million, $2.0&nbsp;million and $2.2&nbsp;million,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;6&nbsp;&#151;</B></TD>
    <TD>
    <B>Investment in Joint Venture</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company owns a 50% equity interest in a joint venture, the
Canon Staar Co., Inc. (&#147;CSC&#148;), with Canon Inc. and
Canon Sales Co, Inc., together the &#147;Canon Companies&#148;
(see Note&nbsp;1). The investment in the Japanese joint venture
is accounted for using the equity method of accounting except
for the nine months ended September&nbsp;29, 2001 when income
was recorded on a cash basis due to disputes between the Company
and the Canon Companies which were resolved during the fourth
quarter of 2001. Dividends received, relating to periods when
the Company accounted for its investment on a cash basis, were
charged to earnings on a cash basis. For all other periods,
dividends are recorded under the equity method as a reduction to
the investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements of CSC include the following
information:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,728</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(304</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s equity in earnings (loss) of the joint
venture is calculated as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joint venture net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total joint venture net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash basis dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity in earnings (loss) of joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company received dividends of $81,000, $76,000 and $40,000
during 2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recorded sales of certain IOL products to CSC of
approximately $185,000, $66,000 and $142,000 in 2004, 2003 and
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company purchased preloaded injectors from CSC in the amount
of $1.7&nbsp;million, $239,000, and $0 in 2004, 2003, and 2002,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;7&nbsp;&#151;</B></TD>
    <TD>
    <B>Notes Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company had a $7&nbsp;million line of credit with a domestic
lender which was amended and restated from time to time during
fiscal 2003 and 2002. The Company&#146;s obligation to the
lender was secured by a first priority lien on substantially all
of the Company&#146;s assets and included certain financial
covenants. The note carried an interest rate equal to the prime
rate (4.25% at January&nbsp;3, 2003), plus interest margin and
commitment fees of 5% and 1.25%&nbsp;per annum, respectively.
Borrowings outstanding under the note as of January&nbsp;3, 2003
were approximately $2.9&nbsp;million, with total borrowings of
up to $3.7&nbsp;million available under
</DIV>

<P align="center" style="font-size: 10pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the line of credit. During 2003, the note, which was originally
due March&nbsp;31, 2003, was extended one year to March&nbsp;31,
2004. In June 2003, the Company paid off the note and canceled
the line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsidiaries of the Company have foreign credit facilities with
different banks to support operations in Switzerland and Germany.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Swiss credit agreement, as amended on August&nbsp;2, 2004,
provides for borrowings of up to 3.75&nbsp;million Swiss Francs
&#147;CHF&#148; (approximately $3.3&nbsp;million based on the
rate of exchange on December&nbsp;31, 2004), and permits either
fixed-term or current advances. The interest rate on current
advances is 6.0%&nbsp;per annum at December&nbsp;31, 2004 and
January&nbsp;2, 2004, respectively, plus a commission rate of
0.25% payable quarterly. There were no current advances
outstanding at December&nbsp;31, 2004 or January&nbsp;2, 2004.
The base interest rate for fixed-term advances follows
Euromarket conditions for loans of a corresponding term and
currency, plus an individual margin (4.5% at December&nbsp;31,
2004 and 4.2% at January&nbsp;2, 2004). Borrowings outstanding
under the facility were CHF 3.4&nbsp;million at
December&nbsp;31, 2004 (approximately $3.0&nbsp;million based on
the rate of exchange at December&nbsp;31, 2004) and CHF
3.7&nbsp;million at January&nbsp;2, 2004 (approximately
$3.0&nbsp;million based on the rate of exchange on
January&nbsp;2, 2004). The credit facility is secured by a
general assignment of claims and includes positive and negative
covenants which, among other things, require the maintenance of
a minimum level of equity of at least $12.0&nbsp;million and
prevents the Swiss subsidiary from entering into other secured
obligations or guaranteeing the obligations of others. The
agreement also prohibits the sale or transfer of patents or
licenses without the prior consent of the lender and the terms
of intercompany receivables may not exceed 90&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Swiss credit facility is divided into two parts. Part&nbsp;A
provides for borrowings of up to CHF 3.0&nbsp;million
($2.7&nbsp;million based on the exchange rate on
December&nbsp;31, 2004) and does not have a termination date.
Part&nbsp;B presently provides for borrowings of up to CHF
750,000 ($662,000 based on the exchange rate on
December&nbsp;31, 2004). The loan amount under Part&nbsp;B of
the agreement reduces by CHF 250,000 ($220,000 based on the
exchange rate on December&nbsp;31, 2004) semi-annually.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The German credit agreement, entered into during fiscal year
2003, provides for borrowings of up to 210,000 EUR ($286,000
based on the exchange rate on December&nbsp;31, 2004), at a rate
of 8.5%&nbsp;per annum and renews automatically each November.
The agreement prohibits our German subsidiary from paying
dividends and is personally guaranteed by the president of the
subsidiary. There were no borrowings outstanding as of
December&nbsp;31, 2004 or January&nbsp;2, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company was in compliance with the covenants of credit
facilities as of December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;8&nbsp;&#151;</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision (benefit) for income taxes consists of the
following (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current tax provision (benefit):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(995</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current provision (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(327</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax provision (benefit):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;federal and state</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred provision (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (benefit) for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Legislation enacted on March&nbsp;9, 2002 (HR 3090) enabled the
Company to carryback a portion of the federal 2001&nbsp;net
operating loss to 1996, 1997 and 1998. Since this legislation
was not enacted as of the end of fiscal year 2001, the benefit
of $959,000 from this carryback was recorded in 2002. As of
December&nbsp;31, 2004, the Company had $63.6&nbsp;million of
federal net operating loss carryforwards available to reduce
future income taxes. The net operating loss carryforwards expire
in varying amounts between 2020 and 2024.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has net income taxes payable at December&nbsp;31,
2004 and January&nbsp;2, 2004 of $420,000 and $416,000,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision (benefit) for income before taxes differs from the
amount computed by applying the statutory federal income tax
rate to income before taxes as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computed provision for taxes based on income at statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,685</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in taxes resulting from:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write down of investment in Circuit Tree Medical Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Permanent differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State taxes, net of federal income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax effect attributed to foreign operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,245</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effective tax provision (benefit) rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111.5</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Undistributed earnings of the Company&#146;s foreign
subsidiaries amounted to approximately $12.1&nbsp;million at
December&nbsp;31, 2004. Undistributed earnings are considered to
be indefinitely reinvested and, accordingly, no provision for
United States federal and state income taxes has been provided
thereon. Upon distribution of earnings in the form of dividends
or otherwise, the Company would be subject to both United States
income taxes (subject to an adjustment for foreign tax credits)
and withholding taxes payable to the various foreign countries.
Determination of the amount of unrecognized deferred United
States income tax liability is not practicable because of the
complexities associated with its hypothetical calculation.
</DIV>

<P align="center" style="font-size: 10pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company&#146;s deferred tax assets (liabilities)&nbsp;as of
December&nbsp;31, 2004 and January&nbsp;2, 2004 are as follows
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current deferred tax assets (liabilities):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts and sales returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued vacation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(890</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current deferred tax assets (liabilities)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Non-current deferred tax assets (liabilities):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss and capital loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business, foreign and AMT credit carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>876</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(54</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for restructuring costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subpart F income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capitalized R&#38;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current deferred tax assets (liabilities)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;109, &#147;Accounting for Income Taxes&#148;
(&#147;SFAS&nbsp;109&#148;) requires that a valuation allowance
be established when it is more likely than not that all or a
portion of a deferred tax asset may not be realized. Cumulative
losses weigh heavily in the assessment of the need for a
valuation allowance. In 2002, due to the Company&#146;s recent
history of losses, an increase to the valuation allowance was
recorded as a non-cash charge to tax expense in the amount of
$9.0&nbsp;million. As a result, the valuation allowance fully
offsets the value of deferred tax assets on the Company&#146;s
balance sheet as of December&nbsp;31, 2004. Under
Section&nbsp;382 of the Internal Revenue Code, significant
changes in ownership may restrict the future utilization of
these tax loss carry forwards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1995, a subsidiary of the Company obtained retrospectively to
1993, a ten-year tax holiday for the payment of federal,
cantonal and municipal income taxes in Switzerland. As such,
Swiss income taxes were not due on the operations of this
subsidiary for the ten year period that ended on
December&nbsp;31, 2002. As the tax holiday from Swiss taxes has
expired, the appropriate federal, cantonal and municipal income
taxes have been included in the foreign tax provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income (loss) before income taxes are as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,887</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(14,066</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,162</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;9&nbsp;&#151;</B></TD>
    <TD>
    <B>Business Acquisitions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the Company
purchased the remaining 20% interest in its Australian
subsidiary for $1.3&nbsp;million, in exchange for $768,000 in
cash and a long-term note in the amount of $542,000 due on
November&nbsp;1, 2007. The transaction resulted in the recording
of goodwill of $1.1&nbsp;million. The Company also entered into
employment agreements with the previous minority owners of the
subsidiary. The employment agreements expire on November&nbsp;1,
2007 and include clauses to not compete for a period of one year
after termination for any cause, except in the event of a change
in control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pro forma amounts for the acquisition are not included, as the
effect on operations is not material to the Company&#146;s
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended January&nbsp;3, 2003, the Company acquired
the remaining 20% interest in its German subsidiary at its book
value of $426,000, from the subsidiary&#146;s president in
exchange for cancellation of amounts due from the
subsidiary&#146;s president of $955,000 less bonuses due to the
subsidiary&#146;s president of $87,000, resulting in goodwill of
$442,000. The terms of the agreement also provided for the
cancellation of 75,000 unexercised stock options previously
issued to the subsidiary&#146;s president and an agreement not
to compete with the Company for a period of ten years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pro forma amounts for the acquisition are not included, as the
effect on operations is not material to the Company&#146;s
consolidated financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;10&nbsp;&#151;</B></TD>
    <TD>
    <B>Stockholders&#146; Equity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Common Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal year 2004, the Company issued 11,000&nbsp;shares
to consultants for services rendered to the Company. Also during
2004, the Company completed a private placement with
institutional investors of 2&nbsp;million shares of the
Company&#146;s common stock, for net proceeds of
$11.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal year 2003, the Company issued 11,000&nbsp;shares
to consultants for services rendered to the Company and
43,000&nbsp;shares, in lieu of bonuses earned, to an officer and
director of the Company. Also during 2003, the Company completed
a private placement with institutional investors of
1&nbsp;million shares of the Company&#146;s common stock, for
net proceeds of $8.9&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal year 2002, the Company issued 39,000&nbsp;shares
to consultants for services rendered to the Company and
3,000&nbsp;shares to an employee relating to an employment
contract. Also during 2002, the Company acquired
243,000&nbsp;shares of treasury stock from a former officer in
settlement of notes receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Receivables from Officers
and Directors</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and January&nbsp;2, 2004, notes
receivable (excluding reserves) from former officers and
directors totaling $2.1&nbsp;million and $2.3&nbsp;million,
respectively, were outstanding. The notes were issued in
connection with purchases of the Company&#146;s common stock and
bear interest at rates ranging between 1.98% and 6.40%&nbsp;per
annum, or at the lowest federal applicable rate allowed by the
Internal Revenue Service. The notes are secured by stock pledge
agreements and other assets and mature on various dates through
June&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the Company
entered into a forbearance agreement with a former director of
the Company whereby the due date of the $1.2&nbsp;million note
receivable was extended from June&nbsp;15, 2004 to
March&nbsp;15, 2005 and the interest rate was reduced to 1.986%,
which was the lowest applicable federal rate at the date of the
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the Company
recorded a $500,000 reserve against the notes of a former
director of the Company which total $1.8&nbsp;million including
accrued interest. The notes are
</DIV>

<P align="center" style="font-size: 10pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
collateralized by the Company&#146;s common stock and a second
mortgage on a home in Florida. The current value of the
collateral is approximately $1.3&nbsp;million. The amount of the
reserve is based on the difference between the note amount and
the collateral value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended January&nbsp;3, 2003, the Company entered
into a promissory note in the amount of $560,000 pursuant to the
terms of a settlement agreement with a law firm, of which a
principal was a former officer, director and stockholder of the
Company. Terms of the note, secured by trade accounts receivable
of the law firm, include interest at the rate of 5% with monthly
payment of principal and interest due beginning July&nbsp;1,
2002 through June&nbsp;1, 2006. During the years ended
December&nbsp;31, 2004 and January&nbsp;2, 2004, payments
against the note were received in the amount of $180,000 and
$100,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Also during the year ended January&nbsp;3, 2003, the Company
entered into a second promissory note in the amount of
$2.2&nbsp;million, pursuant to the terms of the same settlement
agreement, with the former officer&#146;s widow. Terms of the
note, secured by a stock pledge agreement, included interest at
the rate of 5% with principal and interest due on or before
March&nbsp;29, 2006. The note also provided for escalation in
the interest rate to 9.75% if the bid price of the
Company&#146;s common stock traded at $8.00 or greater on any
public stock exchange for a period of 20 consecutive trading
days, or if the stock permanently ceased to trade on any public
stock exchange. Additionally, the note provided an acceleration
of payment in the event the closing bid price of the common
stock of the Company traded at $10.00 or greater on any public
stock exchange for a period of 20 consecutive trading days. The
note was paid in full in July 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Options</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below summarizes the transactions in the
Company&#146;s stock option plans (in thousands except per share
data):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;28, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options forfeited/ cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(746</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;3, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options forfeited/ cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(84</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;2, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options forfeited/ cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(348</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercisable (vested)&nbsp;at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 2003, the Board of Directors approved the 2003
Omnibus Equity Incentive Plan (the &#147;2003 Plan&#148;)
authorizing the granting of options to purchase or awards of the
Company&#146;s common stock. The 2003 Plan amends, restates and
replaces the 1991 Stock Option Plan, the 1995 Consultant Stock
Plan, the 1996 Non-Qualified Stock Plan and the 1998 Stock
Option Plan (the &#147;Restated Plans&#148;). Under provisions
of the 2003 Plan, all of the unissued shares in the Restated
Plans are reserved for issuance in the 2003 Plan. In addition,
2% of the total shares of common stock outstanding on the
immediately preceding December&nbsp;31 will be reserved for
issuance under the 2003 Plan. Options under the plan are granted
at fair market value on the
</DIV>

<P align="center" style="font-size: 10pt;">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
date of grant, become exercisable over a 3-year period, or as
determined by the Board of Directors, and expire over periods
not exceeding 10&nbsp;years from the date of grant. Pursuant to
the plan, options for 522,000 and 83,000&nbsp;shares were
outstanding at December&nbsp;31, 2004 and January&nbsp;2, 2004,
respectively, with exercise prices ranging between $3.00 and
$11.24&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 2000, the Board of Directors approved the Stock
Option Plan and Agreement for the Company&#146;s Chief Executive
Officer authorizing the granting of options to purchase or
awards of the Company&#146;s common stock. The options under the
plan are granted at fair market value on the date of grant,
become exercisable over a 3-year period, and expire
10&nbsp;years from the date of grant. Pursuant to this plan,
options for 500,000 were outstanding at December&nbsp;31, 2004,
January&nbsp;2, 2004, and January&nbsp;3, 2003, respectively,
with an exercise price of $11.125.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 1998, the Board of Directors approved the 1998
Stock Option Plan, authorizing the granting of incentive options
and/or non-qualified options to purchase or awards of the
Company&#146;s common stock. Under the provisions of the plan,
1.0&nbsp;million shares were reserved for issuance; however, the
maximum number of shares authorized may be increased provided
such action is in compliance with Article&nbsp;IV of the plan.
During fiscal year 2001, pursuant to Article&nbsp;IV of the
plan, the stockholders of the Company authorized an additional
1.5&nbsp;million shares. Generally, options under the plan are
granted at fair market value at the date of the grant, become
exercisable over a 3-year period, or as determined by the Board
of Directors, and expire over periods not exceeding
10&nbsp;years from the date of grant. Pursuant to the plan,
options for 1.6&nbsp;million, 1.9&nbsp;million and
1.5&nbsp;million shares were outstanding at December&nbsp;31,
2004, January&nbsp;2, 2004, and January&nbsp;3, 2003,
respectively, with exercise prices ranging between $2.00 and
$13.875&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 1996, the Board of Directors approved the 1996
Non-Qualified Stock Plan, authorizing the granting of options to
purchase or awards of the Company&#146;s common stock. Under
provisions of the Non-Qualified Stock Plan, 600,000&nbsp;shares
were reserved for issuance. Generally, options under the plan
are granted at fair market value at the date of the grant,
become exercisable over a 3-year period, or as determined by the
Board of Directors, and expire over periods not exceeding
10&nbsp;years from the date of grant. Pursuant to this plan,
options for 146,000, 146,000, and 170,000&nbsp;shares were
outstanding at December&nbsp;31, 2004, January&nbsp;2, 2004, and
January&nbsp;3, 2003, respectively. The options were originally
issued with an exercise price of $12.50&nbsp;per share. During
fiscal year 1998 the exercise price was reduced to
$6.25&nbsp;per share by action of the Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 1995, the Company adopted the 1995 Consultant
Stock Plan, authorizing the granting of options to purchase or
awards of the Company&#146;s common stock. Generally, options
under the plan are granted at fair market value at the date of
the grant, become exercisable on the date of grant and expire
10&nbsp;years from the date of grant. Pursuant to this plan,
options for 165,000, 330,000, and 545,000&nbsp;shares were
outstanding at December&nbsp;31, 2004, January&nbsp;2, 2004, and
January&nbsp;3, 2003, respectively, with exercise prices ranging
from $1.70 to $3.99&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under provisions of the Company&#146;s 1991 Stock Option Plan,
2.0&nbsp;million shares were reserved for issuance. Generally,
options under this plan are granted at fair market value at the
date of the grant, become exercisable over a 3-year period, or
as determined by the Board of Directors, and expire over periods
not exceeding 10&nbsp;years from the date of grant. At
December&nbsp;31, 2004, January&nbsp;2, 2004, and
January&nbsp;3, 2003, options for 163,000, 220,000, and
379,000&nbsp;shares were outstanding, with exercise prices
ranging from $9.56 to $11.25&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 2004, officers, employees and others exercised
250,000 options from the 1995, 1998 and 2003 stock option plans
at prices ranging from $1.90 to $4.65 resulting in cash proceeds
totaling $829,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 2003, officers, employees and others exercised
387,000 options from the 1991, 1996 and 1998 stock option plans
at prices ranging from $2.00 to $9.56 resulting in cash proceeds
totaling $1.6&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fiscal year 2002, no options were exercised from any of the
Company&#146;s stock option plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes information about stock options
outstanding and exercisable at December&nbsp;31, 2004 (in
thousands, except per share data):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted-Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Range of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Remaining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted-Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted-Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Exercise Prices</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/04</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contractual Life</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/04</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$&nbsp;1.70 to $&nbsp;2.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$&nbsp;2.96 to $&nbsp;4.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$&nbsp;4.62 to $&nbsp;6.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$&nbsp;7.00 to $10.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9.67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$10.60 to $13.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.9&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>$&nbsp;1.70 to $13.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;11&nbsp;&#151;</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lease Obligations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases certain property, plant and equipment under
capital and operating lease agreements. These leases vary in
duration and many contain renewal options and/or escalation
clauses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Estimated future minimum lease payments under leases having
initial or remaining non-cancelable lease terms in excess of one
year as of December&nbsp;31, 2004 were approximately as follows
(in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less amounts representing interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rent expense was approximately $1.2&nbsp;million,
$1.2&nbsp;million, and $1.1&nbsp;million for each of the years
ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Supply Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 1999, the Company entered into a license and supply
agreement with another manufacturer to license and re-sell one
of the manufacturer&#146;s products. Under the terms of the
agreement, the Company was committed to purchase the specified
product for a total sum of $3.2&nbsp;million over
18&nbsp;months. In September 2001, the supply agreement was
amended reducing the minimum contractual amount that the Company
is
</DIV>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
obligated to purchase from the manufacturer to $2.5&nbsp;million
over a 24-month period commencing September&nbsp;1, 2001. The
agreement, which was cancelable upon four&nbsp;months written
notice, was terminated during the quarter ended January&nbsp;2,
2004 at no additional expense. Purchases under the agreement for
fiscal 2004 and 2003 were approximately $0 and $954,000,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2000, the Company entered into a minimum purchase
agreement with another manufacturer for the purchase of
viscoelastic solution. In addition to the minimum purchase
requirement, the Company is also obligated to pay an annual
regulatory maintenance fee. The agreement contains provisions to
increase the minimum annual purchases in the event that the
seller gains regulatory approval of the product in other
markets, as requested by the Company. Purchases under the
agreement for fiscal 2004 and 2003 were approximately $644,000
and $568,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, estimated annual purchase
commitments under these contracts are as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,222</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FDA Warning Letters and 483
Observations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company received a Warning Letter issued by the FDA, dated
December&nbsp;22, 2003 which outlined deficiencies related to
the manufacturing and quality assurance systems of its Monrovia,
California facility. To assist it in correcting the issues
raised in the Warning Letter, the Company engaged the services
of Quintiles Consulting (&#147;Quintiles&#148;), a well regarded
consulting organization that specializes in FDA related
compliance matters. The Company, with Quintiles&#146; help,
assessed the state of its quality system in light of the
FDA&#146;s concerns, developed an improvement plan, and took
corrective actions to improve the Company&#146;s processes,
procedures, and controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company received a second Warning Letter from the FDA dated
April&nbsp;26, 2004, which outlined deficiencies noted in an
audit by the FDA in December 2003. The Company provided the FDA
with its planned corrective actions to the issues raised, and in
a letter dated July&nbsp;1, 2004, the FDA responded that they
found the corrective and preventative action plans described in
the Company&#146;s response &#147;adequate.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;17, 2004, the FDA completed an audit of the
Company&#146;s Nidau, Switzerland manufacturing facility. The
FDA did not observe any violations of Quality System and Good
Manufacturing Practices requirements during this audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Costs associated with the preparation for these FDA inspections,
and the improvements made to the quality assurance and
regulatory compliance functions, contributed to the 22% increase
in research and development expenses (which included regulatory
and quality assurance expenses) for the year ended
December&nbsp;31, 2004, compared to fiscal 2003. Additionally,
the Warning Letters and 483 Observations have affected the
Company&#146;s reputation in the ophthalmic market and have
adversely affected product sales for the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until the FDA is satisfied with the adequacy of the
Company&#146;s corrective actions, it may take further actions
which could include conducting another inspection, seizure of
the Company&#146;s products, injunction of the Monrovia facility
to compel compliance (which may include suspension of production
operations and/or recall of products), or other actions. Such
actions could have a material adverse effect on the
Company&#146;s established lines of business, results of
operations and liquidity. Furthermore, until the FDA is
satisfied with the Company&#146;s response, it is unlikely to
grant the Company approval to market the ICL in the United
States.
</DIV>

<P align="center" style="font-size: 10pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is not able to predict whether the FDA will conclude
that the Company&#146;s corrective actions to date or those
included in its response to the 483 Observations satisfactorily
resolve its concerns. Nor can the Company predict the
likelihood, nature of, or timing of any additional action by the
FDA or the impact of other FDA action on the Company&#146;s
established lines of business, results of the operations or
liquidity or the approval of the ICL for the United States
market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indemnification
Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into indemnification agreements with its
directors and officers that may require the Company: to
indemnify them against liabilities that may arise by reason of
their status or service as directors or officers, except as
prohibited by applicable law; to advance their expenses incurred
as a result of any proceeding against them as to which they
could be indemnified; and to make a good faith determination
whether or not it is practicable for the Company to obtain
directors&#146; and officers&#146; insurance. The Company
currently has directors&#146; and officers&#146; insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Litigation and Claims</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;1, 2004, multiple class action lawsuits
have been filed in the United States District Courts for the
Central District of California and the District of New Mexico
against the Company and its Chief Executive Officer on behalf of
all persons who acquired the Company&#146;s securities during
various periods between April&nbsp;3, 2003 and
September&nbsp;28, 2004. On December&nbsp;15, 2004, the Court
ordered consolidation of the complaints that had been filed in
the United States District Court for the Central District of
California and directed that the plaintiffs file a consolidated
complaint as soon as practicable. The plaintiffs have proposed a
stipulation pursuant to which they would file a consolidated
amended complaint on or about April&nbsp;29, 2005. The New
Mexico action was voluntarily dismissed on January&nbsp;28,
2005. The lawsuits generally allege that the defendants violated
Sections&nbsp;10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule&nbsp;10b-5 promulgated thereunder, by
issuing false and misleading statements regarding intraocular
lenses and implantable lenses, and failing timely to disclose
significant problems with the lenses, as well as the existence
of serious injuries and/or malfunctions attributable to the
lenses, thereby artificially inflating the price of the
Company&#146;s Common Stock. The plaintiffs generally seek to
recover compensatory damages, including interest. Although the
Company intends to vigorously defend the consolidated lawsuit,
the lawsuit will require significant attention of management and
could result in substantial costs and harm our reputation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is currently party to various claims and legal
proceedings arising out of the normal course of our business.
These claims and legal proceedings relate to contractual rights
and obligations, employment matters, and claims of product
liability. While we do not believe that any of the claims known
to us is likely to have a material adverse effect on our
financial condition or results of operations, new claims or
unexpected results of existing claims could lead to significant
financial harm.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;12&nbsp;&#151;</B></TD>
    <TD>
    <B>Other Liabilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Current
Liabilities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Included in other current liabilities at December&nbsp;31, 2004
and January&nbsp;2, 2004 are approximately $1,868,000 and
$1,534,000 of accrued salaries and wages and $808,000 and
$959,000 of commissions due to outside sales representatives,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;13&nbsp;&#151;</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has had significant related party transactions as
discussed in Notes&nbsp;6, 9 and 10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company issues options to purchase&nbsp;60,000&nbsp;shares
of its common stock at fair market value on the date of grant to
each member of its Board of Directors upon election or
reelection for services provided as Board members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to secured notes (see Note&nbsp;10), the Company
holds other various promissory notes from former officers and
directors of the Company. The notes, which provide for interest
at the lowest applicable rate allowed by the Internal Revenue
Code, are due on demand. Amounts due from former officers and
directors and included in prepaids, deposits, and other current
assets at December&nbsp;31, 2004 and January&nbsp;2, 2004 were
$104,000 and $98,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2001, the Company entered into a consulting agreement
with one of the members of its Board of Directors. In exchange
for services, the Company issued an option to
purchase&nbsp;20,000&nbsp;shares of the Company&#146;s common
stock at fair market value on the date of grant, in addition to
a monthly retainer of $6,000, and a per-diem rate after six days
worked of $1,000. Upon the mutual consent of the parties, the
agreement was cancelled in July 2003. However, the Company has
continued to pay the Board member for consulting services.
Amounts paid to during the year ended December&nbsp;31, 2004,
January&nbsp;2, 2004, and January&nbsp;3, 2003, were $13,000,
$50,000, and $73,000, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;14&nbsp;&#151;</B></TD>
    <TD>
    <B>Supplemental Disclosure of Cash Flow Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest paid was $159,000, $255,000 and $580,000 for the years
ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003, respectively. Income taxes paid amounted
to approximately $1,602,000, $1,477,000 and $719,000 for the
years ended December&nbsp;31, 2004, January&nbsp;2, 2004 and
January&nbsp;3, 2003, respectively. Income taxes paid in 2003
were partially offset by the receipt of $962,000 in
U.S.&nbsp;federal tax refunds related to a carryback claim filed
in 2002 (see Note&nbsp;8).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s non-cash investing and financing activities
were as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable from officers and directors (Note&nbsp;8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,129</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,814</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaids, deposits and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(658</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>973</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of business:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>426</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(542</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(868</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(768</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patent impairment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,438</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;15&nbsp;&#151;</B></TD>
    <TD>
    <B>Other Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the Company
recorded a $500,000 reserve against the notes of a former
director of the Company which total $1.8&nbsp;million including
accrued interest. The notes are collateralized by the
Company&#146;s common stock and a second mortgage on a home in
Florida. The current value of the collateral is approximately
$1.3&nbsp;million. The amount of the reserve is based on the
difference between the note amount and the collateral value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2003, the Company recorded $390,000 in other charges. The
amount includes a charge of $2.1&nbsp;million relating to the
write-down of capitalized patent costs acquired in the purchase
of the Company&#146;s majority interest in Circuit Tree Medical,
a developer and manufacturer of phacoemulsification equipment,
and was partially offset by the reversal of $1.7&nbsp;million in
reserves previously recorded against notes receivable from
officers and directors which the Company has settled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with its business strategy to reduce operating
expenses, announced during the third quarter of 2001, the
Company completed the sale of its South African subsidiary and
closure of its Swedish and Canadian subsidiaries during the year
ended January&nbsp;3, 2003. As a result of these transactions
the Company recorded $1.2&nbsp;million of subsidiary closure
charges. The charges were primarily related to the recognition
of deferred losses resulting from the translation of foreign
currency statements into U.S.&nbsp;dollars (previously included
in equity in the balance sheet in accordance with
SFAS&nbsp;No.&nbsp;52). Since the charges had been included in
equity their subsequent recognition, while impacting retained
earnings, had no impact on total stockholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Also included in other charges at January&nbsp;3, 2003 is
$230,000 in employee separation costs.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;16&nbsp;&#151;</B></TD>
    <TD>
    <B>Net Loss Per Share</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a reconciliation of the weighted average number
of shares used to compute basic and diluted loss per share (in
thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic weighted average shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted effect of stock options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted weighted average shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;17&nbsp;&#151;</B></TD>
    <TD>
    <B>Geographic and Product Data</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company markets and sells its products in over 45 countries
and has manufacturing sites in the United States and
Switzerland. Other than the United States and Germany, the
Company does not conduct business in any country in which its
sales in that country exceed 5% of consolidated sales. Sales are
attributed to countries based on location of customers. The
composition of the Company&#146;s sales to unaffiliated
customers between those in the United States, Germany, and other
locations for each year, is set forth below (in thousands).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Sales to unaffiliated customers</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,082</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,717</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company develops, manufactures and distributes medical
devices used in minimally invasive ophthalmic surgery.
Substantially, all of the Company&#146;s revenues result from
the sale of the Company&#146;s medical devices. The Company
distributes its medical devices in the cataract, refractive and
glaucoma segments within ophthalmology. While the Company has
expanded its marketing focus beyond the cataract market to
include the refractive and glaucoma markets, the cataract market
remains the Company&#146;s primary source of revenues and,
therefore, the Company operates as one business segment for
financial reporting purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The cataract product line includes intraocular lenses,
phacoemulsification equipment, viscoelastics, and other products
used in cataract surgery. During the years presented, revenues
from the refractive and glaucoma product lines were 9% or less
of total revenue. Accordingly, the difference is not significant
enough for the Company to account for these products separately
and, therefore, those products are combined as other products in
the following table.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Net Sales by Product Line</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cataract</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>44,349</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,531</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The composition of the Company&#146;s long-lived assets between
those in the United States, Germany, Switzerland, and other
countries is set forth below (in thousands).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-lived assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,181</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,511</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Switzerland</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,220</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,124</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sells its products internationally, which subjects
the Company to several potential risks, including fluctuating
exchange rates (to the extent the Company&#146;s transactions
are not in U.S.&nbsp;dollars), regulation of fund transfers by
foreign governments, United States and foreign export and import
duties and tariffs, and political instability.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;18&nbsp;&#151;</B></TD>
    <TD>
    <B>Quarterly Financial Data (Unaudited)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summary unaudited quarterly financial data from continuing
operations for fiscal 2004 and 2003 is as follows (in thousands
except per share data):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>December&nbsp;31, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1st&nbsp;Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2nd&nbsp;Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3rd&nbsp;Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>4th&nbsp;Qtr.</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,952</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,579</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,299</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,380</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,268</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,385</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.07</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 24pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>January&nbsp;2, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1st. Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2nd&nbsp;Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3rd&nbsp;Qtr.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>4th&nbsp;Qtr.</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,754</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,215</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(958</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,169</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,710</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,520</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.06</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.07</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Quarterly and year-to-date computations of loss per share
amounts are made independently. Therefore, the sum of the per
share amounts for the quarters may not agree with the per share
amounts for the year.
</DIV>

<P align="center" style="font-size: 10pt;">F-30

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='307'></A>
</DIV>

<!-- link1 "INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT ON SCHEDULE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
STAAR Surgical Company
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audits referred to in our report dated March&nbsp;16, 2005,
which includes an explanatory paragraph concerning substantial
doubt about the Company&#146;s ability to continue as a going
concern, relating to the consolidated financial statements of
STAAR Surgical Company and Subsidiaries, which is contained in
Item&nbsp;8 of this Annual Report on Form&nbsp;10-K included the
audit of Schedule&nbsp;II, Valuation and Qualifying Accounts and
Reserves as of December&nbsp;31, 2004, and for each of the three
years in the period ended December&nbsp;31, 2004. This financial
statement schedule is the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on this
financial statement schedule based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, such financial statement schedule presents
fairly, in all material respects, the information set forth
therein.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">BDO Seidman,
    LLP</FONT> </TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Los Angeles, California
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;16, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-31

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STAAR SURGICAL COMPANY AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='308'></A>
</DIV>

<!-- link1 "SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES" -->

<DIV align="center" style="font-size: 10pt;">
<B>SCHEDULE&nbsp;II&nbsp;&#151; VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Column A</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Column B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Column C</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Column D</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Column E</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>End of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts and sales returns deducted from
    accounts receivable in balance sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>460</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts and sales returns deducted from
    accounts receivable in balance sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>734</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful accounts and sales returns deducted from
    accounts receivable in balance sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued restructuring costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,607</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,795</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-32
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>2
<FILENAME>a06720exv10w10.txt
<DESCRIPTION>EX-10.10
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.10


                            DOMENICO CALDERARI AG/SA


                                 LEASE AGREEMENT

                                     between

EINFACHE GESELLSCHAFT CALDERARI & SCHWAB, Schloss-Str. 10, 2560 NIDAU


                                                                - Lessor  -

                                       and

STARR SURGICAL AG, Junkerngasse 21, 3011 BERN


                                                                - Lessee  -

1.      Leased Premises

        Lessee leases an area of 460 m2 on the 2nd floor of the property known
        as Hauptstrasse 104, 2560 Nidau, as a production site and office as well
        as Parking Area West on the 3rd floor.

        Lessor shall also grant Lessee permission to use the free space in the
        "Kaminraum" [chimney space], which is located outside of the Leased
        Premises, where it may place a compressor, vacuum device and similar
        objects there.

2.      Commencement of Lease:

        The Lease shall commence on October 1st, 1994. For the purpose of
        organizing the business, Lessee may have use of the keys starting
        immediately. There shall be no rent payable for the period up until
        October 1st, 1994.

3       Term of Lease

        The term of the Lease is fixed and the Lease shall expire on October 31.
        1999.

3.1     Option

        After expiration of the fixed-term Lease, Lessee shall have the option
        to extend the Lease by 5 more years. If Lessee elects to exercise this
        option, it must notify Lessor in writing no later than March 31, 1999.
        If Lessee does not exercise the option and as long as neither of the
        parties to the contract terminates the Lease effective October 31, 1999,
        after expiration of the term the Lease shall be automatically extended
        by one year at a time. In case of termination, notice must be given 6
        months in advance.


<PAGE>

4.      Rent

4.1     Net Rent

        Net rent for the production and office space until 09.30.1996 shall be
        Sfr. 59,800.00 annually (= Sfr. 130.00 per m2 for that year) and is
        payable in monthly installments of Sfr. 4,983.00.

        After October 1st, 1996, the rent shall be increased to Sfr.150.00 per
        m2, which results in an annual rent of Sfr. 69,230.00 payable in monthly
        installments of Sfr. 5,769.00.

        Net rent for Parking Area "West" shall be Sfr. 4,800.00 annually and
        shall be payable in monthly installments of Sfr. 400.00.

4.1.1   After October 1st, 1996, the annual net rent of Sfr. 69,230.00/ 4,800.00
        shall be tied to the consumer price index BIGA(1). The rent corresponds
        to the level of the index applicable at that point in time, i.e. August
        1996. Upon request by one of the parties, the net rent may be adjusted
        once annually on January 1st regardless of the fixed term of the Lease,
        taking into account the entire percentage of change undergone by this
        index. The first adjustment may be done on 01.01.1998 at the earliest.

4.1.2   The net annual rent of Sfr. 69,230.00 / 4,800.00 is a base rent. Rent
        may not fall below this amount regardless of potential adjustments.

4.2     Utilities

4.2.1   The payments on account towards expenses for heating, electricity used
        for shared rooms and for the burner, water fees, possibly sewage and
        garbage collection fees, expenses for janitorial services which are
        billed by the manager on April 30th, shall amount to Sfr. 500.00
        monthly.

4.2.2   In exchange for participation in covering the cost thereof, Lessee shall
        have the opportunity to use the service elevator.

4.3     Bank Guarantee

        At the time the Lease is entered into, Lessee shall deposit the sum of
        Sfr. 15,000.00 as an irrevocable bank guarantee.

5.      Use of the Leased Premises

5.1     The Leased Premises shall be used for the production and warehousing of
        medical supplies and as an office and training site.

----------

(1)     Bundesamt fur Industrie, Gewerbe und Arbeit (Swiss federal bureau of
        industry, business and work)

<PAGE>

5.2     The Leased Premises must to be handed over in clean condition. The
        carpeted floors shall be shampooed once more before Lessee moves in.

5.3     Maintenance

        Lessee shall maintain the Leased Premises in good and clean condition.
        Repairs under Sfr.1,000.00 annually shall be paid for by Lessee.

        If damage to the Leased Premises is evident, Lessee shall keep its
        extent at a minimum by either taking immediate measures at its expense
        or by informing Lessor without delay.

        Repair work, minor work to prepare the Leased Premises for occupancy, or
        needed alterations to the Leased Premises or to the property shall be
        tolerated by Lessee without claims for damages.

        The following work shall be paid for entirely by Lessee.

        -       Replacement of electrical switches, sockets and fuses, light
                bulbs (as well as, on a pro rata basis, of the lighting fixtures
                belonging to the building), water faucets and door locks.

        -       Unclogging of water lines, sinks, toilets and laundry equipment.

        -       Repair or replacement of washers on radiators and other devices.

5.4     House Rules

        Lessee shall be duly considerate of the other tenants and neighbors in
        every respect. Lessor shall not lease space to tenants causing a
        trade-related nuisance (heavy dust emission, noise).

5.5     Subletting

        Subletting of rooms shall only be permitted with explicit consent of
        Lessor.

5.6     Access to the Leased Premises

        For the purpose of protecting its interests, Lessor shall have the
        right, having made an appointment in writing with the business
        management, to access the Leased Premises with a member of the
        management present.

6.      Insurance

6.1     Lessee shall insure all machinery, equipment, as well as furniture,
        merchandise and all objects located within the leased space, at its own
        expense, adequately against theft, fire, damage caused by explosion and
        water, as well as against risks incidental to the business, particularly
        renter's liability.


<PAGE>

        Lessee shall bear the consequences in case of non-fulfillment of this
        obligation, with no responsibility whatsoever resting with Lessor.

7.      Company Signs and Inscriptions

7.1     Installation and Execution

        Lessor gives, in advance, its consent to the installation of company
        signs beneath the rented frontage window as well as above the main
        entrance.

7.2     Expenses

        Expenses for new signs or changes to signs shall be the responsibility
        of Lessee. In case of necessary removal and re-installation due to a
        change in tenants, Lessee shall pay for this expense.

8.      Changes to the Leased Premises

8.1     Permits

        Changes to the Leased Premises which require permits shall require
        notification of Lessor in advance.

        Lessor shall inform Lessee regarding changes to the Leased Premises.

9.      Yielding of the Leased Premises

9.1     Cleaning

        The Leased Premises must be yielded in a tidy and cleaned condition.

9.2     Damage

        Lessee shall be liable for any damage not due to normal wear and tear.
        Such damage shall have been repaired by Lessee by the time the Lease
        terminates.

9.3     Restoration

        Restorations shall be carried out according to the customs and practices
        of the property and homeowners association of the city of Biel and its
        environs.

9.4     After 5 years, the changes made to the interior do not have to be
        reversed and the Leased Premises do not have to be restored to their
        original condition after the expiration of the Lease.

10.     Structural Alterations

        The one-time structural alterations indicated on the attached list
        and/or sketch (removal and construction of non-supporting partitions,
        the moving of doors, installation of connecting pipes for water supply
        and drainage) which shall be arranged by Lessor and must be completed by
        October 1st, 1994, shall be paid for by Lessor. The attached and signed
        layout constitutes an integral part of this Lease Agreement.


<PAGE>

        Lessor guarantees that the electrical lines within the Leased Premises
        are of sufficient capacity to meet the needs of the machinery and
        devices used by Lessee. Should this not be the case, Lessor shall
        strengthen the electrical grid at its expense.

        Lessor guarantees the completion of such work within 2 -1/2 months after
        Lessee's submission of the definite layout. Should it not do so, Lessor
        shall be required to pay a conventional penalty of Sfr. 1,000.00 per
        day, regardless of fault. It the layout is later altered, no
        conventional penalty whatsoever shall apply.

        a)      Both parties agree that Lessor shall do its best to carry out
                the alterations as quickly as possible after the definite layout
                has been submitted.

11.     Further Options

        Lessee shall have until 03.01.1995 to notify Lessor whether it wants to
        lease, within a period of 3 months, the space in the cellar (approx. 100
        m2 at Sfr. 80.00 per m2 for that year). Lessor guarantees to make this
        space available within the aforementioned time period.

        Lessor shall have the option to lease the space on the first floor as a
        whole or only one half of it. Notification of interest in the retail
        space "LANCIA" must be submitted at least 6 months in advance, and
        notification of interest in the retail space "FIAT" at least 12 months
        in advance. Regarding rent, it shall be agreed that it may not exceed
        the rent indexed by BIGA as of October 1st, 1994 on a basis of Sfr.
        200.00 per m2 for that year.

        Should Lessee find another tenant for the aforementioned space, it shall
        notify Lessee in writing. If Lessee tenant does not exercises its option
        to lease said space within 60 days, Lessor shall have the right to lease
        it to a third parties.

        Lessee is assured that it shall have first option to rent any and all
        spaces that become available. If Lessee does not exercise this option in
        writing within 60 days, Lessor may rent such spaces to third parties.
        However, the rent charged to the third party may not be below that
        offered to Lessee.

        Lessee is assured that, should the building be sold, it shall be given
        first option to lease it. If Lessee does not exercise this option in
        writing within 60 days, Lessor shall have the right to sell the space,
        subject to the right of preemption hereinafter referred to, to third
        parties. However, the sales price may not be below that offered to
        Lessee.

        Lessor shall grant Lessee an unlimited right of preemption for the
        building known as Hauptstrasse 104, Nidau and/or for parts of the
        property resulting from the establishment of individual floors. This
        right of preemption shall exist for the entire term of the Lease.


<PAGE>
12.     Special Provisions

        Lessee specifically acknowledges that it has been notified that Lessor
        shall insist on its right of retention guaranteed by law under Schkg(2)
        283 / OR(3) 257-59 and 268. The deadline for filing a retention request
        is 30 days after written notification.

        Lessee shall be granted the right to have this Lease Agreement noted in
        the public real estate register at its own expense.


Nidau, July 12, 1994                            Nidau, July 12, 1994




Lessee:                                         Lessor:



[signature]                                     [signature]
STAAR SURGICAL AG                               EINFACHE GESELLSCHAFT
                                                CALDIERI & SCHWAB




--------
(2)       Schweizerisches Kassationsgericht (Swiss court of appeal)

(3)       Obligationenrecht (law of contracts)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>3
<FILENAME>a06720exv10w11.txt
<DESCRIPTION>EX-10.11
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.11


               SUPPLEMENT TO THE LEASE AGREEMENT OF JULY 12, 1994

                                     between

EINFACHE GESELLSCHAFT CALDERARI & SCHWAB, Schloss-Str. 8 A, 2560 NIDAU


                                                                - Lessor  -

                                       and


STARR SURGICAL AG, Hauptstrass 104, 2560 NIDAU

                                                                - Lessee  -

1.      Leased Premises

        Lessee leases an area of 390 m2 on the ground floor of the property
        known as Hauptstrasse 104, 2560 Nidau, as a production site and office
        as well as Parking Area North in front of the building.

2.      Commencement of Lease:

        The Lease shall commence on November 1st, 1995. For the purpose of
        organizing the business, Lessee may have use of the keys starting
        September 1st. immediately. There shall be no rent payable for the
        period up until November 1st, 1995.

3       Term of Lease

        The term of the Lease is fixed and the Lease shall expire on October 31.
        2000.

3.1     Option

        After expiration of the fixed-term Lease, Lessee shall have the option
        to extend the Lease by 5 more years. If Lessee elects to exercise this
        option, it must notify Lessor in writing no later than March 31, 2000.
        If Lessee does not exercise the option and as long as neither of the
        parties to the contract terminates the Lease effective October 31, 2000,
        after expiration of the term the Lease shall be automatically extended
        by one year at a time. In case of termination, notice must always be
        given 6 months in advance.

4.      Rent

4.1     Net Rent

<PAGE>

        Net rent for the production and office space shall be Sfr. 70,200.00
        annually (= Sfr. 180.00 per m2 for that year) and is payable in monthly
        installments of Sfr.5,850.00.

        Net rent for Parking Area "Nord" shall be Sfr. 4,800.00 annually and
        shall be payable in monthly installments of Sfr. 400.00.

4.1.1   After October 1st, 1997, the annual net rent of Sfr. 70,200.00/ 5,850.00
        shall be tied to the consumer price index BIGA(1). The rent corresponds
        to the level of the index applicable at that point in time, i.e. August
        1997. Upon request by one of the parties, the net rent may be adjusted
        once annually on January 1st regardless of the fixed term of the Lease,
        taking into account the entire percentage of change undergone by this
        index. The first adjustment may be done on 01.01.1998 at the earliest.

4.1.2   The net annual rent of Sfr. 70,200.00 / 5,850.00 is a base rent. Rent
        may not fall below this amount regardless of potential adjustments.

4.2     Utilities

4.2.1   The payments on account towards expenses for heating, electricity used
        for shared rooms and for the burner, water fees, possibly sewage and
        garbage collection fees, expenses for janitorial services which are
        billed by the manager on April 30th, shall amount to Sfr. 400.00
        monthly.

4.2.2   In exchange for participation in covering the cost thereof, Lessee shall
        have the opportunity to use the service elevator.

4.3     Bank Guarantee

        At the time the Lease is entered into, Lessee shall deposit the sum of
        Sfr. 15,000.00 as an irrevocable bank guarantee.

10.     Structural Alterations

        Lessor shall carry out the following structural alterations at its
        expense:

        -       Service elevator (Palette USA) to the already leased warehouse
                located in the basement, without transportation of persons.

        -       Stairs for persons leading to the warehouse in the basement.

        -       Opening in the wall with door into the stairway (as big as
                possible).

        -       Construction of 2 walls with 2 doors for building a reception
                area by the entrance (according to layout).

        -       Construction of two bathrooms (3 toilets each for men / 3 each
                for women) and possible sewer hook-up according to layout.



--------

(1)     Bundesamt fur Industrie, Gewerbe und Arbeit (Swiss federal bureau of
        industry, business and work)

<PAGE>

        -       Construction of a firm boundary along the store window front at
                a railing level.

        -       Construction of a sliding door in store window "North".

Lessor guarantees the completion of the aforementioned work between 07.01 -
08.30.1995 as long as the definite layout is submitted by 04.30.1995 at the
latest.



Nidau,                                          Nidau,

Lessee:                                         Lessor:



                                                [signature]
------------------------                        --------------------------------
STARR SURGICAL AG                               Mr. E. Calderari


                                                [signature]
                                                --------------------------------
                                                Mr. W. Schwab



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>4
<FILENAME>a06720exv10w12.txt
<DESCRIPTION>EX-10.12
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.12


               SUPPLEMENT TO THE LEASE AGREEMENT OF JULY 12, 1994
                        FOR THE PRODUCTION SPACE EX RUCCI

                                     between


EINFACHE GESELLSCHAFT CALDERARI & SCHWAB, Schloss-Str. 8-A 2560 Nidau

                                                                - Lessor  -

                                       and

STARR SURGICAL AG, Hauptsrasse 104, 2560 NIDAU

                                                                - Lessee  -

1.      Leased Premises

        Lessee Lessee leases an area of 259 m2 on the ground floor of the
        property known as Hauptstrasse 104, 2560 Nidau as a production site
        (240 m2) and basement (29 m2), as well as 5 parking spaces in the
        Parking Area North (Ex Rucci).

2.      Commencement of Lease

        The Lease shall commence on September 15, 1999.

3.      Term of Lease

        The term of the Lease is fixed and the Lease shall expire on December 3,
        2006.

3.1     Option

        After expiration of the fixed-term Lease, Lessee shall have the option
        to extend the Lease by 5 more years. If Lessee elects to exercise this
        option, it must notify Lessor in writing no later than 12.31.2005. If
        Lessee does not exercise the option and as long as neither of the
        parties to the contract terminates the Lease effective December 31,
        2005, after expiration of the term, the Lease shall be automatically
        extended by one year at a time. In case of termination, notice must
        always be given 1 year in advance.



<PAGE>

4.      Rent

4.1      Net Rent

        Net rent for the production and cellar space shall be Sfr. 45,520.00
        annually (= Sfr.180.00 per m2 for that year/cellar = Sfr. 80.00 per m2
        for that year) and is payable in monthly installments of Sfr.3,793.00.

        Net rent for 5 parking spaces "Nord" shall be Sfr. 4,800.00 annually and
        shall be payable in monthly installments of Sfr. 400.00.

4.1.1   After September 15, 1999, the annual net rent of Sfr. 45,520.00/
        3,793.00 shall be tied to the consumer price index BIGA1. The rent
        corresponds to the level of the index applicable at that point in time,
        i.e. August 1999. Upon request by one of the parties, the net rent may
        be adjusted once annually on January 1st regardless of the fixed term of
        the Lease, taking into account the entire percentage of change undergone
        by this index. The first adjustment may be done on 01.01.2001 at the
        earliest.

4.1.2   The net annual rent of Sfr. 45,520.00 / 3,793.00 is a base rent. Rent
        may not fall below this amount regardless of potential adjustments.

4.2     Utilities

4.2.1   The payments on account towards expenses for heating, electricity used
        for shared rooms and for the burner, water fees, possibly sewage and
        garbage collection fees, expenses for janitorial services which are
        billed by the manager on April 30th, shall amount to Sfr. 400.00
        monthly.

4.2.2   Possible land contamination by the body shop, such as oil, gasoline,
        etc., shall be the responsibility of Lessor.

10.     Structural Alterations

        Lessor shall carry out the following structural alterations at its
        expense:

        -       Interior walling up of an exterior garage door with transom.

        -       3 doors with an interior width of at least 1.30 m (e.g. a double
                door like we already have in our production area).

        -       1 partition (if possible transom).

        -       All side walls and ceilings finished with smooth plaster and
                painted white.

        -       Floor with smooth, easy to clean covering (such as ceramic tile,
                anti-static linoleum).


--------

(1)     Bundesamt fur Industrie, Gewerbe und Arbeit (Swiss federal bureau of
        industry, business and work)

<PAGE>


        -       All windows, glass brick walls and doors fitted flush so that
                they are dustproof.

        -       All no longer used pipes, cables and other objects attracting
                dust removed, all walls, floors and ceiling cleaned of dust.

        -       Division of exterior parking area into marked spaces and
                resurfacing of the transition from exterior wall to road
                surface.

        -       Standard lighting for production and warehouse space

11.     Special Provisions

        By entering into this contract, both Lease Agreements of 07.12.1994 as
well as Supplement I dated 07.10.1995 are being extended. The new term of the
Lease shall expire on 12.31.2006.




Nidau,                                          Nidau,


Lessee:                                         Lessor:


[signature] 08.02.99                            [signature]
-----------------------------                   --------------------------------
STARR SURGICAL AG                               Mr. E. Calderari

                                                [signature]
                                                --------------------------------
                                                Mr. W. Schwab

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>5
<FILENAME>a06720exv10w13.txt
<DESCRIPTION>EX-10.13
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.13


                           COMMERCIAL LEASE AGREEMENT

Lessor:           DePfa Deutsche Pfandbriefbank AG Paulinenstra(beta)e 15, 65189
                  WiesbADEN

represented by:   DePfa Bau-, Verwaltungs- und Controlling GmbH
                  Poppenbutteler Bogen 17, 22399 Hamburg

Lessee:           DOMILENS GmbH
                  Holsteiner Chaussee 303 a, 22457 Hamburg

enter into the following Lease Agreement:

Leased Premises:  Office and Business Premises
                  Holsteiner Chaussee 303 a + b, 22457 Hamburg
                  Area Entrance 303 a, approx. 1'454.15 m2
                  Entrance 303 b, 3rd floor, approx. 118.83 m2
                  Entrance 303 b, 4th floor, approx. 148.85 m2

        Parts of the Lease Agreement

                Preamble

        1.      Leased Premises

        2.      Purpose of Lease

        3.      Term and Termination of Lease

        4.      Handing over of Premises

        5.      Rent, Utilities, Heating Costs, Value Guarantee Payment and
                Accounting

        6.      Security Deposit

        7.      Joint Advertising

        8.      Advertising Equipment

        9.      Safeguarding Collective Interests

        10.     Electricity, Heating (Gas), and Water

        11.     Maintenance and Repair of Leased Premises

        12.     Structural Alterations by Lessee

        13.     Lessee's Liability

        14.     Improvements and Structural Alterations by Lessor

        15.     Yielding of Leased Premises

        16.     Lessor's Access to the Leased Premises

        17.     Assignability of Use of Leased Premises

        18.     Reconstruction Clause, Business Interruptions

        19.     Lessor's Liability, Insurance

        20.     House Rules

        21.     Miscellaneous

        22.     Final Provisions



                                       1
<PAGE>

                Preamble

                Due to the fact that Lessee has decided to lease additional
                space beyond the already existing Lease involving Holsteiner
                Chaussee 303 a and b, 22457 Hamburg, the parties agree to the
                following:

                Through the signing of this Lease Agreement, the Lease Agreement
                dated July 07.07./14.1993 as well as the Supplement to the Lease
                Agreement dated 04.27./ 05.05.98, and the Lease Agreement of
                08.20./25.1999 as well as the Supplement to the Lease Agreement
                dated 08.12./16.99 are void as of 12.31.2000..

                The Lease of the entire space of approx. 1,721.83 m2 is subject
                to the following provisions:

        1.      Leased Premises

                1.1     The Leased Premises consist of an area measuring approx.
                        1,721.83 m2. Unless otherwise agreed upon hereinafter,
                        the office space leased by Lessee is referred to as
                        Leased Space.

                1.2     The space measurements in 1.1 of the Lease Agreement are
                        axis measurements based on building plans. Provided that
                        the deviation from the actual Leased Space is less than
                        5 percent, Lessee states already today that it is in
                        agreement with such a deviation.

                1.3     Lessee shall be responsible for obtaining, at its own
                        expense, all official permits and licenses which may be
                        required in connection with conducting business. In this
                        effort, Lessor shall lend technical support to Lessee
                        upon Lessee's request.

                1.4     The Leased Premises may only be used for legally,
                        officially and contractually permitted purposes. Lessee
                        is required to comply, at its own expense, with the
                        legal, governmental and technical regulations (e.g.
                        DIN(1), VDS(2), VDE(3)) which apply to its business and
                        keep Lessor free of any impositions which may be issued
                        against it. Upon request, Lessee must provide Lessor
                        with relevant inspection certificates issued by an
                        accredited expert. Lessor may set a reasonable time
                        limit within which Lessee must meet above obligations.
                        If it is not met or Lessee's whereabouts are unknown,
                        Lessor may have necessary measures taken at Lessee's
                        expense.

        2.      Purpose of Lease

                2.1     Maintaining an Office


----------

(1)     Deutsche Industrie-Normen (German industrial standards)

(2)     Vertrauen durch Sicherheit, an independent, international, accredited
        testing and certification institution

(3)     Assn. for Electrical, Electronic and Information Technologies, an
        independent testing and certification institute



                                       2
<PAGE>
        3.      Term and Termination of Lease

                3.01    Commencement of Lease:                  01.01.2001

                3.02    Not applicable

                3.03    Term of Lease:                          10 years fixed

                3.04    Special rights of termination:          as of 12.31.2004
                                                                as of 08.30.2007

                Notice of special termination must be given by Lessee in writing
                and received by Lessor at least 6 months before the agreed upon
                date.

                3.05    Tenancy shall end with the expiration of the term agreed
                        upon under this contract according to 3.03 if the rights
                        to special termination are not exercised.

                3.06    Not applicable

                3.07    As far as the right of termination without notice is
                        concerned, in particular termination due to non-payment
                        of rent, the legal provisions apply. In this context,
                        the prepaid fees for utilities as well as heating shall
                        be treated as part of the rent. Moreover, it shall be
                        considered an important reason for termination without
                        notice by Lessor if Lessee, although it has received a
                        reminder in writing, does not meet essential obligations
                        within a reasonable period (e.g. use that constitutes a
                        breach of contract, considerable harassment or
                        interference with Lessor or other tenants, permitting
                        unauthorized use by third parties).

                3.08    Lessor is further entitled to terminate the lease
                        without notice if Lessee's assets are subject to the
                        initiation of judicial court-supervised reorganization
                        or bankruptcy proceedings or an application for
                        reorganization has been denied due to insufficient
                        assets. The same applies filed for reorganization or
                        bankruptcy, stops payments or enters into a settlement
                        out of court.

                3.09    In case of a premature termination of the Lease for
                        which Lessee is responsible, Lessee is liable for lost
                        rent, utilities and other payments for the term of the
                        Lease under the Lease Agreement as well as for all
                        additional damages suffered by Lessor due to the
                        premature termination of the lease.

                3.10    Any notice of termination must be given in writing.


                                       3
<PAGE>

                3.11    If the term of the Lease expires, Section of the BGB(4)
                        shall not apply.

        4.      Handing-over of Leased Premises

                4.1     Lessor shall hand over the Leased Premises in the
                        presently existing condition which Lessee observed when
                        viewing the premises, unless other terms have been
                        agreed upon which are explicitly set forth in this Lease
                        Agreement. Lessor reserves the right to make
                        insignificant changes as well as alterations required to
                        comply with governmental regulations. Any structural or
                        other work requested by Lessee or necessary for its
                        intended use, particularly if it goes beyond or
                        otherwise differs from the condition at the time the
                        Leased Premises was handed over, shall be at the expense
                        of Lessee. The same applies to technical equipment whose
                        installation is required either by the authorities or
                        under this Lease Agreement or which becomes necessary
                        for the operation or furnishing of the Leased Premises.

                4.2     Not applicable

                4.3     Lessee's right to occupy Leased Space Nr. 5, 3rd floor,
                        approx. size 118,83 m2, takes effect only after payment
                        of the security deposit under section 6. Handing over is
                        scheduled for January 2001, but may be delayed until
                        02.01.2001 due to remodeling. For this reason, the owner
                        grants Lessee a rent reduction of DM 1'000.00 per month
                        for November and December of 2000.

                4.4     At the time of the hand-over, a hand-over protocol shall
                        be created which shall document, in particular, which
                        defects, if any, are pointed out by Lessee. Lessor shall
                        have any noted defects which it has acknowledged
                        repaired before the office is opened if possible. Lessee
                        shall give Lessor the opportunity to carry out the
                        repairs. The provisions in section 14.2 shall apply
                        hereto.

                4.5     Not applicable

                4.6     Not applicable

        5.      Rent, Utilities, Heating Expenses, Payment and Accounting

                5.1     Rent



----------

(4)     Bundesgesetzbuch (Swiss federal law)


                                       4
<PAGE>
                 For the space measuring 1,721.83 m2,
                 Lessee shall pay Lessor a monthly net rent
                 excluding  heating of                     DM 34'800.00 plus VAT
                 plus advance payments:

                 1. for operating expenses per Exhibit 3 to
                    Section 27 II. Assessment
                    Regulations (II. AR)                   DM 3'281.00 plus VAT

                 2. for heating costs per Exhibit 3 to
                    Section 27 II AR                       DM 880.00 plus VAT

                 3. rent for reserved parking space        DM 2'220.00 plus VAT
                                                           ---------------------

                 Total rent:                               DM 41'181.00 plus VAT
                                                           ---------------------

                 Lessor's bank account information:

                 Name of account DePfa-BVC wg Host.Chausee
                 Account number: 8626000001

                 Bank/Savings bank DePfa Bank AG BauBoden
                 Bank code: 200 104 24

                 Lessee's bank account information:

                 Name of account: __________________________Account number:

                 Bank/Savings bank _____________________________Bank code:

                5.1.1   Graduated Lease agreement

                The net rent excluding heating agreed upon in 5.1 shall increase
                after a year at the earliest as follows:

<TABLE>
<CAPTION>
                                Level            m2             DM/m2     monthly rent in DM
                                -----            --             ------    ------------------
<S>                                              <C>            <C>       <C>
                Area                             1,721.83
                at the end of the 1st rental year 2002           20.57    DM 35,426.40
                at the end of the 2nd rental year 2003           20.95    DM 36,064.08
                at the end of the 3rd rental year 2004           21.32    DM 36,713.23
</TABLE>

                        Rent increases during the term of the graduated lease
                        agreement are not allowed, except for increases in
                        advance payments for utilities.

                5.1.2.  All aforementioned amounts are net amounts and Lessee
                        must pay additional VAT at the official rate applicable
                        at the respective times, at this time 15 percent.

                5.2     Rent adjustment at the end of the 4th year of lease:

                        New negotiations regarding rent will be initiated as of
                        01.01.2005

                5.3     not applicable



                                       5
<PAGE>

                5.4     not applicable

                5.5     Utilities

                        5.5.1   Utilities for the office and business premises,
                                in particular operational expenses, the cost for
                                care, maintenance, upkeep and repairs as well as
                                for the cleaning of shared facilities and
                                equipment, shall be distributed evenly among all
                                tenants according to the ratio of the area of
                                their leased space to the total area of leased
                                space within the office and business premises.
                                These utilities consist of:

                                a)      reserved parking for cars (parking
                                        spaces, underground parking garages),
                                        traffic lanes, landscaping and other
                                        external improvements as well as
                                        exterior lighting;

                                b)      other shared facilities and equipment of
                                        a structural or technical nature, such
                                        as, if applicable, entrances, all
                                        toilets and sanitation, elevators,
                                        sprinkler systems, etc. which are not
                                        located within the Leased Premises;

                                c)      property taxes;

                                d)      building insurance, such as fire,
                                        liability and tap water insurance;

                                e)      fees for public street sweeping and
                                        expenses for snow and ice removal;

                                f)      electrical power supply for shared
                                        facilities and equipment, garbage
                                        collection, water supply and sewage
                                        disposal incl. public fees, insofar as
                                        these expenses are not the
                                        responsibility of the individual
                                        tenants. Included is, in particular,
                                        water usage connected with shared
                                        installations and facilities (e.g.
                                        heating systems, sprinkler systems,
                                        etc.);

                                g)      security, janitorial and consultation
                                        services for the office and business
                                        facilities, including the hiring of
                                        required personnel, especially the
                                        expenses for building personnel
                                        (building inspector, building
                                        technician, etc.);

                                h)      alterations to the existing shared
                                        facilities and installations needed due
                                        to official requirements established
                                        after construction of the Leased
                                        Premises;



                                       6
<PAGE>

                                i)      neon signs, collective sign
                                        installations, interior and exterior
                                        building signage, including signs in
                                        public traffic areas, flag poles, flags
                                        and the like, which are not related to
                                        individual tenants, but to the Leased
                                        Premises; furthermore, the installation
                                        of such equipment as well as the rental
                                        of space required for their
                                        installation;

                                j)      expenses for cleaning the area of
                                        Entrance 303 b;

                                k)      expenses for local building management,
                                        as well as all utilities according to
                                        Exhibit 3, Section 27 II AR.

                                Lessor has the right to establish a new scale
                                for the distribution of utilities (as a whole or
                                as individual types of expenses) at any time -
                                whereby the new scale may also be applied to the
                                running accounting period - as long as it is
                                appropriate.

                        5.5.2   not applicable

                        5.5.3   Lessor has the right to allocate the cost for
                                further services, which may be allocated under
                                section 5.5.1., to third parties.

                        5.5.4   Lessor has the right to also include those costs
                                for utilities which have not yet been incurred
                                at the commencement of the Lease Agreement in
                                the utilities statement and bill the tenants
                                proportionally.

                5.6     Heating expenses

                        5.6.1   The costs attributable to the leased areas, such
                                as the costs for operation (including control),
                                care, maintenance, upkeep and repairs as well as
                                for cleaning the heating system, shall be
                                distributed evenly among all tenants according
                                to the provisions regarding heating expenses at
                                a rate determined to 50 percent by usage and to
                                50 percent by the size of the used space.

                        5.6.2   The heating expenses attributable to the shared
                                facilities and installations of the office and
                                business facilities shall be paid for by all
                                tenants evenly according to each tenant's total
                                leased space in relation to the total leased
                                area of the commercial building. Insofar as the
                                usage is not determined by measurements, the
                                calculation of these costs shall be based upon
                                the ratio between shared areas to be heated and
                                total areas to be heated within the Leased
                                Premises.

                        5.6.3   not applicable



                                       7
<PAGE>

                        5.6.4   Section 5.5.1, last sentence (establishment of a
                                new scale of distribution) applies to the
                                expensed mentioned in sections 5.6.1 and 5.6.2
                                accordingly.

                        5.6.5   The heating period lasts from October 1st of any
                                given year until May 31st of the following year.
                                Furthermore, Lessee is only entitled to heating
                                during normal business hours. Lessor reserves
                                the right to make changes hereto.

                5.7     Sales tax

                        See section 5.1.2

                5.8     not applicable

                5.9     Rent Payments and Accounting and Cost Allocation

                        5.9.1   Rent is payable monthly in advance, no later
                                than on the third business day of each month.
                                Determination whether a payments is on time
                                shall be based upon the day on which it is
                                received by Lessor or credited to Lessor's
                                account.

                        5.9.2   All payments must be made to Lessor or to the
                                person or agency authorized by Lessor to receive
                                them. Upon request by Lessor, Lessee shall make
                                payments by method of direct debit transfer
                                using the attached form.

                        5.9.3   not applicable

                        5.9.4   not applicable

                        5.9.5   Lessee shall make monthly prepayments towards
                                the expenses described in sections 5.5.1
                                (utilities for the office and business
                                facilities), 5.6.1 and 5.6.2 (heating expenses)
                                together with the minimum rent, initially in the
                                amount stated in 5.1. Section 5.6.1 is applied
                                accordingly. Unless explicitly agreed upon
                                otherwise, an annual statement regarding the
                                prepayments will be issued to Lessee. Any
                                differences between the final billed amount and
                                the prepaid amount shall be either paid by
                                Lessee within four weeks from receipt of the
                                statement or reimbursed by Lessor, whichever may
                                apply. Upon Lessee's request, Lessor shall grant
                                Lessee the opportunity to review the accounting
                                records at the administrative offices of
                                Lessee/manager at a scheduled time within the
                                above mentioned four week period.



                                       8
<PAGE>

                                The statement is considered approved if Lessee
                                has not contested it in writing by stating his
                                reasons within another period of four weeks.

                                Lessor may reassess prepayments if it is obvious
                                that the prepayments do not cover the projected
                                costs, and he can do so during an accounting
                                period or at the time the tenancy commences.

                        5.9.6   According to section 5.5, all expenses
                                pertaining to a particular billing period for
                                which Lessor has been billed shall be invoiced.
                                Invoices pertaining to past billing periods
                                which are received after the period has ended
                                are included in the next statement. If tenancy
                                commences within a billing period, Lessee shall
                                be billed on a pro- rated basis.

                        5.9.7.  If a payment is overdue, Lessor shall have the
                                right to charge an administrative fee of DM
                                10.00 per reminder to pay, plus interest for
                                default which shall be 5 percent higher than the
                                base interest rate of the Bundesbank [German
                                central bank], which is 4,26 percent at this
                                time, unless the sustained damage is verifiably
                                less.

                                Furthermore, in case of delinquency Lessor may
                                demand the surrender of the property placed as a
                                lien and dispose of such property by means of
                                unrestricted sale.

                        5.9.8   If a payment made by Lessee is not sufficient to
                                cover all of its accrued debts, Lessor shall
                                have the right, regardless of any dissenting
                                statement made by Lessee, to apply the payment
                                first to the not legally enforceable and not
                                legally pending and finally to the legally
                                enforceable debt, first to the older and then to
                                the newer one.

                        5.9.9   In regards to rent or other charges made by
                                Lessor based upon this Lease Agreement, Lessee
                                may neither exercise a right to withhold payment
                                (right to withhold performance) nor offset the
                                charges against a contested counterclaim or a
                                counterclaim that has been determined to be not
                                legally valid. A right to mitigate only exists
                                if it is explicitly provided for under the Lease
                                Agreement.

                        5.9.10  Lessor shall not owe interest on overpaid rent,
                                prepayments and other billed amounts.

                5.10    The disposal of packaging materials etc. shall be the
                        duty of Lessee. All expenses connected with the disposal
                        shall be paid by Lessee. If Lessor arranges the
                        disposal, the resulting expenses shall be distributed
                        among the tenants under utilities according to section
                        5.5.



                                       9
<PAGE>

                5.11    Should there be an increase in official charges (taxes,
                        fees, assessments), insurance premiums and the like
                        applicable to the property after the Lease Agreement is
                        entered into, or an introduction of new charges levied
                        upon the property, Lessor shall have the right to
                        distribute the extra costs incurred during the period
                        following the commencement of the Lease Agreement among
                        the tenants, based upon the their area of leased space
                        in relation to the total leased space within the office
                        and business facilities, unless another method of
                        allocation is mandated by law or decree.

                5.12.   Any increases in premiums for property insurance which
                        my arise due to the specific commercial use by Lessee
                        shall be paid by Lessee to Lessor. Any changes on the
                        part of Lessee which could lead to an increase in those
                        insurance premiums during the tenancy must be reported
                        to Lessor.

        6.      Security Deposit

                Upon entering into this Lease Agreement, Lessee shall pay Lessor
                a security deposit in the amount of DM 5,000.00. This security
                deposit must be in the form of a performance bond through a
                large German bank or financial institution governed by public
                law. Lessor shall be authorized to use this bond to satisfy his
                claims based upon this Leases Agreement if Lessee dose not
                fulfill his obligations or does not do so completely or in a
                timely manner. The bond serves as a means to cover all claims by
                Lessor existing in connections with or arising due to the
                termination of the tenancy. The bond must be surrendered after
                termination of the tenancy as soon as and if it has been
                determined that Lessor has no further claims against Lessee.
                Furthermore, should the bond be used by Lessor during the term
                of the lease, it must be replenished immediately by Lessee until
                it is restored to its original amount.

        7.      Joint Advertising

                not applicable

        8.      Advertising Equipment

                8.1     In the interest of advertising in keeping with the
                        common character of the office and business facilities,
                        the installation and design of equipment serving the
                        purpose of advertising or sales promotion located
                        outside the Leased Premises shall require prior approval
                        in writing by the Lessor.

                8.2     It shall be the responsibility of Lessee to obtain all
                        the necessary permits which may be hereto required by
                        law and to fulfill any imposed administrative
                        conditions, whereby all expenses shall be the
                        responsibility of Lessee.



                                       10
<PAGE>

                8.3     Lessee shall be liable for all damage arising from the
                        installation of such equipment and must hold Lessor
                        harmless of all claims by third parties.

        9.      Safeguarding Collective Interests

                Assuming that in the interest of all tenants a positive general
                impression of the Leased Premises must be maintained, Lessee
                shall promise to comply with the following provisions:

                9.1     not applicable

                9.2     Lessee shall be required to use the Leased Premises
                        during the entire term of the lease without interruption
                        according to the stated purpose; Lessee shall not leave
                        the Leased Premises unused or empty, either as a whole
                        or in part.

                9.3     not applicable

                9.4     not applicable

                9.5     Lessee shall use the Leased Premises in keeping with the
                        character of the office and business premises. It shall
                        abstain from any actions of a nature which could be
                        detrimental to the legitimate interests of other tenants
                        or have a negative effect on the office building.

                9.6     not applicable

                9.7     not applicable

        10.     Electricity, Heat (Gas) and Water

                10.1    The existing lines for electricity, heat (gas) and water
                        (supply media) may be used - if available - by Lessee
                        only to the extent that its use does not exceed their
                        capacity. Lessee may meet excess needs by having supply
                        lines enlarged at its own expense after obtaining
                        Lessor's prior written consent hereto.

                10.2    For its gas and/or electrical needs, Lessee shall have a
                        meter/meters installed by firms authorized to do so at
                        its own expense; payment for gas or electricity shall be
                        Lessee's responsibility.

                10.3    Water meters are installed for the purpose of
                        determining water use. The cost for water supply and
                        sewage disposal shall be carried by Lessee based on use
                        and shall be distributed among the tenants and billed
                        under utilities.

                10.4    Meters are to be kept accessible and easily readable.



                                       11
<PAGE>

                10.5    In case of disruptions or damage to the supply lines,
                        Lessee shall be responsible for immediate shut-off. If
                        it is unable to do so or if the disruption or damage
                        affects other tenants, Lessee or his agent shall be
                        require to notify Lessor immediately.

                10.6    In case of changes to or interruptions in the supply of
                        electricity, heating or water or the disposal of sewage
                        due to circumstances not caused by Lessee, or if
                        flooding or other events of a catastrophic nature should
                        occur, Lessee shall have no right to withhold rent or
                        seek damages from Lessor.

        11.     Maintenance and Repair of Leased Premises

                11.1    Lessee shall be responsible for the care, maintenance,
                        cosmetic repair, upkeep and repair of the leased space
                        and/or the interior of the leased rooms as well as the
                        doors and windows of the exterior facade at its own
                        expense. This shall also apply to technical equipment
                        (such as electrical and sanitary installations, etc.) to
                        the extent that this equipment is located within the
                        Leased Premises and is used exclusively by Lessee.
                        Cosmetic repairs in particular shall be carried out by
                        Lessee in a professional manner at regular intervals -
                        sanitary installations and kitchen areas every 3 years -
                        the remaining office spaces every 4 years.

                        Work on technical installations may only be done by
                        professional companies.

                11.2    If Lessee does not fulfill any of the above obligations
                        within a reasonable grace period set by Lessor in spite
                        of a written request by the Lessor, Lessor shall have
                        the right to have the required work done at Lessee's
                        expense. A warning of dismissal by Lessor shall not be
                        required. Should a delay pose a danger, not grace period
                        shall be necessary.

        12.     Structural Alterations by Lessee

                12.1    Structural alterations by Lessee, especially remodeling
                        and incorporation of fixtures and fittings,
                        installations, as well as putting bars on windows, may
                        only be carried out with prior written approval by
                        Lessor. If approval is granted by Lessor, Lessee shall
                        be responsible for obtaining all necessary permits. All
                        expenses for structural alterations (including any
                        official fees) shall be paid for by Lessee.

                12.2    Installation of transmission devices (e.g. exterior
                        antennae, access cables, etc.) shall require prior
                        approval in writing by Lessor.




                                       12
<PAGE>

        12.3    Lessee shall be liable for any damage arising from any
                construction measures taken by Lessee.

        13.     Lessee's Liability

                13.1    Lessee shall be liable to Lessor for any damage caused
                        to the Leased Premises by Lessee, members of its family
                        and its employees, as well as hired craftsmen, their
                        workers and assistants, delivery personnel, clients and
                        other related persons. Lessee shall be liable, in
                        particular, for any damage due to improper use of
                        high-voltage and low-voltage power lines, bathroom and
                        sanitary installations, sprinkler and heating systems,
                        or failure to close doors or carry out other duties
                        (e.g. lighting, etc.). In such cases it shall not matter
                        whether the party causing the damage is at fault.

                13.2    Lessee shall also be liable to Lessor for any damage to
                        any and all buildings, gates, parking facilities and
                        traffic lanes caused by delivery and pickup of
                        merchandise, in particular by its own or other vehicles
                        and not due to normal wear and tear. Section 13.1
                        sentence 3 shall apply accordingly.

                13.3    Lessee shall repair any damage for which it is liable
                        under sections 13.1 and 13.2 immediately. If it does not
                        meet this obligation within the deadline set by Lessor
                        even after receiving written notice, Lessor may have the
                        necessary work done at Lessee's expense. A warning of
                        dismissal by Lessor shall not be required. Should the
                        damage pose a danger or the whereabouts of Lessee be
                        unknown, a written warning and setting of a deadline
                        shall not be required.

                13.4    If Lessor is responsible for repairing damage on or in
                        the building or Leased Premises, such damage must be
                        reported to Lessor immediately. If Lessee fails to do
                        so, it shall be liable for any damage due to the delay.

        14.     Improvements and Structural Alterations by Lessor

                14.1    Lessor may carry out improvements and structural
                        alterations for the purpose of expansion and extension
                        of the office and business facilities, of preservation
                        of the building or Leased Premises, of protection from
                        impending damage or of repair of defects or damage
                        without Lessee's consent. This shall also apply to work
                        which, although not necessary, is useful, such as the
                        modernization of the building and Leased Premises.
                        Lessee shall keep the affected sections of the Leased
                        Premises accessible; it may not impede such work being
                        carried out; it shall be required to tolerate the
                        inconveniences, in particular odors, dirt, and noise,
                        caused by the above mentioned measures.



                                       13
<PAGE>

                14.2    As far as Lessee's tolerance of the work is concerned,
                        Lessee shall only be entitled to reduce the rent if the
                        work results in substantial interference with its use of
                        the Leased Premises.

        15.     Yielding of Leased Premises

                15.1    The conversions, incorporation of fixtures and fittings
                        and installations carried out by Lessee are only for
                        temporary purposes. Therefore, they do not become part
                        of the building (Section 95 BGB).

                15.2    At the termination of the Lease, Lessee shall be
                        required to yield the Leased Premises - subject to
                        regulations to the contrary and irrespective of their
                        condition at the commencement of the Lease - as follows:

                        a)      All removable equipment as well as all fittings
                                installed by Lessee shall be removed;

                        b)      all exterior advertising shall be removed;

                        c)      the leased space is to be turned over in clean
                                and tidy condition;

                        d)      any and all keys in Lessee's possession - even
                                those for lockable fixtures installed by Lessee,
                                shall be turned over to Lessor.

        16.     Lessor's Access to the Leased Premises

                16.1    Lessor or its agents shall have the right to access the
                        Leased Premises any time within Lessee's normal business
                        hours.

                16.2    Lessee shall ensure that rooms can also be entered in
                        its absence. If it does not fulfill this obligation, it
                        shall be liable for any and all damage due to undue
                        delay, such as when entry was not possible in case of
                        impending danger.

        17.     Assignability of Use of Leased Premises

                17.1    Subletting or any other assignment of use to third
                        parties by Lessee shall only be permitted with Lessor's
                        prior consent in writing. Lessor's consent must also be
                        obtained regarding the provisions for
                        subletting/assignment of use proposed by Lessee. Section
                        549 paragraph 1, clause 2 BGB shall not be applied. In
                        case of subletting/assignment of use, Lessee assigns, in
                        advance, the rent it is entitled to receive from the
                        third party, including the security deposit, up to the
                        amount which Lessor is entitled to, as a precaution to
                        Lessor.

                17.2    For companies, a change of principal or of a general
                        partner or a change in legal form shall constitute an
                        assignment of use to a third party. Lessee



                                       14
<PAGE>

                        must immediately report such developments as well as
                        changes in regards to business permits or other
                        important matters affecting the Lease to Lessor in
                        writing.

                17.3    In case of the sale of Lessee's entire business or a
                        portion of the business, this Lease Agreement shall be
                        transferred to Lessee's legal successor, if Lessor
                        consents to it in writing.

        18.     Reconstruction Clause, Business Interruptions

                18.1    Should the Leased Premises or shared facilities be
                        totally or vastly destroyed or damaged due to
                        construction errors, fire, explosion, lightning, a
                        storm, an act of God, the effects of war or other
                        circumstances, this Lease Agreement shall only expire
                        after Lessor has declared that it will not rebuild.
                        Insofar as the use of the damaged or destroyed Leased
                        Premises under the Lease Agreement is no longer
                        possible, Lessee's obligation to pay rent rests
                        commencing on the day following the event causing the
                        damage. In case of partial destruction or damage, the
                        obligation to pay rent shall lapse pro rata. After
                        reconstruction has been completed, the provisions
                        regarding handing over and payment of rent shall apply
                        correspondingly.

                18.2    Business interruptions within the office and business
                        facilities - for whatever reason - which are beyond
                        Lessor's control shall not affect Lessee's obligation to
                        pay rent as long as those interruptions can be remedied
                        within a reasonable amount of time. Lessor shall have
                        the right to have the office and business facilities
                        vacated during daily business hours for safety reasons
                        and to have access to the site of the office and
                        business facilities cordoned off.

                18.3    In cases described in sections 18.1 and 18.2 above,
                        Lessee shall only be entitled to compensation for
                        damages under the provisions set forth in section 19.1.
                        Lessee may only exercise other rights if Lessor is
                        responsible for the business interruption.

        19.     Lessor's Liability, Insurance

                19.1    Lessee shall only be entitled to compensation for
                        damages in case of gross negligence by Lessor or its
                        vicarious agents; such entitlements in cases of gross
                        negligence shall be limited to the type and extent of
                        coverage provided by an adequate liability insurance
                        contract entered into by Lessor.

                19.2    Furthermore, in case of a defect in the Leased Property,
                        Lessee may only make a claim for damages if the damage
                        or curtailment of use is substantial. The same shall
                        apply to a reduction in rent, which, in addition,



                                       15
<PAGE>

                        shall only be permissible if it is announced in writing
                        one month prior to the due date of the affected rent.

                19.3    Lessee shall be obligated to purchase the following
                        insurance policies at its expense and to furnish proof
                        of such a purchase upon Lessor's request:

                        a)      fire as well as tap water insurance including
                                coverage for waste water damage to personal
                                property, such as fixtures and materials;

                        b)      liability insurance for personal injury,
                                property and asset damage up to the limits of
                                coverage customary for the line of business
                                Lessee is conducting.

        20.     House Rules

                20.1    In the interest of peaceful coexistence, any
                        interference with the other tenants must be avoided.
                        This shall apply in particular to noise and odors.
                        Lessee shall be liable for any and all damages due to
                        its non-compliance with these rules and must take
                        immediate remedial action in case of a complaint. This
                        shall apply even if Lessee is engaged in a line of
                        business usually associated with noise and odor
                        emissions.

                        Lessee shall take, at its own expense, all necessary
                        structural and business measures (especially those
                        required by law) to prevent unacceptable emissions,
                        especially emissions of noise and odor, from Lessee's
                        business premises to neighboring areas of the Leased
                        Property. This shall also apply for other areas outside
                        the business premises. If necessary, Lessee shall, upon
                        request by Lessor, install its own exhaust system.
                        Lessee shall be required to keep this system in good
                        working order at all times, to make sure that it
                        complies meets official requirements and regulations and
                        is operating continuously.

                20.2    Lessee shall be responsible for the adequate cleaning of
                        its leased space, including, in particular, the facades
                        and/or store window areas, and must ensure adequate
                        ventilation, heating and lighting in its rooms, to the
                        extent that Lessee has control over these matters. It
                        shall be Lessee's duty to clean areas even if they are
                        outside the Leased Property at any time if the dirt has
                        been caused by its business.

                        If Lessee does not meet these responsibilities in
                        accordance with regulations, Lessor shall have the right
                        to have the dirt removed at Lessee's expense.

                20.3    Unauthorized persons shall be prohibited from accessing
                        the roof and the technical rooms.



                                       16
<PAGE>

                20.4    Lessee must use the main traffic routes and necessary
                        emergency exits - if need be, according to Lessor's
                        instructions - and keep those as well as the entrances
                        to the buildings, traffic areas, courtyards, passages,
                        stairways, entrances to basements, etc. free of objects
                        of any kind. Sales, presentations of merchandise and the
                        placement of advertising media outside the Leased
                        Property shall only be permitted after Lessor's written
                        consent, which may be revoked at any time, has been
                        obtained in advance.

                20.5    Lessee may only park its vehicles in the spaces
                        allocated for this purpose by Lessor. The same shall
                        apply to the vehicles of employees, visitors, and
                        delivery personnel. Lessee must instruct these persons
                        to comply with these provisions. Lessee shall not be
                        entitled to the allotment of such parking spaces; their
                        allocation may be revoked or changed by Lessor at any
                        time. The washing of vehicles on the property shall not
                        be permitted.

                20.6    In case of the existence of shared major equipment
                        systems and facilities, such as central heating,
                        elevators, other technical systems, etc., provisions
                        regarding their usage must be complied with and the
                        instructions of the manager or building inspectors must
                        be followed.

                20.7    Lessee may make useful changes and amendments to these
                        house rules; it is required to notify Lessor of such
                        changes and amendments in writing.

        21.     Miscellaneous

                21.1    The Owner, DePfa Deutsche Pfandbriefbank AG, assumes the
                        cost for the interior fittings of the leased space Nr.
                        6, 3rd Floor, approx. 118.83 m2. Owner also awards the
                        contracts for the interior fittings of the leased space.

                21.2    not applicable

                21.3    Lessee is aware that not all contracts of the tenants
                        located in the office and business facilities have the
                        same term. Lessee may not infer any rights based upon
                        the termination of other leases or the amount of rent
                        payable under such leases.

                21.4    Lessor reserves the right to carry out structural
                        alterations outside the Leased Property and make changes
                        regarding the occupancy of the leased spaces. Lessor
                        does not guarantee that certain tenants or trades are
                        represented in the office and business facilities.

                21.5    If Lessee changes its mailing address, a statement by
                        Lessor sent to the address last given in writing by
                        Lessee shall be considered received on the day it is
                        posted in the mail (date postmarked).



                                       17
<PAGE>

                21.6    If Lessor consists of several persons, they assume joint
                        liability for all debts arising from the Lease
                        Agreement. For a statement by Lessor to be legally
                        valid, it is sufficient if made towards one of the
                        tenants. Statements of intent by one tenant are also
                        binding for the other tenants. Facts leading to a change
                        in tenancy for one tenant have to be accepted by the
                        other tenants as having the same kind of effect on them.

                21.7    Lessor shall have the right to transfer its rights and
                        duties under this contract to another company, unless
                        such a transfer jeopardizes the continued proper
                        performance of the contract. Upon Lessor's announcement
                        of such legal succession to Lessee, Lessor ceases, with
                        all its rights and duties, to be a party in the Lease
                        Agreement with Lessee.

                21.8    Any protection of Lessee from competition is excluded.

                21.9    not applicable

                21.10   Lessee consents to data regarding the Lease in
                        connection with the administration of the property being
                        stored on electronic data carriers. When processing such
                        data, Lessor shall comply with the provisions of the
                        German Federal Data Protection Act.

        22.     Final Provisions

                22.1    The validity of this contract shall not be affected by
                        the invalidity of individual provisions or by gaps in
                        the provisions of the Agreement. An invalid provision or
                        gap in the provision is to be replaced or closed,
                        respectively, by a valid provision which conforms in its
                        meaning and purpose with the deleted or not provided
                        provision as closely as possible.

                22.2    Agreements or assurances of any kind which affect the
                        Lease or the Leased Premises shall only be effective if
                        made in writing and if they bare the legally valid
                        signatures of Lessor and Lessee, unless a different wish
                        by the parties to the contract has been clearly
                        expressed. The same applies to changes and amendments as
                        well as the annulment of the contract or the clause
                        mandating that the agreements or assurances be in
                        writing.

Hamburg, dated: 11.30.2000                   Hamburg, dated: 11.29.2000

            DePfa
            Verwaltungs- und
            Controlling GmbH
            Poppenbutteler Bogen 17,
            22399 Hamburg

[signature]                                  [signature]
-------------------------------------        -----------------------------------
           (Lessor)                                   (Lessee)

                                                      DOMILENS GmbH
                                                      Holsteiner Chaussee 303 a,
                                                      22457 Hamburg
                                                      Phone: 040/55 98 80-0
                                                      Fax: 040/56 98 80-80



                                       18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>6
<FILENAME>a06720exv10w20.txt
<DESCRIPTION>EX-10.20
<TEXT>
<PAGE>

                                                                   Exhibit 10.20

After Recording Return To:

Staar Surgical Company
1911 Walker Avenue
Monrovia, California 91016
Attn: John Bily

__________________ [Space Above This Line for Recording Data] __________________

                                    MORTGAGE

DEFINITIONS

Words used in multiple sections of this document are defined below and other
words are defined in Sections 3, 11, 13, 18, 20 and 21. Certain rules regarding
the usage of words used in this document are also provided in Section 16.

(A) "SECURITY INSTRUMENT" means this document, which is dated July 16, 2004,
together with all Riders to this document.

(B) "BORROWER" is PETER J. UTRATA, an individual. Borrower is the mortgagor
under this Security Instrument.

(C) "LENDER" is STAAR SURGICAL COMPANY, a Delaware corporation. Lender's address
is 1911 Walker Avenue, Monrovia, California 91016. Lender is the mortgagee under
this Security Instrument.

(D) "NOTE" means, collectively and individually (i) the promissory note ("Note
A") signed by Borrower and dated June 16, 1999, in the face principal amount of
$1,258,000.00, and (ii) the promissory note ("Note B") signed by Borrower and
dated June 2, 2000, in the face principal amount of $272,500.00. Note A states
that Borrower owes Lender One Million Two Hundred Fifty-Eight Thousand Dollars
(U.S. $1,258,000.00) plus interest. Borrower has promised to pay the debt
evidenced by Note A in full not later than June 15, 2004. (By a Forbearance
Agreement dated June 16, 2004 (the "Forbearance Agreement") between Borrower and
Lender, Lender agreed to forebear on the exercise of its rights and remedies
under the Note and the Pledge Agreement (as defined in the Forbearance
Agreement) until March 15, 2005. Note B states the Borrower owes Lender Two
Hundred Seventy-Two Thousand Five Hundred Dollars (U.S. $272,500.00) plus
interest. Borrower has promised to pay the debt evidenced by Note B in full no
later than June 1, 2005.

(E) "PROPERTY" means the property that is described below under the heading
"Transfer of Rights in the Property."

(F) "LOAN" means the debt evidenced by the Note, plus interest, any prepayment
charges and late charges due under the Note, and all sums due under this
Security Instrument, plus interest.

                                      -1-
<PAGE>

(G) [Intentionally omitted.]

(H) "APPLICABLE LAW" means all controlling applicable federal, state and local
statutes, regulations, ordinances and administrative rules and orders (that have
the effect of law) as well as all applicable final, non-appealable judicial
opinions.

(I) "COMMUNITY ASSOCIATION DUES, FEES, AND ASSESSMENTS" means all dues, fees,
assessments and other charges that are imposed on Borrower or the Property by a
condominium association, homeowners association or similar organization.

(J) "ELECTRONIC FUNDS TRANSFER" means any transfer of funds, other than a
transaction originated by check, draft, or similar paper instrument, which is
initiated through an electronic terminal, telephonic instrument, computer, or
magnetic tape so as to order, instruct, or authorize a financial institution to
debit or credit an account. Such term includes, but is not limited to,
point-of-sale transfers, automated teller machine transactions, transfers
initiated by telephone, wire transfers, and automated clearinghouse transfers.

(K) [Intentionally omitted.]

(L) "MISCELLANEOUS PROCEEDS" means any compensation, settlement, award of
damages, or proceeds paid by any third party (other than insurance proceeds paid
under the coverages described in Section 5) for: (i) damage to, or destruction
of, the Property; (ii) condemnation or other taking of all or any part of the
Property; (iii) conveyance in. lieu of condemnation; or (iv) misrepresentations
of, or omissions as to, the value and/or condition of the Property.

(M) "MORTGAGE INSURANCE" means insurance protecting Lender against the
nonpayment of, or default on, the Loan.

(N) "PERIODIC PAYMENT" means the regularly scheduled amount due for (i)
principal and interest under the Note, plus (ii) any amounts under Section 3 of
this Security Instrument.

(O) [Intentionally omitted.]

(P) "SUCCESSOR IN INTEREST OF BORROWER" means any party that has taken title to
the Property, whether or not that party has assumed Borrower's obligations under
the Note and/or this Security Instrument.

TRANSFER OF RIGHTS IN THE PROPERTY

This Security Instrument secures to Lender: (i) the repayment of the Loan, and
all renewals, extensions and modifications of the Note; and (ii) the performance
of Borrower's covenants and agreements under this Security Instrument and the
Note. For this purpose, Borrower does hereby mortgage, grant and convey to
Lender, the following described property, which currently has the address of 117
NE Sewalls Road, Stuart, Florida 34995 ("Property Address"):

      See Exhibit "A" attached hereto and incorporated herein by this reference.

      TOGETHER WITH all the improvements now or hereafter erected on the
property, and all easements, appurtenances, and fixtures now or hereafter a part
of the property. All replacements and additions shall also be covered by this
Security Instrument. All of the foregoing is referred to in this Security
Instrument as the "Property."

      BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby
conveyed and has the right to mortgage, grant and convey the Property and that
the Property

                                      -2-
<PAGE>

is unencumbered, except for encumbrances of record. Borrower warrants and will
defend generally the title to the Property against all claims and demands,
subject to any encumbrances of record.

      THIS SECURITY INSTRUMENT combines uniform covenants for national use and
non-uniform covenants with limited variations by jurisdiction to constitute a
uniform security instrument covering real property.

      UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:

      1. PAYMENT OF PRINCIPAL, INTEREST, ESCROW ITEMS, PREPAYMENT CHARGES, AND
LATE CHARGES. Borrower shall pay when due the principal of, and interest on, the
debt evidenced by the Note and any prepayment charges and late charges due under
the Note. Borrower shall also pay funds for Escrow Items pursuant to Section 3.
Payments due under the Note and this Security Instrument shall be made in U.S.
currency. However, if any check or other instrument received by Lender as
payment under the Note or this Security Instrument is returned to Lender unpaid,
Lender may require that any or all subsequent payments due under the Note and
this Security Instrument be made in one or more of the following forms, as
selected by Lender: (a) cash; (b) money order; (c) certified check, bank check,
treasurer's check or cashier's check, provided any such check is drawn upon an
institution whose deposits are insured by a federal agency, instrumentality, or
entity; or (d) Electronic Funds Transfer.

      Payments are deemed received by Lender when received at the location
designated in the Note or at such other location as may be designated by Lender
in accordance with the notice provisions in Section 15. Lender may return any
payment or partial payment if the payment or partial payments are insufficient
to bring the Loan current. Lender may accept any payment or partial payment
insufficient to bring the Loan current, without waiver of any rights hereunder
or prejudice to its rights to refuse such payment or partial payments in the
future, but Lender is not obligated to apply such payments at the time such
payments are accepted. If each Periodic Payment is applied as of its scheduled
due date, then Lender need not pay interest on unapplied funds. Lender may hold
such unapplied funds until Borrower makes payment to bring the Loan current. If
Borrower does not do so within a reasonable period of time, Lender shall either
apply such funds or return them to Borrower. If not applied earlier, such funds
will be applied to the outstanding principal balance under the Note immediately
prior to foreclosure. No offset or claim which Borrower might have now or in the
future against Lender shall relieve Borrower from making payments due under the
Note and this Security Instrument or performing the covenants and agreements
secured by this Security Instrument.

      2. APPLICATION OF PAYMENTS OR PROCEEDS. Except as otherwise described in
this Section 2, all payments accepted and applied by Lender shall be applied in
the following order of priority:

(a) interest due under the Note; (b) principal due under the Note; (c) amounts
due under Section 3. Such payments shall be applied to each Periodic Payment in
the order in which it became due. Any remaining amounts shall be applied first
to late charges, second to any other amounts due under this Security Instrument,
and then to reduce the principal balance of the Note.

      If Lender receives a payment from Borrower for a delinquent Periodic
Payment which includes a sufficient amount to pay any late charge due, the
payment may be applied

                                      -3-
<PAGE>

to the delinquent payment and the late charge. If more than one Periodic Payment
is outstanding, Lender may apply any payment received from Borrower to the
repayment of the Periodic Payments if, and to the extent that, each payment can
be paid in full. To the extent that any excess exists after the payment is
applied to the full payment of one or more Periodic Payments, such excess may be
applied to any late charges due. Voluntary prepayments shall be applied first to
any prepayment charges and then as described in the Note.

      Any application of payments, insurance proceeds, or Miscellaneous Proceeds
to principal due under the Note shall not extend or postpone the due date, or
change the amount, of the Periodic Payments.

      3. FIRST MORTGAGE. This Security Instrument is subordinate to a mortgage
in favor of Virtual Bank, a Division of Lydian Private Bank, securing a note in
the amount of $1,500,000.00 (the "First Mortgage"). Borrower hereby agrees that
the current outstanding principal balance of the indebtedness secured by the
First Mortgage does not exceed $1,500,000.00. Borrower further agrees that
Borrower shall pay all amounts secured by the First Mortgage when due and
perform all of its obligations under the First Mortgage. Any default under the
First Mortgage shall constitute a default under this Security Instrument.

      4. CHARGES; LIENS. Borrower shall pay all taxes, assessments, charges,
fines, and impositions attributable to the Property which can attain priority
over this Security Instrument, leasehold payments or ground rents on the
Property, if any, and Community Association Dues, Fees, and Assessments, if any.
To the extent that these items are Escrow Items, Borrower shall pay them in the
manner provided in Section 3.

      Borrower shall promptly discharge any lien which has priority over this
Security Instrument unless Borrower: (a) agrees in writing to the payment of the
obligation secured by the lien in a manner acceptable to Lender, but only so
long as Borrower is performing such agreement; (b) contests the lien in good
faith by, or defends against enforcement of the lien in, legal proceedings which
in Lender's opinion operate to prevent the enforcement of the lien while those
proceedings are pending, but only until such proceedings are concluded; or (c)
secures from the holder of the lien an agreement satisfactory to Lender
subordinating the lien to this Security Instrument. If Lender determines that
any part of the Property is subject to a lien which can attain priority over
this Security Instrument, Lender may give Borrower a notice identifying the
lien. Within 10 days of the date on which that notice is given, Borrower shall
satisfy the lien or take one or more of the actions set forth above in this
Section 4.

      Lender may require Borrower to pay a one-time charge for a real estate tax
verification and/or reporting service used by Lender in connection with this
Loan.

      5. PROPERTY INSURANCE. Borrower shall keep the improvements now existing
or hereafter erected on the Property insured against loss by fire, hazards
included within the term "extended coverage," and any other hazards including,
but not limited to, earthquakes and floods, for which Lender requires insurance.
This insurance shall be maintained in the amounts (including deductible levels)
and for the periods that Lender requires. What Lender requires pursuant to the
preceding sentences can change during the term of the Loan. The insurance
carrier providing the insurance shall be chosen by Borrower subject to Lender's
right to disapprove Borrower's choice, which right shall not be exercised
unreasonably. Lender may require Borrower to pay, in connection with this Loan,
either: (a) a one-time

                                      -4-
<PAGE>

charge for flood zone determination, certification and tracking services; or (b)
a one-time charge for flood zone determination and certification services and
subsequent charges each time remappings or similar changes occur which
reasonably might affect such determination or certification. Borrower shall also
be responsible for the payment of any fees imposed by the Federal Emergency
Management Agency in connection with the review of any flood zone determination
resulting from an objection by Borrower.

      If Borrower fails to maintain any of the coverages described above, Lender
may obtain insurance coverage, at Lender's option and Borrower's expense. Lender
is under no obligation to purchase any particular type or amount of coverage.
Therefore, such coverage shall cover Lender, but might or might not protect
Borrower, Borrower's equity in the Property, or the contents of the Property,
against any risk, hazard or liability and might provide greater or lesser
coverage than was previously in effect. Borrower acknowledges that the cost of
the insurance coverage so obtained might significantly exceed the cost of
insurance that Borrower could have obtained. Any amounts disbursed by Lender
under this Section 5 shall become additional debt of Borrower secured by this
Security Instrument. These amounts shall bear interest at the Note rate from the
date of disbursement and shall be payable, with such interest, upon notice from
Lender to Borrower requesting payment.

      All insurance policies required by Lender and renewals of such policies
shall be subject to Lender's right to disapprove such policies, shall include a
standard mortgage clause, and shall name Lender as mortgagee and/or as an
additional loss payee. Lender shall have the right to hold the policies and
renewal certificates. If Lender requires, Borrower shall promptly give to Lender
all receipts of paid premiums and renewal notices. If Borrower obtains any form
of insurance coverage, not otherwise required by Lender, for damage to, or
destruction of, the Property, such policy shall include a standard mortgage
clause and shall name Lender as mortgagee and/or as an additional loss payee.

      In the event of loss, Borrower shall give prompt notice to the insurance
carrier and Lender. Lender may make proof of loss if not made promptly by
Borrower. Unless Lender and Borrower otherwise agree in writing, any insurance
proceeds, whether or not the underlying insurance was required by Lender, shall
be applied to restoration or repair of the Property, if the restoration or
repair is economically feasible and Lender's security is not lessened. During
such repair and restoration period, Lender shall have the right to hold such
insurance proceeds until Lender has had an opportunity to inspect such Property
to ensure the work has been completed to Lender's satisfaction, provided that
such inspection shall be undertaken promptly. Lender may disburse proceeds for
the repairs and restoration in a single payment or in a series of progress
payments as the work is completed. Unless an agreement is made in writing or
Applicable Law requires interest to be paid on such insurance proceeds, Lender
shall not be required to pay Borrower any interest or earnings on such proceeds.
Fees for public adjusters, or other third parties, retained by Borrower shall
not be paid out of the insurance proceeds and shall be the sole obligation of
Borrower. If the restoration or repair is not economically feasible or Lender's
security would be lessened, the insurance proceeds shall be applied to the sums
secured by this Security Instrument, whether or not then due, with the excess,
if any, paid to Borrower. Such insurance proceeds shall be applied in the order
provided for in Section 2.

      If Borrower abandons the Property, Lender may file, negotiate and settle
any available insurance claim and related matters. If Borrower does not respond
within 30 days

                                      -5-
<PAGE>

to a notice from Lender that the insurance carrier has offered to settle a
claim, then Lender may negotiate and settle the claim. The 30-day period will
begin when the notice is given. In either event, or if Lender acquires the
Property under Section 22 or otherwise, Borrower hereby assigns to Lender (a)
Borrower's rights to any insurance proceeds in an amount not to exceed the
amounts unpaid under the Note or this Security Instrument, and (b) any other of
Borrower's rights (other than the right to any refund of unearned premiums paid
by Borrower) under all insurance policies covering the Property, insofar as such
rights are applicable to the coverage of the Property. Lender may use the
insurance proceeds either to repair or restore the Property or to pay amounts
unpaid under the Note or this Security Instrument, whether or not then due.

      6. [Intentionally omitted.]

      7. PRESERVATION, MAINTENANCE AND PROTECTION OF THE PROPERTY; INSPECTIONS.
Borrower shall not destroy, damage or impair the Property, allow the Property to
deteriorate or commit waste on the Property. Whether or not Borrower is residing
in the Property, Borrower shall maintain the Property in order to prevent the
Property from deteriorating or decreasing in value due to its condition. Unless
it is determined pursuant to Section 5 that repair or restoration is not
economically feasible, Borrower shall promptly repair the Property if damaged to
avoid further deterioration or damage. If insurance or condemnation proceeds are
paid in connection with damage to, or the taking of, the Property, Borrower
shall be responsible for repairing or restoring the Property only if Lender has
released proceeds for such purposes. Lender may disburse proceeds for the
repairs and restoration in a single payment or in a series of progress payments
as the work is completed. If the insurance or condemnation proceeds are not
sufficient to repair or restore the Property, Borrower is not relieved of
Borrower's obligation for the completion of such repair or restoration.

      Lender or its agent may make reasonable entries upon and inspections of
the Property. If it has reasonable cause, Lender may inspect the interior of the
improvements on the Property. Lender shall give Borrower notice at the time of
or prior to such an interior inspection specifying such reasonable cause.

      8. [Intentionally omitted.]

      9. PROTECTION OF LENDER'S INTEREST IN THE PROPERTY AND RIGHTS UNDER THIS
SECURITY INSTRUMENT. If (a) Borrower fails to perform the covenants and
agreements contained in this Security Instrument, (b) there is a legal
proceeding that might significantly affect Lender's interest in the Property
and/or rights under this Security Instrument (such as a proceeding in
bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien
which may attain priority over this Security Instrument or to enforce laws or
regulations), or (c) Borrower has abandoned the Property, then Lender may do and
pay for whatever is reasonable or appropriate to protect Lender's interest in
the Property and rights under this Security Instrument, including protecting
and/or assessing the value of the Property, and securing and/or repairing the
Property. Lender's actions can include, but are not limited to: (a) paying any
sums secured by a lien which has priority over this Security Instrument; (b)
appearing in court; and (c) paying reasonable attorneys' fees to protect its
interest in the Property and/or rights under this Security Instrument, including
its secured position in a bankruptcy proceeding. Securing the Property includes,
but is not limited to, entering the Property to make repairs, change locks,
replace or board up doors and windows, drain water from pipes, eliminate
building or other code violations or dangerous conditions, and have

                                      -6-
<PAGE>

utilities turned on or off. Although Lender may take action under this Section
9, Lender does not have to do so and is not under any duty or obligation to do
so. It is agreed that Lender incurs no liability for not taking any or all
actions authorized under this Section 9.

      Any amounts disbursed by Lender under this Section 9 shall become
additional debt of Borrower secured by this Security Instrument. These amounts
shall bear interest at the Note rate from the date of disbursement and shall be
payable, with such interest, upon notice from Lender to Borrower requesting
payment.

      If this Security Instrument is on a leasehold, Borrower shall comply with
all the provisions of the lease. If Borrower acquires fee title to the Property,
the leasehold and the fee title shall not merge unless Lender agrees to the
merger in writing.

      10. [Intentionally omitted.]

      11. ASSIGNMENT OF MISCELLANEOUS PROCEEDS; FORFEITURE. All Miscellaneous
Proceeds are hereby assigned to and shall be paid to Lender.

      If the Property is damaged, such Miscellaneous Proceeds shall be applied
to restoration or repair of the Property, if the restoration or repair is
economically feasible and Lender's security is not lessened. During such repair
and restoration period, Lender shall have the right to hold such Miscellaneous
Proceeds until Lender has had an opportunity to inspect such Property to ensure
the work has been completed to Lender's satisfaction, provided that such
inspection shall be undertaken promptly. Lender may pay for the repairs and
restoration in a single disbursement or in a series of progress payments as the
work is completed. Unless an agreement is made in writing or Applicable Law
requires interest to be paid on such Miscellaneous Proceeds, Lender shall not be
required to pay Borrower any interest or earnings on such Miscellaneous
Proceeds. If the restoration or repair is not economically feasible or Lender's
security would be lessened, the Miscellaneous Proceeds shall be applied to the
sums secured by this Security Instrument, whether or not then due, with the
excess, if any, paid to Borrower. Such Miscellaneous Proceeds shall be applied
in the order provided for in Section 2.

      In the event of a total taking, destruction, or loss in value of the
Property, the Miscellaneous Proceeds shall be applied to the sums secured by
this Security Instrument, whether or not then due, with the excess, if any, paid
to Borrower.

      In the event of a partial taking, destruction, or loss in value of the
Property in which the fair market value of the Property immediately before the
partial taking, destruction, or loss in value is equal to or greater than the
amount of the sums secured by this Security Instrument immediately before the
partial taking, destruction, or loss in value, unless Borrower and Lender
otherwise agree in writing, the sums secured by this Security Instrument shall
be reduced by the amount of the Miscellaneous Proceeds multiplied by the
following fraction: (a) the total amount of the sums secured immediately before
the partial taking, destruction, or loss in value divided by (b) the fair market
value of the Property immediately before the partial taking, destruction, or
loss in value. Any balance shall be paid to Borrower.

      In the event of a partial taking, destruction, or loss in value of the
Property in which the fair market value of the Property immediately before the
partial taking, destruction, or loss in value is less than the amount of the
sums secured immediately before the partial taking, destruction, or loss in
value, unless Borrower and Lender otherwise agree in writing,

                                      -7-
<PAGE>

the Miscellaneous Proceeds shall be applied to the sums secured by this Security
Instrument whether or not the sums are then due.

      If the Property is abandoned by Borrower, or if, after notice by Lender to
Borrower that the Opposing Party (as defined in the next sentence) offers to
make an award to settle a claim for damages, Borrower fails to respond to Lender
within 30 days after the date the notice is given, Lender is authorized to
collect and apply the Miscellaneous Proceeds either to restoration or repair of
the Property or to the sums secured by this Security Instrument, whether or not
then due. "Opposing Party" means the third party that owes Borrower
Miscellaneous Proceeds or the party against whom Borrower has a right of action
in regard to Miscellaneous Proceeds.

      Borrower shall be in default if any action or proceeding, whether civil or
criminal, is begun that, in Lender's judgment, could result in forfeiture of the
Property or other material impairment of Lender's interest in the Property or
rights under this Security Instrument. Borrower can cure such a default and, if
acceleration has occurred, reinstate as provided in Section 19, by causing the
action or proceeding to be dismissed with a ruling that, in Lender's judgment,
precludes forfeiture of the Property or other material impairment of Lender's
interest in the Property or rights under this Security Instrument. The proceeds
of any award or claim for damages that are attributable to the impairment of
Lender's interest in the Property are hereby assigned and shall be paid to
Lender.

      All Miscellaneous Proceeds that are not applied to restoration or repair
of the Property shall be applied in the order provided for in Section 2.

      12. BORROWER NOT RELEASED; FORBEARANCE BY LENDER NOT A WAIVER. Extension
of the time for payment or modification of amortization of the sums secured by
this Security Instrument granted by Lender to Borrower or any Successor in
Interest of Borrower shall not operate to release the liability of Borrower or
any Successors in Interest of Borrower. Lender shall not be required to commence
proceedings against any Successor in Interest of Borrower or to refuse to extend
time for payment or otherwise modify amortization of the sums secured by this
Security Instrument by reason of any demand made by the original Borrower or any
Successors in Interest of Borrower. Any forbearance by Lender in exercising any
right or remedy including, without limitation, Lender's acceptance of payments
from third persons, entities or Successors in Interest of Borrower or in amounts
less than the amount then due, shall not be a waiver of or preclude the exercise
of any right or remedy.

      13. JOINT AND SEVERAL LIABILITY; CO-SIGNERS; SUCCESSORS AND ASSIGNS BOUND.
Borrower covenants and agrees that Borrower's obligations and liability shall be
joint and several. However, any Borrower who co-signs this Security Instrument
but does not execute the Note (a "co-signer"):

(a) is co-signing this Security Instrument only to mortgage, grant and convey
the co-signer's interest in the Property under the terms of this Security
Instrument; (b) is not personally obligated to pay the sums secured by this
Security Instrument; and (c) agrees that Lender and any other Borrower can agree
to extend, modify, forbear or make any accommodations with regard to the terms
of this Security Instrument or the Note without the co-signer's consent.

      Subject to the provisions of Section 18, any Successor in Interest of
Borrower who assumes Borrower's obligations under this Security Instrument in
writing, and is approved by Lender, shall obtain all of Borrower's rights and
benefits under this Security Instrument. Borrower shall not be released from
Borrower's obligations and liability under this Security

                                      -8-
<PAGE>

Instrument unless Lender agrees to such release in writing. The covenants and
agreements of this Security Instrument shall bind (except as provided in Section
20) and benefit the successors and assigns of Lender.

      14. LOAN CHARGES. Lender may charge Borrower fees for services performed
in connection with Borrower's default, for the purpose of protecting Lender's
interest in the Property and rights under this Security Instrument, including,
but not limited to, attorneys' fees, property inspection and valuation fees. In
regard to any other fees, the absence of express authority in this Security
Instrument to charge a specific fee to Borrower shall not be construed as a
prohibition on the charging of such fee. Lender may not charge fees that are
expressly prohibited by this Security Instrument or by Applicable Law.

      If the Loan is subject to a law which sets maximum loan charges, and that
law is finally interpreted so that the interest or other loan charges collected
or to be collected in connection with the Loan exceed the permitted limits,
then: (a) any such loan charge shall be reduced by the amount necessary to
reduce the charge to the permitted limit; and (b) any sums already collected
from Borrower which exceeded permitted limits will be refunded to Borrower.
Lender may choose to make this refund by reducing the principal owed under the
Note or by making a direct payment to Borrower. If a refund reduces principal,
the reduction will be treated as a partial prepayment without any prepayment
charge (whether or not a prepayment charge is provided for under the Note).
Borrower's acceptance of any such refund made by direct payment to Borrower will
constitute a waiver of any right of action Borrower might have arising out of
such overcharge.

      15. NOTICES. All notices given by Borrower or Lender in connection with
this Security Instrument must be in writing. Any notice to Borrower in
connection with this Security Instrument shall be deemed to have been given to
Borrower when mailed by first class mail or when actually delivered to
Borrower's notice address if sent by other means. Notice to any one Borrower
shall constitute notice to all Borrowers unless Applicable Law expressly
requires otherwise. The notice address shall be the Property Address unless
Borrower has designated a substitute notice address by notice to Lender.
Borrower shall promptly notify Lender of Borrower's change of address. If Lender
specifies a procedure for reporting Borrower's change of address, then Borrower
shall only report a change of address through that specified procedure. There
may be only one designated notice address under this Security Instrument at any
one time. Any notice to Lender shall be given by delivering it or by mailing it
by first class mail to Lender's address stated herein unless Lender has
designated another address by notice to Borrower. Any notice in connection with
this Security Instrument shall not be deemed to have been given to Lender until
actually received by Lender. If any notice required by this Security Instrument
is also required under Applicable Law, the Applicable Law requirement will
satisfy the corresponding requirement under this Security Instrument.

      16. GOVERNING LAW; SEVERABILITY; RULES OF CONSTRUCTION. This Security
Instrument shall be governed by federal law and the law of the jurisdiction in
which the Property is located. All rights and obligations contained in this
Security Instrument are subject to any requirements and limitations of
Applicable Law. Applicable Law might explicitly or implicitly allow the parties
to agree by contract or it might be silent, but such silence shall not be
construed as a prohibition against agreement by contract. In the event that any
provision or clause of this Security Instrument or the Note conflicts with
Applicable

                                      -9-
<PAGE>

Law, such conflict shall not affect other provisions of this Security Instrument
or the Note which can be given effect without the conflicting provision.

      As used in this Security Instrument: (a) words of the masculine gender
shall mean and include corresponding neuter words or words of the feminine
gender; (b) words in the singular shall mean and include the plural and vice
versa; and (c) the word "may" gives sole discretion without any obligation to
take any action.

      17. BORROWER'S COPY. Borrower shall be given one copy of the Note and of
this Security Instrument.

      18. TRANSFER OF THE PROPERTY OR A BENEFICIAL INTEREST IN BORROWER. As used
in this Section 18, "Interest in the Property" means any legal or beneficial
interest in the Property, including, but not limited to, those beneficial
interests transferred in a bond for deed, contract for deed, installment sales
contract or escrow agreement, the intent of which is the transfer of title by
Borrower at a future date to a purchaser.

      If all or any part of the Property or any Interest in the Property is sold
or transferred (or if Borrower is not a natural person and a beneficial interest
in Borrower is sold or transferred) without Lender's prior written consent,
Lender may require immediate payment in full of all sums secured by this
Security Instrument. However, this option shall not be exercised by Lender if
such exercise is prohibited by Applicable Law.

      If Lender exercises this option, Lender shall give Borrower notice of
acceleration. The notice shall provide a period of not less than 30 days from
the date the notice is given in accordance with Section 15 within which Borrower
must pay all sums secured by this Security Instrument. If Borrower fails to pay
these sums prior to the expiration of this period, Lender may invoke any
remedies permitted by this Security Instrument without further notice or demand
on Borrower.

      19. BORROWER'S RIGHT TO REINSTATE AFTER ACCELERATION. If Borrower meets
certain conditions, Borrower shall have the right to have enforcement of this
Security Instrument discontinued at any time prior to the earliest of: (a) five
days before sale of the Property pursuant to any power of sale contained in this
Security Instrument; (b) such other period as Applicable Law might specify for
the termination of Borrower's right to reinstate; or (c) entry of a judgment
enforcing this Security Instrument. Those conditions are that Borrower: (a) pays
Lender all sums which then would be due under this Security Instrument and the
Note as if no acceleration had occurred; (b) cures any default of any other
covenants or agreements; (c) pays all expenses incurred in enforcing this
Security Instrument, including, but not limited to, reasonable attorneys' fees,
property inspection and valuation fees, and other fees incurred for the purpose
of protecting Lender's interest in the Property and rights under this Security
Instrument; and (d) takes such action as Lender may reasonably require to assure
that Lender's interest in the Property and rights under this Security
Instrument, and Borrower's obligation to pay the sums secured by this Security
Instrument, shall continue unchanged. Lender may require that Borrower pay such
reinstatement sums and expenses in one or more of the following forms, as
selected by Lender: (a) cash; (b) money order; (c) certified check, bank check,
treasurer's check or cashier's check, provided any such check is drawn upon an
institution whose deposits are insured by a federal agency, instrumentality or
entity; or (d) Electronic Funds Transfer. Upon reinstatement by Borrower, this
Security Instrument and obligations secured hereby shall

                                      -10-
<PAGE>

remain fully effective as if no acceleration had occurred. However, this right
to reinstate shall not apply in the case of acceleration under Section 18.

      20. SALE OF NOTE; NOTICE OF GRIEVANCE. The Note or a partial interest in
the Note (together with this Security Instrument) can be sold one or more times
without prior notice to Borrower.

      Neither Borrower nor Lender may commence, join, or be joined to any
judicial action (as either an individual litigant or the member of a class) that
arises from the other party's actions pursuant to this Security Instrument or
that alleges that the other party has breached any provision of, or any duty
owed by reason of, this Security Instrument, until such Borrower or Lender has
notified the other party (with such notice given in compliance with the
requirements of Section 15) of such alleged breach and afforded the other party
hereto a reasonable period after the giving of such notice to take corrective
action. If Applicable Law provides a time period which must elapse before
certain action can be taken, that time period will be deemed to be reasonable
for purposes of this paragraph. The notice of acceleration and opportunity to
cure given to Borrower pursuant to Section 22 and the notice of acceleration
given to Borrower pursuant to Section 18 shall be deemed to satisfy the notice
and opportunity to take corrective action provisions of this Section 20.

      21. HAZARDOUS SUBSTANCES. As used in this Section 21: (a) "Hazardous
Substances" are those substances defined as toxic or hazardous substances,
pollutants, or wastes by Environmental Law and the following substances:
gasoline, kerosene, other flammable or toxic petroleum products, toxic
pesticides and herbicides, volatile solvents, materials containing asbestos or
formaldehyde, and radioactive materials; (b) "Environmental Law" means federal
laws and laws of the jurisdiction where the Property is located that relate to
health, safety or environmental protection; (c) "Environmental Cleanup" includes
any response action, remedial action, or removal action, as defined in
Environmental Law; and (d) an "Environmental Condition" means a condition that
can cause, contribute to, or otherwise trigger an Environmental Cleanup.

      Borrower shall not cause or permit the presence, use, disposal, storage,
or release of any Hazardous Substances, or threaten to release any Hazardous
Substances, on or in the Property. Borrower shall not do, nor allow anyone else
to do, anything affecting the Property (a) that is in violation of any
Environmental Law, (b) which creates an Environmental Condition, or (c) which,
due to the presence, use, or release of a Hazardous Substance, creates a
condition that adversely affects the value of the Property. The preceding two
sentences shall not apply to the presence, use, or storage on the Property of
small quantities of Hazardous Substances that are generally recognized to be
appropriate to normal residential uses and to maintenance of the Property
(including, but not limited to, hazardous substances in consumer products).

      Borrower shall promptly give Lender written notice of(a) any
investigation, claim, demand, lawsuit or other action by any governmental or
regulatory agency or private party involving the Property and any Hazardous
Substance or Environmental Law of which Borrower has actual knowledge, (b) any
Environmental Condition, including but not limited to, any spilling, leaking,
discharge, release or threat of release of any Hazardous Substance, and (c) any
condition caused by the presence, use or release of a Hazardous Substance which
adversely affects the value of the Property. If Borrower learns, or is notified
by any governmental or regulatory authority, or any private party, that any
removal or other

                                      -11-
<PAGE>

remediation of any Hazardous Substance affecting the Property is necessary,
Borrower shall promptly take all necessary remedial actions in accordance with
Environmental Law. Nothing herein shall create any obligation on Lender for an
Environmental Cleanup.

      NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as
follows: 22. ACCELERATION; REMEDIES. LENDER SHALL GIVE NOTICE TO BORROWER PRIOR
TO ACCELERATION FOLLOWING BORROWER'S BREACH OF ANY COVENANT OR AGREEMENT IN THIS
SECURITY INSTRUMENT (BUT NOT PRIOR TO ACCELERATION UNDER SECTION 18 UNLESS
APPLICABLE LAW PROVIDES OTHERWISE). THE NOTICE SHALL SPECIFY: (a) THE DEFAULT;
(b) THE ACTION REQUIRED TO CURE THE DEFAULT; (c) A DATE, NOT LESS THAN 30 DAYS
FROM THE DATE THE NOTICE IS GIVEN TO BORROWER, BY WHICH THE DEFAULT MUST BE
CURED; AND (d) THAT FAILURE TO CURE THE DEFAULT ON OR BEFORE THE DATE SPECIFIED
IN THE NOTICE MAY RESULT IN ACCELERATION OF THE SUMS SECURED BY THIS SECURITY
INSTRUMENT, FORECLOSURE BY JUDICIAL PROCEEDING AND SALE OF THE PROPERTY. THE
NOTICE SHALL FURTHER INFORM BORROWER OF THE RIGHT TO REINSTATE AFTER
ACCELERATION AND THE RIGHT TO ASSERT IN THE FORECLOSURE PROCEEDING THE
NONEXISTENCE OF A DEFAULT OR ANY OTHER DEFENSE OF BORROWER TO ACCELERATION AND
FORECLOSURE. IF THE DEFAULT IS NOT CURED ON OR BEFORE THE DATE SPECIFIED IN THE
NOTICE, LENDER AT ITS OPTION MAY REQUIRE IMMEDIATE PAYMENT IN FULL OF ALL SUMS
SECURED BY THIS SECURITY INSTRUMENT WITHOUT FURTHER DEMAND AND MAY FORECLOSE
THIS SECURITY INSTRUMENT BY JUDICIAL PROCEEDING. LENDER SHALL BE ENTITLED TO
COLLECT ALL EXPENSES INCURRED IN PURSUING THE REMEDIES PROVIDED IN THIS SECTION
22, INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS' FEES AND COSTS OF TITLE
EVIDENCE.

      23. RELEASE. Upon payment of all sums secured by this Security Instrument,
Lender shall release this Security Instrument. Borrower shall pay any
recordation costs. Lender may charge Borrower a fee for releasing this Security
Instrument, but only if the fee is paid to a third party for services rendered
and the charging of the fee is permitted under Applicable Law.

      24. ATTORNEYS' FEES. As used in this Security Instrument and the Note,
attorneys' fees shall include those awarded by an appellate court and any
attorneys' fees incurred in a bankruptcy proceeding.

      25. JURY TRIAL WAIVER. The Borrower hereby waives any right to a trial by
jury in any action, proceeding, claim, or counterclaim, whether in contract or
tort, at law or in equity, arising out of or in any way related to this Security
Instrument or the Note.

                                      -12-
<PAGE>

      BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Security Instrument and in any Rider executed by Borrower and
recorded with it.

Signed, sealed and delivered in the presence of:

                                                 Borrower:

Witness:

/s/ Christi Murphy                                /s/ Peter J. Utrata
------------------                                ------------------------------
                                                  Peter J. Utrata, an individual

__________________ [SPACE BELOW THIS LINE FOR ACKNOWLEDGMENT] __________________

STATE OF CALIFORNIA       )
                          )   ss.
COUNTY OF _____________   )

      On 7/21/04, before me, Lisa Reynolds, a Notary Public in and for said
County and State, personally appeared Peter J. Utrata, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument, and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument. WITNESS my hand and official seal.

                                                  /s/ Lisa M. Reynolds
                                                  ------------------------------
                                                  Signature of Notary Public

[SEAL]

                                      -13-
<PAGE>

                                    EXHIBIT A

                          LEGAL DESCRIPTION OF PROPERTY

      All that real property in the City of Stuart, Martin County, Florida
described as follows:

            Lot 6 Twin Rivers (less easterly 2" right of way per
            D/R1096/1064) PB 2, Page 62.

      Assessor's Parcel No.: 36-37-41-007-000-00060-2.

                                      -1-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>7
<FILENAME>a06720exv10w21.txt
<DESCRIPTION>EX-10.21
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.21


                              FORBEARANCE AGREEMENT

         This FORBEARANCE AGREEMENT (this "Agreement") is made and entered into
as of the 22nd day of July, 2004, by and between Peter J. Utrata, M.D., an
individual ("Borrower") and STAAR Surgical Company, a Delaware corporation
("Lender") with reference to the following facts:

                                    RECITALS

               A. Borrower has executed a Promissory Note (the "Note") in favor
of Lender in the original principal amount of One Million Two Hundred
Fifty-Eight Thousand Dollars ($1,258,000).

               B. Borrower has pledged to Lender the interest of Borrower in
certain common stock pursuant to the Pledge Agreement (the "Pledge Agreement")
dated as of June 16, 1999, for the purpose of securing payment of the Note.

               C. Under the Note, the entire unpaid principal balance plus
accrued interest was due on June 15, 2004.

               D. Borrower failed to pay the amounts due under the Note when
due.

               E. Lender and Borrower are willing to enter into this Agreement
on the terms and conditions set forth herein.

                                    AGREEMENT

        1. Defined Terms. Capitalized terms used but not defined herein shall
have the meanings set forth in the Pledge Agreement.

        2. Agreement of Forbearance. Subject to all of the terms and provisions
contained in this Agreement, the Lender agrees to forbear in the exercise of any
rights or remedies it may have under the Note and the Pledge Agreement until
March 15, 2005 (the "Forbearance Period").

        3. Initial Repayment. Borrower agrees that, in consideration of Lender's
agreement to enter into this Forbearance Agreement, on or before July 30, 2004
Borrower shall pay to Lender $150,000 (the "Initial Repayment"), to be applied
first to repayment of unpaid interest, and second to reduction of the principal
balance of the Note.

        4. Payment of Principal and Interest. All obligations of Borrower to
Lender under the Note shall become immediately due and payable, and Borrower
shall pay the Principal Amount and all accrued and unpaid interest on the
Principal Amount and all


<PAGE>

other indebtedness due under the Note, on the earlier to occur of (a) July 1,
2004, if Borrower has not prior to that date delivered to Lender the Initial
Repayment, (b) the first date after the date of the execution of this
Forbearance Agreement on which the closing bid price for STAAR common stock on
the Nasdaq National Market (or on such other stock exchange or quotation system
where STAAR's common stock principally trades at the time) (the "Closing Price")
is, and has been for twenty (20) consecutive trading days, [$13.00] or greater
(the "Market Settlement Date"), or (c) the end of the Forbearance Period. If the
date set for payment under this Note falls on a Saturday, Sunday, or holiday
recognized by either the United States of America or the State of California,
payment of this Note shall be due on the next business day.

        5. Company Right of Redemption. The Lender may at any time request that
on the Market Settlement Date the Borrower surrender some or all of its pledged
shares to the Lender in lieu of some or all of the cash repayment of Borrower's
obligation under the Note. If so requested, the Borrower shall surrender the
requested shares on the Market Settlement Date (or an earlier date at the
election of the Borrower) and the Borrower's indebtedness under the Note shall
be reduced in an amount equal to the number of shares so surrendered multiplied
by the Closing Price on the date of surrender. The maximum number of shares of
Common Stock that the Borrower may be required to surrender shall be the
quotient resulting when the total amount of the Borrower's obligations under the
Note is divided by the closing Price on the Market Settlement Date.

        6. Reaffirmation and Ratification. Borrower hereby reaffirms, ratifies
and confirms its obligations under the Note and Pledge Agreement and
acknowledges that all of the terms and provisions of the Pledge Agreement and
Note remain in full force and effect.

        7. Further Assurances. Each of the parties hereto shall, at the request
of the other party hereto, deliver to the requesting party all further documents
or other assurances as may reasonably be necessary or desirable in connection
with this Agreement.

        8. Integration. This Agreement constitutes the entire agreement of the
parties in connection with the subject matter hereof and cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties and negotiations regarding the subject matter hereof, if any, are
merged into this Agreement.

        9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which when so executed and delivered shall be deemed an
original, and all of which, taken together, shall constitute but one and the
same agreement.

        10. Attorney's Fees. Borrower acknowledges and agrees that all
attorney's fees and expenses incurred in connection with the negotiation and
preparation of this Agreement shall be the responsibility of Borrower under
Section 10 of the Note and that such fees and expenses shall be added to the
obligations of Borrower to Lender under the Note.

<PAGE>

        11. Governing Law. This Agreement shall be governed by and construed to
be in accordance with the internal laws of the State of California.

         WHEREFORE, the parties hereto have executed this Forbearance Agreement
as of the date first set forth above.

                                    Borrower:

                                    /s/  Peter J. Utrata, M.D.
                                    -----------------------------------
                                    Peter J. Utrata, M.D.


                                    Lender:

                                    STAAR SURGICAL COMPANY
                                    1911 Walker Avenue Monrovia,
                                    California 91016

                                    By: /s/ John Bily
                                        -------------------------------
                                    Name:  John Bily
                                         ------------------------------
                                    Title:  CFO
                                          -----------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>8
<FILENAME>a06720exv10w24.txt
<DESCRIPTION>EX-10.24
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.24

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and DAVID
BAILEY (the "Recipient") whose address is 1911 Walker Avenue, Monrovia,
California 91016, pursuant to that certain 1998 STAAR Surgical Company Stock
Plan (the "Plan") adopted by the Board of Directors on April 17, 1998 and
approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. This Stock Option Certificate certifies that the
Company has granted to the Recipient, pursuant to the terms of the Plan, an
option (the "Option") to purchase, in whole or in part, one hundred and fifty
thousand (150,000) shares of the Company's voting common stock, par value $.01
(the "Common Stock") (collectively and severally, the "Option Shares"), at the
price of three dollars and thirty-five cents ($3.35) per Option Share (the
"Option Price"), subject to the following terms and conditions. The date of this
grant is August 9, 2001 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. Subject to the terms of this Stock Option
Certificate, the Recipient's rights to purchase the Option Shares are governed
by the Plan, the terms of which are incorporated herein by this reference.
Capitalized terms used in this Stock Option Certificate but not defined herein
shall have the meanings ascribed to them in the Plan.

      3. CHARACTER OF OPTION. This Option (i) is [__] a Non-Qualified Option or
(ii) is [X] an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. The right to exercise the Options granted by this
Stock Option Certificate shall expire and be null and void and of no further
force or effect to the extent not exercised by 5:00 p.m. Pacific Time, on the
8th day of August, 2011 (the "Option Expiration Date"). Nothwithstanding the
foregoing, to the extent the Option is not fully vested, the right to exercise
the Option shall be subject to earlier expiration as provided in Article X of
the Plan.

      6. EXERCISE VESTING CONDITIONS. The Option Shares are subject to
Article V, Section 5.05 of the Plan and to the following vesting schedule:

<TABLE>
<CAPTION>
                         Cumulative Vested
                           Percentage of
   Date                        Shares
--------------           -----------------
<S>                      <C>
August 9, 2001                 16.67%
August 9, 2002                 33.33%
August 9, 2003                    50%
August 9, 2004                 66.67%
August 9, 2005                   100%
</TABLE>

<PAGE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain goals and objectives as stated below:

      (i) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest immediately upon completion of the implant of four hundred (400)
implantable contact lenses (ICLs) in Canada, so long as such implants are
completed by March 31, 2002;

      (ii) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest immediately upon completion of the implant of three thousand (3,000)
AquaFlow glaucoma devices worldwide, so long as such implants are completed by
March 31, 2002;

      (iii) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest immediately upon agreement with banks, funds or other lenders to
refinance the business to the satisfaction of the Board of Directors;

      (iv) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest immediately upon execution of a license agreement between the
Corporation and a third party in respect of current technology of STAAR (such as
the WAVE(TM) Phacoemulsification System or between the Corporation and a third
party for production of the Corporation's silicone IOL); and

      (v) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest immediately upon resolution of the dispute pending on August 9, 2001
between the Corporation and Canon-STAAR Company, Inc.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. The Option Shares Subject to Article V,
Section 5.05 of the Plan and to the vesting schedule set forth above are subject
to Article X of the Plan and to the forfeiture provisions included therein
relating to the Recipient's continued performance of services in the capacity
indicated above; provided, however, that the vesting schedule and forfeiture
provisions of that certain Employment Agreement entered into by and between the
Recipient and the Company on December 20,

<PAGE>

2000.

      9. VESTING ON CHANGE OF CONTROL. Any unvested Option Shares shall
immediately vest upon the occurrence of a Change In Control or an Approved
Corporate Transaction.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Stock Option Certificate nor any of its terms may be
amended, supplemented, discharged or terminated (other than by performance),
except as provided in the Plan or by a written instrument or instruments signed
by all of the parties to this Stock Option Certificate. No waiver of any acts or
obligations hereunder shall be effective unless such waiver shall be in a
written instrument or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its application is invalid, illegal or
unenforceable) shall be excused as if it had never been incorporated into this
Stock Option Certificate, and, in lieu of such excused provision, there shall be
added a provision as similar in terms and amount to such excused provision as
may be possible and be legal, valid and enforceable, and (B) the remaining part
of this Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent

<PAGE>

provided by law.

                  (iv) No Reliance Upon Prior Representation. The Recipient
acknowledges that neither the Company nor any of its officers, directors,
employees or agents have made any oral representation or promise which would
induce the Recipient prior to executing this Stock Option Certificate to change
the Recipient's position to the Recipient's detriment, partially perform, or
part with value in reliance upon such representation or promise; the Recipient
acknowledges that he or she has taken such action at its own risk; and the
Recipient represents that he or she has not so changed his or her position,
performed or parted with value prior to the time of his or her execution of this
Stock Option Certificate.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his
rights or benefits or delegate any of his duties or obligations under this Stock
Option Certificate, in whole or in part, without the prior written consent of
the Company, except pursuant to the terms of the Plan. Subject to the foregoing,
all of the representations, warranties, covenants, conditions and provisions of
this Stock Option Certificate shall be binding upon and shall inure to the
benefit of each party and such party's respective successors and permitted
assigns, spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the 9th day of
August 2001.

                                                   COMPANY:

                                                   STAAR Surgical Company,
                                                   a Delaware corporation

                                                   By: /s/ John Bily
                                                       -------------------------
                                                   John C. Bily, Secretary
ATTEST:

                  [SEAL]                           RECIPIENT:

                                                       /s/ David Bailey
                                                   -----------------------------
                                                   David Bailey


<PAGE>

                                    EXHIBIT A
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:      Secretary
         STAAR Surgical Company
         1911 Walker Avenue
         Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the 9th day of August, 2001 (the "Option
Certificate"), between STAAR Surgical Company, a Delaware corporation (the
"Company") and the undersigned (the "Recipient"), hereby irrevocably elects, in
accordance with the terms and conditions of that certain 1998 STAAR Surgical
Company Stock Plan (the "Plan") adopted by the Board of Directors on April 17,
1998 and approved by the shareholders on May 29, 1998, under which the Option
Certificate was granted, to exercise the undersigned's Option to purchase
____________________ (______)(1) shares of the Company's voting common stock,
$.01 per share par value ("Common Stock") (collectively and severally, the
"Option Shares"), for the aggregate purchase price of __________________
($_________)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:_________________________________

                           Print Name:________________________________

                           Address:___________________________________

                           ___________________________________________

                                                           Date:________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>9
<FILENAME>a06720exv10w25.txt
<DESCRIPTION>EX-10.25
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.25

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and DAVID
BAILEY (the "Recipient") whose address is 1911 Walker Avenue, Monrovia,
California 91016, pursuant to that certain 1998 STAAR Surgical Company Stock
Plan (the "Plan") adopted by the Board of Directors on April 17, 1998 and
approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. This Stock Option Certificate certifies that the
Company has granted to the Recipient, pursuant to the terms of the Plan, a stock
option (the "Option") to purchase, in whole or in part, one hundred and fifty
thousand (150,000) shares of the Company's voting common stock, par value $.01
(the "Common Stock") (collectively and severally, the "Option Shares"), at the
price of three dollars and eighty-one cents ($3.81) per Option Share (the
"Option Price"), subject to the following terms and conditions. The date of this
grant January 2, 2002 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. Subject to the terms of this Stock Option
Certificate, the Recipient's rights to purchase the Option Shares are governed
by the Plan, the terms of which are incorporated herein by this reference.
Capitalized terms used in this Stock Option Certificate but not defined herein
shall have the meanings ascribed to them in the Plan.

      3. CHARACTER OF OPTION. This Option (i) is [__] a Non-Qualified Option or
(ii) is [X] an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. The right to exercise the Options granted by this
Stock Option Certificate shall expire and be null and void and of no further
force or effect to the extent not exercised by 5:00 p.m. Pacific Time, on the
2nd day of January, 2012 (the "Option Expiration Date"). Nothwithstanding the
foregoing, to the extent the Option is not fully vested, the right to exercise
the Option shall be subject to earlier expiration as provided in Article X of
the Plan.

      6. EXERCISE VESTING CONDITIONS. The Option Shares are subject to Article
V, Section 5.05 of the Plan and to the following vesting schedule:

<TABLE>
<CAPTION>
                           Cumulative Vested
                             Percentage of
     Date                        Shares
---------------            -----------------
<S>                        <C>
January 2, 2003                 33 1/3%
January 2, 2004                 33 1/3%
January 2, 2005                 33 1/3%
</TABLE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain goals

<PAGE>

and objectives as stated below:

      (i) the right to purchase thirty thousand (30,000) Option Shares shall
vest immediately upon the Company's receipt of approval from the United States
Food and Drug Administration for use of the Toric ICL as an investigational
device, so long as such approval is received by March 31, 2002;

      (ii) the right to purchase thirty thousand (30,000) Option Shares shall
vest immediately when the Company's product, Visacryl 2, is launched in Germany
and four additional key markets outside the United States, so long as the
product is launched in all five markets by June 30, 2002;

      (iii) the right to purchase thirty thousand (30,000) Option Shares shall
vest on the date that the Company executes an original equipment manufacturer
supply agreement for the Company's existing products yielding revenues in the
first year of not less than $1,500,000, so long as such agreement is signed by
September 30, 2002;

      (iv) the right to purchase thirty thousand (30,000) Option Shares shall
vest immediately once the Company hires a qualified Chief Financial Officer and
qualified Vice President in charge of research and development, clinical affairs
and regulatory affairs, so long as both positions are filled by June 30, 2002;
and

      (v) the right to purchase thirty thousand (30,000) Option Shares shall
vest on April 1, 2002, so long as the Company has achieved and maintained a
positive cash flow during the period from October 1 through December 31, 2001
and January 1 through March 31, 2002.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of the Notice of Exercise of Stock Option, in the form attached hereto
as Exhibit A, to the Secretary of the Company, together with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. The Option Shares Subject to Article V,
Section 5.05 of the Plan and to the vesting schedule set forth above are subject
to Article X of the Plan and to the forfeiture provisions included therein
relating to the Recipient's continued performance of services in the capacity
indicated above; provided, however, that the vesting schedule and forfeiture
provisions of that certain Employment Agreement entered into by and between the
Recipient and the Company on December 20, 2000.

<PAGE>

      9. VESTING ON CHANGE OF CONTROL. Any unvested Option Shares shall
immediately vest upon the occurrence of a Change In Control or an Approved
Corporate Transaction.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise
provided herein, neither this Stock Option Certificate nor any of its terms may
be amended, supplemented, discharged or terminated (other than by performance),
except as provided in the Plan or by a written instrument or instruments signed
by all of the parties to this Stock Option Certificate. No waiver of any acts or
obligations hereunder shall be effective unless such waiver shall be in a
written instrument or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its application is invalid, illegal or
unenforceable) shall be excused as if it had never been incorporated into this
Stock Option Certificate, and, in lieu of such excused provision, there shall be
added a provision as similar in terms and amount to such excused provision as
may be possible and be legal, valid and enforceable, and (B) the remaining part
of this Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

                  (iv) No Reliance Upon Prior Representation. The Recipient
acknowledges that neither the Company nor any of its officers, directors,
employees or agents have made any oral representation or promise which would
induce the Recipient prior to executing this Stock Option Certificate

<PAGE>

to change the Recipient's position to the Recipient's detriment, partially
perform, or part with value in reliance upon such representation or promise; the
Recipient acknowledges that he or she has taken such action at its own risk; and
the Recipient represents that he or she has not so changed his or her position,
performed or parted with value prior to the time of his or her execution of this
Stock Option Certificate.

                  (c) ENFORCEMENT. This Stock Option Certificate and the
rights and remedies of each party arising out of or relating to this Stock
Option Certificate shall be solely governed in accordance with the laws (without
regard to the conflicts of law principles thereof) of the state of Delaware.

                  (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his
rights or benefits or delegate any of his duties or obligations under this Stock
Option Certificate, in whole or in part, without the prior written consent of
the Company, except pursuant to the terms of the Plan. Subject to the foregoing,
all of the representations, warranties, covenants, conditions and provisions of
this Stock Option Certificate shall be binding upon and shall inure to the
benefit of each party and such party's respective successors and permitted
assigns, spouses, heirs, executors, administrators, and personal and legal
representatives.

                  (e) NOTICES. Unless otherwise specifically provided in this
Stock Option Certificate, all notices, demands, requests, consents, approvals or
other communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the 2nd day of
January 2002.

                                         COMPANY:

                                         STAAR Surgical Company,
                                         a Delaware corporation

                                         By: /s/ John Bily
                                             -------------------
                                         John C. Bily, Secretary
ATTEST:

                                         RECIPIENT:

                                             /s/ David Bailey
                                         -----------------------
                                         David Bailey

<PAGE>

                                    EXHIBIT A
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:      Secretary
         STAAR Surgical Company
         1911 Walker Avenue
         Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the 2nd day of January , 2002 (the "Option
Certificate"), between STAAR Surgical Company, a Delaware corporation (the
"Company") and the undersigned (the "Recipient"), hereby irrevocably elects, in
accordance with the terms and conditions of that certain 1998 STAAR Surgical
Company Stock Plan (the "Plan") adopted by the Board of Directors on April 17,
1998 and approved by the shareholders on May 29, 1998, under which the Option
Certificate was granted, to exercise the undersigned's Option to purchase
(_______)(1) shares of the Company's voting common stock, $ .01 per share par
value ("Common Stock") (collectively and severally, the "Option Shares"), for
the aggregate purchase price of ($________)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:________________________________

                           Print Name:_______________________________

                           Address:__________________________________

                           __________________________________________

                                                      Date:_____________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>10
<FILENAME>a06720exv10w26.txt
<DESCRIPTION>EX-10.26
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.26

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and DAVID
BAILEY (the "Recipient") whose address is 1911 Walker Avenue, Monrovia,
California 91016, pursuant to that certain 1998 STAAR Surgical Company Stock
Plan (the "Plan") adopted by the Board of Directors on April 17, 1998 and
approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. This Stock Option Certificate certifies that the
Company has granted to the Recipient, pursuant to the terms of the Plan, a stock
option (the "Option") to purchase, in whole or in part, sixty thousand (60,000)
shares of the Company's voting common stock, par value $.01 (the "Common Stock")
(collectively and severally, the "Option Shares"), at the price of five dollars
and nineteen cents ($5.19) per Option Share (the "Option Price"), subject to the
following terms and conditions. The date of this grant May 30, 2002 (the "Grant
Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or is
[X] an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [__] an employee, (ii) [X] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. The right to exercise the Options granted by this
Stock Option Certificate shall expire and be null and void and of no further
force or effect to the extent not exercised by 5:00 p.m. Pacific Time, on the
30th day of May, 2007 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well
as based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                Cumulative Vested
                  Percentage of
    Date             Shares
------------    -----------------
<S>             <C>
May 30, 2002       33 1/3%
May 30, 2003       66 2/3%
May 30, 2004        100.0%
</TABLE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

<PAGE>

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested on date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENTS REPRESENTATIONS. The Recipient represents that the Recipient
has received a Section 10(a) Prospectus, which explains the administration and
operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Stock Option Certificate nor any of its terms may be
amended, supplemented,

<PAGE>

discharged or terminated (other than by performance), except as provided in the
Plan or by a written instrument or instruments signed by all of the parties to
this Stock Option Certificate. No waiver of any acts or obligations hereunder
shall be effective unless such waiver shall be in a written instrument or
instruments signed by each party claimed to have given or consented to such
waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its application is invalid, illegal or
unenforceable) shall be excused as if it had never been incorporated into this
Stock Option Certificate, and, in lieu of such excused provision, there shall be
added a provision as similar in terms and amount to such excused provision as
may be possible and be legal, valid and enforceable, and (B) the remaining part
of this Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Stock Option
Certificate, in whole or in part, without the prior written consent of the
Company, except pursuant to the terms of the Plan. Subject to the foregoing, all
of the representations, warranties, covenants, conditions and provisions of this
Stock Option Certificate shall be binding upon and shall inure to the benefit of
each party and such party's respective successors and permitted assigns,
spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate

<PAGE>

executed this Stock Option Certificate in the City of Monrovia, County of Los
Angeles, State of California, effective as of the 14th day of February 2003.

                                    COMPANY:

                                    STAAR Surgical Company,
                                    a Delaware corporation

                                    By:  /s/ John Bily
                                         ------------------------
                                         John C. Bily, Secretary
ATTEST:

                  [SEAL]

                                   RECIPIENT:

                                         /s/ David Bailey
                                         ------------------------

<PAGE>

                                    EXHIBIT A
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:        Secretary
           STAAR Surgical Company
           1911 Walker Avenue
           Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the ___ day of _____, ______ (the "Option
Certificate"), between STAAR Surgical Company, a Delaware corporation (the
"Company") and the undersigned (the "Recipient"), hereby irrevocably elects, in
accordance with the terms and conditions of that certain 1998 STAAR Surgical
Company Stock Plan (the "Plan") adopted by the Board of Directors on April 17,
1998 and approved by the shareholders on May 29, 1998, under which the Option
Certificate was granted, to exercise the undersigned's Option to purchase_____
( )(1) shares of the Company's voting common stock, $ .01 per share par value
("Common Stock") (collectively and severally, the "Option Shares"), for the
aggregate purchase price of ($____)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:_________________________________

                           Print Name:________________________________

                           Address:___________________________________

                           ___________________________________________

                                                          Date:________________










</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>11
<FILENAME>a06720exv10w27.txt
<DESCRIPTION>EX-10.27
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.27

                  AMENDED AND RESTATED STOCK OPTION CERTIFICATE

      This Amended and Restated Stock Option Certificate dated February 12, 2003
amends in its entirety the Amended and Restated Stock Option Certificate dated
February 12, 2003, and is entered into between STAAR Surgical Company, a
Delaware corporation (the "Company"), whose principal executive office is
located at 1911 Walker Avenue, Monrovia, California 91016, and DAVID BAILEY (the
"Recipient") whose address is 1911 Walker Avenue, Monrovia, California 91016,
pursuant to that certain 1998 STAAR Surgical Company Stock Plan (the "Plan")
adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Amended and Restated Stock Option Certificate certifies that the Company
has granted to the Recipient, pursuant to the terms of the Plan, an option (the
"Option") to purchase, in whole or in part, one hundred and forty thousand
(140,000) shares of the Company's voting common stock, par value $.01 (the
"Common Stock") (collectively and severally, the "Option Shares"), at the price
of three dollars and sixty cents ($3.60) per Option Share (the "Option Price").
The date of this grant is February 13, 2003 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or [X]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Amended and Restated Stock Option Certificate and in the Plan, the right to
exercise the Options granted by this Amended and Restated Stock Option
Certificate shall expire and be null and void and of no further force or effect
to the extent not exercised by 5:00 p.m. Pacific Time, on the 12th day of
February, 2008 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well
as based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                     Cumulative Vested
                       Percentage of
       Date               Shares
-----------------    -----------------
<S>                  <C>
February 13, 2004       33 1/3%
February 13, 2005       66 2/3%
February 13, 2006        100.0%
</TABLE>

<PAGE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain goals and objectives as stated below:

      (i) the right to purchase fifty thousand (50,000) Option Shares shall vest
immediately upon the Company's filing its submission for approval of the ICL to
the United States Food and Drug Administration, so long as such filing is made
by March 4, 2003; and

      (ii) the right to purchase fifty thousand (50,000) Option Shares shall
vest on April 1, 2004, so long as the Company has achieved sales and profit
forecast for fiscal year 2003.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Amended and
Restated Stock Option Certificate was prepared by the Company or its legal
counsel solely on behalf of the Company. It is acknowledged by the Recipient
that he or she was not represented by the Company or any of its officers,
directors, employees or agents (including the Company's legal counsel) in
connection with the transaction contemplated by this Amended and Restated Stock
Option Certificate, and that the Recipient had separate and independent advice
of counsel. In light of the foregoing it is acknowledged by the Recipient that
the Company shall not be construed to be solely responsible for the drafting
hereof, and that any ambiguity in the Plan or this Amended and Restated Stock
Option Certificate, or the interpretation thereof or hereof, shall not be
construed against the Company as the alleged draftsman of this Amended and
Restated Stock Option Certificate.

<PAGE>

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Amended and Restated Stock Option
Certificate, together with and subject to the Plan: (1) is the final, complete
and exclusive statement of the agreement of the parties with respect to the
subject matter hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written (collectively and severally, the
"prior agreements"), and that any such prior agreements are of no force or
effect except as expressly set forth herein; and (3) may not be varied,
supplemented or contradicted by evidence of prior agreements, or by evidence of
subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Amended and Restated Stock Option Certificate nor any of
its terms may be amended, supplemented, discharged or terminated (other than by
performance), except as provided in the Plan or by a written instrument or
instruments signed by all of the parties to this Amended and Restated Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Amended
and Restated Stock Option Certificate or the application thereof to any person
or circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable under present or future laws effective during the term of this
Amended and Restated Stock Option Certificate, then, and in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Amended and Restated Stock Option Certificate,
and, in lieu of such excused provision, there shall be added a provision as
similar in terms and amount to such excused provision as may be possible and be
legal, valid and enforceable, and (B) the remaining part of this Amended and
Restated Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Amended and Restated Stock Option Certificate
and the rights and remedies of each party arising out of or relating to this
Amended and Restated Stock Option Certificate shall be solely governed in
accordance with the laws (without regard to the conflicts of law principles
thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Amended and
Restated Stock Option Certificate, in whole or in part, without the prior
written consent of the Company, except pursuant to the terms of the Plan.
Subject to the foregoing, all of the representations, warranties, covenants,
conditions and provisions of this Amended and Restated Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and such
party's respective successors and permitted assigns, spouses, heirs, executors,
administrators, and personal and legal representatives.

<PAGE>

            (e) NOTICES. Unless otherwise specifically provided in this Amended
and Restated Stock Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called "notices")
required or permitted to be given hereunder, or which are given with respect to
this Amended and Restated Stock Option Certificate, shall be in writing, and
shall be given by: (A) personal delivery (which form of notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of notice shall be deemed to
have been given upon confirmed delivery by the delivery agency), (C) by
electronic or facsimile or telephonic transmission, provided the receiving party
has a compatible device or confirms receipt thereof (which forms of notice shall
be deemed delivered upon confirmed transmission or confirmation of receipt), or
(D) by mailing in the United States mail by registered or certified mail, return
receipt requested, postage prepaid (which forms of notice shall be deemed to
have been given upon the fifth {5th} business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Amended and
Restated Stock Option Certificate executed this Amended and Restated Stock
Option Certificate in the City of Monrovia, County of Los Angeles, State of
California, effective as of the 13th day of February, 2003.

                                    COMPANY:

                                    STAAR Surgical Company,
                                    a Delaware corporation

                                    By:  /s/ John Bily
                                      ---------------------------
                                      John C. Bily, Secretary
ATTEST:

                  [SEAL]

                                    RECIPIENT:

                                    /s/ David Bailey
                                    ------------------------------
                                    David Bailey

<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:       Secretary
          STAAR Surgical Company
          1911 Walker Avenue
          Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Amended and
Restated Stock Option Certificate dated effective the ________ day of
_______________, ___ (the "Option Certificate"), between STAAR Surgical Company,
a Delaware corporation (the "Company") and the undersigned (the "Recipient"),
hereby irrevocably elects, in accordance with the terms and conditions of that
certain 1998 STAAR Surgical Company Stock Plan (the "Plan") adopted by the Board
of Directors on April 17, 1998 and approved by the shareholders on May 29, 1998,
under which the Option Certificate was granted, to exercise the undersigned's
Option to purchase (_________)(1) shares of the Company's voting common stock,
$ .01 per share par value ("Common Stock") (collectively and severally, the
"Option Shares"), for the aggregate purchase price of ($_________)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:________________________________________

                           Print Name:_______________________________________

                           Address:__________________________________________

                           __________________________________________________

                           Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>12
<FILENAME>a06720exv10w28.txt
<DESCRIPTION>EX-10.28
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.28

                            STOCK OPTION CERTIFICATE

      THE OPTION RIGHTS REPRESENTED BY THIS STOCK OPTION CERTIFICATE DO NOT
      CONSTITUTE A SECURITY WHICH IS REQUIRED TO BE REGISTERED UPON THE GRANT OF
      THESE OPTION RIGHTS (AND THEREFORE HAVE NOT BEEN REGISTERED) WITH THE
      UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
      OF 1933, AS AMENDED, INSOFAR AS THE RECIPIENT OF THIS OPTION HAS NOT AND
      WILL NOT BE REQUIRED TO PAY OR GIVE ANY CONSIDERATION WITH RESPECT TO THE
      GRANT OF THESE OPTION RIGHTS, NOR HAS THE SECURITIES AND EXCHANGE
      COMMISSION REVIEWED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE
      RECIPIENT'S STOCK OPTION CERTIFICATE. THE OPTION RIGHTS REPRESENTED BY
      THIS STOCK OPTION CERTIFICATE CONSTITUTE A SECURITY WHICH HAS NOT BEEN
      REGISTERED OR QUALIFIED, AS THE CASE MAY BE, UNDER THE SECURITIES LAWS OF
      ANY STATE OR TERRITORY OF THE UNITED STATES WHICH MAY BE APPLICABLE, IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION OR QUALIFICATION, AS THE CASE
      MAY BE, AFFORDED BY SUCH STATE OR TERRITORIAL SECURITIES LAWS INCLUDING,
      WITHOUT LIMITATION, WITH THE CALIFORNIA DEPARTMENT OF CORPORATIONS, IN
      RELIANCE UPON THE EXEMPTION FROM REGISTATION AFFORDED BY SECTION 25102(o)
      OF THE CALIFORNIA BLUE SKY LAW, AS AMENDED, NOR HAS NAY SUCH SECURITIES
      REGULATORY AGENCY REVIEWED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
      STOCK OPTION CERTIFICATE.

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and VOLKER
D. ANHAEUSSER (the "Recipient") whose address is c/o 10900 Wilshire Boulevard,
Suite 500, Los Angeles, California 90024, pursuant to that certain 1998 STAAR
Surgical Company Stock Plan (the "Plan") adopted by the Board of Directors on
April 17, 1998 and approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. This Stock Option Certificate certifies that the
Company has granted to the Recipient, pursuant to the terms of the Plan, an
option (the "Option") to purchase, in whole or in part, twenty thousand (20,000)
shares of the Company's voting common stock, par value $.01 (the "Common Stock")
(collectively and severally, the "Option Shares"), at the price of ten dollars
and 18.8 cents ($10.188) per Option Share (the "Option Price"), subject to the
following terms and conditions.

      2. PLAN; PLAN SUMMARY. Subject to the terms of this Stock Option
Certificate, the Recipient's rights to purchase the Option Shares are governed
by the Plan, the terms of which are incorporated herein by this reference.

      3. CHARACTER OF OPTION. This Option (i) is [X] a Non-Qualified Option or
(ii) is [____]

<PAGE>

an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [__] an employee, (ii) [X] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. The right to exercise the Options granted by this
Stock Option Certificate shall expire and be null and void and of no further
force or effect to the extent not exercised by 5:00 p.m. Pacific Time, on the
8th day of May 2010 (the "Option Expiration Date"). Notwithstanding the
foregoing, to the extent the Option is not fully vested, the right to exercise
the Option shall be subject to earlier expiration as provided in Article X of
the Plan.

      6. EXERCISE VESTING CONDITIONS. The Option Shares are subject to Article
V, Section 5.05 of the Plan and to the following vesting schedule:

<TABLE>
<CAPTION>
                               Cumulative Vested
                                 Percentage of
    Date                            Shares
------------                   -----------------
<S>                            <C>
May 31, 2000                        10,000
May 31, 2001                        10,000
</TABLE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check, and/or the following items (if
      checked by the Company); (i) [X] shares of Common Stock pursuant to
      Article VIII of the Plan, (ii) [__] surrender of relinquishment of rights
      to acquire Common Stock as more particularly described below, or (iii)
      [X] a full-recourse promissory note as more particularly described
      below.

      8. FORFEITURE; VESTING CONDITIONS. The Option Shares: (i) [__] will be
fully vested upon date of grant, or (ii) [X] are subject to Article V, Section
5.05 of the Plan and to the vesting schedule set forth above , and are subject
to Article X of the Plan and to the forfeiture provisions included therein
relating to the Recipient's continued performance of services in the capacity
indicated above.

      9. VESTING ON CHANGE OF CONTROL. Any unvested Option Shares shall
immediately vest upon the occurrence of a Change In Control or an Approved
Corporate Transaction.

      10. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Recipient hereby
represents, warrants and covenants to the Company, each of which is deemed to be
a separate representation, warranty or covenant, whichever the case may be,
that:

            (a) The Recipient's legal permanent residence and domicile is in the
State of

<PAGE>

California.

            (b) The Recipient, if a natural person, is eighteen (18) or over.

            (c) The Recipient has received a copy of the Plan which explains the
administration and operation of the Plan and certain other relevant matters
pertaining to the Plan, and has read and understood the Plan.

            (d) By reason of the Recipient's business or financial experience,
the Recipient can be reasonably assumed to have the capacity to protect the
Recipient's own interests in connection with the transaction contemplated by
this Stock Option Certificate.

            (e) Before purchasing the Option Shares, the Recipient has had the
opportunity, to the extent the Recipient has determined to be necessary, to be
provided with financial and other written information about the Company; to ask
questions and receive answers concerning the terms and conditions of this Stock
Option Certificate, an investment in the Option Shares, and the business of the
Company and its finances; and that the Recipient has, to the extent he has
availed himself of this opportunity, received satisfactory information and
answers.

            (f) Prior to exercising the Option, the Recipient had the
opportunity to consult with Recipient's investment advisors who are independent
of the Company, including, without limitation, investment, tax, accounting and
legal advisors relative to (i) the investment merits of a proposed investment in
the Option Shares and (ii) the tax consequences of the grant and exercise of the
Option and the subsequent disposition of the Option Shares and the effect of
same upon the Recipient's personal financial circumstances, and that the
Recipient has, to the extent he has availed himself of this opportunity,
received satisfactory information and answers from such investment advisors.

            (g) The Recipient has been informed and understands and agrees as
follows: there are substantial restrictions on the transferability of the Option
Shares as are more particularly described in Article XI, Section 11.02 of the
plan and, as a result of such restrictions, it may not be possible for the
Recipient to sell or otherwise liquidate the Option Shares in the case of
emergency and/or other need, and the Recipient must therefore be able to hold
the Option Shares until the lapse of said restrictions; the Recipient must have
adequate means of providing for the Recipient's current needs and personal
contingencies; the Recipient must have not need for liquidity in an investment
in the Option Shares; and the Recipient has evaluated the Recipient's financial
resources and investment position in view of the foregoing; and that the
Recipient is able to bear the economic risk of an investment in the Option
Shares.

            (h) The Option Shares are being purchased by the Recipient as
principal and not by any other person, with the Recipient's own funds and not
with the funds of any other person, and for the account of the Recipient and not
as nominee or agent and not for the account of any other person. The Recipient
is purchasing the Option Shares for investment for an indefinite period and not
with a view to the sale of distribution of any part or all thereof by public or
private sale or other disposition. Nor person other than the Recipient will have
an interest, beneficial or otherwise, in the Option Shares, and the Recipient is
not obligated to transfer the Option Shares to any other person nor does the
Recipient have any agreement or understanding to do so.

<PAGE>

            (i) To the best of the Recipient's knowledge and belief the offer
and sale of the Option Shares was not accomplished by the publication of any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio; nor
was the offer and sale of the Option Shares accomplished through any seminar or
meeting to which the Recipient was invited by any such publication or
advertisement.

            Each representation, warranty and covenant of the Recipient shall be
deemed made as of the time of grant of this Option, shall be deemed remade at
any time the Recipient exercises this Option, and shall survive the date closing
with respect to the exercise of the last Option hereunder.

      11. MISCELLANEOUS

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Stock Option Certificate nor any of its terms may be
amended, supplemented, discharged or terminated (other than by performance),
except as provided in the Plan or by a written instrument or instruments signed
by all of the parties to this Stock Option Certificate. No waiver of any acts or
obligations hereunder shall be effective unless such waiver shall be in a
written instrument or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its

<PAGE>

application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Stock Option Certificate, and, in lieu of such
excused provision, there shall be added a provision as similar in terms and
amount to such excused provision as may be possible and be legal, valid and
enforceable, and (B) the remaining part of this Stock Option Certificate
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby and shall continue in full force
and effect to the fullest extent provided by law.

                  (iv) No Reliance Upon Prior Representation. The Recipient
acknowledges that neither the Company nor any of its officers, directors,
employees or agents have made any oral representation or promise which would
induce the Recipient prior to executing this Stock Option Certificate to change
the Recipient's position to the Recipient's detriment, partially perform, or
part with value in reliance upon such representation or promise; the Recipient
acknowledges that he or she has taken such action at its own risk; and the
Recipient represents that he or she has not so changed his or her position,
performed or parted with value prior to the time of his or her execution of this
Stock Option Certificate.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Stock Option
Certificate, in whole or in part, without the prior written consent of the
Company, except pursuant to the terms of the Plan. Subject to the foregoing, all
of the representations, warranties, covenants, conditions and provisions of this
Stock Option Certificate shall be binding upon and shall inure to the benefit of
each party and such party's respective successors and permitted assigns,
spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

<PAGE>

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the 9st day of May
2000.

                                      COMPANY:

                                      STAAR Surgical Company,
                                      a Delaware corporation

                                      By: ________________________________
                                          William C. Huddleston, President

      ATTEST:

                                      By: ________________________________
                                          John Santos, Chief Financial Officer

                                      RECIPIENT:

                                       /s/ Volker D. Anhaeusser
                                      ------------------------------------
                                      Volker D. Anhaeusser

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:         Secretary
            STAAR Surgical Company
            1911 Walker Avenue
            Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the 31st day of May 2000 (the "Option Certificate"),
between STAAR Surgical Company, a Delaware corporation (the "Company") and the
undersigned (the "Recipient"), hereby irrevocably elects, in accordance with the
terms and conditions of that certain 1998 STAAR Surgical Company Stock Plan (the
"Plan") adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998, under which the Option Certificate was granted, to
exercise the undersigned's Option to purchase _________________________________
(_____)(1) shares of the Company's voting common stock, $ .01 per share par
value ("Common Stock") (collectively and severally, the "Option Shares"), for
the aggregate purchase price of _____________________ ($_________)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

      The Recipient hereby remakes, reaffirms and reacknowledges all agreements,
representations, warranties and covenants set forth in the Option Certificate as
of the date of the Recipient's notice, all of which shall survive the Closing
with respect to the shares of Common Stock purchased hereby.

      The Recipient hereby acknowledges that the following legend (or any
variation thereof determined appropriate by the Company) will be placed on the
share certificate or certificates for the Option Shares to comply with
applicable federal and state securities laws:

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN (1)
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION AFFORDED BY SUCH ACT, OR (2)
      REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR
      TERRITORY OF THE UNITED STATES WHICH MAY BE APPLICABLE, IN RELIANCE UPON
      AN EXEMPTION FROM REGISTRATION OR QUALIFICATION AFFORDED BY SUCH STATE OR
      TERRITORIAL SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE
      HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW FOR
      RESALE OR DISTRIBUTION. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
      UNLESS (A) THEY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
      ACT OF 1933 AS WELL AS UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY
      OF THE UNITED STATES AS MAY THEN BE APPLICABLE, OR (B) THE TRANSFER AGENT
      (OR THE COMPANY IF THEN ACTING

<PAGE>

      AS ITS TRANSFER AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION
      SATISFACTORY TO COUNSEL FOR THE COMPANY OR A NO-ACTION OR INTERPRETIVE
      LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND ANY
      APPLICABLE STATE OR TERRITORIAL SECURITIES REGULATORY AGENCY TO THE EFFECT
      THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED UNDER THE
      CIRCUMSTANCES OF SUCH SALE OR TRANSFER.

            (Signature must conform in all respects to name of the Recipient as
            specified in the Plan, unless the undersigned is the Recipient's
            Successor, in which case the undersigned must submit appropriate
            proof of the right of the undersigned to exercise the Option.)

                  Signature:________________________________________

                  Print Name:_______________________________________

                  Address:__________________________________________

                  __________________________________________________

                                                          Date:________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>13
<FILENAME>a06720exv10w29.txt
<DESCRIPTION>EX-10.29
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.29

                            STOCK OPTION CERTIFICATE

      THE OPTION RIGHTS REPRESENTED BY THIS STOCK OPTION CERTIFICATE DO NOT
      CONSTITUTE A SECURITY WHICH IS REQUIRED TO BE REGISTERED UPON THE GRANT OF
      THESE OPTION RIGHTS (AND THEREFORE HAVE NOT BEEN REGISTERED) WITH THE
      UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
      OF 1933, AS AMENDED, INSOFAR AS THE RECIPIENT OF THIS OPTION HAS NOT AND
      WILL NOT BE REQUIRED TO PAY OR GIVE ANY CONSIDERATION WITH RESPECT TO THE
      GRANT OF THESE OPTION RIGHTS, NOR HAS THE SECURITIES AND EXCHANGE
      COMMISSION REVIEWED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE
      RECIPIENT'S STOCK OPTION CERTIFICATE. THE OPTION RIGHTS REPRESENTED BY
      THIS STOCK OPTION CERTIFICATE CONSTITUTE A SECURITY WHICH HAS NOT BEEN
      REGISTERED OR QUALIFIED, AS THE CASE MAY BE, UNDER THE SECURITIES LAWS OF
      ANY STATE OR TERRITORY OF THE UNITED STATES WHICH MAY BE APPLICABLE, IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION OR QUALIFICATION, AS THE CASE
      MAY BE, AFFORDED BY SUCH STATE OR TERRITORIAL SECURITIES LAWS INCLUDING,
      WITHOUT LIMITATION, WITH THE CALIFORNIA DEPARTMENT OF CORPORATIONS, IN
      RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 25102(o)
      OF THE CALIFORNIA BLUE SKY LAW, AS AMENDED, NOR HAS NAY SUCH SECURITIES
      REGULATORY AGENCY REVIEWED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
      STOCK OPTION CERTIFICATE.

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and VOLKER
D. ANHAEUSSER (the "Recipient") whose address is c/o 10900 Wilshire Boulevard,
Suite 500, Los Angeles, California 90024, pursuant to that certain 1998 STAAR
Surgical Company Stock Plan (the "Plan") adopted by the Board of Directors on
April 17, 1998 and approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. This Stock Option Certificate certifies that the
Company has granted to the Recipient, pursuant to the terms of the Plan, an
option (the "Option") to purchase, in whole or in part, forty thousand (40,000)
shares of the Company's voting common stock, par value $.01 (the "Common Stock")
(collectively and severally, the "Option Shares"), at the price of thirteen
dollars and sixty-two and one-half cents ($13.625) per Option Share (the "Option
Price"), subject to the following terms and conditions.

      2. PLAN; PLAN SUMMARY. Subject to the terms of this Stock Option
Certificate, the Recipient's rights to purchase the Option Shares are governed
by the Plan, the terms of which are incorporated herein by this reference.

      3. CHARACTER OF OPTION. This Option (i) is [X] a Non-Qualified Option or
(ii) is [___]

<PAGE>

an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [_____] an employee, (ii) [X] a director, or (iii)
[_____] a consultant.

      5. EXPIRATION OF OPTION. The right to exercise the Options granted by this
Stock Option Certificate shall expire and be null and void and of no further
force or effect to the extent not exercised by 5:00 p.m. Pacific Time, on the
30th day of May 2010 (the "Option Expiration Date"). Notwithstanding the
foregoing, to the extent the Option is not fully vested, the right to exercise
the Option shall be subject to earlier expiration as provided in Article X of
the Plan.

      6. EXERCISE VESTING CONDITIONS. The Option Shares are subject to Article
V, Section 5.05 of the Plan and to the following vesting schedule:

<TABLE>
<CAPTION>
                                        Cumulative Vested
                                          Percentage of
    Date                                     Shares
------------                            -----------------
<S>                                     <C>
May 31, 2000                                 20,000
May 31, 2001                                 20,000
</TABLE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check, and/or the following items (if
      checked by the Company); (i) [X] shares of Common Stock pursuant to
      Article VIII of the Plan, (ii) [__] surrender of relinquishment of rights
      to acquire Common Stock as more particularly described below, or (iii)
      [X] a full-recourse promissory note as more particularly described
      below.

      8. FORFEITURE; VESTING CONDITIONS. The Option Shares: (i) [__] will be
fully vested upon date of grant, or (ii) [X] are subject to Article V, Section
5.05 of the Plan and to the vesting schedule set forth above , and are subject
to Article X of the Plan and to the forfeiture provisions included therein
relating to the Recipient's continued performance of services in the capacity
indicated above.

      9. VESTING ON CHANGE OF CONTROL. Any unvested Option Shares shall
immediately vest upon the occurrence of a Change In Control or an Approved
Corporate Transaction.

      10. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Recipient hereby
represents, warrants and covenants to the Company, each of which is deemed to be
a separate representation, warranty or covenant, whichever the case may be,
that:

            (a) The Recipient's legal permanent residence and domicile is in the
State of

<PAGE>

California.

            (b) The Recipient, if a natural person, is eighteen (18) or over.

            (c) The Recipient has received a copy of the Plan which explains the
administration and operation of the Plan and certain other relevant matters
pertaining to the Plan, and has read and understood the Plan.

            (d) By reason of the Recipient's business or financial experience,
the Recipient can be reasonably assumed to have the capacity to protect the
Recipient's own interests in connection with the transaction contemplated by
this Stock Option Certificate.

            (e) Before purchasing the Option Shares, the Recipient has had the
opportunity, to the extent the Recipient has determined to be necessary, to be
provided with financial and other written information about the Company; to ask
questions and receive answers concerning the terms and conditions of this Stock
Option Certificate, an investment in the Option Shares, and the business of the
Company and its finances; and that the Recipient has, to the extent he has
availed himself of this opportunity, received satisfactory information and
answers.

            (f) Prior to exercising the Option, the Recipient had the
opportunity to consult with Recipient's investment advisors who are independent
of the Company, including, without limitation, investment, tax, accounting and
legal advisors relative to (i) the investment merits of a proposed investment in
the Option Shares and (ii) the tax consequences of the grant and exercise of the
Option and the subsequent disposition of the Option Shares and the effect of
same upon the Recipient's personal financial circumstances, and that the
Recipient has, to the extent he has availed himself of this opportunity,
received satisfactory information and answers from such investment advisors.

            (g) The Recipient has been informed and understands and agrees as
follows: there are substantial restrictions on the transferability of the Option
Shares as are more particularly described in Article XI, Section 11.02 of the
plan and, as a result of such restrictions, it may not be possible for the
Recipient to sell or otherwise liquidate the Option Shares in the case of
emergency and/or other need, and the Recipient must therefore be able to hold
the Option Shares until the lapse of said restrictions; the Recipient must have
adequate means of providing for the Recipient's current needs and personal
contingencies; the Recipient must have not need for liquidity in an investment
in the Option Shares; and the Recipient has evaluated the Recipient's financial
resources and investment position in view of the foregoing; and that the
Recipient is able to bear the economic risk of an investment in the Option
Shares.

            (h) The Option Shares are being purchased by the Recipient as
principal and not by any other person, with the Recipient's own funds and not
with the funds of any other person, and for the account of the Recipient and not
as nominee or agent and not for the account of any other person. The Recipient
is purchasing the Option Shares for investment for an indefinite period and not
with a view to the sale of distribution of any part or all thereof by public or
private sale or other disposition. Nor person other than the Recipient will have
an interest, beneficial or otherwise, in the Option Shares, and the Recipient is
not obligated to transfer the Option Shares to any other person nor does the
Recipient have any agreement or understanding to do so.

<PAGE>

            (i) To the best of the Recipient's knowledge and belief the offer
and sale of the Option Shares was not accomplished by the publication of any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio; nor
was the offer and sale of the Option Shares accomplished through any seminar or
meeting to which the Recipient was invited by any such publication or
advertisement.

            Each representation, warranty and covenant of the Recipient shall be
deemed made as of the time of grant of this Option, shall be deemed remade at
any time the Recipient exercises this Option, and shall survive the date closing
with respect to the exercise of the last Option hereunder.

      11. MISCELLANEOUS

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Stock Option Certificate nor any of its terms may be
amended, supplemented, discharged or terminated (other than by performance),
except as provided in the Plan or by a written instrument or instruments signed
by all of the parties to this Stock Option Certificate. No waiver of any acts or
obligations hereunder shall be effective unless such waiver shall be in a
written instrument or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its

<PAGE>

application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Stock Option Certificate, and, in lieu of such
excused provision, there shall be added a provision as similar in terms and
amount to such excused provision as may be possible and be legal, valid and
enforceable, and (B) the remaining part of this Stock Option Certificate
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby and shall continue in full force
and effect to the fullest extent provided by law.

                  (iv) No Reliance Upon Prior Representation. The Recipient
acknowledges that neither the Company nor any of its officers, directors,
employees or agents have made any oral representation or promise which would
induce the Recipient prior to executing this Stock Option Certificate to change
the Recipient's position to the Recipient's detriment, partially perform, or
part with value in reliance upon such representation or promise; the Recipient
acknowledges that he or she has taken such action at its own risk; and the
Recipient represents that he or she has not so changed his or her position,
performed or parted with value prior to the time of his or her execution of this
Stock Option Certificate.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Stock Option
Certificate, in whole or in part, without the prior written consent of the
Company, except pursuant to the terms of the Plan. Subject to the foregoing, all
of the representations, warranties, covenants, conditions and provisions of this
Stock Option Certificate shall be binding upon and shall inure to the benefit of
each party and such party's respective successors and permitted assigns,
spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

<PAGE>

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the 31st day of May
2000.

                                      COMPANY:

                                      STAAR Surgical Company,
                                      a Delaware corporation

                                      By: ________________________________
                                          William C. Huddleston, President
      ATTEST:

                                      By: ________________________________
                                          John Santos, Chief Financial Officer

                                      RECIPIENT:

                                       /s/ Volker D. Anhaeusser
                                      ------------------------------------
                                      Volker D. Anhaeusser

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:         Secretary
            STAAR Surgical Company
            1911 Walker Avenue
            Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the 31st day of May 2000 (the "Option Certificate"),
between STAAR Surgical Company, a Delaware corporation (the "Company") and the
undersigned (the "Recipient"), hereby irrevocably elects, in accordance with the
terms and conditions of that certain 1998 STAAR Surgical Company Stock Plan (the
"Plan") adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998, under which the Option Certificate was granted, to
exercise the undersigned's Option to purchase ____________________________
(______)(1) shares of the Company's voting common stock, $ .01 per share par
value ("Common Stock") (collectively and severally, the "Option Shares"), for
the aggregate purchase price of _____________________ ($______)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

      The Recipient hereby remakes, reaffirms and reacknowledges all agreements,
representations, warranties and covenants set forth in the Option Certificate as
of the date of the Recipient's notice, all of which shall survive the Closing
with respect to the shares of Common Stock purchased hereby.

      The Recipient hereby acknowledges that the following legend (or any
variation thereof determined appropriate by the Company) will be placed on the
share certificate or certificates for the Option Shares to comply with
applicable federal and state securities laws:

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN (1)
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION AFFORDED BY SUCH ACT, OR (2)
      REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR
      TERRITORY OF THE UNITED STATES WHICH MAY BE APPLICABLE, IN RELIANCE UPON
      AN EXEMPTION FROM REGISTRATION OR QUALIFICATION AFFORDED BY SUCH STATE OR
      TERRITORIAL SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE
      HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW FOR
      RESALE OR DISTRIBUTION. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
      UNLESS (A) THEY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
      ACT OF 1933 AS WELL AS UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY
      OF THE UNITED STATES AS MAY THEN BE APPLICABLE, OR (B) THE TRANSFER AGENT
      (OR THE COMPANY IF THEN ACTING

<PAGE>

      AS ITS TRANSFER AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION
      SATISFACTORY TO COUNSEL FOR THE COMPANY OR A NO-ACTION OR INTERPRETIVE
      LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND ANY
      APPLICABLE STATE OR TERRITORIAL SECURITIES REGULATORY AGENCY TO THE EFFECT
      THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED UNDER THE
      CIRCUMSTANCES OF SUCH SALE OR TRANSFER.

            (Signature must conform in all respects to name of the Recipient as
            specified in the Plan, unless the undersigned is the Recipient's
            Successor, in which case the undersigned must submit appropriate
            proof of the right of the undersigned to exercise the Option.)

                  Signature:________________________________________

                  Print Name:_______________________________________

                  Address:__________________________________________

                  __________________________________________________

                                                         Date:________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>14
<FILENAME>a06720exv10w30.txt
<DESCRIPTION>EX-10.30
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.30

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and VOLKER
ANHAEUSSER (the "Recipient") whose address is Anhausser Unger Eckle & Bergien,
Kriegstrasse 85, D-76133 Karlsruhe, Germany, pursuant to that certain 1998 STAAR
Surgical Company Stock Plan (the "Plan") adopted by the Board of Directors on
April 17, 1998 and approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, an option (the "Option") to
purchase, in whole or in part, Forty-Five Thousand (45,000) shares of the
Company's voting common stock, par value $.01 (the "Common Stock") (collectively
and severally, the "Option Shares"), at the price of Three dollars and
Eighty-one cents ($3.81) per Option Share (the "Option Price"). The date of this
grant is: January 2, 2002 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [X] a Non-Qualified Option or [__]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [__] an employee, (ii) [X] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Stock Option Certificate and in the Plan, the right to exercise the Options
granted by this Stock Option Certificate shall expire and be null and void and
of no further force or effect to the extent not exercised by 5:00 p.m. Pacific
Time, on the 1st day of January, 2007 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well as
based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                     Cumulative Vested
                       Percentage of
      Date                Shares
---------------      -----------------
<S>                  <C>
January 2, 2002          33 1/3%
January 2, 2003          66 2/3%
January 2, 2004           100.0%
</TABLE>

                                       1
<PAGE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or

                                       2
<PAGE>

written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise
provided herein, neither this Stock Option Certificate nor any of its terms may
be amended, supplemented, discharged or terminated (other than by performance),
except as provided in the Plan or by a written instrument or instruments signed
by all of the parties to this Stock Option Certificate. No waiver of any acts or
obligations hereunder shall be effective unless such waiver shall be in a
written instrument or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its application is invalid, illegal or
unenforceable) shall be excused as if it had never been incorporated into this
Stock Option Certificate, and, in lieu of such excused provision, there shall be
added a provision as similar in terms and amount to such excused provision as
may be possible and be legal, valid and enforceable, and (B) the remaining part
of this Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his
rights or benefits or delegate any of his duties or obligations under this Stock
Option Certificate, in whole or in part, without the prior written consent of
the Company, except pursuant to the terms of the Plan. Subject to the foregoing,
all of the representations, warranties, covenants, conditions and provisions of
this Stock Option Certificate shall be binding upon and shall inure to the
benefit of each party and such party's respective successors and permitted
assigns, spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon

                                       3
<PAGE>

confirmed transmission or confirmation of receipt), or (D) by mailing in the
United States mail by registered or certified mail, return receipt requested,
postage prepaid (which forms of notice shall be deemed to have been given upon
the fifth {5th} business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the 30th day of May
2002.

                                                 COMPANY:

                                                 STAAR Surgical Company,
                                                 a Delaware corporation

                                                 By:____________________________
                                                 David Bailey, President
ATTEST:
                                                 RECIPIENT:
          [SEAL]
                                                 _______________________________


                                       4
<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

                                       5
<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:          Secretary
             STAAR Surgical Company
             1911 Walker Avenue
             Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the __________ day of _________, _____ (the "Option
Certificate"), between STAAR Surgical Company, a Delaware corporation (the
"Company") and the undersigned (the "Recipient"), hereby irrevocably elects, in
accordance with the terms and conditions of that certain 1998 STAAR Surgical
Company Stock Plan (the "Plan") adopted by the Board of Directors on April 17,
1998 and approved by the shareholders on May 29, 1998, under which the Option
Certificate was granted, to exercise the undersigned's Option to purchase
______________________ (______)(1) shares of the Company's voting common stock,
$ .01 per share par value ("Common Stock") (collectively and severally, the
"Option Shares"), for the aggregate purchase price of __________________________
__________ ($_______)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                      Signature:________________________________________

                      Print Name:_______________________________________

                      Address:__________________________________________

                      __________________________________________________

                      Date:_____________________________________________

                                       6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>15
<FILENAME>a06720exv10w32.txt
<DESCRIPTION>EX-10.32
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.32

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and Donald
Duffy (the "Recipient") whose address is 1911 Walker Avenue, Monrovia, CA 91016
pursuant to that certain 1998 STAAR Surgical Company Stock Plan (the "Plan")
adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, an option (the "Option") to
purchase, in whole or in part, sixty thousand (60,000) shares of the Company's
voting common stock, par value $.01 (the "Common Stock") (collectively and
severally, the "Option Shares"), at the price of three dollars and sixty-one
cents ($3.61) per Option Share (the "Option Price"). The date of this grant is
January 30, 2003 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [X] a Non-Qualified Option or [__]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [__] an employee, (ii) [X] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Stock Option Certificate and in the Plan, the right to exercise the Options
granted by this Stock Option Certificate shall expire and be null and void and
of no further force or effect to the extent not exercised by 5:00 p.m. Pacific
Time, on the 29th day of January, 2008 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [__] subject to the following vesting schedule as well as
based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                                                        Cumulative Vested
                                                          Percentage of
Date                                                          Shares
----                                                    -----------------
<S>                                                     <C>
                                                              100.0%
</TABLE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

<PAGE>

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [__] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Stock Option
Certificate was prepared by the Company or its legal counsel solely on behalf of
the Company. It is acknowledged by the Recipient that he or she was not
represented by the Company or any of its officers, directors, employees or
agents (including the Company's legal counsel) in connection with the
transaction contemplated by this Stock Option Certificate, and that the
Recipient had separate and independent advice of counsel. In light of the
foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Stock Option Certificate, or the interpretation
thereof or hereof, shall not be construed against the Company as the alleged
draftsman of this Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Stock Option Certificate, together
with and subject to the Plan: (1) is the final, complete and exclusive statement
of the agreement of the parties with respect to the subject matter hereof; (2)
supersedes any prior or contemporaneous agreements or understandings of any
kind, oral or written (collectively and severally, the "prior agreements"), and
that any such prior agreements are of no force or effect except as expressly set
forth herein; and (3) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Stock Option Certificate nor any of its terms may be
amended, supplemented, discharged or

<PAGE>

terminated (other than by performance), except as provided in the Plan or by a
written instrument or instruments signed by all of the parties to this Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Stock
Option Certificate or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable
under present or future laws effective during the term of this Stock Option
Certificate, then, and in that event: (A) the performance of the offending term
or provision (but only to the extent its application is invalid, illegal or
unenforceable) shall be excused as if it had never been incorporated into this
Stock Option Certificate, and, in lieu of such excused provision, there shall be
added a provision as similar in terms and amount to such excused provision as
may be possible and be legal, valid and enforceable, and (B) the remaining part
of this Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Stock Option Certificate and the rights and
remedies of each party arising out of or relating to this Stock Option
Certificate shall be solely governed in accordance with the laws (without regard
to the conflicts of law principles thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Stock Option
Certificate, in whole or in part, without the prior written consent of the
Company, except pursuant to the terms of the Plan. Subject to the foregoing, all
of the representations, warranties, covenants, conditions and provisions of this
Stock Option Certificate shall be binding upon and shall inure to the benefit of
each party and such party's respective successors and permitted assigns,
spouses, heirs, executors, administrators, and personal and legal
representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Stock
Option Certificate, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this Stock
Option Certificate, shall be in writing, and shall be given by: (A) personal
delivery (which form of notice shall be deemed to have been given upon
delivery), (B) by telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in the United States
mail by registered or certified mail, return receipt requested, postage prepaid
(which forms of notice shall be deemed to have been given upon the fifth {5th}
business day following the date mailed).

<PAGE>

      WHEREFORE, the parties hereto have for purposes of this Stock Option
Certificate executed this Stock Option Certificate in the City of Monrovia,
County of Los Angeles, State of California, effective as of the _______ day of
__________________ 2001.

                                       COMPANY:

                                       STAAR Surgical Company,
                                       a Delaware corporation

                                       By: /s/ John C. Bily
                                           -------------------------------------
                                           John C. Bily, Chief Financial Officer
ATTEST:

                  [SEAL]

                                       RECIPIENT:

                                       /s/ Donald Duffy
                                       -----------------------------------------


<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:       Secretary
          STAAR Surgical Company
          1911 Walker Avenue
          Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Stock Option
Certificate dated effective the _________ day of ____________, _________ (the
"Option Certificate"), between STAAR Surgical Company, a Delaware corporation
(the "Company") and the undersigned (the "Recipient"), hereby irrevocably
elects, in accordance with the terms and conditions of that certain 1998 STAAR
Surgical Company Stock Plan (the "Plan") adopted by the Board of Directors on
April 17, 1998 and approved by the shareholders on May 29, 1998, under which the
Option Certificate was granted, to exercise the undersigned's Option to
purchase _________________ (______)(1) shares of the Company's voting common
stock, $ .01 per share par value ("Common Stock") (collectively and severally,
the "Option Shares"), for the aggregate purchase price of _____________________
($_____)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:________________________________________

                           Print Name:_______________________________________

                           Address:__________________________________________

                           __________________________________________________

                           Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>16
<FILENAME>a06720exv10w34.txt
<DESCRIPTION>EX-10.34
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.34

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and JOHN C.
BILY (the "Recipient") whose address is 1911 Walker Avenue, Monrovia, California
91016, pursuant to that certain 1998 STAAR Surgical Company Stock Plan (the
"Plan") adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, an option (the "Option") to
purchase, in whole or in part, One Hundred Thousand (100,000) shares of the
Company's voting common stock, par value $.01 (the "Common Stock") (collectively
and severally, the "Option Shares"), at the price of Three dollars and
Twenty-nine cents ($3.29) per Option Share (the "Option Price"). The date of
this grant is: December 12, 2001 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or [X]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Amended and Restated Stock Option Certificate and in the Plan, the right to
exercise the Options granted by this Amended and Restated Stock Option
Certificate shall expire and be null and void and of no further force or effect
to the extent not exercised by 5:00 p.m. Pacific Time, on the 11th day of
December, 2006 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well as
based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                                Cumulative Vested
                                  Percentage of
     Date                            Shares
-----------------               -----------------
<S>                             <C>
December 12, 2002                    33 1/3%
December 12, 2003                    66 2/3%
December 12, 2004                     100.0%
</TABLE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain goals and objectives to be determined at a later date. A
summary of the milestones will be attached

<PAGE>

to this agreement and will have the same force and effect as if the milestones
were stated herein.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Amended and
Restated Stock Option Certificate was prepared by the Company or its legal
counsel solely on behalf of the Company. It is acknowledged by the Recipient
that he or she was not represented by the Company or any of its officers,
directors, employees or agents (including the Company's legal counsel) in
connection with the transaction contemplated by this Amended and Restated Stock
Option Certificate, and that the Recipient had separate and independent advice
of counsel. In light of the foregoing it is acknowledged by the Recipient that
the Company shall not be construed to be solely responsible for the drafting
hereof, and that any ambiguity in the Plan or this Amended and Restated Stock
Option Certificate, or the interpretation thereof or hereof, shall not be
construed against the Company as the alleged draftsman of this Amended and
Restated Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Amended and Restated Stock Option
Certificate, together with and subject to the Plan: (1) is the final, complete
and exclusive statement of the agreement of the parties with respect to the
subject matter hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written (collectively and severally, the
"prior

<PAGE>

agreements"), and that any such prior agreements are of no force or effect
except as expressly set forth herein; and (3) may not be varied, supplemented or
contradicted by evidence of prior agreements, or by evidence of subsequent oral
agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Amended and Restated Stock Option Certificate nor any of
its terms may be amended, supplemented, discharged or terminated (other than by
performance), except as provided in the Plan or by a written instrument or
instruments signed by all of the parties to this Amended and Restated Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Amended
and Restated Stock Option Certificate or the application thereof to any person
or circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable under present or future laws effective during the term of this
Amended and Restated Stock Option Certificate, then, and in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Amended and Restated Stock Option Certificate,
and, in lieu of such excused provision, there shall be added a provision as
similar in terms and amount to such excused provision as may be possible and be
legal, valid and enforceable, and (B) the remaining part of this Amended and
Restated Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Amended and Restated Stock Option Certificate
and the rights and remedies of each party arising out of or relating to this
Amended and Restated Stock Option Certificate shall be solely governed in
accordance with the laws (without regard to the conflicts of law principles
thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Amended and
Restated Stock Option Certificate, in whole or in part, without the prior
written consent of the Company, except pursuant to the terms of the Plan.
Subject to the foregoing, all of the representations, warranties, covenants,
conditions and provisions of this Amended and Restated Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and such
party's respective successors and permitted assigns, spouses, heirs, executors,
administrators, and personal and legal representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Amended
and Restated Stock Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called "notices")
required or permitted to be given hereunder, or which are given with respect to
this Amended and Restated Stock Option Certificate, shall be in writing, and
shall be given by: (A) personal delivery (which form of notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of notice shall be deemed to
have been given upon confirmed delivery by the delivery agency), (C) by
electronic or facsimile or telephonic transmission, provided

<PAGE>

the receiving party has a compatible device or confirms receipt thereof (which
forms of notice shall be deemed delivered upon confirmed transmission or
confirmation of receipt), or (D) by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of notice shall be deemed to have been given upon the fifth {5th} business
day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Amended and
Restated Stock Option Certificate executed this Amended and Restated Stock
Option Certificate in the City of Monrovia, County of Los Angeles, State of
California, effective as of the 18 January 2002.

                                        COMPANY:

                                        STAAR Surgical Company,
                                        a Delaware corporation

                                        By: /s/ David Bailey
                                        --------------------------
                                           David Bailey

ATTEST:

                                        By: /s/ John Santos
                                        --------------------------
                                           John Santos, Secretary

            [SEAL]

                                        RECIPIENT:

                                            /s/ John Bily
                                        --------------------------

<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:         Secretary
            STAAR Surgical Company
            1911 Walker Avenue
            Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Amended and
Restated Stock Option Certificate dated effective the _____ day of ___________,
______ (the "Option Certificate"), between STAAR Surgical Company, a Delaware
corporation (the "Company") and the undersigned (the "Recipient"), hereby
irrevocably elects, in accordance with the terms and conditions of that certain
1998 STAAR Surgical Company Stock Plan (the "Plan") adopted by the Board of
Directors on April 17, 1998 and approved by the shareholders on May 29, 1998,
under which the Option Certificate was granted, to exercise the undersigned's
Option to purchase (___)(1) shares of the Company's voting common stock, $ .01
per share par value ("Common Stock") (collectively and severally, the "Option
Shares"), for the aggregate purchase price of ($______)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                  Signature:________________________________________

                  Print Name:_______________________________________

                  Address:__________________________________________

                  __________________________________________________

                  Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>17
<FILENAME>a06720exv10w35.txt
<DESCRIPTION>EX-10.35
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.35

                  AMENDED AND RESTATED STOCK OPTION CERTIFICATE

      This Amended and Restated Stock Option Certificate dated February 12, 2003
replaces in its entirety the Amended and Restated Stock Option Certificate dated
February 12, 2003 and is entered into between STAAR Surgical Company, a Delaware
corporation (the "Company"), whose principal executive office is located at 1911
Walker Avenue, Monrovia, California 91016, and JOHN C. BILY (the "Recipient")
whose address is 1911 Walker Avenue, Monrovia, CA 91016, pursuant to that
certain 1998 STAAR Surgical Company Stock Plan (the "Plan") adopted by the Board
of Directors on April 17, 1998 and approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Amended and Restated Stock Option Certificate certifies that the Company
has granted to the Recipient, pursuant to the terms of the Plan, an option (the
"Option") to purchase, in whole or in part, fifty thousand (50,000) shares of
the Company's voting common stock, par value $.01 (the "Common Stock")
(collectively and severally, the "Option Shares"), at the price of three dollars
and sixty cents ($3.60) per Option Share (the "Option Price"). The date of this
grant is February 13, 2003 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or [X]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Stock Option Certificate and in the Plan, the right to exercise the Options
granted by this Stock Option Certificate shall expire and be null and void and
of no further force or effect to the extent not exercised by 5:00 p.m. Pacific
Time, on the 12th day of February, 2008 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well as
based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                                Cumulative Vested
                                  Percentage of
       Date                          Shares
-----------------               -----------------
<S>                             <C>
February 13, 2004                    33 1/3%
February 13, 2005                    66 2/3%
February 13, 2006                     100.0%
</TABLE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain

<PAGE>

goals and objectives as stated below:

      (i) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest on April 1, 2004, so long as the Company has generated cash from
operating activities exceeding two million dollars ($2,000,000) in fiscal year
2003; and

      (ii) the right to purchase twenty-five thousand (25,000) Option Shares
shall vest on April 1, 2004, so long as the Company achieves or exceeds its
planned cost of goods on manufactured product for fiscal year 2003.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Amended and
Restated Stock Option Certificate was prepared by the Company or its legal
counsel solely on behalf of the Company. It is acknowledged by the Recipient
that he or she was not represented by the Company or any of its officers,
directors, employees or agents (including the Company's legal counsel) in
connection with the transaction contemplated by this Amended and Restated Stock
Option Certificate, and that the Recipient had separate and independent advice
of counsel. In light of the foregoing it is acknowledged by the Recipient that
the Company shall not be construed to be solely responsible for the drafting
hereof, and that any ambiguity in the Plan or this Amended and Restated Stock
Option Certificate, or the interpretation thereof or hereof, shall not be
construed against the Company as the alleged draftsman of this Amended and
Restated Stock Option Certificate.

<PAGE>

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Amended and Restated Stock Option
Certificate, together with and subject to the Plan: (1) is the final, complete
and exclusive statement of the agreement of the parties with respect to the
subject matter hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written (collectively and severally, the
"prior agreements"), and that any such prior agreements are of no force or
effect except as expressly set forth herein; and (3) may not be varied,
supplemented or contradicted by evidence of prior agreements, or by evidence of
subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Amended and Restated Stock Option Certificate nor any of
its terms may be amended, supplemented, discharged or terminated (other than by
performance), except as provided in the Plan or by a written instrument or
instruments signed by all of the parties to this Amended and Restated Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Amended
and Restated Stock Option Certificate or the application thereof to any person
or circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable under present or future laws effective during the term of this
Amended and Restated Stock Option Certificate, then, and in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Amended and Restated Stock Option Certificate,
and, in lieu of such excused provision, there shall be added a provision as
similar in terms and amount to such excused provision as may be possible and be
legal, valid and enforceable, and (B) the remaining part of this Amended and
Restated Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Amended and Restated Stock Option Certificate
and the rights and remedies of each party arising out of or relating to this
Amended and Restated Stock Option Certificate shall be solely governed in
accordance with the laws (without regard to the conflicts of law principles
thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Amended and
Restated Stock Option Certificate, in whole or in part, without the prior
written consent of the Company, except pursuant to the terms of the Plan.
Subject to the foregoing, all of the representations, warranties, covenants,
conditions and provisions of this Amended and Restated Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and such
party's respective successors and permitted assigns, spouses, heirs, executors,
administrators, and personal and legal representatives.

<PAGE>

            (e) NOTICES. Unless otherwise specifically provided in this Amended
and Restated Stock Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called "notices")
required or permitted to be given hereunder, or which are given with respect to
this Amended and Restated Stock Option Certificate, shall be in writing, and
shall be given by: (A) personal delivery (which form of notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of notice shall be deemed to
have been given upon confirmed delivery by the delivery agency), (C) by
electronic or facsimile or telephonic transmission, provided the receiving party
has a compatible device or confirms receipt thereof (which forms of notice shall
be deemed delivered upon confirmed transmission or confirmation of receipt), or
(D) by mailing in the United States mail by registered or certified mail, return
receipt requested, postage prepaid (which forms of notice shall be deemed to
have been given upon the fifth {5th} business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Amended and
Restated Stock Option Certificate executed this Amended and Restated Stock
Option Certificate in the City of Monrovia, County of Los Angeles, State of
California, effective as of the 13th day of February, 2003.

                                        COMPANY:

                                        STAAR Surgical Company,
                                        a Delaware corporation

                                        By: /s/ John Bily
                                        ----------------------------
                                           John C. Bily, Secretary

ATTEST:

                  [SEAL]

                                        RECIPIENT:

                                            /s/ John Bily
                                        ----------------------------
                                        John Bily

<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:         Secretary
            STAAR Surgical Company
            1911 Walker Avenue
            Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Amended and
Restated Stock Option Certificate dated effective the ______ day of ___________,
_____ (the "Option Certificate"), between STAAR Surgical Company, a Delaware
corporation (the "Company") and the undersigned (the "Recipient"), hereby
irrevocably elects, in accordance with the terms and conditions of that certain
1998 STAAR Surgical Company Stock Plan (the "Plan") adopted by the Board of
Directors on April 17, 1998 and approved by the shareholders on May 29, 1998,
under which the Option Certificate was granted, to exercise the undersigned's
Option to purchase (___)(1) shares of the Company's voting common stock, $ .01
per share par value ("Common Stock") (collectively and severally, the "Option
Shares"), for the aggregate purchase price of ($_____)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                  Signature:________________________________________

                  Print Name:_______________________________________

                  Address:__________________________________________

                  __________________________________________________

                  Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>18
<FILENAME>a06720exv10w36.txt
<DESCRIPTION>EX-10.36
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.36




July 12, 2002




Mr. Nick Curtis



Dear Mr. Curtis:

STAAR Surgical Company is pleased to offer you the position of Sr. Vice
President Sales and Marketing (U.S. and Canada), reporting directly to me. Your
beginning wage will be $7,692.31 per bi-weekly payroll, in addition to all the
benefits offered in our current policy.

Also included in your compensation package is an annual bonus, which will be
targeted to pay up to 50% of your base salary, based on the achievement of
specific objectives of which the major component - 80% of the total for the
first two years - will be linked to market share growth and sales increase
within the U.S. and Canadian market. Should sales growth targets be exceeded,
there will be no cap on the percentage bonus that may be earned. The 2002 bonus
payment will be pro-rated according to the actual number of months worked.

To further solidify our offer and subject to approval by the compensation
committee, we are awarding you 75,000 STAAR Surgical Company stock options,
priced at the market value on the date of acceptance of this offer, and vested
in equal increments over a three year period. Additionally, 50,000 STAAR
Surgical Company stock options will be available at the end of 2002 fiscal year
and may be awarded based on the achievement of sales growth in the second half
of 2002 versus the first half of 2002, and will be priced at the close of
business on the last day of fiscal 2002, vested over a three year period. The
compensation committee will review and decide on the exact size of the second
award based on your performance.

STAAR Surgical will pay relocation costs from Illinois to California as outlined
below:

        1.      Full move services. Household goods only.

        2.      Storage of items up to 60 days.

        3.      One car transported. Mileage reimbursed for second car.

        4.      Two days plus reasonable number of travel days expense to
                include lodging, meals and mileage reimbursed.


<PAGE>

        5.      Two trips homefinding assistance - not to exceed four days each.

        6.      Temporary living expense up to 60 days.

        7.      Incidental expense allowance up to $1,000.

        8.      Closing costs on primary residence. Excludes mobile homes,
                excess acreage, resort homes, houseboats.

        9.      Traditional closing costs on home purchase up to $2,000.

Additionally, upon relocation to California, your salary and eligibility to an
additional stock option grant will be reviewed. A change of control provision
will be added to your terms of employment upon relocation whereby if the company
is acquired and if the essential duties and responsibilities as set forth in
your job description are significantly changed resulting in a loss of employment
or if your employment is terminated without cause, all stock options issued to
you will immediately vest and you will be entitled to payment of one year base
salary.

Upon acceptance of this offer and the successful completion of a pre-employment
physical, you may begin work on or before September 3, 2002. Please note that a
drug test is included in the physical. Employment is at the mutual consent of
the employee and STAAR and can be terminated "at will" with or without cause, by
the employee or by STAAR in its sole discretion at any time.

On your first day of employment you will need to bring with you identification
in order to complete all necessary paperwork, including your Employment
Eligibility Verification (form I-9).

You will be asked to do your best to accomplish the mission working as part of
our team and in return, STAAR offers many great opportunities. This offer is
valid until July 16, 2002.

Sincerely,

/s/ David Bailey
--------------------------------------
David Bailey
President and Chief Executive Officer


/s/ Nicholas T. Curtis                      7/15/02
---------------------------------------     ---------
Accepted By                                 Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>19
<FILENAME>a06720exv10w37.txt
<DESCRIPTION>EX-10.37
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.37

February 14, 2003


Mr. Nick Curtis



Dear Nick:

I am writing to confirm the changes that will take place in your compensation
package related to your relocation to California. Effective July 1, 2003, your
base salary will increase to $225,000 or $8,653.80 per bi-weekly pay period.

In addition, you agree to make the arrangements for bridge financing for the
move to California and STAAR agrees to pay the cost of financing for a maximum
six month period from the date of closing on the new property in California. In
addition to paying for bridge financing, STAAR will also pay the mortgage on the
new property for a maximum six-month period. If you house in Chicago is sold
within this six-month period, this funding will immediately cease.

STAAR is adding to the terms of your employment a change of control provision
effective immediately, with the compensation being equal to the revised base
salary, plus 50% of the base as bonus reverting after two years to the average
bonus actually earned over the prior two-year period.

If your employment is terminated for any reason without cause within the first
two years of your relocation, you will receive 18 months of base salary. After
the first two years, this figure will drop to one-year base salary and the
average of the prior two years' bonus.

The abovementioned changes to your compensation package will be memorialized in
an employment agreement that will be provided to you under separate cover.

Sincerely,

/s/ David Bailey
-------------------------------------
David  Bailey
President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>20
<FILENAME>a06720exv10w38.txt
<DESCRIPTION>EX-10.38
<TEXT>
<PAGE>

                                                                EXHIBIT 10.38

                            STOCK OPTION CERTIFICATE

      This Stock Option Certificate is entered into between STAAR Surgical
Company, a Delaware corporation (the "Company"), whose principal executive
office is located at 1911 Walker Avenue, Monrovia, California 91016, and Nick
Curtis (the "Recipient") whose address is 1911 Walker Avenue, Monrovia,
California 91016, pursuant to that certain 1998 STAAR Surgical Company Stock
Plan (the "Plan") adopted by the Board of Directors on April 17, 1998 and
approved by the shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, an option (the "Option") to
purchase, in whole or in part, seventy-five thousand (75,000) shares of the
Company's voting common stock, par value $.01 (the "Common Stock") (collectively
and severally, the "Option Shares"), at the price of three dollars and
forty-five cents ($3.45) per Option Share (the "Option Price"). The date of this
grant is July 15, 2002 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or [X]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Amended and Restated Stock Option Certificate and in the Plan, the right to
exercise the Options granted by this Amended and Restated Stock Option
Certificate shall expire and be null and void and of no further force or effect
to the extent not exercised by 5:00 p.m. Pacific Time, on the 15th day of July,
2007 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well as
based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                                Cumulative Vested
                                  Percentage of
     Date                            Shares
-------------                   -----------------
<S>                             <C>
July 15, 2003                        33 1/3%
July 15, 2004                        66 2/3%
July 15, 2005                         100.0%
</TABLE>

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

<PAGE>

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Amended and
Restated Stock Option Certificate was prepared by the Company or its legal
counsel solely on behalf of the Company. It is acknowledged by the Recipient
that he or she was not represented by the Company or any of its officers,
directors, employees or agents (including the Company's legal counsel) in
connection with the transaction contemplated by this Amended and Restated Stock
Option Certificate, and that the Recipient had separate and independent advice
of counsel. In light of the foregoing it is acknowledged by the Recipient that
the Company shall not be construed to be solely responsible for the drafting
hereof, and that any ambiguity in the Plan or this Amended and Restated Stock
Option Certificate, or the interpretation thereof or hereof, shall not be
construed against the Company as the alleged draftsman of this Amended and
Restated Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Amended and Restated Stock Option
Certificate, together with and subject to the Plan: (1) is the final, complete
and exclusive statement of the agreement of the parties with respect to the
subject matter hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written (collectively and severally, the
"prior agreements"), and that any such prior agreements are of no force or
effect except as expressly set forth herein; and (3) may not be varied,
supplemented or contradicted by evidence of prior agreements, or by evidence of
subsequent oral agreements.

<PAGE>

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Amended and Restated Stock Option Certificate nor any of
its terms may be amended, supplemented, discharged or terminated (other than by
performance), except as provided in the Plan or by a written instrument or
instruments signed by all of the parties to this Amended and Restated Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Amended
and Restated Stock Option Certificate or the application thereof to any person
or circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable under present or future laws effective during the term of this
Amended and Restated Stock Option Certificate, then, and in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Amended and Restated Stock Option Certificate,
and, in lieu of such excused provision, there shall be added a provision as
similar in terms and amount to such excused provision as may be possible and be
legal, valid and enforceable, and (B) the remaining part of this Amended and
Restated Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Amended and Restated Stock Option Certificate
and the rights and remedies of each party arising out of or relating to this
Amended and Restated Stock Option Certificate shall be solely governed in
accordance with the laws (without regard to the conflicts of law principles
thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Amended and
Restated Stock Option Certificate, in whole or in part, without the prior
written consent of the Company, except pursuant to the terms of the Plan.
Subject to the foregoing, all of the representations, warranties, covenants,
conditions and provisions of this Amended and Restated Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and such
party's respective successors and permitted assigns, spouses, heirs, executors,
administrators, and personal and legal representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Amended
and Restated Stock Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called "notices")
required or permitted to be given hereunder, or which are given with respect to
this Amended and Restated Stock Option Certificate, shall be in writing, and
shall be given by: (A) personal delivery (which form of notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of notice shall be deemed to
have been given upon confirmed delivery by the delivery agency), (C) by
electronic or facsimile or telephonic transmission, provided the receiving party
has a compatible device or confirms receipt thereof (which forms of notice shall
be deemed delivered upon confirmed transmission or confirmation of receipt), or
(D) by mailing in the United States mail by registered or certified mail, return
receipt requested, postage prepaid (which forms of notice shall be deemed to
have been given upon the fifth {5th} business day

<PAGE>

following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Amended and
Restated Stock Option Certificate executed this Amended and Restated Stock
Option Certificate in the City of Monrovia, County of Los Angeles, State of
California, effective as of the 14th day of February, 2003.

                                        COMPANY:

                                        STAAR Surgical Company,
                                        a Delaware corporation

                                        By: /s/ John Bily
                                           ----------------------------------
                                           John C. Bily, Chief Financial Officer

                  [SEAL]

                                        RECIPIENT:

                                            /s/ Nick Curtis
                                        -------------------------------------
                                        Nick Curtis

<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:         Secretary
            STAAR Surgical Company
            1911 Walker Avenue
            Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Amended and
Restated Stock Option Certificate dated effective the ______ day of ___________,
_____ (the "Option Certificate"), between STAAR Surgical Company, a Delaware
corporation (the "Company") and the undersigned (the "Recipient"), hereby
irrevocably elects, in accordance with the terms and conditions of that certain
1998 STAAR Surgical Company Stock Plan (the "Plan") adopted by the Board of
Directors on April 17, 1998 and approved by the shareholders on May 29, 1998,
under which the Option Certificate was granted, to exercise the undersigned's
Option to purchase (___)(1) shares of the Company's voting common stock, $ .01
per share par value ("Common Stock") (collectively and severally, the "Option
Shares"), for the aggregate purchase price of ($_____)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                  Signature:________________________________________

                  Print Name:_______________________________________

                  Address:__________________________________________

                  __________________________________________________

                  Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>21
<FILENAME>a06720exv10w39.txt
<DESCRIPTION>EX-10.39
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.39

                  AMENDED AND RESTATED STOCK OPTION CERTIFICATE

      This Amended and Restated Stock Option Certificate dated February 12, 2003
replaces in its entirety the Amended and Restated Stock Option Certificate dated
February 12, 2003 and is entered into between STAAR Surgical Company, a Delaware
corporation (the "Company"), whose principal executive office is located at 1911
Walker Avenue, Monrovia, California 91016, and NICHOLAS T. CURTIS (the
"Recipient") whose address 1911 Walker Avenue, Monrovia, California 91016,
pursuant to that certain 1998 STAAR Surgical Company Stock Plan (the "Plan")
adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998.

      1. GRANT OF OPTION. Subject to the terms and conditions included herein,
this Amended and Restated Stock Option Certificate certifies that the Company
has granted to the Recipient, pursuant to the terms of the Plan, an option (the
"Option") to purchase, in whole or in part, sixty thousand (60,000) shares of
the Company's voting common stock, par value $.01 (the "Common Stock")
(collectively and severally, the "Option Shares"), at the price of three dollars
and sixty cents ($3.60) per Option Share (the "Option Price"). The date of this
grant is February 13, 2003 (the "Grant Date").

      2. PLAN; PLAN SUMMARY. The Recipient's rights to purchase the Option
Shares are governed by the Plan, the terms of which are incorporated herein by
this reference.

      3. CHARACTER OF OPTION. This Option is [__] a Non-Qualified Option or [X]
an Incentive Option.

      4. CAPACITY OF RECIPIENT. This Option is granted to the Recipient in the
Recipient's capacity as (i) [X] an employee, (ii) [__] a director, or (iii) [__]
a consultant.

      5. EXPIRATION OF OPTION. Subject to the terms and conditions set forth in
this Stock Option Certificate and in the Plan, the right to exercise the Options
granted by this Stock Option Certificate shall expire and be null and void and
of no further force or effect to the extent not exercised by 5:00 p.m. Pacific
Time, on the 12th day of February, 2008 (the "Option Expiration Date").

      6. EXERCISE VESTING CONDITIONS. The Option is (i) [__] fully vested upon
date of grant, or (ii) [X] subject to the following vesting schedule as well
as based upon Recipient's continued performance of services in the capacity
hereinabove indicated:

<TABLE>
<CAPTION>
                                                        Cumulative Vested
                                                          Percentage of
       Date                                                   Shares
-----------------                                       -----------------
<S>                                                     <C>
February 13, 2004                                            33 1/3%
February 13, 2005                                            66 2/3%
February 13, 2006                                             100.0%
</TABLE>

<PAGE>

The above vesting schedule will be accelerated according to the Recipient's
achievement of certain goals and objectives as stated below:

      (i) the right to purchase thirty thousand (30,000) Option Shares shall
vest on April 1, 2004, so long as the Company achieves twenty-eight million
dollars ($28,000,000) in sales at the budgeted gross profit percentage for the
U.S. for fiscal year 2003; or

      (ii) the right to purchase forty thousand (40,000) Option Shares shall
vest on April 1, 2004, so long as the Company achieves twenty-nine million
dollars ($29,000,000) in sales at the budgeted gross profit percentage for the
U.S. for fiscal year 2003; or

      (iii) the right to purchase sixty thousand (60,000) Option Shares shall
vest on April 1, 2004, so long as the Company achieves thirty million dollars
($30,000,000) in sales at the budgeted gross profit percentage for the U.S. for
fiscal year 2003.

      7. MANNER OF EXERCISE AND PAYMENT. This Option shall be exercised by
delivery of this Option Certificate to the Secretary of the Company, together
with:

            (a) A Consent of Spouse (as such consent is defined in the Plan)
      from the spouse of the Recipient, if any, duly signed by such spouse; and

            (b) Full payment for the Option Shares to be purchased in goods
      funds (in U.S. dollars) by cash or check or through a "same day sale"
      commitment from the Recipient and a broker-dealer that is a member of the
      National Association of Securities Dealers (an "NASD Dealer") whereby the
      Recipient irrevocably elects to exercise the Option and to sell a portion
      of the Option Shares so purchased to pay for the Option Price, and whereby
      the NASD Dealer irrevocably commits upon receipt of such Option Shares to
      forward the Option Price directly to the Company.

      8. FORFEITURE; VESTING CONDITIONS. This Option (i) [__] will be fully
vested upon date of grant, or (ii) [X] will be subject to Article V, Section
5.05 and Article X of the Plan, inasmuch as the Option will be subject to: (A)
the vesting schedule set forth above and (B) the special rules regulating
vesting and forfeiture on Termination of Recipient.

      9. RECIPIENT'S REPRESENTATIONS. The Recipient represents that the
Recipient has received a Section 10(a) Prospectus, which explains the
administration and operation of the Plan, and has received a copy of the Plan.

      10. MISCELLANEOUS.

            (a) PREPARATION OF STOCK OPTION CERTIFICATE. This Amended and
Restated Stock Option Certificate was prepared by the Company or its legal
counsel solely on behalf of the Company. It is acknowledged by the Recipient
that he or she was not represented by the Company or any of its officers,
directors, employees or agents (including the Company's legal counsel) in
connection with the transaction contemplated by this Amended and Restated Stock
Option Certificate, and that the Recipient had separate and independent advice
of counsel. In light of the

<PAGE>

foregoing it is acknowledged by the Recipient that the Company shall not be
construed to be solely responsible for the drafting hereof, and that any
ambiguity in the Plan or this Amended and Restated Stock Option Certificate, or
the interpretation thereof or hereof, shall not be construed against the Company
as the alleged draftsman of this Amended and Restated Stock Option Certificate.

            (b) INTERPRETATION.

                  (i) Entire Agreement/No Collateral Representations. The
Recipient acknowledges and agrees that this Amended and Restated Stock Option
Certificate, together with and subject to the Plan: (1) is the final, complete
and exclusive statement of the agreement of the parties with respect to the
subject matter hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written (collectively and severally, the
"prior agreements"), and that any such prior agreements are of no force or
effect except as expressly set forth herein; and (3) may not be varied,
supplemented or contradicted by evidence of prior agreements, or by evidence of
subsequent oral agreements.

                  (ii) Amendment; Waiver. Except as expressly otherwise provided
herein, neither this Amended and Restated Stock Option Certificate nor any of
its terms may be amended, supplemented, discharged or terminated (other than by
performance), except as provided in the Plan or by a written instrument or
instruments signed by all of the parties to this Amended and Restated Stock
Option Certificate. No waiver of any acts or obligations hereunder shall be
effective unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver and each
party affected by such waiver.

                  (iii) Severability. If any term or provision of this Amended
and Restated Stock Option Certificate or the application thereof to any person
or circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable under present or future laws effective during the term of this
Amended and Restated Stock Option Certificate, then, and in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Amended and Restated Stock Option Certificate,
and, in lieu of such excused provision, there shall be added a provision as
similar in terms and amount to such excused provision as may be possible and be
legal, valid and enforceable, and (B) the remaining part of this Amended and
Restated Stock Option Certificate (including the application of the offending
term or provision to persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable) shall not be affected thereby and shall
continue in full force and effect to the fullest extent provided by law.

            (c) ENFORCEMENT. This Amended and Restated Stock Option Certificate
and the rights and remedies of each party arising out of or relating to this
Amended and Restated Stock Option Certificate shall be solely governed in
accordance with the laws (without regard to the conflicts of law principles
thereof) of the state of Delaware.

            (d) SUCCESSORS AND ASSIGNS. The Recipient may not assign his rights
or benefits or delegate any of his duties or obligations under this Amended and
Restated Stock Option

<PAGE>

Certificate, in whole or in part, without the prior written consent of the
Company, except pursuant to the terms of the Plan. Subject to the foregoing, all
of the representations, warranties, covenants, conditions and provisions of this
Amended and Restated Stock Option Certificate shall be binding upon and shall
inure to the benefit of each party and such party's respective successors and
permitted assigns, spouses, heirs, executors, administrators, and personal and
legal representatives.

            (e) NOTICES. Unless otherwise specifically provided in this Amended
and Restated Stock Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called "notices")
required or permitted to be given hereunder, or which are given with respect to
this Amended and Restated Stock Option Certificate, shall be in writing, and
shall be given by: (A) personal delivery (which form of notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of notice shall be deemed to
have been given upon confirmed delivery by the delivery agency), (C) by
electronic or facsimile or telephonic transmission, provided the receiving party
has a compatible device or confirms receipt thereof (which forms of notice shall
be deemed delivered upon confirmed transmission or confirmation of receipt), or
(D) by mailing in the United States mail by registered or certified mail, return
receipt requested, postage prepaid (which forms of notice shall be deemed to
have been given upon the fifth {5th} business day following the date mailed).

      WHEREFORE, the parties hereto have for purposes of this Amended and
Restated Stock Option Certificate executed this Amended and Restated Stock
Option Certificate in the City of Monrovia, County of Los Angeles, State of
California, effective as of the 12th day of February, 2003.

                                              COMPANY:

                                              STAAR Surgical Company,
                                              a Delaware corporation

                                              By: /s/ John Bily
                                                  -----------------------
                                                  John C. Bily, Secretary

ATTEST:

                  [SEAL]

                                              RECIPIENT:

                                              /s/ Nicholas T. Curtis
                                              ----------------------
                                              Nicholas T. Curtis

<PAGE>

                                   ATTACHMENT
                                       TO
                            STOCK OPTION CERTIFICATE

                       NOTICE OF EXERCISE OF STOCK OPTION

<PAGE>

                       NOTICE OF EXERCISE OF STOCK OPTION

          [To be signed by the Recipient only upon exercise of Option]

TO:       Secretary
          STAAR Surgical Company
          1911 Walker Avenue
          Monrovia, California 91016

      The undersigned, the holder of an Option under that certain Amended and
Restated Stock Option Certificate dated effective the _________ day of
____________________, _______ (the "Option Certificate"), between STAAR Surgical
Company, a Delaware corporation (the "Company") and the undersigned (the
"Recipient"), hereby irrevocably elects, in accordance with the terms and
conditions of that certain 1998 STAAR Surgical Company Stock Plan (the "Plan")
adopted by the Board of Directors on April 17, 1998 and approved by the
shareholders on May 29, 1998, under which the Option Certificate was granted, to
exercise the undersigned's Option to purchase (____)(1) shares of the Company's
voting common stock, $ .01 per share par value ("Common Stock") (collectively
and severally, the "Option Shares"), for the aggregate purchase price of
($______)(2).

(1)   Insert number of Option Shares as specified in the Option Certificate
      which are vested Option Shares (as defined by the Plan) which the
      Recipient is exercising the Option to purchase.

(2)   Number of Option Shares to be exercised as hereinabove specified
      multiplied by the Option Price per share.

                           Signature:________________________________________

                           Print Name:_______________________________________

                           Address:__________________________________________

                           __________________________________________________

                           Date:_____________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>22
<FILENAME>a06720exv10w40.htm
<DESCRIPTION>EX-10.40
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w40</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="right" style="font-size: 10pt">EXHIBIT 10.40



<P align="center" style="font-size: 10pt"><U>EMPLOYMENT AGREEMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Employment Agreement is made and entered into by and between STAAR Surgical Company (the
&#147;Company&#148;), a Delaware corporation located at 1911 Walker Avenue, Monrovia, California 91016 and
Thomas Paul, PhD., (hereinafter the &#147;Employee&#148;), located at 1911 Walker Ave., Monrovia, CA, 91016 effective March&nbsp;18, 2005.


<P align="center" style="font-size: 10pt"><U>RECITALS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;WHEREAS, the Company wishes to retain the services of Employee and Employee wishes to
render services to Company as Vice President of Research and Development.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;WHEREAS, the Employee and the Company desire to enter into this Employment Agreement and to
establish the terms and conditions of the Employee&#146;s employment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;WHEREAS, the Company and the Employee intend that this Agreement will supercede and replace
any and all other employment agreements or arrangements for employment entered into by and between
the Company and the Employee, and that such employment agreements or arrangements shall have no
further force or effect.


<P align="center" style="font-size: 10pt"><U>AGREEMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, for and in consideration of the promises, covenants, and agreements contained
herein, the parties hereto agree as follows:


<P align="center" style="font-size: 10pt">ARTICLE 1<BR>
<U>EMPLOYMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Employment</U>. The Company hereby agrees to employ the Employee and the Employee
hereby agrees to serve the Company in the capacity of Vice President Research and Development,
based upon the terms and conditions set forth in this agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Duties</U>. During the term of his employment, the Employee shall devote his full
time, efforts, abilities, and energies to the Company&#146;s business and, in particular, shall use his
best efforts, skill, and abilities to promote the general welfare and interests of the Company.
The Employee shall loyally, conscientiously, and professionally do and perform all such duties and
responsibilities as shall be reasonably assigned by the Company and the Employee&#146;s superiors from
time to time, and shall


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">comply with all of the Company&#146;s personnel policies and procedures, including, but not
limited to, those contained in The Company&#146;s Employee Handbook.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Noncompetition, Nonsolicitation and Noninterference and Proprietary Property and
Confidential Information Provisions</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Applicable Definitions</U>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this paragraph, the following capitalized terms shall have the definitions set
forth below:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<U>Business Segments</U>&#148; &#151; The term &#147;Business Segments&#148; is defined as each of Company&#146;s
(or Company&#146;s affiliates&#146;) products or product lines.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &#147;<U>Competitive Business</U>&#148; &#151; The term &#147;Competitive Business&#148; is defined as any
business that is or may be competitive with or similar to or adverse to any of Company&#146;s (or
Company&#146;s affiliates&#146;) Business Segments, whether such business is conducted by a proprietorship,
partnership, corporation or other entity or venture.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Nonsolicitation and Noninterference</U>.




<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) <U>Covenants</U>. Employee hereby covenants and agrees that Employee shall not, either
for Employee&#146;s own account or directly or indirectly in conjunction with or on behalf of any
person, partnership, corporation or other entity or venture:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) During the term of this Agreement and for a period of one (1)&nbsp;year from the date this
Agreement terminates or expires, solicit or employ or attempt to solicit or employ any person who
is then or has, within twelve (12)&nbsp;months prior thereto, been an officer, partner, manager, agent
or employee of Company or any affiliate of Company whether or not such a person would commit a
breach of that person&#146;s contract of employment with Company or any affiliate of Company, if any, by
reason of leaving the service of Company or any affiliate of Company (the &#147;<U>Nonsolicitation
Covenant</U>&#148;); or



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) During the term of this Agreement and for a period of one (1)&nbsp;year from the date of the
Agreement, on behalf of, directly or indirectly, any Competitive Business, or for the purpose of or
with the reasonably foreseeable effect of harming the business of Company, solicit the business of
any person, firm or company which is then, or has been at any time during the preceding twelve (12)
months prior to such solicitation, a customer, client, contractor, supplier or vendor of Company or
any affiliate of Company (the &#147;Noninterference Covenant)&#148;.


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<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) <U>Acknowledgements</U>. Each of the parties acknowledges that: (i)&nbsp;the covenants and
the restrictions contained in the Nonsolicitation and Noninterference Covenants are necessary,
fundamental, and required for the protection of the business of Company; (ii)&nbsp;such Covenants relate
to matters which are of a special, unique and extraordinary value; and (iii)&nbsp;a breach of either of
such Covenants will result in irreparable harm and damages which cannot be adequately compensated
by a monetary award.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) <U>Judicial Limitation</U>. Notwithstanding the foregoing, if at any time, despite the
express agreement of Company and Employee, a court of competent jurisdiction holds that any portion
of this Nonsolicitation and/or Noninterference Covenant is unenforceable by reason of its extending
for too great a period of time or by reason of its being too extensive in any other respect, such
Covenant shall be interpreted to extend only over the maximum period of time or to the maximum
extent in all other respects, as the case may be, as to which it may be enforceable, all as
determined by such court in such action.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) <U>Termination of Agreement</U>. The covenants and agreements contained in the
Nonsolicitation and Noninterference Covenant shall terminate and be of no effect if this Agreement
is terminated by Company without Cause.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Proprietary Property; Confidential Information</U>.




<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) &#147;<U>Applicable Definitions</U>&#148; &#151; For purposes of this paragraph, the following
capitalized terms shall have the definitions set forth below:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<U>Confidential Information</U>&#148; &#151; The term &#147;Confidential Information&#148; is collectively
and severally defined as any information, matter or thing of a secret, confidential or private
nature, whether or not so labeled, which is connected with Company&#146;s business or methods of
operation or concerning any of Company&#146;s suppliers, customers, licensors, licensees or others with
whom Company has a business relationship, and which has current or potential value to Company or
the unauthorized disclosure of which could be detrimental to Company. Confidential Information
shall be broadly defined and shall include, by way of example and not limitation: (i)&nbsp;matters of a
business nature available only to management and owners of Company of which Employee may become
aware (such as information concerning customers, vendors and suppliers, including their names,
addresses, credit or financial status, buying or selling habits, practices, requirements, and any
arrangements or contracts that Company may have with such parties, Company&#146;s marketing methods,
plans and strategies, the costs of materials, the prices Company obtains or has obtained or at
which Company sells or has sold its products or services, Company&#146;s manufacturing and sales costs,
the amount of compensation paid to employees of Company and other terms of their employment,
financial information such as financial statements, budgets and projections, and the terms of any
contracts or agreements Company has entered into)


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="margin-left:3%; font-size: 10pt">and (ii)&nbsp;matters of a technical nature (such as product information, trade secrets, know-how,
formulae, innovations, inventions, devices, discoveries, techniques, formats, processes, methods,
specifications, designs, patterns, schematics, data, compilation of information, test results, and
research and development projects). For purposes of the foregoing, the term &#147;trade secrets&#148; shall
mean the broadest and most inclusive interpretation of trade secrets as defined by Section
3426.1(d) of the <U>California Civil Code</U> (the Uniform Trade Secrets Act) and cases
interpreting the scope of said Section.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &#147;<U>Proprietary Property</U>&#148; &#151; The term &#147;Proprietary Property&#148; is collectively and
severally defined as any written or tangible property owned or used by Company in connection with
Company&#146;s business, whether or not such property also qualifies as Confidential Information.
Proprietary Property shall be broadly defined and shall include, by way of example and not
limitation, products, samples, equipment, files, lists, books, notebooks, records, documents,
memoranda, reports, patterns, schematics, compilations, designs, drawings, data, test results,
contracts, agreements, literature, correspondence, spread sheets, computer programs and software,
computer print outs, other written and graphic records, and the like, whether originals, copies,
duplicates or summaries thereof, affecting or relating to the business of Company, financial
statements, budgets, projections, invoices.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) <U>Ownership of Proprietary Property</U>. Employee acknowledges that all Proprietary
Property which Employee may prepare, use, observe, come into possession of and/or control shall, at
all times, remain the sole and exclusive property of Company. Employee shall, upon demand by
Company at any time, or upon the cessation of Employee&#146;s employment, irrespective of the time,
manner, cause or lack of cause of such cessation, immediately deliver to Company or its designated
agent, in good condition, ordinary wear and tear and damage by any cause beyond the reasonable
control of Employee excepted, all items of the Proprietary Property which are or have been in
Employee&#146;s possession or under his control, as well as a statement describing the disposition of
all items of the Proprietary Property beyond Employee&#146;s possession or control in the event Employee
has not previously returned such items of the Proprietary Property to Company.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) <U>Agreement Not to Use or Divulge Confidential Information</U>. Employee agrees that he
will not, in any fashion, form or manner, unless specifically consented to in writing by Company,
either directly or indirectly use, divulge, transmit or otherwise disclose or cause to be used,
divulged, transmitted or otherwise disclosed to any person, firm or corporation, in any manner
whatsoever (other than in Employee&#146;s performance of duties for Company or except as required by
law) any Confidential Information of any kind, nature or description. The foregoing provisions
shall not be construed to prevent Employee from making use of or disclosing information which is in
the public domain through no fault of Employee, provided, however, specific information shall not
be deemed to be in the public domain merely because it is


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="margin-left:3%; font-size: 10pt">encompassed by some general information that is published or in the public domain or in
Employee&#146;s possession prior to Employee&#146;s employment with Company.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) <U>Acknowledgement of Secrecy</U>. Employee acknowledges that the Confidential
Information is not generally known to the public or to other persons who can obtain economic value
from its disclosure or use and that the Confidential Information derives independent economic value
thereby, and Employee agrees that he shall take all efforts reasonably necessary to maintain the
secrecy and confidentiality of the Confidential Information and to otherwise comply with the terms
of this Agreement.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) <U>Inventions, Discoveries</U>. Employee acknowledges that any inventions, discoveries
or trade secrets, whether patentable or not, made or found by Employee in the scope of his
employment with Company constitute property of Company and that any rights therein now held or
hereafter acquired by Employee individually or in any capacity are hereby transferred and assigned
to Company, and agrees to execute and deliver any confirmatory assignments, documents or
instruments of any nature necessary to carry out the intent of this paragraph when requested by
Company without further compensation therefore, whether or not Employee is at the time employed by
Company. Provided, however, notwithstanding the foregoing, Employee shall not be required to
assign his rights in any invention which qualifies fully under the provisions of Section 2870(a) of
the <U>California Labor Code</U>, which provides, in pertinent part, that the requirement to
assign &#147;shall not apply to any invention that the employee developed entirely on his or her own
time without using employer&#146;s equipment, supplies, facilities or trade secret information except
for those inventions that either:



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Relate at the time of conception or reduction to practice of the invention to the
employer&#146;s business, or actual or demonstrably anticipated research or development of the employer;
or



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Result from any work performed by the employee for the employer.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee understands that he bears the full burden of proving to Company that an invention
qualifies fully under Section&nbsp;2870(a). By signing this Agreement, Employee acknowledges receipt of
a copy of this Agreement and of written notification of the provisions of Section&nbsp;2870.


<P align="center" style="font-size: 10pt">ARTICLE 2<BR>
<U>COMPENSATION</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Salary</U>. The Company shall pay the Employee a salary payable at the gross rate of
$6346.15 per pay period, to be paid on a bi-weekly basis. Employee&#146;s annual salary shall be
reviewed periodically by Company for the purpose of determining whether Employee&#146;s salary shall be
increased.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Employee Benefits</U>. In addition to the compensation specified above, the Employee
shall be permitted to participate in certain employee benefit programs in the same manner and
subject to the same terms, conditions, and limitations as other full-time employees of the Company.
The Employee shall also be eligible for four weeks vacation per year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Business Expenses</U>. The Company will reimburse the Employee for reasonable
business expenses as outlined in the company&#146;s business expense policy and provided that these
expenses were incurred on Company business and that expense reports regarding these expenses are
submitted to the Company in a timely manner.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Bonus</U>. In addition to the salary described above, the Employee shall be eligible
for an annual bonus of up to 25% of Employee&#146;s base salary, with 30% of the 25% based on the
achievement of individual objectives, 70% based on the achievement of Corporate financial targets.
This bonus will be payable on Employee&#146;s anniversary date of hire and subject to the successful
achievement of the goals and objectives.


<P align="center" style="font-size: 10pt">ARTICLE 3<BR>
<U>TERMINATION OF EMPLOYMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Termination</U>. This employment relationship may be terminated for any of the
reasons provided below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Termination for Cause</U>. Company may terminate this Agreement for &#147;Cause&#148;, upon 15
days written notice. Cause means any of the following: (1)&nbsp;willful breach or habitual neglect of
the duties which Employee is required to perform under the terms of this Agreement, (2)&nbsp;any act of
dishonesty, fraud, insubordination, misrepresentation, gross negligence or willful misconduct, (3)
conviction of a felony, or (4)&nbsp;intentional violation of any Company policy. With the exception of
the covenants set forth in Paragraph&nbsp;1.3, 4.1 and 4.3, upon such termination the obligations of
Employee and Company under this Agreement shall immediately cease. Such termination shall be
without prejudice to any other remedy to which Company may be entitled either at law, in equity, or
under this Agreement. If Employee&#146;s employment is terminated pursuant to this paragraph, the
Company shall pay to Employee, immediately upon such termination, any accrued but unpaid
compensation to which Employee is entitled on the date of such termination.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Termination for Poor Performance</U>. Employer may terminate employee&#146;s employment
under this Agreement for &#147;Poor Performance&#148;. Poor Performance is a failure of the Employee to
properly meet the duties and responsibilities of his position in a competent fashion, as determined
by the Chief Executive Officer. Such termination for &#147;Poor Performance&#148; shall occur only after
employee has been advised in writing of the failure to meet the duties and responsibilities, or


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">guidelines/goals and given a reasonable period of time of at least 30&nbsp;days to cure the Poor
Performance. Following the termination for Poor Performance, the Employee shall be entitled to
payment of his base salary through the last day of his employment. Employee shall be entitled to
no other payments or benefits after a termination for Poor Performance. With the exception of the
covenants set forth in Paragraph&nbsp;1.3, 4.1 and 4.3, upon such termination the obligations of
Employee and Company under this Agreement shall immediately cease.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Death</U>. Employee&#146;s employment shall terminate upon the death of Employee. Upon
such termination, the obligations of Employee and Company under this Agreement shall immediately
cease. In the event of a termination pursuant to this paragraph, Employee shall be entitled to
receive any amount of compensation earned but unpaid. All other rights Employee has under any
benefit or stock option plans and programs shall be determined in accordance with the terms and
conditions of such plans and programs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Election By Employee</U>. Employee&#146;s employment may be terminated at any time by
Employee upon not less than thirty (30)&nbsp;days written notice to Company. With the exception of the
covenants set forth in Paragraphs 1.3, 4.1 and 4.3, upon such termination the obligations of
Employee and the Company under this Agreement shall immediately cease. In the event of a
termination pursuant to this paragraph, Employee shall be entitled to receive any amount of
compensation earned but unpaid. All other rights Employee has under any benefit or stock option
plans and programs shall be determined in accordance with the terms and conditions of such plans
and programs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>Election by Company Due to a Change of Control</U>. If Employee&#146;s employment
is terminated by Company due to the sale or disposition by the Company of substantially all of its
business or assets or the sale of the capital stock of Company in connection with the sale or
transfer of a controlling interest in Company to a third party or the merger or consolidation of
Company with another corporation as part of a sale or transfer of a controlling interest in Company
to a third party <U>and </U>if the Employee&#146;s essential duties and responsibilities as set forth
in the job description for the position that Employee is in at the time of the change of control
are significantly changed due to a change in control, then in lieu of any other rights or benefits
under this Agreement, Employee shall be entitled to six months base salary, and any option held by
Employee which is unvested on the date of termination shall immediately vest. &#147;A controlling
interest&#148; shall be defined as 50% or more of the common stock of the Company. &#147; Six months base
salary&#148; shall be defined as only the cash compensation paid to Employee pursuant to paragraph 2.1,
as it may be modified from time to time, and shall not include employee benefits, bonus, stock
options, automobile allowance or debt forgiveness, if any. With the exception of the covenants
contained in Paragraphs 1.3(c), 4.1 and 4.3, upon such termination the obligations of Employee and
the Company shall immediately cease.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Termination Without Cause</U>. Company is entitled to terminate the Employee&#146;s
employment without cause for any reason; provided, however, that the Employee shall be entitled to
30&nbsp;days written notice and five months pay as severance, as well as any accrued but unpaid
compensation in lieu of any other rights or benefits under this Agreement, to which Employee is
entitled on the date of such termination. With the exception of the covenants contained in
Paragraphs 1.3(c), 4.1 and 4.3, upon such termination the obligations of Employee and the Company
shall immediately cease.


<P align="center" style="font-size: 10pt">ARTICLE 4<BR>
<U>ADDITIONAL OBLIGATIONS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Non-Interference</U>. The Employee shall not now or in the future, either during or
subsequent to the period of the Employee&#146;s employment, disrupt, damage, impair or interfere with
the business of the Company in any manner, including, without limitation, inducing an employee to
leave the employ of the Company or inducing an employee, a consultant, a sales representative, or
an independent contractor to sever that person&#146;s relationship with the Company either by
interfering with or raiding the Company&#146;s employees or sales representatives, disrupting the
relationships with customers, agents, independent contractors, representatives or vendors, or
otherwise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Conflicts of Interest</U>. If the Employee is involved, directly or indirectly, in an
activity that presents a potential or actual conflict of interest, as determined by the Company, by
virtue of the Employee&#146;s employment or employment relationship with the Company, the Employee shall
immediately terminate such activity, employment and/or relationship unless the Employee has the
express written permission of the Company to continue it. If the Employee has any doubts as to
whether a potential or actual conflict of interest is involved, the Employee must disclose all
pertinent facts to the Company before undertaking the activity. The Company shall make the final
decision as to whether such a conflict or potential conflict exists in its sole and subjective
discretion.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Confidentiality</U>. The Employee agrees, at all times during and after the
Employee&#146;s employment hereunder, to hold in the strictest confidence, and not to disclose to any
person, firm or corporation without the express written authorization of the Chairman of the Board
of the Company, any trade secret, such as any financial


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">information or any secret, proprietary, or confidential information relating to the research
and development programs, vendor and marketing programs, customers, customers&#146; information, sales
or business of the Company, except as such disclosure or use may be required in connection with his
work for the Company or is published or is otherwise readily available to the public or becomes
known to the public other than by his breach of this Agreement. If it is at any time determined
that any of the information or materials identified above are, in whole or in part, not entitled to
protection as trade secrets, the Employee and the Company agree that they shall nevertheless be
considered and treated as confidential information that is protected under this Agreement, in the
same manner as trade secrets, to the extent permitted by law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Employee further agrees, upon termination of this Agreement, to promptly deliver to the
Company all notes, books, correspondence, drawings, computer storage information, and any and all
other written and graphical records in his possession or under his control relating to the past,
present or future business, accounts, or projects of the Company.


<P align="center" style="font-size: 10pt">ARTICLE 5<BR>
<U>MISCELLANEOUS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Entire Agreement</U>. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and supersedes any and
all other arrangements, communications, understandings, promises, stipulations, arrangements,
whether any of the same are either oral or in writing, or express or implied, between the parties
hereto with respect to the subject matter hereof, including, but not limited to, any implied-in-law
or implied-in-fact covenants or duties relating to employment or the termination of employment. No
change to or modification of this Agreement shall be valid or binding unless the same shall be in
writing and signed by both the Employee and the President of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Severability</U>. In the event that any one or more of the provisions of this
Agreement shall be held invalid, illegal, or unenforceable, in any respect, by a court of competent
jurisdiction, the validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Applicable Law</U>. This Agreement and the rights and remedies of each party arising
out of or relating to this Agreement, shall be governed by, interpreted under and enforced under
the laws of the State of California.


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Counterparty</U>. This Agreement may be executed in counterparts, each of which shall
be deemed an original.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto acknowledge that they have read this Agreement, fully
understand it, and have freely and voluntarily entered into it.





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    <TD align="left" valign="top" colspan="3">&#147;EMPLOYEE&#148;</TD>
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</DIV></TD>
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    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">&#147;The Company&#148;</TD>
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    <TD align="left" valign="top" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By</TD>
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    <TD align="left" valign="top">STAAR Surgical Company</TD>
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<TYPE>EX-10.41
<SEQUENCE>23
<FILENAME>a06720exv10w41.htm
<DESCRIPTION>EX-10.41
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<P align="right" style="font-size: 10pt">EXHIBIT 10.41



<P align="center" style="font-size: 10pt"><U>EMPLOYMENT AGREEMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Employment Agreement is made and entered into by and between STAAR Surgical Company (the
&#147;Company&#148;), a Delaware corporation located at 1911 Walker Avenue, Monrovia, California 91016 and
James Farnworth (hereinafter the &#147;Employee&#148;), located at 1911 Walker Ave., Monrovia, CA, 91016, effective March&nbsp;18, 2005.


<P align="center" style="font-size: 10pt"><U>RECITALS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;WHEREAS, the Company wishes to retain the services of Employee and Employee wishes to
render services to Company as Vice President Regulatory Affairs and Quality Assurance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;WHEREAS, the Employee and the Company desire to enter into this Employment Agreement and to
establish the terms and conditions of the Employee&#146;s employment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;WHEREAS, the Company and the Employee intend that this Agreement will supercede and replace
any and all other employment agreements or arrangements for employment entered into by and between
the Company and the Employee, and that such employment agreements or arrangements shall have no
further force or effect.


<P align="center" style="font-size: 10pt"><U>AGREEMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, for and in consideration of the promises, covenants, and agreements contained
herein, the parties hereto agree as follows:


<P align="center" style="font-size: 10pt">ARTICLE 1<BR>
<U>EMPLOYMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Employment</U>. The Company hereby agrees to employ the Employee and the Employee
hereby agrees to serve the Company in the capacity of Vice President Regulatory Affairs and
Quality Assurance, based upon the terms and conditions set forth in this agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Duties</U>. During the term of his employment, the Employee shall devote his full
time, efforts, abilities, and energies to the Company&#146;s business and, in particular, shall use his
best efforts, skill, and abilities to promote the general welfare and interests of the Company.
The Employee shall loyally, conscientiously, and professionally do and perform all such duties and
responsibilities as shall be reasonably assigned by the Company and the Employee&#146;s superiors from
time to time, and shall


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">comply with all of the Company&#146;s personnel policies and procedures, including, but not
limited to, those contained in The Company&#146;s Employee Handbook.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Noncompetition, Nonsolicitation and Noninterference and Proprietary Property and
Confidential Information Provisions</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Applicable Definitions</U>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this paragraph, the following capitalized terms shall have the definitions set
forth below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&#147;<U>Business Segments</U>&#148; &#151; The term &#147;Business Segments&#148; is defined as each of Company&#146;s
(or Company&#146;s affiliates&#146;) products or product lines.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&#147;<U>Competitive Business</U>&#148; &#151; The term &#147;Competitive Business&#148; is defined as any
business that is or may be competitive with or similar to or adverse to any of Company&#146;s (or
Company&#146;s affiliates&#146;) Business Segments, whether such business is conducted by a proprietorship,
partnership, corporation or other entity or venture.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Nonsolicitation and Noninterference</U>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;<U>Covenants</U>. Employee hereby covenants and agrees that Employee shall not, either
for Employee&#146;s own account or directly or indirectly in conjunction with or on behalf of any
person, partnership, corporation or other entity or venture:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;During the term of this Agreement and for a period of one (1)&nbsp;year from the date this
Agreement terminates or expires, solicit or employ or attempt to solicit or employ any person who
is then or has, within twelve (12)&nbsp;months prior thereto, been an officer, partner, manager, agent
or employee of Company or any affiliate of Company whether or not such a person would commit a
breach of that person&#146;s contract of employment with Company or any affiliate of Company, if any, by
reason of leaving the service of Company or any affiliate of Company (the &#147;<U>Nonsolicitation
Covenant</U>&#148;); or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;During the term of this Agreement and for a period of one (1)&nbsp;year from the date of the
Agreement, on behalf of, directly or indirectly, any Competitive Business, or for the purpose of or
with the reasonably foreseeable effect of harming the business of Company, solicit the business of
any person, firm or company which is then, or has been at any time during the preceding twelve (12)
months prior to such solicitation, a customer, client, contractor, supplier or vendor of Company or
any affiliate of Company (the &#147;Noninterference Covenant)&#148;.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;<U>Acknowledgements</U>. Each of the parties acknowledges that: (i)&nbsp;the covenants and
the restrictions contained in the Nonsolicitation and Noninterference Covenants are necessary,
fundamental, and required for the protection of the business of Company; (ii)&nbsp;such Covenants relate
to matters which are of a special, unique and extraordinary value; and (iii)&nbsp;a breach of either of
such Covenants will result in irreparable harm and damages which cannot be adequately compensated
by a monetary award.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;<U>Judicial Limitation</U>. Notwithstanding the foregoing, if at any time, despite the
express agreement of Company and Employee, a court of competent jurisdiction holds that any portion
of this Nonsolicitation and/or Noninterference Covenant is unenforceable by reason of its extending
for too great a period of time or by reason of its being too extensive in any other respect, such
Covenant shall be interpreted to extend only over the maximum period of time or to the maximum
extent in all other respects, as the case may be, as to which it may be enforceable, all as
determined by such court in such action.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;<U>Termination of Agreement</U>. The covenants and agreements contained in the
Nonsolicitation and Noninterference Covenant shall terminate and be of no effect if this Agreement
is terminated by Company without Cause.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Proprietary Property; Confidential Information</U>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&#147;<U>Applicable Definitions</U>&#148; &#151; For purposes of this paragraph, the following
capitalized terms shall have the definitions set forth below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&#147;<U>Confidential Information</U>&#148; &#151; The term &#147;Confidential Information&#148; is collectively
and severally defined as any information, matter or thing of a secret, confidential or private
nature, whether or not so labeled, which is connected with Company&#146;s business or methods of
operation or concerning any of Company&#146;s suppliers, customers, licensors, licensees or others with
whom Company has a business relationship, and which has current or potential value to Company or
the unauthorized disclosure of which could be detrimental to Company. Confidential Information
shall be broadly defined and shall include, by way of example and not limitation: (i)&nbsp;matters of a
business nature available only to management and owners of Company of which Employee may become
aware (such as information concerning customers, vendors and suppliers, including their names,
addresses, credit or financial status, buying or selling habits, practices, requirements, and any
arrangements or contracts that Company may have with such parties, Company&#146;s marketing methods,
plans and strategies, the costs of materials, the prices Company obtains or has obtained or at
which Company sells or has sold its products or services, Company&#146;s manufacturing and sales costs,
the amount of compensation paid to employees of Company and other terms of their employment,
financial information such as financial statements, budgets and projections, and the terms of any
contracts or agreements Company has entered into)


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<P align="left" style="font-size: 10pt">and (ii)&nbsp;matters of a technical nature (such as product information, trade secrets, know-how,
formulae, innovations, inventions, devices, discoveries, techniques, formats, processes, methods,
specifications, designs, patterns, schematics, data, compilation of information, test results, and
research and development projects). For purposes of the foregoing, the term &#147;trade secrets&#148; shall
mean the broadest and most inclusive interpretation of trade secrets as defined by Section
3426.1(d) of the <U>California Civil Code</U> (the Uniform Trade Secrets Act) and cases
interpreting the scope of said Section.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&#147;<U>Proprietary Property</U>&#148; &#151; The term &#147;Proprietary Property&#148; is collectively and
severally defined as any written or tangible property owned or used by Company in connection with
Company&#146;s business, whether or not such property also qualifies as Confidential Information.
Proprietary Property shall be broadly defined and shall include, by way of example and not
limitation, products, samples, equipment, files, lists, books, notebooks, records, documents,
memoranda, reports, patterns, schematics, compilations, designs, drawings, data, test results,
contracts, agreements, literature, correspondence, spread sheets, computer programs and software,
computer print outs, other written and graphic records, and the like, whether originals, copies,
duplicates or summaries thereof, affecting or relating to the business of Company, financial
statements, budgets, projections, invoices.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;<U>Ownership of Proprietary Property</U>. Employee acknowledges that all Proprietary
Property which Employee may prepare, use, observe, come into possession of and/or control shall, at
all times, remain the sole and exclusive property of Company. Employee shall, upon demand by
Company at any time, or upon the cessation of Employee&#146;s employment, irrespective of the time,
manner, cause or lack of cause of such cessation, immediately deliver to Company or its designated
agent, in good condition, ordinary wear and tear and damage by any cause beyond the reasonable
control of Employee excepted, all items of the Proprietary Property which are or have been in
Employee&#146;s possession or under his control, as well as a statement describing the disposition of
all items of the Proprietary Property beyond Employee&#146;s possession or control in the event Employee
has not previously returned such items of the Proprietary Property to Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;<U>Agreement Not to Use or Divulge Confidential Information</U>. Employee agrees that he
will not, in any fashion, form or manner, unless specifically consented to in writing by Company,
either directly or indirectly use, divulge, transmit or otherwise disclose or cause to be used,
divulged, transmitted or otherwise disclosed to any person, firm or corporation, in any manner
whatsoever (other than in Employee&#146;s performance of duties for Company or except as required by
law) any Confidential Information of any kind, nature or description. The foregoing provisions
shall not be construed to prevent Employee from making use of or disclosing information which is in
the public domain through no fault of Employee, provided, however, specific information shall not
be deemed to be in the public domain merely because it is


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<P align="left" style="font-size: 10pt">encompassed by some general information that is published or in the public domain or in
Employee&#146;s possession prior to Employee&#146;s employment with Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;<U>Acknowledgement of Secrecy</U>. Employee acknowledges that the Confidential
Information is not generally known to the public or to other persons who can obtain economic value
from its disclosure or use and that the Confidential Information derives independent economic value
thereby, and Employee agrees that he shall take all efforts reasonably necessary to maintain the
secrecy and confidentiality of the Confidential Information and to otherwise comply with the terms
of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;<U>Inventions, Discoveries</U>. Employee acknowledges that any inventions, discoveries
or trade secrets, whether patentable or not, made or found by Employee in the scope of his
employment with Company constitute property of Company and that any rights therein now held or
hereafter acquired by Employee individually or in any capacity are hereby transferred and assigned
to Company, and agrees to execute and deliver any confirmatory assignments, documents or
instruments of any nature necessary to carry out the intent of this paragraph when requested by
Company without further compensation therefore, whether or not Employee is at the time employed by
Company. Provided, however, notwithstanding the foregoing, Employee shall not be required to
assign his rights in any invention which qualifies fully under the provisions of Section 2870(a) of
the <U>California Labor Code</U>, which provides, in pertinent part, that the requirement to
assign &#147;shall not apply to any invention that the employee developed entirely on his or her own
time without using employer&#146;s equipment, supplies, facilities or trade secret information except
for those inventions that either:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Relate at the time of conception or reduction to practice of the invention to the
employer&#146;s business, or actual or demonstrably anticipated research or development of the employer;
or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Result from any work performed by the employee for the employer.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee understands that he bears the full burden of proving to Company that an invention
qualifies fully under Section&nbsp;2870(a). By signing this Agreement, Employee acknowledges receipt of
a copy of this Agreement and of written notification of the provisions of Section&nbsp;2870.


<P align="center" style="font-size: 10pt">ARTICLE 2<BR>
<U>COMPENSATION</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Salary</U>. The Company shall pay the Employee a salary payable at the gross rate of
$5769.23 per pay period, to be paid on a bi-weekly basis. Employee&#146;s annual salary shall be
reviewed periodically by Company for the purpose of determining whether Employee&#146;s salary shall be
increased.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Employee Benefits</U>. In addition to the compensation specified above, the Employee
shall be permitted to participate in certain employee benefit programs in the same manner and
subject to the same terms, conditions, and limitations as other full-time employees of the Company.
The Employee will also be eligible for three weeks vacation per year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Business Expenses</U>. The Company will reimburse the Employee for reasonable
business expenses as outlined in the company&#146;s business expense policy and provided that these
expenses were incurred on Company business and that expense reports regarding these expenses are
submitted to the Company in a timely manner.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Bonus</U>. In addition to the salary described above, the Employee shall be eligible
for an annual bonus of up to 15% of Employee&#146;s annual base salary, which will be payable on an
annual basis and subject to the successful achievement of company and individual goals and
objectives.


<P align="center" style="font-size: 10pt">ARTICLE 3<BR>
<U>TERMINATION OF EMPLOYMENT</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Termination</U>. This employment relationship may be terminated for any of the
reasons provided below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;<U>Termination for Cause</U>. Company may terminate this Agreement for &#147;Cause&#148;, upon 15
days written notice. Cause means any of the following: (1)&nbsp;willful breach or habitual neglect of
the duties which Employee is required to perform under the terms of this Agreement, (2)&nbsp;any act of
dishonesty, fraud, insubordination, misrepresentation, gross negligence or willful misconduct, (3)
conviction of a felony, or (4)&nbsp;intentional violation of any Company policy. With the exception of
the covenants set forth in Paragraph&nbsp;1.3, 4.1 and 4.3, upon such termination the obligations of
Employee and Company under this Agreement shall immediately cease. Such termination shall be
without prejudice to any other remedy to which Company may be entitled either at law, in equity, or
under this Agreement. If Employee&#146;s employment is terminated pursuant to this paragraph, the
Company shall pay to Employee, immediately upon such termination, any accrued but unpaid
compensation to which Employee is entitled on the date of such termination.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;<U>Termination for Poor Performance</U>. Employer may terminate employee&#146;s employment
under this Agreement for &#147;Poor Performance&#148;. Poor Performance is a failure of the Employee to
properly meet the duties and responsibilities of his position in a competent fashion, as determined
by the Chief Executive Officer. Such termination for &#147;Poor Performance&#148; shall occur only after
employee has been


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<P align="left" style="font-size: 10pt">advised in writing of the failure to meet the duties and responsibilities, or guidelines/goals
and given a reasonable period of time of at least 30&nbsp;days to cure the Poor Performance. Following
the termination for Poor Performance, the Employee shall be entitled to payment of his base salary
through the last day of his employment. Employee shall be entitled to no other payments or
benefits after a termination for Poor Performance. With the exception of the covenants set forth
in Paragraph&nbsp;1.3, 4.1 and 4.3, upon such termination the obligations of Employee and Company under
this Agreement shall immediately cease.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;<U>Death</U>. Employee&#146;s employment shall terminate upon the death of Employee. Upon
such termination, the obligations of Employee and Company under this Agreement shall immediately
cease. In the event of a termination pursuant to this paragraph, Employee shall be entitled to
receive any amount of compensation earned but unpaid. All other rights Employee has under any
benefit or stock option plans and programs shall be determined in accordance with the terms and
conditions of such plans and programs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;<U>Election By Employee</U>. Employee&#146;s employment may be terminated at any time by
Employee upon not less than thirty (30)&nbsp;days written notice to Company. With the exception of the
covenants set forth in Paragraphs 1.3, 4.1 and 4.3, upon such termination the obligations of
Employee and the Company under this Agreement shall immediately cease. In the event of a
termination pursuant to this paragraph, Employee shall be entitled to receive any amount of
compensation earned but unpaid. All other rights Employee has under any benefit or stock option
plans and programs shall be determined in accordance with the terms and conditions of such plans
and programs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.&nbsp;<U>Election by Company Due to a Change of Control</U>. If Employee&#146;s employment
is terminated by Company due to the sale or disposition by the Company of substantially all of its
business or assets or the sale of the capital stock of Company in connection with the sale or
transfer of a controlling interest in Company to a third party or the merger or consolidation of
Company with another corporation as part of a sale or transfer of a controlling interest in Company
to a third party <U>and </U>if the Employee&#146;s essential duties and responsibilities as set forth
in the job description for the position that Employee is in at the time of the change of control
are significantly changed due to a change in control, then in lieu of any other rights or benefits
under this Agreement, Employee shall be entitled to six month&#146;s base salary, and any option held by
Employee which is unvested on the date of termination shall immediately vest. &#147;A controlling
interest&#148; shall be defined as 50% or more of the common stock of the Company. &#147;Six months base
salary&#148; shall be defined as only the cash compensation paid to Employee pursuant to paragraph 2.1,
as it may be modified from time to time, and shall not include employee benefits, bonus, stock
options, automobile allowance or debt forgiveness, if any. With the exception of the covenants
contained in Paragraphs 1.3(c), 4.1 and 4.3,


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">upon such termination the obligations of Employee and the Company shall immediately cease.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.&nbsp;<U>Termination Without Cause</U>. Company is entitled to terminate the Employee&#146;s
employment without cause for any reason; provided, however, that the Employee shall be entitled to
30&nbsp;days written notice and five months pay as severance, as well as any accrued but unpaid
compensation in lieu of any other rights or benefits under this Agreement, to which Employee is
entitled on the date of such termination. With the exception of the covenants contained in
Paragraphs 1.3(c), 4.1 and 4.3, upon such termination the obligations of Employee and the Company
shall immediately cease.


<P align="center" style="font-size: 10pt">ARTICLE 4<BR>
<U>ADDITIONAL OBLIGATIONS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Non-Interference</U>. The Employee shall not now or in the future, either during or
subsequent to the period of the Employee&#146;s employment, disrupt, damage, impair or interfere with
the business of the Company in any manner, including, without limitation, inducing an employee to
leave the employ of the Company or inducing an employee, a consultant, a sales representative, or
an independent contractor to sever that person&#146;s relationship with the Company either by
interfering with or raiding the Company&#146;s employees or sales representatives, disrupting the
relationships with customers, agents, independent contractors, representatives or vendors, or
otherwise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Conflicts of Interest</U>. If the Employee is involved, directly or indirectly, in an
activity that presents a potential or actual conflict of interest, as determined by the Company, by
virtue of the Employee&#146;s employment or employment relationship with the Company, the Employee shall
immediately terminate such activity, employment and/or relationship unless the Employee has the
express written permission of the Company to continue it. If the Employee has any doubts as to
whether a potential or actual conflict of interest is involved, the Employee must disclose all
pertinent facts to the Company before undertaking the activity. The Company shall make the final
decision as to whether such a conflict or potential conflict exists in its sole and subjective
discretion.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Confidentiality</U>. The Employee agrees, at all times during and after the
Employee&#146;s employment hereunder, to hold in the strictest confidence, and not to disclose to any
person, firm or corporation without the express written authorization of the Chairman of the Board
of the Company, any trade secret, such as any financial information or any secret, proprietary, or
confidential information relating to the research and development programs, vendor and marketing
programs, customers, customers&#146; information, sales or business of the Company, except as such
disclosure or use may be required in connection with his work for the Company or is published or is
otherwise readily available to the public or becomes known to the public other than by his breach
of this Agreement. If it is at any time determined that any of the information or materials
identified above are, in whole or in part, not entitled to protection as trade secrets, the
Employee and the Company agree that they shall nevertheless be considered and treated as
confidential information that is protected under this Agreement, in the same manner as trade
secrets, to the extent permitted by law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Employee further agrees, upon termination of this Agreement, to promptly deliver to the
Company all notes, books, correspondence, drawings, computer storage information, and any and all
other written and graphical records in his possession or under his control relating to the past,
present or future business, accounts, or projects of the Company.


<P align="center" style="font-size: 10pt">ARTICLE 5<BR>
<U>MISCELLANEOUS</U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Entire Agreement</U>. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and supersedes any and
all other arrangements, communications, understandings, promises, stipulations, arrangements,
whether any of the same are either oral or in writing, or express or implied, between the parties
hereto with respect to the subject matter hereof, including, but not limited to, any implied-in-law
or implied-in-fact covenants or duties relating to employment or the termination of employment. No
change to or modification of this Agreement shall be valid or binding unless the same shall be in
writing and signed by both the Employee and the President of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Severability</U>. In the event that any one or more of the provisions of this
Agreement shall be held invalid, illegal, or unenforceable, in any respect, by a court of competent
jurisdiction, the validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Applicable Law</U>. This Agreement and the rights and remedies of each party arising
out of or relating to this Agreement, shall be governed by, interpreted under and enforced under
the laws of the State of California.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Counterparty</U>. This Agreement may be executed in counterparts, each of which shall
be deemed an original.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto acknowledge that they have read this Agreement, fully
understand it, and have freely and voluntarily entered into it.




<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">&#147;EMPLOYEE&#148;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DATED:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-bottom: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">&#147;The Company&#148;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DATED:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STAAR Surgical Company</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>24
<FILENAME>a06720exv10w42.txt
<DESCRIPTION>EX-10.42
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.42


     FORM OF INDEMNIFICATION AGREEMENT WITH CERTAIN DIRECTORS AND OFFICERS

         This Agreement is made and entered into this ___ day of ____________
(the "Agreement"), by and between STAAR Surgical Company, a Delaware corporation
(the "Company", which term shall include, where appropriate, any Entity (as
hereinafter defined) controlled directly or indirectly by the Company) and
______________ (the "Indemnitee").

         WHEREAS, it is essential to the Company that it be able to retain and
attract as directors and officers the most capable persons available;

         WHEREAS, increased corporate litigation has subjected directors and
officers to litigation risks and expenses, and the limitations on the
availability of directors and officers liability insurance have made it
increasingly difficult for the Company to attract and retain such persons;

         WHEREAS, the Company desires to provide the Indemnitee with specific
contractual assurance of the Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of any the Company's Certificate of Incorporation or by-laws or
any change in the ownership of the Company or the composition of its Board of
Directors); and

         WHEREAS, the Indemnitee is relying upon the rights afforded under this
Agreement in agreeing to continue to act as a director of the Company.

         NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and the Indemnitee do hereby covenant and agree as
follows:

        1. Definitions.

                  (a) "Corporate Status" describes the status of a person who is
serving or has served (i) as a director of the Company, including as a member of
any committee thereof, (ii) as an officer of the Company, (iii) in any capacity
with respect to any employee benefit plan of the Company, or (iv) as a director,
partner, trustee, officer, employee, or agent of any other Entity at the request
of the Company. For purposes of subsection (iv) of this Section 1(a), an officer
or director of the Company who is serving or has served as a director, partner,
trustee, officer, employee or agent of a Subsidiary (as defined below) shall be
deemed to be serving at the request of the Company.

                  (b) "Entity" shall mean any corporation, partnership, limited
liability company, joint venture, trust, foundation, association, organization
or other legal entity.

                  (c) "Expenses" shall mean all direct and indirect fees, costs
and expenses of any nature whatsoever actually and reasonably incurred in
connection with the investigation, preparation of a defense, appeal of or
settlement of any Proceeding (as defined below), including, without limitation,
reasonable attorneys fees, disbursements and retainers (including,


<PAGE>

without limitation, any such fees, disbursements and retainers incurred by the
Indemnitee pursuant to Sections 8 and 11(c) of this Agreement), fees and
disbursements of expert witnesses, private investigators and professional
advisors (including, without limitation, accountants and investment bankers),
court costs, transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges, postage,
delivery services, secretarial services and other disbursements and expenses;
provided, however, that Expenses shall not include judgments, fines, penalties
or amounts paid in settlement of a Proceeding.

                  (d) "Indemnifiable Expenses", "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those terms in
Section 3(a) below.

                  (e) "Liabilities" shall mean judgments, damages, liabilities,
losses, penalties, excise taxes, fines and amounts paid in settlement.

                  (f) "Proceeding" shall mean any threatened, pending or
completed claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, or any other proceeding,
whether civil, criminal, administrative, arbitrative or investigative, whether
formal or informal, whether or not he is serving in such capacity at the time
any Expense or Liability is incurred for which indemnification or reimbursement
can be provided under this Agreement, including a proceeding initiated by the
Indemnitee pursuant to Section 11 of this Agreement to enforce the Indemnitee's
rights hereunder or an action brought by or in the right of the Company.

                  (g) "Subsidiary" shall mean any corporation, partnership,
limited liability company, joint venture, trust or other Entity of which the
Company owns (either directly or through or together with another Subsidiary of
the Company) either (i) a general partner, managing member or other similar
interest or (ii) (A) 50% or more of the voting power of the voting capital stock
or other voting equity interests of any corporation, partnership, limited
liability company, joint venture or other Entity, or (B) 50% or more of the
outstanding voting capital stock or other voting equity interests of any
corporation, partnership, limited liability company, joint venture or other
Entity.

         2. Services of the Indemnitee. In consideration of the Company's
covenants and commitments hereunder, the Indemnitee agrees to serve or continue
to serve as a director of the Company. However, this Agreement shall not impose
any obligation on the Indemnitee or the Company to continue the Indemnitee's
service to the Company beyond any period otherwise required by law or by other
agreements or commitments of the parties, if any.

         3. Agreement to Indemnify. The Company agrees to indemnify the
Indemnitee as follows:

                  (a) Subject to the exceptions contained in Section 4(a) below,
if the Indemnitee was or is a party or is threatened to be made a party to any
Proceeding (other than an action by or in the right of the Company) by reason of
the Indemnitee's Corporate Status, the Indemnitee shall be indemnified by the
Company against all Expenses and Liabilities incurred or paid by the Indemnitee
in connection with such Proceeding (referred to herein as "Indemnifiable



<PAGE>

Expenses" and "Indemnifiable Liabilities", respectively, and collectively as
"Indemnifiable Amounts").

                  (b) To the fullest extent permitted by applicable law and
subject to the exceptions contained in Section 4(b) below, if the Indemnitee was
or is a party or is threatened to be made a party to any Proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the
Indemnitee's Corporate Status, the Indemnitee shall be indemnified by the
Company against all Indemnifiable Expenses as well as against any amount paid by
Indemnitee in settlement of the Proceeding.

             4. Exceptions to Indemnification. Upon receipt of a written claim
addressed to the Board of Directors for indemnification pursuant to Section 3,
the Company shall determine by any of the methods set forth in Section 145(d) of
the Delaware General Corporation Law whether the Indemnitee has met the
applicable standards of conduct which makes is permissible under applicable law
to indemnify the Indemnitee. If it is determined that the Indemnitee is entitled
to indemnification, the Indemnitee shall be entitled to such indemnification
under Sections 3(a) and 3(b) above in all circumstances other than the
following:

                  (a) If indemnification is requested under Section 3(a) and it
has been determined that, in connection with the subject of the Proceeding out
of which the claim for indemnification has arisen, the Indemnitee failed to act
(i) in good faith and (ii) in a manner the Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, the Indemnitee had reasonable cause to believe
that the Indemnitee's conduct was unlawful, the Indemnitee shall not be entitled
to payment of Indemnifiable Amounts hereunder.

                  (b) If indemnification is requested under Section 3(b) and

                           (i) it has been determined that, in connection with
                  the subject of the Proceeding out of which the claim for
                  indemnification has arisen, the Indemnitee failed to act (A)
                  in good faith and (B) in a manner the Indemnitee reasonably
                  believed to be in or not opposed to the best interests of the
                  Company, the Indemnitee shall not be entitled to payment of
                  Indemnifiable Expenses hereunder; or

                           (ii) it has determined that the Indemnitee is liable
                  to the Company with respect to any claim, issue or matter
                  involved in the Proceeding out of which the claim for
                  indemnification has arisen, no Indemnifiable Expenses shall be
                  paid with respect to such claim, issue or matter unless the
                  Court of Chancery or another court in which such Proceeding
                  was brought shall determine upon application that, despite the
                  adjudication of liability, but in view of all the
                  circumstances of the case, Indemnitee is fairly and reasonably
                  entitled to indemnity for such Indemnifiable Expenses which
                  such court shall deem proper.

         5. Procedure for Payment of Indemnifiable Amounts. The Indemnitee shall
submit to the Company a written request specifying the Indemnifiable Amounts for
which the


<PAGE>

Indemnitee seeks payment under Section 3 of this Agreement and the
basis for the claim. The Company shall pay such Indemnifiable Amounts to the
Indemnitee within ten (10) calendar days of receipt of the request. At the
request of the Company, the Indemnitee shall furnish such documentation and
information as is reasonably available to the Indemnitee and necessary to
establish that the Indemnitee is entitled to indemnification hereunder.

         6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that the Indemnitee is, by reason of
the Indemnitee's Corporate Status, a party to and is successful, on the merits
or otherwise, in any Proceeding, the Indemnitee shall be indemnified against all
Expenses reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection therewith. If the Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
indemnify the Indemnitee against all Expenses reasonably incurred by the
Indemnitee or on the Indemnitee's behalf in connection with each successfully
resolved claim, issue or matter. For purposes of this Agreement, the termination
of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.

         7. Effect of Certain Resolutions. Neither the settlement or termination
of any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that the Indemnitee is not entitled to indemnification hereunder. In addition,
the termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Company or, with respect to any criminal action or proceeding, had
reasonable cause to believe that the Indemnitee's action was unlawful.

         8. Agreement to Advance Expenses; Conditions. The Company shall pay to
the Indemnitee all Indemnifiable Expenses incurred by the Indemnitee in
connection with any Proceeding, including a Proceeding by or in the right of the
Company, in advance of the final disposition of such Proceeding, as the same are
incurred. In making any such advance, the ability of the Indemnitee to repay
shall not be a factor. To the extent required by Delaware law, the Indemnitee
hereby undertakes to repay the amount of Indemnifiable Expenses paid to the
Indemnitee if it is finally determined by a court of competent jurisdiction that
the Indemnitee is not entitled under this Agreement to indemnification with
respect to such Expenses. This undertaking is an unlimited general obligation of
the Indemnitee.

         9. Procedure for Advance Payment of Expenses. The Indemnitee shall
submit to the Company a written request specifying the Indemnifiable Expenses
for which the Indemnitee seeks an advancement under Section 8 of this Agreement,
together with documentation evidencing that the Indemnitee has incurred such
Indemnifiable Expenses. Payment of Indemnifiable Expenses under Section 8 shall
be made no later than ten (10) calendar days after the Company's receipt of such
request.


<PAGE>

         10. Selection of Counsel. In the event the Company shall be obligated
under this Agreement to pay Indemnifiable Expenses with respect to any
Proceeding, the Company shall be entitled to assume the defense of such
Proceeding with counsel approved by the Indemnitee, which approval shall not be
unreasonably withheld, upon delivery of written notice to the Indemnitee of the
Company's election to do so. After the Company's assumption of the defense, the
Company shall not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently incurred by the Indemnitee with respect to such
Proceeding; provided, however, that (i) the Indemnitee shall have the right to
employ his own counsel in any such Proceeding at the Indemnitee's expense; and
(ii) if the Indemnitee shall have reasonably concluded that there may be a
conflict of interest by reason of the representation in such Proceeding of the
Indemnitee and the Company and/or any other defendants by the same counsel, then
the Indemnitee may retain his own counsel with respect to such Proceeding and
the fees and expenses of such counsel shall be an amount for which the
Indemnitee is entitled to indemnification from the Company under this Agreement,
and (iii) if the Company does not retain counsel after assuming the defense of
the Proceeding or if counsel does not vigorously defend the Proceeding, then the
Indemnitee may retain his own counsel with respect to such Proceeding and the
fees and expenses of such counsel shall be an amount for which the Indemnitee is
entitled to indemnification from the Company under this Agreement. The
Indemnitee shall notify the Company in writing of any matter with respect to
which the Indemnitee intends to seek indemnification hereunder as soon as
reasonably practicable following the receipt by the Indemnitee of written notice
thereof. The written notification to the Company shall be addressed to the Board
of Directors and shall include a description of the nature of the Proceeding and
the facts underlying the Proceeding and be accompanied by copies of any
documents filed with the court in which the Proceeding is pending. In addition,
the Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within the Indemnitee's power.

         11. Remedies of Indemnitee.

                  (a) Right to Petition Court. In the event that the Indemnitee
makes a request for payment of Indemnifiable Amounts under Sections 3 and 5
above, or a request for an advance of Indemnifiable Expenses under Sections 8
and 9 above, and the Company fails to make such payment or advance in a timely
manner pursuant to the terms of this Agreement, the Indemnitee may petition a
court of law to enforce the Company's obligations under this Agreement.

                  (b) Burden of Proof. In any judicial proceeding brought under
Section 11(a) above, the Company shall have the burden of proving that the
Indemnitee is not entitled to payment of the Indemnifiable Amounts hereunder.

                  (c) Expenses. So long as the Indemnitee prevails in any action
he files pursuant to Section 11(a) or if the Company and the Indemnitee settle
such action, the Company agrees to reimburse the Indemnitee in full for any
Expenses incurred by the Indemnitee in connection with investigating, preparing
for, litigating, defending or settling any action brought by the Indemnitee
under Section 11(a) above, or in connection with any claim or counterclaim
brought by the Company in connection therewith.


<PAGE>

                  (d) Validity of Agreement. The Company shall be precluded from
asserting in any Proceeding, including, without limitation, an action under
Section 11(a) above, that the provisions of this Agreement are not valid,
binding and enforceable or that there is insufficient consideration for this
Agreement and shall stipulate in court that the Company is bound by all the
provisions of this Agreement.

                  (e) Failure to Act Not a Defense. The failure of the Company
(including its Board of Directors or any committee thereof, independent legal
counsel or stockholders) to make a determination concerning the permissibility
of the payment of Indemnifiable Amounts or the advance of Indemnifiable Expenses
under this Agreement shall not be a defense in any action brought under Section
11(a) above, and shall not create a presumption that such payment or advance is
not permissible.

         12. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Indemnitee as follows:

                  (a) Authority. The Company has all necessary power and
authority to enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings contemplated by this
Agreement have been duly authorized by the Company.

                  (b) Enforceability. This Agreement, when executed and
delivered by the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforcement of creditors' rights generally.

         13. Insurance. The Company maintains directors and officer liability
insurance coverage on terms satisfactory to the Indemnitee, covering, among
other things, violations of federal or state securities laws. The Company shall
use its reasonable best efforts to maintain such coverage in effect. In all
policies of director and officer liability insurance, the Indemnitee shall be
named as an insured in such a manner as to provide the Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's officers and directors.

                  (a) Inability to Obtain or Maintain Insurance. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain
director and officer liability insurance if the Company determines in good faith
that such insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage provided, the coverage
provided by the insurance is limited by exclusions so as to provide an
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company.

                  (b) Notice to Insurer. If, at the time of the receipt of a
notice of a claim pursuant to Section 8 hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such Proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall


<PAGE>

thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemintee, all amounts payable as a result of such Proceeding
in accordance with the terms of such policies.

         14. Fees and Expenses. During the term of the Indemnitee's service as a
director, the Company shall promptly reimburse the Indemnitee for all reasonable
travel and other reasonable expenses incurred by him in connection with his
service as a director or member of any board committee or otherwise in
connection with the Company's business.

         15. Contract Rights Not Exclusive. The rights to payment of
Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this
Agreement shall be in addition to, but not exclusive of, any other rights which
Indemnitee may have at any time under applicable law, the Company's by-laws or
certificate of incorporation, or any other agreement, vote of stockholders or
directors (or a committee of directors), or otherwise, both as to action in
Indemnitee's official capacity and as to action in any other capacity as a
result of Indemnitee's serving as a director of the Company.

         16. Successors. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or a substantial
portion of the business, stock and/or assets of the Company and any direct or
indirect successor by merger or consolidation or otherwise by operation of law)
and (b) binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.

         17. Subrogation. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of Indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.

         18. Change in Law. To the extent that a change in Delaware law (whether
by statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the by-laws of the
Company and this Agreement, Indemnitee shall be entitled to such broader
indemnification and advancements, and this Agreement shall be deemed to be
amended to such extent.

         19. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.


<PAGE>

         20. Indemnitee as Plaintiff. Except as provided in Section 11(c) of
this Agreement and in the next sentence, Indemnitee shall not be entitled to
payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with
respect to any Proceeding brought by Indemnitee against the Company, any Entity
which it controls, any director or officer thereof, or any third party, unless
the Company has consented to the initiation of such Proceeding. This Section
shall not apply to counterclaims or affirmative defenses asserted by Indemnitee
in an action brought against Indemnitee.

         21. Modifications and Waiver. Except as provided in Section 18 above
with respect to changes in Delaware law which broaden the right of Indemnitee to
be indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.

         22. Notices. Any notice or demand which is required or provided to be
given under this Agreement shall be deemed to have been sufficiently given and
received for all purposes when delivered by hand, telecopy, telex or other
method of facsimile, or five days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, or two days after
being sent by overnight delivery providing receipt of delivery, to the following
addresses if to the Company, 1911 Walker Avenue, Monrovia, California 91016 or
at any other address designated by the Company to the Indemnitee in writing; if
to the Indemnitee, at the address set forth below such Indemnitee's name on the
signature page hereto, or at any other address designated by the Indemnitee to
the Company in writing.

         23. Governing Law. This Agreement shall be governed by and construed
and enforced under the laws of the State of Delaware without giving effect to
the provisions thereof relating to conflicts of law.

         24. Inability of the Company to Indemnify. Both the Company and the
Indemnitee acknowledge that in certain instances federal law or applicable
public policy may prohibit the Company from indemnifying its directors and
officers under this Agreement or otherwise. The Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the appropriate state or federal regulatory agency to submit for
approval any request for indemnification, and has undertaken or may be required
in the future to undertake with the Securities and Exchange Commission to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify the
Indemnitee.


<PAGE>
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


                                    COMPANY:
                                    STAAR Surgical Company



                                    By: /s/  David Bailey
                                        ----------------------------------------
                                    Name:  David Bailey
                                    Title: President, Chief Executive Officer:

                                    INDEMNITEE:




                                    /s/
                                    --------------------------------------------
                                    Name:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.43
<SEQUENCE>25
<FILENAME>a06720exv10w43.txt
<DESCRIPTION>EX-10.43
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.43

         MANAGING DIRECTOR'S CONTRACT OF EMPLOYMENT DATED JUNE 22, 1993

                                     between

1.      DOMILENS Vertrieb fur medizinische Produkte GmbH, represented by

        a)      Guenther Roepstorff, shareholder

        b)      FRISIA BV, Shareholder, represented by its Managing Director
                with sole powers of representation

        -       referred to below as "Company" -

and

2.      Mr. Guenther Roepstorff, Achtern Felln 20, 2087 Hasloh

ARTICLE 1 TASKS AND OBLIGATIONS

1.      By virtue of a resolution of the meeting of shareholders of 22 May 1987
        Mr. Roepstorff has been appointed as Managing Director immediate effect.
        He has sole authority to represent the Company. Mr. Roepstorff is exempt
        from the restrictions set out in s. 181 of the German Civil Code (BGB).

2.      Mr. Roepstorff shall manage the business in compliance with the law, the
        provisions of this contract of employment and the Company's
        shareholders' agreement.

3.      In the Company's line of business Mr. Roepstorff may conduct
        transactions on his own account and on the account of third parties, act
        on behalf of other companies or become a shareholder in such companies.
        The exemption is exclusively restricted to trade with all ophthalmology
        products, particularly with diagnostic and optical goods and with
        pharmaceuticals, in as far as these products were not part of the
        Company's distribution programme on 1 January 1993.

        The exemption from the prohibition of competition is non-gratuitous. The
        consideration shall amount to 20% of the annual profit as stated in the
        commercial balance sheet before tax as a result of this work.

4.      This shall only apply to companies in which Mr. Roepstorff is a
        shareholder if court rulings concerning the assumption of a disguised
        profit distribution in the case of a gratuitous exemption from the
        prohibition of competition also extends to the activities of such
        companies.

        The agreed share of the profit shall be adjusted in accordance with any
        change in the circumstances.

ARTICLE 2 THE TERM OF THE CONTRACT OF EMPLOYMENT

1.      This contract of employment shall commence on 1 January 1993 and may not
        be terminated before 31 December 1995. It shall be renewed for three
        years if it is not terminated at least six months before 31 December
        1995 or six months before the end of one of the subsequent three-year
        periods.

2.      Notice of termination must be given in writing.

3.      Mr. Roepstorff's appointment as Managing Director may be revoked at any
        time by a resolution of the meeting of shareholders without prejudice to
        his claims to compensation under this contract of employment. The
        revocation shall be regarded as the termination of the contract of
        employment by the next possible date.

<PAGE>

4.      The control of employment shall end without notice of termination being
        needle at the end of the month in which Mr. Roepstorff reaches the age
        of 65.

ARTICLE 3 EMOLUMENTS

1.      In return for this services Mr. Roepstorff shall be paid the following
        remuneration:

a)      a gross annual salary of DM 234,000. -- which shall be paid in eleven
        equal installments of DM 18,000.- at the end of each month and DM
        36,000.- on 30 November of each year,

b)      a commission of 5% on all sales of lenses achieved in a sales area
        personally attended to by Mr. Roepstorff, payable at the end of the
        month following the month in which the sales are achieved,

c)      an annual management bonus to be decided on by the meeting of
        shareholders after the adoption of the annual financial statements
        taking account of the business results for the financial year and Mr.
        Roepstorff's achievements,

d)      expenses according to the expenses incurred and vouchers, payable at the
        end of the month in which the expenses are incurred.

2.      In addition to the remuneration set out in para. 1 Mr. Roepstorff shall
        be given a car for business purposes and for his own personal use within
        the framework decided on by the meeting of shareholders.

        The tax payable on this remuneration in kind shall be bome by Mr.
        Roepstorff.

ARTICLE 4 EMOLUMENTS IN THE EVENT OF SICKNESS, ACCIDENT, DEATH

1.      If Mr. Roepstorff should be temporarily unfit for work due to sickness
        or for any other reason which is not his own fault, Mr Roepstorff shall
        keep his claims to the emoluments set out in Article 3 para. 1 (salary
        and guaranteed management bonus) as long as he remains unfit for work up
        to an uninterrupted period of six months.

2.      If Mr. Roepstorff should pass away during the term of the contract of
        employment, his widow and his legitimate children, if they have not yet
        reached the age of 25 and are still learning a trade or profession,
        shall, as joint and several creditors, have a claim to the continuing
        payment of the salary set out in Article 3 para. 1 a) for the month in
        which Mr. Roepstorff passes away and for twelve months following this
        month.

3.      The Company shall insure Mr. Roepstorff against accidents to the extent
        that is usual for the Company's managing directors.

ARTICLE 5 VACATION

Mr. Roepstorff shall be entitled to an annual vacation of 30 working days which
may also be taken in parts.

ARTICLE 6 DIRECT INSURANCE

1 a)    The Company has already taken out an endowment insurance in Mr.
        Roepstorff favour. This shall be continued on the previous terms

<PAGE>

1.b)    With effect from 1 January 1993 the Company shall take out an endowment
        insurance in Mr. Roepstorff `s favour which shall guarantee him a
        monthly pension of at least DM 8,000.- when he reaches the age of 65.
        The sum insured shall be increased by benefits from profit sharing. It
        shall be due for payment on Mr. Roepstorff's death and no later than by
        the date when he reaches the age of 65.

2.      The beneficiary for the insurance benefits are Mr. Roepstorff or, if he
        should pass away, the persons that Mr. Roepstorff has indicated to the
        Company. If Mr. Roepstorff has not indicated any persons to the Company
        the beneficiaries shall be his heirs.

3.      The insurance premiums shall be paid by the Company as the policyholder.
        In addition to this, the Company shall pay the wage tax and church tax
        payable on the premiums. The wage tax and church tax on the premiums is
        payable at the end of the calendar year.

4.      If the contract of employment should end before the insured event, the
        claims under the contract of insurance shall be limited to the benefits
        that are payable under the contract of insurance due to the payment of
        premiums until the date that Mr. Roepstorff leaves the Company (s. 2
        para. 2 BetrAVG). Mr. Roepstorff shall have the right to continue the
        contract of insurance by paying the premiums himself or to convert it
        into a policy on which no premiums are payable.

5.      It is not permitted to use the irrevocable right to benefits as security
        for a loan nor to assign or pledge this right.

ARTICLE 7 FINAL PROVISIONS

1.      If any term of this contract of employment should be void, either in
        part or in full, or if it should cease to be legally valid at a later
        date, this shall not affect the validity of the remaining terms. In as
        far as it is legally permissible, the invalid term shall be replaced by
        another appropriate provision which comes closest in a commercial sense
        to what the Contracting Parties intended or would have intended if they
        had given consideration to the fact that the provision was void.

2.      Any amendments or additions to this contract of employment must be made
        in writing.

3.      This agreement shall replace the existing contract of contract of
        employment between the Parties dated 12 June 1987.


Hamburg, 22 June 1993

(Hamburg crossed out and replaced by an illegible word - translator's note.)




(signature)                                   (signature)

The Company                                   Gunther Roepstorff

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.44
<SEQUENCE>26
<FILENAME>a06720exv10w44.txt
<DESCRIPTION>EX-10.44
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.44

             SUPPLEMENTARY AGREEMENT # 1 TO THE MANAGING DIRECTOR'S
             CONTRACT OF EMPLOYMENT DATED NOVEMBER 25, 1997 BETWEEN
                   STAAR SURGICAL AG AND GUENTHER ROEPSTORFF

       No. 1075 of the register of documents for 1997

                                   Negotiated
                                  in Pinneberg
                               on 25 November 1997
                        Before me, the officiating notary
                                  AXEL MALLICK
                         officially based in Pinneberg,

the following appeared today of known identity:

1.       Mr. Guenther Roepstorff, born on 05/08/1945, businessman
         resident in Achtern Felln 20, 25474 Hasloh
         business address: Holsteiner Chaussee 303a, 22457 Hamburg

2.       Dr Volker Dietrich Anhausser, lawyer
         business address: Kriegsstraae 85, 76133 Karlsruhe

         on the basis of an authorization to be submitted acting for:

a)       STAAR SURGICAL AG
         Hauptstrabe 104 C81-2560 Nidau

B)       HIMSELF regarding the following ' 13

The persons appearing acting as specified requested the officiating notary to
authenticate the following

                                    AGREEMENT

                        REGARDING THE PURCHASE OF SHARES

and declared:

PREAMBLE

Mr. Guenter Roepstorff| is the sole owner and proprietor of all business shares
of Domilens Vertrieb fuer medizinische Produkte GmbH with a nominal capital
totalling DM 1,000,000.00 registered in the commercial register of the Local
Court in Hamburg (HRB 38182). The initial capital contributions for the shares
have been paid in full.


<PAGE>

Staar Surgical AG is a joint stock company in accordance with Swiss law. The
joint stock company is represented by Vladimir Feingold (president of the board
of directors) and John Wolf (vice-president of the board of directors).
' 1 OBJECT OF PURCHASE, TRANSFER

(1)
The Seller sells the Buyer the business shares at the par value of
DM 20,000.00
DM 30,000.00
DM 17,000.00
DM 233,000.00 and
DM 300,000.00

with all the appertaining rights to future profits and other ancillary rights
which arise from 05 January 1998 onwards. The aforementioned business shares are
united in a separate deed to form a business share of DM 600,000.00.

(2)
The economic transition deadline for the business shares described in paragraph
1 and for the combined business share is 05 January 1998.

(3)
In his capacity as sole shareholder and managing director, the Seller, Mr.
Gruenter Roepstorff, grants his consent as is required in ' 11 para. 1 of the
Articles, in the version of the Articles changed today before the officiating
notary in register of documents no. 1077/1977.

' 2 PURCHASE PRICE

(1)
The purchase price is DM 7,800,000.00 (in words: seven million eight hundred
thousand Deutschmarks). The purchase price was determined on the basis of the
company valuation executed by the accountant Dipl.-Kauffrau Hortense Thielsen,
Hamburg, of 29/07/97 which is an integral part of the agreement of purchase of
the Company and is enclosed with this agreement as

                                   APPENDIX 1.

The valuation was also based on the Company's audited annual accounts for 1994,
1995, 1996 and the non-audited interim balance sheet for the period January 1997
to 31 October 1997. The estimated further development of sales and profits for
the period 1997 to the year 2000, predicted by the Seller was of decisive
importance for determining the purchase price.


<PAGE>

(2)
The purchase price is to be paid as follows: The payment of the purchase price
is to be arranged on 05 January 1998, with the proviso that the proprietorship
of the purchase price objects has been proven by then. The payment is to be
transferred to an account which is still to be named, kept by the attesting
notary in his own name for the Buyer on a trust basis. The notary drew the
parties' attention to the standard deadlines in international payment
transactions. The notary is instructed only to dispose of the purchase price In
favour of the buyer once one of the parties of this agreement has proven that
the buyer has become proprietor of the purchase object mentioned in ' 1 or when
both parties declare this unanimously.

(3)
The Seller has made distributions in advance on the company profits expected for
1997.

If and in so far as these advance distributions should exceed the yields from
the annual statement of accounts of 31/12/1997 applicable for the distribution
of profits, any excess distributions are to be reimbursed without delay.

(4)
Additional uncovered expenses for taxes and contributions due to entering on the
liabilities side in the annual statement of accounts of 31/12/1997 are to be
reimbursed to the Buyer by the Seller. This also applies if this first results
following external audits at a later date.

' 3 GUARANTEES FROM THE SELLER
The Seller guarantees the Buyer as follows:

(1)
The share capital has been paid in full. No repayments from the assets necessary
to maintain the share capital have been made. The shares are not encumbered with
third party's rights.

(2)
The annual statements of accounts on which the valuation of the Company is based
have been drawn up according to the principles of proper accounting and the
continuity of balance sheet preservation. They reflect the actual state of the
Company with regard to their assets, income and financial situation. Any
write-offs, devaluations, valuation adjustments and operating reserves,
especially for taxes, were made in the sufficient amount.

(3)
The Seller has not concluded any agreements between him and the Company apart
from the contract of employment as Managing Director, including any which affect
the partnership beyond 31/12/97. There are also no agreements with the
shareholder ECC GmbH who has withdrawn and the shareholders who are legally and
financially behind ECC.

Agreements regarding cooperations, joint ventures etc were also not concluded.


<PAGE>

(4)
There are no letters of support in favour of third parties.

(5)
The purchase of the initial contributions by the Buyer is not classified as
taking over the property of another person as defined by ' 419 German Civil
Code. The Seller assures that he additionally owns other actual net assets which
are worth at least 20% of the purchase price agreed.

(6)
There are no preemptive rights, option rights or other purchase rights
governing the object of purchase.

(7)
The fixed assets which were taken into consideration in the company valuation
and are included in the list of the development of the fixed assets of
01/01/1996 and are handed over as

                                   APPENDIX 2

are in the unrestricted possession of the Company and are also available for the
unlimited use of the Company with the exception of disposals caused by
operational use.

(8)
All objects to be found in the Company are capable of being used without any
limitations.

(9)
Existing delivery and performance commitments can be met.

(10)
The brands and trademarks listed in

                                   APPENDIX 3

are due only to the Company without any restrictions. They are not encumbered
with any rights of third parties. In particular no third parties hold usufructs
for these trademarks and brands. No licenses have been awarded to third parties.

Al1 brands and trademarks are valid. These rights have not been challenged by
third parties. As far as the Seller is aware, no industrial property rights of
third parties have been violated by the use of the brands and trademarks.


<PAGE>

Measures required to maintain the proper rights have without exception been
initiated in good time and sufficient provisions have been made to guarantee
that the property rights are upheld.

Finally, all fees which are due have also been paid in full.


(11)
No other distribution agreements have been made with manufacturers apart from
those listed in

                                   APPENDIX 4

of this agreement. The texts of the agreements have been enclosed in full. There
are no supplementary stipulations, side letters etc. In so far as no written
agreements were made the agreements have been fully and correctly transcribed.
The agreements and oral agreements do not affect the interests of STAAR
SURGICAL.

The Seller further assures that there are no sales representatives or - from the
Company's viewpoint - similar persons who are entitled to represent the Company
in connection with the sales and distribution of their products or otherwise
result in financial commitments or temporal obligations for the Company.

(12)
The fixed assets and inventories are free of rights of third parties. In
particular they have neither been attached nor has their ownership been
transferred by way of security.

(13)
The Seller commits himself in good time before his withdrawal to train a
successor for the management of the Company and to pass on to him/her all
contacts with people, companies and institutions which are of importance for the
management, in particular for sales and distribution, so that these can be
implemented in the Company without any problems.

(14)
The orders on hand can be processed smoothly without exception. The individual
orders are reasonably priced in accordance with the business procedures of the
Company exercised to date. The orders are processed in accordance with the
agreement. There are no deals pending which are connected with particular risks.
The Seller is not aware of any other circumstances which could conceal the risk
of permanently negatively affecting the intrinsic value or the earning power of
the Company.

<PAGE>

(15)
The list of customers which is submitted as

                                   APPENDIX 5

is complete. The gross margins stated in it are correct.

(16)
There are no restrictions from authorities, judicial or neighbourly measures on
the business currently practised. By conducting this business, as far as the
Seller knows, no regulations of industrial law, criminal law or any other public
legal matters are being violated.

(17)
The list of the company's liabilities which is submitted as

                                   APPENDIX 6

is complete and correct.

The Company has fulfilled all its financial obligations punctually.

(18)
The Company does not receive any investment subsidies or other subsidies.

(19)
The Company is neither involved in a law suit or execution proceedings, nor is
there any risk of a law suit or execution proceedings being lodged. An exception
in this case is the legal action with the customer Morawetz GmbH against which
claims to the amount of approx. DM 18,000.00 have been lodged. Bankruptcy
proceedings have been petitioned for this customer's assets.

(20)
All known fiscal commitments have been fully met.

(21)
The list of stock in hand "Inventory October 1997 of 03/11/97" which has been
submitted by the Seller and enclosed as

                                   APPENDIX 7

contains the complete inventory. The values specified are the net purchase
prices. The objects are at the free disposal of and unencumbered proper of the
Company. The purchase prices have been paid. All inventories are fully
functional and vendible.

Therefore no value adjustment was necessary.

(22)
There are no legal disputes between the (previous) shareholders and the Company.


<PAGE>

(23)
The accounts receivables list which is submitted as

                                   APPENDIX 8

is complete and correct. The claims are all good with the exception of the above
mentioned claim against Morawetz GmbH. The Seller guarantees that he is not
aware of any conditions, and there are also no signs of any which could make the
ability of the claims listed to be collected questionable.

(24)
The Company has sufficient own financial funds to maintain the business
operation as it has in the past and make the targeted profits.

(25)
No bad debt losses due to short term expiry of the limitation of action have to
be dealt with.

(26)
There are only loan commitments to Bankhaus Wolbern & Co., Hamburg. A credit
limit of DM 1.5 million has been granted which has been taken advantage of to
the amount of DM 1,242,467.86 as of 14/11/97. The details of the loan commitment
are outlined in the bank's letter of 23 July 97 which is submitted as

                                   APPENDIX 9.

The credit balances are listed in the "Daily bank statement" lists,

                                  APPENDIX 10.

(27)
None of the existing sales agreements are in conflict with the interests of the
Buyer.

' 4 EMPLOYMENT

(1)
In

                                   APPENDIX 11

all employees are listed with which written or oral contracts of employment have
been made. Without any exceptions, identical contracts of employment have been
concluded with the employees. Solely the wage agreements are different. With the
sales representatives the employment form was concluded in each case which is
submitted as

                                   APPENDIX 12

With the other employees, a contract of employment was concluded subject to the
proviso of the contract text enclosed as

                                  APPENDIX 13.

The sample contracts of employment duly reflect the full agreements.


<PAGE>

(2)
The list Appendix 11 referred to above specifies in full the total gross
emoluments including bonuses, commissions and shares in profits. After the
agreement has been concluded the contracts of employment are only concluded,
changed or terminated with the prior approval of the Buyer.

(3)
Within the past 12 months no pay or wage increases have been made or assured by
the Seller which have not been recorded in the payroll - Appendix 11. The
increases which were expressed or assured therefore have no influence on the
total payroll. Neither were agreements made to the effect that employees are
entitled to old age or survivors' pensions. Assurances with regard to this were
also not made.

There are no financial commitments made on the basis of Company practice.

Employees who have left the company and their dependants have not been made any
undertakings that they should receive pensions or other payments.

The exception here is the Seller. As managing director he has been made a
pension undertaking to receive a gross pension of DM 8,000.00 monthly. This
undertaking does not however represent any financial burden for the Company with
the exception of the contributions for the direct insurance as well as the
employer's pension liability insurance. The financial commitments in the insured
event are covered by an adequate employer's pension liability insurance.

(4)
Binding collective wage agreements, works agreements and commitments on the
basis of Company practice to a degree of financial importance do not exist apart
from Christmas and holiday pay.

(5)
The Seller will prevent, that after the agreement has been concluded new
contracts for the Company will be concluded with today's shareholders or their
near relatives without the Buyer issuing its prior approval.

' 5 MANAGING DIRECTOR CONTRACT OF EMPLOYMENT OF THE SELLER

(1)
The current contract of employment of the Seller is continued basically at the
same financial conditions, however is considerably changed in the layout as is
evident from


<PAGE>

                                   APPENDIX 14

The Seller receives an annual gross salary of DM 450,000.00 plus a share in
profits of 5% of the annual net profit.

The Buyer's decision to buy is considerably based on the future trustworthy
cooperation with the Seller. Additionally, that the succession of the Company is
secured. On the basis of the latter, the Seller has agreed in ' 3 item 13 to
train a successor in good time before he withdraws.

To cover the financial risk of the Company in the event of the Seller suddenly
withdrawing due to death of the Seller, the Company will take out a term life
Insurance policy on the life of the Seller Guenter Roepstorff. The Company in
doing so is granted an irrevocable preemptive right. The sum insured will be DM
5.0 million. The policy will run for 10 years. If the event insured occurs, the
sum insured received by the Company is left out of count when determining the
amount of compensation for the Seller's business share in the Company.

(2)
The gross remuneration of the Seller is to be adapted to the modified situations
of the Company. The details are regulated by the modified Managing director
contract of employment in force from 05/01/1998.

(3)
The pension agreement is not affected by the paragraphs above.

(4)
The Seller will repay all financial commitments which he has towards the Company
which result from

                                   APPENDIX 15

by 31/12/1997 at the latest.

Additionally the company has extended other loans to third parties the current
standing of which can be seen in

                                   APPENDIX 16

The Seller guarantees that these loans will be paid back by 31/12/1997 at the
latest.

' 6 COMPETITION CLAUSE

(1)
The Seller will not enter into competition neither indirectly nor directly with
the Buyer, the Company or a company affiliated with these for the duration of 12
years from the day of the conclusion of this agreement. This prohibition to
compete is limited to the field of ophthalmology. This mean: that for the
relationship after the contract, a post-contractual prohibition to compete will
exist for two years.


<PAGE>

(2)
The Seller understands that the restrictions on competition were a decisive
factor for the Buyer when concluding this agreement.

(3)
The Seller is aware that the Buyer supplies customers in Germany directly. Even
after this agreement has been concluded and enforced, the Buyer may supply the
customer Benemed without any restrictions. For the rest, the Buyer will
terminate its other existing customer relations within an appropriate period
from the enforcement of the agreement.

(4)
The Seller will ensure and commits itself, if necessary to agree at a
shareholders' meeting that the Company ends the business relations with other
suppliers within an appropriate period in accordance with an agreement having
been made, in so far as they supply products which could be supplied by the
Buyer, its parent company or subsidiaries.

(5)
The buyer intends to grant the Company the exclusive sales rights for Germany at
a point in time which cannot yet be defined.

' 8 RESPONSIBILITY FOR TAXES, CONTRIBUTIONS AND OTHER CHARGES TO BE PAID

(1)
Any payment of taxes from the period up to 31/12/1997, if these are not listed
in the balance sheet, reduce the purchase price in so far as they are based on
expenditure of the Seller or members of his family which are not recognized as
business expenses or other hidden profit distributions.

(2)
The payments for income tax on wages and salaries and social insurance
contributions due before the transfer deadline for the employees have been or
will be correctly determined, cleared and paid.

(3)
All tax returns have been given in correctly and punctually.

(4)
The buyer will inform the Seller without delay of a pending fiscal audit and
give the Seller the opportunity to defend itself against this.

' 9 LEGAL PROCEEDINGS

The Seller once again expressly assures that there are no pending legal
proceedings against the Company and that there are no claimed or threatened
legal or contractual claims against the Company with the exception of the claims
expressly mentioned in this agreement.


<PAGE>

' 10 CONSEQUENCES IN THE EVENT OF BREACH OF AGREEMENT

(1)
If the Seller should not meet his obligations taken on with this agreement at
all or in full or does not meet them in keeping with the agreement in any other
way, the Buyer is entitled to set a reasonable period of grace to give the
Seller the opportunity to create the state as conformable to the agreement. The
period of grace should be no less than two weeks. It is however dispensable if
the state as conformable to the agreement cannot be created or the Seller
refuses performance or if this is unreasonable for the Buyer.

(2)
If the state as conformable to the agreement is not created within the time set
or if the period of grace is dispensable, the Buyer can either demand that the
financial prejudice sustained be made good or make use of the legally available
rights with the exception of rescission.

(3)
The following applies for the compensation for financial prejudice sustained:

To be compensated is the expense of the Buyer, which is required to create the
state as conformable to the agreement, or which results from the state as
conformable to the agreement not being able to be created at all, in full
permanently or only temporarily.

The expense proven by the Buyer is to be compensated. Advantages in excess what
is required are duly taken into account. For the rest, the Buyer is to be
financially reimbursed so that it is in the same position financially as it
would be if the undertakings were correct or as it would be if the obligations
had been executed as stipulated by the agreement.

' 11 COST OF THE AGREEMENT

The notary's office's costs for the authentication of this agreement are to be
equally borne by both parties of this agreement. For the rest, each party pays
for its own consulting costs separately.

' 12 PURCHASE THROUGH TRUSTEES

(1)
Both parties are in agreement that the shares will be purchased through Dr
Volker D. Anhausser, lawyer in Karlsruhe, as trustee for the Buyer. This is
because both parties consider it to be wise that it does not become known on the
relevant market that the Buyer has shares in the Company.

(2)
Furthermore both parties are in agreement that, even if the purchase takes place
through the trustee, the contractual parties treat each other as if the Buyer
were the direct contractual partner.


<PAGE>

(3)
This agreement is also met and enforced with the authentication of the
assignment of the shares to the amount of DM 600,000.00 by the Swiss notary Dr
Suter on Friday 21 November 1997.


(4)
Dr Anhausser (lawyer) enters into this agreement as party in so far as he
commits himself to purchase the business shares for the Buyer as a trustee.

' 13 ASSIGNMENT OF THE SHARES

(1)
The Seller herewith declares the assignment of the shares listed in ' 1 para. 1
which following the agreement made with ECC GmbH still have to be formally
assigned to him.

(2)
Dr Volker D. Anhausser, lawyer, accepts the assignment in his own name, however
as trustee of the Buyer, STAAR SURGICAL AG, Nidau, Switzerland.

(3)
The agreement is subject to the condition precedent that the Seller purchases
from the current copartner ECC GmbH the shares described in detail in ' 1 of
this document by 10 December 1997. The assignment becomes effective with the
assignment of the shares to the Buyer.

' 14 CHOICE OF LAW AND JURISDICTION

(1)
This agreement including all appendices, additional agreements and ancillary
agreements is subject to German law. The parties are in agreement that the
uniform UN law on the sale of goods should not apply.

(2) A court of arbitration decides about all legal disputes from this agreement
and from all existing and future additional agreements and ancillary agreements
ousting the jurisdiction of normal courts subject to the proviso of the
arbitration agreement concluded in a separate deed.

' 15 LIMITATION OF ACTIONS

The parties agree a uniform limitation period of 4 years for all claims
resulting from this contractual relationship.


<PAGE>

' 16 OPTION TO BUY

For each sale, the parties agree a right of first refusal. In this instance, it
is of no consequence whether the shares in the Company are being sold in pad or
in full. The purchase price at which the shares are to be offered is to be
determined with binding force for both parties by the Chamber of Auditors based
in Dusseldorf.

(2)
 The Seller's obligation to offer the shares for sale also exists if the parties
unanimously establish that a further cooperation is no longer possible. In this
case, a purchase price should if possible be determined by mutual agreement.
Each contractual party can force the other to sell at a price which corresponds
to 120% of the determined value of the shares.

(3)
If a third party with the approval of the board of directors of the Buyer's
parent company should purchase shares in the parent company, which constitute a
controlling interest, the Seller has the right to sell his shares in the
Company. if in this case, he no longer wishes to continue the cooperation. This
is to be assumed if either the majority of the shares issued which are freely
traded on the market, *verb is missing* or in the case the assets are purchased
or through a merger. The same applies if a share majority is acquired with which
a decisive change in the executive management of the parent company (Staar
Surgical Company) is enforced. The Buyer itself or a third pad to be named by
it, in this case has the obligation to buy the shares at the determined value of
the shares.

If the third party is not a buyer which was approved by the board of directors
of the parent company, the Buyer or a third party to be named by it, must buy
the shares at a price which constitutes 150% of the determined value if the
Seller wishes to terminate cooperation (with the Company) in this case.

' 17 WRITTEN FORM

Changes and supplements to this agreement require the written form and if
legally required an additional notary's authentication. This also applies to a
change of this written form clause. The written form clause should not be
contracted out of the agreement formlessly, especially not orally.

' 18 ESCAPE CLAUSE

(1)
If clauses of this agreement or a clause included in it in future are fully or
partially legally invalid or not executable or later lose their validity or
practicability, the validity of the other clauses is not affected. The same
applies if it should be shown that the agreement has a gap in the regulations.

(2)
In place of the invalid or impracticable clause or to fill the gap an
appropriate regulation should apply which in so far as legally possible is as
nearest to what the parties desired or would have wanted defined by and for the
purpose of the agreement in so far as they had considered the matter on
concluding the agreement or when later including a point.


<PAGE>

(3)
The same also applies if the invalidity of a clause is based on a measure of
performance or time (deadline) specified in the agreement; in this case the
legally permissible measure of performance or time (deadline) as near to the one
desired should apply.

(4)
The parties are obliged to lay down whatever is valid according to paragraphs
1-3 through a formal modification or supplement to the text of the agreement in
proper form.



PARTS OF THE AGREEMENT

This agreement was concluded with reference to the following appendices:

<TABLE>
<S>               <C>
Appendix 1:       Company valuation of accountant Hortense Thielsen
Appendix 2:       List of the development of the fixed assets as of 01/01/1996
Appendix 3:       Copies of brand and trademark registrations
Appendix 4:       Sales agreements with manufacturers
Appendix 5:       List of customers
Appendix 6:       List of liabilities
Appendix 7:       List of stock in hand
Appendix 8:       List of accounts receivables
Appendix 9:       Letter from Bankhaus Wolbern of 23/07/97
Appendix 10:      List of  "Daily bank statements"
Appendix 11:      List of employees with wage/salary specifications
Appendix 12:      Sample contract of employment sales representatives
Appendix 13:      Sample contract of employment in-house staff
Appendix 14:      Modification to the Managing director contract of employment
Appendix 15:      List of liabilities of the Seller owed to the Company as well
                  as loans to third parties
</TABLE>


The following negotiation was read out to those appearing, approved by them and
signed by their own hand as follows:

signed G. Roepstorff
signed Volker D. Anheuser L.S.
signed Mallick, notary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.45
<SEQUENCE>27
<FILENAME>a06720exv10w45.txt
<DESCRIPTION>EX-10.45
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.45

         SUPPLEMENTARY AGREEMENT #2 TO THE MANAGING DIRECTOR'S CONTRACT
            OF EMPLOYMENT DATED JANUARY 1, 1998 BETWEEN DOMILENS AND
                              GUENTHER ROEPSTORFF

                                    ADDENDUM
               TO THE MANAGING DIRECTOR'S CONTRACT OF 22 JUNE 1993

                                     (seal of Axel Mallick, notary in Pinneberg)


                                                                       signature

                                                                          Notary


The contract of employment shall be amended as from 1 January 1998:

Article 1

Paragraph 1

shall be amended as follows:

Mr. Roepstorff is no longer exempted from the restrictions set out in section
181 of the German Civil Code (BGB).

Paragraph 2

shall be amended as follows:

        -       He shall comply with the restrictions set out therein. He shall
                follow the resolutions and instructions of the meeting of
                shareholders.

        -       Mr. Roepstorff must obtain the prior approval of the meeting of
                shareholders for all measures and transactions which go beyond
                the Company's usual trading operations. This shall particularly
                include:


<PAGE>

        1.      The purchase of real estate and all dispositions concerning such
                real estate, rights lo real estate, rights in respect of a real
                estate right and the obligation to exercise such real estate
                rights.

        2.      Structural building measures including conversions and repairs.
                (structural building measures crossed out and replaced by
                "important measures"? - translator's note)

        3.      The granting of all types of securities, the approval of loans
                outside or inside the usual business transactions and the
                assumption of third-party liabilities, the granting of loans and
                guarantees to the Company's employees.

        4.      The taking out of new loans which go beyond the credit limit of
                the existing loan of DM 1 ,500000.- and the termination of
                loans.

        5.      The granting of new powers of procuration (prokura) and
                commercial authority (Handlungsvollmachten - narrower than
                "prokura" (translator's note) and the revocation of such.

        6.      The setting up, sale and closure of offices and plants.

        7.      The purchase of other enterprises, the purchase, change or
                termination of dormant equity holdings including the purchase of
                shares in the Company; furthermore voting in associated
                companies.

        8.      Taking on and ending continuous obligations if the obligations
                under the contract may exceed 150,000.- in total.

        9.      The conclusion and amendment of pool agreements, integrated
                inter-company relations and co-operations

        10.     The closure or any major restriction in the lines of business in
                which the Company engages and the inclusion of new lines of
                business which have nothing to do with the field of
                ophthalmology

        11.     Promising gifts and hand gifts which go beyond what is usual

        12.     Agreements with any kind of relatives and with companies in
                which the managing director or his relatives are shareholders.

        13.     The recruitment of employees who are to have a annual gross
                salary in excess of DM 120,000.-.

        14.     Any (major) change in the employees' remuneration and all other
                major amendments to contracts of employment. ("major" inserted
                in handwriting - translator's note)

        15.     Taking legal action other than such action as is necessary to
                collect outstanding debts. (an illegible word inserted in
                handwriting before legal action - translator's note)

        16.     The conclusion, amendment and ending of contracts which grant
                the right to share in the Company's earnings in any kind of form


<PAGE>

        17.     The restrictions set out in Article 6 of the Company's
                shareholders' agreement shall apply in addition.

        -       Mr. Roepstorff shall at all times protect the Company's
                economic, financial and organizational interests. In all
                decisions he must act immediately, exercising the care of a
                proper businessman as laid down by the law, the resolutions of
                the shareholders, the rules of procedure, in as far as they
                exists, and the provisions of this agreement.

        -       Mr. Roepstorff may not grant other shareholders or himself or
                persons or companies close to him any advantages of any kind
                under contract or through unilateral acts. In the event of any
                breach of this rule the Company must be compensated for the
                advantage which has been granted.

        -       Mr Roepstorff must devote his entire energies and all his
                expertise and experience solely to the Company. He must be
                available for service if and in as far as this is in the
                interests of the Company. Any acceptance of a non-gratuitous or
                a gratuitous side-line occupation and of any positions on
                supervisory boards, advisory boards or similar positions shall
                require the prior written approval of the meeting of
                shareholders. (Crossed out: This does not apply to the
                Consulting Agreement with the shareholders of the STAAR SURGICAL
                Group.)

Paragraph 4

To be deleted in full.

Article 2

Paragraph 1

shall be amended as follows:

The contract shall be prolonged until the end of 31 December 2007. During this
time neither party may terminate the contract unless there are important grounds
for doing so. Such important grounds include:


<PAGE>

        -       Any breach of this contract and the shareholders' agreement

        -       Any irreconcilable difference in business policy

        -       Any criminal acts to the detriment of the Company

Article 3

Paragraph 1a-d shall be documented as follow in accordance with the existing
agreements:

        a.      As previously, the annual salary shall amount to DM 450,000.-.
                It shall be paid in the following installments, each of which
                shall be due at the end of the month:

        b.      To be deleted in full.

        c.      The management bonus shall amount to 5% of the net annual
                profit.

        d.      Expenses shall be reimbursed on the production of a voucher
                according to the tax laws.

The following clause is to be added:

Mr. Roepstorff agrees that the meeting of shareholders may adjust his pay as
appropriate if the Company's economic circumstances should deteriorate. This
shall be irrebutably assumed if the Company's earnings position declines
(crossed out: by half or more than the earnings achieved in 1996 (replaced by:
to DM 1 .0 million or less).


Paragraph 2

The following clause is to be added:

In as far as the vehicle is permanently or temporarily equipped with a car
telephone Mr. Roepstorff shall not be permitted to conduct private
conversations. He must strictly observe this prohibition.

<PAGE>

Furthermore the contract shall be supplemented as follows:

        I.      For the duration of this contract of employment Mr. Roepstorff
                may not become a shareholder in enterprises that compete with
                the Company or with which the Company has business relations,
                neither directly nor indirectly.

        II.     For the duration of two year after the end of this contract of
                employment Mr. Roepstorff undertakes not to work in any way for
                a company that operates in the same area as the company and in
                this area not to conduct any transactions on his own account or
                on the account of a third party and not to acquire any indirect
                or direct share in a company that operates in the same area as
                the Company.

        III.    Mr. Roepstorff undertakes to maintain strict confidentiality
                vis-a-vis third parties concerning all matters confided to him
                or otherwise revealed to him, particularly concerning the
                participating interests in the Company and concerning such
                business matters which are regarded as business secrets. This
                particularly means lists of customers, contracts, business
                policy and supply sources. The provisions of the Data Protection
                Act must be observed. The above obligations shall also continue
                after Mr. Roepstorff has left the Company.

        IV.     On leaving the Company or on being discharged of his obligation
                to serve the Company Mr. Roepstorff must immediately surrender
                all documents, correspondence, records and similar which concern
                the Company's interests and which are in his possession. It is
                expressly agreed that he shall have no right of retention in
                respect of such documents. It is also expressly prohibited to
                make photocopies/duplicates of statements of costs, statistic
                and similar or to pass them on to third parties.

        V.      All inventions, trade marks, patents, copyrights and other
                working results that qualify for protection shall be the
                property of the Company, even if they should be created by pure
                chance. Mr. Roepstorff therefore guarantees that all rights
                shall be granted free of charge in this respect. This also
                applies to such rights in the above meaning which Mr. Roepstorff
                obtains, publishes and/or invents, in part or in full, two years
                after the expiry of the contract of employment.


(signature)                                              (signature)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.46
<SEQUENCE>28
<FILENAME>a06720exv10w46.txt
<DESCRIPTION>EX-10.46
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.46

       SUPPLEMENTARY AGREEMENT #3 TO THE MANAGING DIRECTOR'S CONTRACT OF
   EMPLOYMENT DATED JANUARY 1, 2003 BETWEEN DOMILENS AND GUENTHER ROEPSTORFF

SECTION 3 REMUNERATION

Section 3, sub-paragraph 1 a) to c) shall be revised as follows:

        (1)     The annual remuneration amounts to E292.500,00 effective as of
                1st January 2003. This annual remuneration shall be paid in
                equal monthly amounts of E22.500,00, respectively due for
                payment at the end of the month. At the end of November the
                amount shall be increased to E45.000,00.

        (2)     Furthermore, Mr Roepstorff shall receive an annual bonus payment
                up to an amount of maximum E150.000,00. The payment of the bonus
                is dependent on Mr Roepstorff reaching variable milestones which
                will be newly determined every year by the CEO of Staar Surgical
                or his authorized representative.

                A company car was made available to Mr Roepstorff for his work
                in the framework of this Agreement, which may also be used on a
                private basis. Mr Roepstorff shall keep records of the
                kilometers driven in the company car for his private use. The
                parties herewith intend to clarify and record the fact that Mr
                Roepstorff also has a future claim to a company car
                corresponding to the value of the car currently driven.

SECTION 4 REMUNERATION IN THE CASE OF SICKNESS, DEATH

        (1)     In the case of a temporary incapacity to work on the part of Mr
                Roepstorff caused by sickness or other reasons for which Mr
                Roepstorff is not responsible, the remuneration shall continue
                to be paid for six months according to Section 3 (1) during the
                period of the incapacity to work. The amount will hereby be
                deducted which corresponds to the sickness allowance paid by the
                health insurance company. The continuation of the payment of the
                remuneration shall only be made to the end of the Agreement at
                the latest.

        (2)     Should Mr Roepstorff pass away during the term of this
                Agreement, his widow and legitimate children, provided they have
                not yet reached the age of 25 and are still in professional
                training, shall have a claim as joint and several creditors to
                the continuation of payment of the salary according to Section 3
                for the month in which Mr Roepstorff passed away and the
                following six months.

SECTION 5 HOLIDAY

        (1)     The holiday claim agreed up to now with Mr Roepstorff of an
                annual holiday of 30 workdays shall be increased every third
                year of employment by one day, whereby the first increase in the
                annual holiday shall take place in the year in which Mr
                Roepstorff has reached the age of 58. Further increases shall
                subsequently take place on a three-year basis.


<PAGE>

                The parties are furthermore in agreement that Mr Roepstorff is
                entitled to transfer each year ten days of his annual holiday to
                the next calendar year. The transferred holiday expires at the
                end of the transferred year to which the annual holiday was
                transferred, should Mr Roepstorff not have taken the transferred
                annual holiday.

                In other respects the Agreement shall be supplemented as
                follows:

                Change in Control

                The parties are in agreement that the contractual relationship
                on hand shall be continued with unchanged conditions even in the
                case of there being a change in control. This shall not apply if
                a possible successor of the present shareholders wishes to
                terminate the contractual relationship. In this case Mr
                Roepstorff shall receive a redundancy payment to the amount of
                half a month's salary for each year he has been employed with
                the company. The same correspondingly applies in the case of his
                position being considerably reduced as a result of the change in
                control or if the headquarters of the company is relocated to
                over 75 km away from the present headquarters. Mr Roepstorff is
                entitled to end the contractual relationship himself within the
                first six months of acquiring knowledge of the change in control
                with a notice period of twelve months. After this period, Mr
                Roepstorff shall receive a bonus of six monthly salaries if he
                has continued to manage the business during the notice period of
                twelve months.

                Euro conversion

                The parties are in agreement that sums of money, in as far as
                they have been shown up to now in Deutsche Mark, shall be
                converted to euros. This particularly applies to sums of money
                included in Section 1, paragraph 2 of the Supplementary
                Agreement dated 25th November 1997.

                /s/ Gunther Roepstorff       CEO STAAR Surgical
                ---------------------
                Domilens GmbH                /s/ David Bailey
                                             ---------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.56
<SEQUENCE>29
<FILENAME>a06720exv10w56.txt
<DESCRIPTION>EX-10.56
<TEXT>
<PAGE>

                                                                   Exhibit 10.56

                                 PROMISSORY NOTE

$560,000.00                                                       MARCH 29, 2002
                                                         LOS ANGELES, CALIFORNIA

      FOR VALUE RECEIVED, the receipt and sufficiency of which is acknowledged,
POLLET & RICHARDSON, A LAW CORPORATION ("Maker"), hereby promises to pay STAAR
SURGICAL COMPANY, or order ("Holder"), at the address designated on the
signature page of this Note, or at such other place as Holder may designate by
written notice to Maker, the principal sum herein below described ("Principal
Amount"), together with interest thereon, in the manner and at the times
provided and subject to the terms and conditions described herein.

      1.    PRINCIPAL AMOUNT.

            The Principal Amount means the sum of $560,000.00

      2.    INTEREST.

            Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the Commencement Date (as that term is defined herein) at the
rate of five percent (5%) per annum, compounded annually. Interest shall be
computed on the basis of a three hundred sixty (360) day year and a thirty (30)
day month.

      3.    PAYMENT OF PRINCIPAL AND INTEREST.

            Subject to paragraph 9, below, Maker shall pay the Principal Amount
and all accrued and unpaid interest on the Principal Amount and all other
indebtedness due under this Note in forty-seven (47) equal monthly installments
of ten thousand dollars ($10,000) each, commending one (1) month from the
Commencement Date, and concluding three (3) years and eleven (11) months from
the Commencement Date, and one (1) payment due four (4) years from the
Commencement Date, for all sums remaining due under this Note (i.e., approx.
$153,552). If the date set for payment by Maker of any installment or other sum
due under this Note falls on a Saturday, Sunday or holiday recognized by either
the United States of America or the State of California, payment under this Note
shall be due on the first subsequent business day.

      4.    COMMENCEMENT DATE.

            The Commencement Date shall be June 1, 2002.

      5.    SECURITY/RELEASE OF SECURITY.

            Maker shall pledge as security for the repayment of all sums payable
under this Note all of Maker's accounts receivable, both those existing at the
time of the execution of this Note and those which come into existence at a
future date prior to the exoneration of this Note. Maker shall execute a
Security Agreement of even date evidencing Holder's security interest in the
accounts receivable. If, at a future date, Maker obtains a line of credit from a
third party, not to exceed $250,000, secured by Maker's accounts receivable,
Holder's security interest in Maker's accounts receivable will be subordinated
to the security interest of the party which

<PAGE>

extends the line of credit to Maker. This Note shall be recourse as to Maker,
but non-recourse as to Maker's shareholders, officers, directors, agents and
employees.

      6.    PREPAYMENTS.

            Maker shall have the right to prepay any portion of the Principal
Amount and interest due without prepayment penalty or premium or discount.

      7.    MANNER OF PAYMENTS/CREDITING OF PAYMENTS.

            Payments of any amount required hereunder shall be made in lawful
money of the United States or in such other property as Holder, in its sole and
absolute discretion, may accept, without deduction or offset, and shall be
credited first against accrued but unpaid fees and costs, if any, thereafter
against accrued but unpaid interest, if any, and thereafter against the unpaid
balance of the Principal Amount.

      8.    INTEREST ON DELINQUENT PAYMENTS.

            Any payment under this Note not paid when due shall bear interest at
the same rate and method as interest is charged on the Principal Amount from the
due date until paid.

      9.    ACCELERATION UPON DEFAULT.

            At the option of Holder, all or any part of the indebtedness of
Maker hereunder shall immediately become due and payable, irrespective of any
agreed maturity date, upon the happening of any of the following events of
default:

            (a) If Maker shall breach any condition or obligation imposed on
Maker pursuant to the terms of this Note, the Settlement Agreement and General
Release or even date, or the Security Agreement of even date, provided however
that if any such breach is reasonably susceptible of being cured, Maker shall be
entitled to a grace period of fifteen (15) days following written notice of such
event of default to cure;

            (b) If Maker shall make an assignment for the benefit of creditors;

            (c) If a custodian, trustee, receiver, or agent is appointed or
takes possession of substantially all of the property of maker;

            (d) If Maker shall be adjudicated bankrupt or insolvent or admit in
writing Maker's inability to pay Maker's debts as they become due;

            (e) If any petition is filed against Maker under the Bankruptcy Code
and either (A) the Bankruptcy Court orders relief against Maker, or (B) such
petition is not dismissed by the Bankruptcy Court within thirty (30) days of the
date of filing;

            (f) If any attachment, execution or other writ is levied on
substantially all of the assets of Maker and remains in effect for more than
five (5) days; or

            (g) If Maker shall apply for or consent to the appointment of a
custodian, trustee, receiver, intervenor, liquidator or agent of maker, or
commence any proceeding related to Maker under any bankruptcy or reorganization
statute, or under any arrangement, insolvency,

<PAGE>

readjustment of debt, dissolution, or liquidation law of any jurisdiction,
whether now or hereafter in effect.

Maker shall notify Holder immediately if any event of default occurs.

      10.   COLLECTION COSTS AND ATTORNEY'S FEES.

            Maker agrees to pay Holder all costs and expenses, including
reasonable attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of this Note or any instrument securing payment of
this Note, including without limitation, defending the priority of such
instrument or conducting a trustee sale thereunder. In the even any litigation
is initiated concerning the enforcement, interpretation or collection of this
Note by the parties hereto, the prevailing party in any such proceeding shall be
entitled to receive from the non-prevailing party all costs and expenses
including, without limitation, reasonable attorneys' and other fees incurred by
the prevailing party in connection with such action or proceeding.

      11.   NOTICE.

            Any notice to either party under this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, addressed to such party at the address
set forth below, or to such other address as either party from time to time may
designate by written notice. Notices delivered by overnight delivery service
shall be deemed delivered the next business day following consignment to such
delivery service. Mailed notices shall be deemed delivered and received in
accordance with this provision three (3) days after deposit in the United States
mail.

      12.   USURY COMPLIANCE.

            All agreements between Maker and Holder are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note shall involve transcending
the highest interest rate permitted by law which a court of competent
jurisdiction deems applicable, then the obligations to be fulfilled shall be
reduced to such maximum rate, and if, under any circumstances whatsoever, Holder
shall ever receive as interest an amount that exceeds the highest lawful rate,
the amount that would be excessive interest shall be applied to the reduction of
the unpaid Principal Amount under this Note and not to the payment of interest,
or, if such excessive interest exceeds the unpaid balance of the Principal
Amount under this Note, such excess shall be refunded to Maker. This provision
shall control every other provision of all agreements between Maker and Holder.

      13.   JURISDICTION; VENUE.

            This Note shall be governed by, interpreted under and construed and
enforced in accordance with the laws of the State of California, excluding any
law relating to the conflict of laws. Any action to enforce payment of this Note
shall be filed and heard solely in Los Angeles County, California.

<PAGE>

      14.   BUSINESS PURPOSE.

            This Note is entered into by Maker in connection with a business
transaction and not for personal, family or household purposes.

                                             MAKER:

                                             Pollet & Richardson
                                             A Law Corporation

                                             By: /s/ Eric E. Richardson, Jr.
                                                 -----------------------------
                                                 Eric E. Richardson, President

                                             MAKER'S ADDRESS:

                                             10900 Wilshire Boulevard, Suite 500
                                             Los Angeles, California 90024

                                             HOLDER'S ADDRESS:

                                             STAAR SURGICAL COMPANY
                                             1911 Walker Avenue
                                             Monrovia, California 91016
                                             Attn: Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.1
<SEQUENCE>30
<FILENAME>a06720exv14w1.txt
<DESCRIPTION>EX-14.1
<TEXT>
<PAGE>
                                                                    EXHIBIT 14.1



                          STAAR SURGICAL CODE OF ETHICS

      This Code of Ethics (the Code) has been adopted by the Board of Directors
of STAAR Surgical (the Company) as a supplement to the existing codes and
policies of the Company.

1.      Scope. This Code of Ethics applies to all directors, officers and
        employees of the Company.

2.      Ethical Conduct. Each director, officer and employee shall promote
        honest and ethical conduct, including the avoidance and ethical handling
        of actual or apparent conflicts of interest between personal and
        professional relationships.

        a.      We encourage participation in the political process, and
                recognize that participation is primarily a matter of individual
                involvement. Any payment of corporate funds to any political
                party, candidate or campaign may be made only if permitted under
                applicable law and approved in advance by the Chief Executive
                Officer.

        b.      Gifts of cash or property may not be offered or made to any
                officer or employee of a customer or supplier or any government
                official or employee unless the gift is nominal in value and
                legal.

        c.      Employees of the Company should decline or turn over to the
                Company gifts of more than nominal c value or cash from persons
                or companies that do (or may expect to do) business with STAAR
                Surgical.

        d.      Business entertainment (whether we do the entertaining or are
                entertained) must have a legitimate business purpose, may not be
                excessive, and must be legal.

        e.      An employee who has a financial interest in, or performs work
                for, a company with which we do business must disclose that
                interest or work to the appropriate human resource manager. A
                "financial interest" in another company includes stock ownership
                by the employee, members of his or her immediate family and any
                related trusts or estates but excludes ownership of a small
                amount of stock in a publicly held company.

        f.      We do not discriminate in the hiring, discharge, compensation,
                promotion, or benefits offered to any employee, applicant or
                retiree on the basis of race, sex, religion, age, disability, or
                any other unlawful basis. We respect the privacy and dignity of
                our employees. Harassment of any form is strictly prohibited.

                                        1



<PAGE>

        g.      We conduct our business in compliance with applicable
                governmental laws, rules and regulations.

3.      Company Records and Communications. Accurate and reliable records of
        many kinds are necessary to meet the Company's legal and financial
        obligations and manage our business. Therefore, the Chief Executive
        Officer, Chief Financial Officer and all accounting employees shall
        promote full, fair, accurate, timely and understandable disclosure
        reports and documents that the Company files with, or submits to, the
        Securities and Exchange Commission and in other public communications
        made by the company such as:

        a.      Becoming familiar with the disclosure requirements applicable to
                the Company as well as the business and financial operations of
                the Company.

        b.      Providing a system for the careful review of all such reports,
                documents and communications.

        c.      Adequately supervising the preparation of the financial
                disclosure in the periodic reports required by the the Company,
                including reviewing and analyzing the financial information to
                be disclosed.

        d.      Consulting, when appropriate, with professional advisors for
                advice with respect to such reports, documents and
                communications.

        e.      Fully complying with the provisions of the Company's Insider
                Trading Policy and the Company's Corporate Communication Policy.

4.      Prompt Internal Reporting. Violations (or potential violations ) of this
        code must be reported to the Chairman of the Board of Directors or the
        Chairman of the Audit Committee either by direct contact or the use of
        the Company "hot-line". The report through the Company hot-line can be
        made anonymously. Employees who make reports of suspected violations of
        the Code, or other matters regarding accounting, internal accounting
        controls or audit matters, will be protected from retaliation such as
        discipline or involuntary termination of employment as a result of their
        reports. Every reported allegation of illegal or unethical behavior will
        be thoroughly and promptly investigated.

5.      Any amendment to this code must be approved by the Board of Directors of
        the Company, and the Company shall, within 5 business days of such
        amendment (other than a technical, administrative or other
        non-substantive amendment), report such amendment on a form 8-K.

6.      If the company approves any material departure from the provisions of
        the Code, or if the Company fails to take action within a reasonable
        period of time, the Company shall, within 5 business days of such an
        event, report such event on form 8-K.

7.      Each designated manager will be asked to certify annually, in writing,
        their compliance with the Code substantially as follows:

        a.      I have reviewed and understand the Code of Ethics. I hereby
                confirm that during (the most recently completed year)

                i.      I have complied with the Code.

                ii.     I do not have personal knowledge of any code violations
                        by others; and



                                        2

<PAGE>

                iii.    All who report directly to me have certified in writing
                        their compliance with the Code.

        b.      The Assistant Vice President of Human Resources will be
                responsible for obtaining certifications not later than February
                15 with respect to the preceding year.

8.      Sanctions. If a Compliance Officer determines that a person may have
        violated a provision of this code, the violation shall be reported to
        the Board of Directors of the Company. If the Board of Directors
        determines that a violation has occurred, it may, among other things:

-       Terminate the employment of such person (this shall be deemed to be "for
        cause" for any employee with an employment agreement).

-       Place such person on a leave of absence.

-       Counsel such person.

-       Authorize such other action as it deems appropriate.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>31
<FILENAME>a06720exv21w1.txt
<DESCRIPTION>EX-21.1
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    EXHIBIT 21.1


                        LIST OF SIGNIFICANT SUBSIDIARIES


<TABLE>
<CAPTION>
                                                         STATE OR OTHER JURISDICTION OF INCORPORATION
                                                           OR ORGANIZATION OF EACH SUCH SIGNIFICANT
                                                          SUBSIDIARY, AND NAMES (IF ANY) UNDER WHICH
NAME OF SIGNIFICANT SUBSIDIARY                           EACH SUCH SIGNIFICANT SUBSIDIARY DOES BUSINESS
------------------------------                           ----------------------------------------------
<S>                                                      <C>
STAAR Surgical AG                                                          Switzerland


Canon STAAR Co., Inc.                                                         Japan
   (Canon STAAR Kabushiki Kaisha)

Domilens GmbH                                                                Germany
   (Domilens fuer medizinische produkte GmbH)
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>32
<FILENAME>a06720exv23w1.txt
<DESCRIPTION>EX-23.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 23.1

             INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT

To the Board of Directors
STAAR Surgical Company

We consent to incorporation by reference in the Registration Statements on Forms
S-8 (No. 333-111154) and (No. 333-60241) and S-3 (No. 333-116901), (No.
333-111140) and (No. 333-106989) of STAAR Surgical Company of our reports dated
March 16, 2005 relating to the consolidated financial statements, related
schedule and the effectiveness of STAAR Surgical Company's internal control over
financial reporting, which appear in this Form 10-K.

                                              /s/ BDO SEIDMAN, LLP

Los Angeles, California
March 16, 2005
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>33
<FILENAME>a06720exv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibit&nbsp;31.1</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTIFICATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
I, David Bailey, Chief Executive Officer, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1.&nbsp;I have reviewed this annual report on Form&nbsp;10-K of
STAAR Surgical Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
2.&nbsp;Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
3.&nbsp;Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
4.&nbsp;The registrant&#146;s other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    a)&nbsp;Designed such disclosure controls and procedures, or
    caused such disclosure controls and procedures to be designed
    under our supervision, to ensure that material information
    relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those
    entities, particularly during the period in which this report is
    being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    b)&nbsp;Designed such internal control over financial reporting,
    or caused such internal control over financial reporting to be
    designed under our supervision, to provide reasonable assurance
    regarding the reliability of financial reporting and the
    preparation of financial statements for external purposes in
    accordance with generally accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    c)&nbsp;Evaluated the effectiveness of the registrant&#146;s
    disclosure controls and procedures and presented in this report
    our conclusions about the effectiveness of the disclosure
    controls and procedures, as of the end of the period covered by
    this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    d)&nbsp;Disclosed in this report any change in the
    registrant&#146;s internal control over financial reporting that
    occurred during the registrant&#146;s most recent fiscal quarter
    (the registrant&#146;s fourth fiscal quarter in the case of an
    annual report) that has materially affected, or is reasonably
    likely to materially affect, the registrant&#146;s internal
    control over financial reporting;&nbsp;and</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
5.&nbsp;The registrant&#146;s other certifying officers and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of
directors (or persons performing the equivalent functions):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    a)&nbsp;All significant deficiencies and material weaknesses in
    the design or operation of internal control over financial
    reporting which are reasonably likely to adversely affect the
    registrant&#146;s ability to record, process, summarize and
    report financial information;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    b)&nbsp;Any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrant&#146;s internal control over financial reporting.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Bailey
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    David Bailey</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>President, Chief Executive Officer, Chairman and</I></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>Director (principal executive officer)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date: March&nbsp;30, 2005
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>34
<FILENAME>a06720exv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibit&nbsp;31.2</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTIFICATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
I, John Bily, Chief Financial Officer, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1.&nbsp;I have reviewed this annual report on Form&nbsp;10-K of
STAAR Surgical Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
2.&nbsp;Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
3.&nbsp;Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
4.&nbsp;The registrant&#146;s other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    a)&nbsp;Designed such disclosure controls and procedures, or
    caused such disclosure controls and procedures to be designed
    under our supervision, to ensure that material information
    relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those
    entities, particularly during the period in which this report is
    being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    b)&nbsp;Designed such internal control over financial reporting,
    or caused such internal control over financial reporting to be
    designed under our supervision, to provide reasonable assurance
    regarding the reliability of financial reporting and the
    preparation of financial statements for external purposes in
    accordance with generally accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    c)&nbsp;Evaluated the effectiveness of the registrant&#146;s
    disclosure controls and procedures and presented in this report
    our conclusions about the effectiveness of the disclosure
    controls and procedures, as of the end of the period covered by
    this report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    d)&nbsp;Disclosed in this report any change in the
    registrant&#146;s internal control over financial reporting that
    occurred during the registrant&#146;s most recent fiscal quarter
    (the registrant&#146;s fourth fiscal quarter in the case of an
    annual report) that has materially affected, or is reasonably
    likely to materially affect, the registrant&#146;s internal
    control over financial reporting;&nbsp;and</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
5.&nbsp;The registrant&#146;s other certifying officers and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of
directors (or persons performing the equivalent functions):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    a)&nbsp;All significant deficiencies and material weaknesses in
    the design or operation of internal control over financial
    reporting which are reasonably likely to adversely affect the
    registrant&#146;s ability to record, process, summarize and
    report financial information;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    b)&nbsp;Any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrant&#146;s internal control over financial reporting.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">John Bily
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    John Bily</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>Chief Financial Officer</I></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>(principal accounting and financial officer)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date: March&nbsp;30, 2005
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>35
<FILENAME>a06720exv32w1.htm
<DESCRIPTION>EX-32.1
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<B>Exhibit&nbsp;32.1</B>
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<B>Certification pursuant to 18&nbsp;U.S.C.
Section&nbsp;1350,</B>
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<DIV align="center" style="font-size: 10pt;">
<B>As adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley
Act of 2002</B>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the filing of the Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004 (the
&#147;Report&#148;) by STAAR Surgical Company
(&#147;Registrant&#148;), each of the undersigned hereby
certifies that:
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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    1.&nbsp;The Report fully complies with the requirements of
    Section&nbsp;13(a) or 15(d) of the Securities Exchange Act of
    1934, as amended,&nbsp;and</TD>
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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2.&nbsp;The information contained in the Report fairly presents,
    in all material respects, the financial condition and results of
    operations of Registrant as of and for the periods presented in
    the Report.</TD>
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    <TD width="58%"></TD>
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    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">David Bailey
    </FONT></TD>
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    <TD width="40%"></TD>
    <TD width="60%"></TD>
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    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    David Bailey</TD>
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<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>President, Chief Executive Officer,</I></TD>
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<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>Chairman and Director</I></TD>
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    <TD>&nbsp;</TD>
    <TD align="center">
    <I>(principal executive officer)</I></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dated: March&nbsp;30, 2005
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    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
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    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">John Bily
    </FONT></TD>
</TR>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

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    <TD width="40%"></TD>
    <TD width="60%"></TD>
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    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    John Bily</TD>
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<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>Chief Financial Officer (principal</I></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I>accounting and financial officer)</I></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dated: March&nbsp;30, 2005
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A signed original of this written statement required by
Section&nbsp;906 has been provided to STAAR Surgical Company and
will be furnished to the Securities and Exchange Commission or
its staff upon request.
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