Note 8 — Liabilities

Lines of Credit

Since 1998, the Company’s wholly owned Japanese subsidiary, STAAR Japan, has had an agreement with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.06% as of December 29, 2017) plus a 0.50% spread, and may be renewed quarterly (the current line expires on February 21, 2018). The credit facility is not collateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of December 29, 2017 and December 30, 2016 (approximately $4,438,000 and $4,283,000 based on the foreign exchange rates on December 29, 2017 and December 30, 2016, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of December 29, 2017, there were no available borrowings under the line. At maturity on February 21, 2018, this line of credit was renewed until May 21, 2018, with similar terms.

In September 2013, the Company’s wholly owned Swiss subsidiary, STAAR Surgical AG, entered into a framework agreement for loans (“framework agreement”) with Credit Suisse (the “Bank”). The framework agreement provides for borrowings of up to 1,000,000 CHF (Swiss Francs) (approximately $1,000,000 at the rate of exchange on December 29, 2017 and December 30, 2016), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The framework agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The framework agreement may be terminated by either party at any time in accordance with its general terms and conditions. The framework agreement is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the framework agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a “material qualification” in STAAR Surgical independent auditors’ report, as defined. There were no borrowings outstanding as of December 29, 2017 and December 30, 2016.

On January 31, 2017, the Company entered into lease schedule 010 with Farnam Street Financial, Inc. (“Farnam”). The line of credit provides for borrowings of up to $2,000,000 at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. Interim rent is paid until the full amount of the line is used at which time the lease commences. The Company expects to convert this into a $1,600,000 capital lease in the first quarter of 2018.

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

On June 12, 2014, the Company entered into lease schedule 008R with Farnam. Under the agreement, equipment with a cost of $964,612 was financed over a period of 36 months at a lease rate factor of 2.81% per $1 for hardware equipment and 3.12% per $1 for non-hardware equipment. At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option. The lease schedule was paid off in May 2017 and the Company returned the equipment in February 2018.

Covenant Compliance

The Company is in compliance with covenants of its credit facilities and lines of credit as of December 29, 2017.

Asset Retirement Obligation

The Company recorded certain Asset Retirement Obligations (“ARO”), in accordance with ASC 410-20 in connection with the Company’s obligation to return its Japan facility to its “original condition”, as defined in the lease agreement. The Company has recorded approximately $202,000 and $195,000, representing the fair value of the ARO liability obligation in noncurrent liabilities at December 29, 2017 and December 30, 2016, respectively. The lease expires in 2018, however, the Company has no plans to vacate the facility and will start negotiations during 2018 to extend the lease beyond 2018.